Arth-Aarth

Volume X / 2020-21

TRANSCENDING

IDEOLOGIES
USHERING IN..

THE NEW AGE OF

INVESTING
 PREFACE

Finomina, the Finance Club of IIM Udaipur, is pleased to bring to you the tenth edition of its annual
magazine, Arth-Aarth. Since Arth-Aarth is known for providing a holistic interpretation of the current
happenings of the financial world in order to enlighten the student community on the various issues
impacting domestic as well as global financial environment. The magazine features various
researches and reports on the financial markets, thus enforcing the theme of the annual management
fest of IIM Udaipur- Transcending Ideologies.

The 10th edition is built on the theme that encompasses shared experiences and perceptions leading
to evolving beyond existing ideologies in the rapidly changing world. The magazine covers a broad
range of topics from the evolution of the life insurance industry to the US-China trade war. It also
gives a brief account of the Indian financial market meltdown and the financial adversity of the 21st
century. The magazine apprises our readers about some of the informative topics like Insolvency and
Bankruptcy Code and technologies in finance. It contains very valuable inputs from our faculty
members. Moreover, it features details of some eminent personalities, who have path-breaking
contributions in the financial world. This edition also gives an overview of the trends of IPOs in 2020.

We would love to hear your views; send in your comments, feedback, and suggestions to the team at
finomina@iimu.ac.in

Editorial Team Design Team

Diksha Ashutosh Dekatey

Parth Patel Diksha
Sahil Waingankar Rajat Mohta
Shreya Saloni

3
 FROM THE DIRECTOR'S DESK
PROF. JANAT SHAH
DIRECTOR, IIM UDAIPUR

I am pleased to pen down the message for Arthaarth - the annual chronicle of Finomina, the
Finance Club of Indian Institute of Management Udaipur. IIMU has traversed almost a decade of
essential years, and today it is well on its path of becoming a globally recognized management
school, having achieved many significant milestones. This year is marked as another consecutive
year of IIM Udaipur being featured in the prestigious FT Masters in Management 2020 Global
Ranking.

Apart from being the youngest B-School on the list, the Institute has moved up four places and is
at the 72nd Rank for its two-year MBA program. Only four other IIMs are in this coveted list,
including IIM Ahmedabad, IIM Bangalore, IIM Calcutta, and IIM Indore. Also, IIMU is the youngest
Institute in the country to receive AACSB accreditation. These steps and recognitions are a means
to prove ourselves, and that with similar continued efforts, we will be among the best management
institutions in the world by 2030. IIMU was founded with the aim to groom, nurture, and polish
individuals' abilities and make them responsible business leaders with a strong moral compass.
Today, the Institute has developed a holistic system where formal education is intricately woven
with moral and social education, to enable transformational learning for students from diverse
fields.

Our graduates are equipped with academic competence, leadership, and intellectual maturity. They
interact with corporate leaders and thinkers, conduct projects with top companies, tap into the
local socio-cultural dynamics, and make deep, lasting connections with peers from different
geographies.

The clubs at IIMU provide pathways for transition from the classroom to the corporate world. The
functional club for finance - Finomina makes the community understand the intricacies of the
world of finance and fosters an environment where they can learn, share, participate, organize, and
network with the industry. Finomina caters to every finance enthusiast's needs and aspirations by
enabling them to explore issues associated with the world economy, financial concerns, and
current trends in businesses. This mission is achieved by conducting activities including quizzes,
conferences, summits, analyses, and discussions related to various financial profiles. Their
regular publications keep our community abreast with current business news and new financial
concepts. The club also provides material for stock market enthusiasts in the form of IPO analysis
and Sector analysis. Case study Competitions organized by Finomina provide a way for students to
reinforce their classroom learnings.

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 January 2021
Volume X

What we got for you?

2020: The Year of Blockbuster IPOs Amidst Do you know about these technologies in
Uncertainties.. Finance?
2020 was a year full of roller coaster rides. A Traveling back in time, we realize that change in
year full of extremes not only for mankind but the financial sector is not a new phenomenon.
also for the financial markets in totality. NSE From the emergence of the Double Entry system
Nifty Index hit the, then all-time high in Jan 2020 to Blockchain technology, everything for once is
at 12,430 points but fell to a 3.3 year low on an innovation.
March 24 to 7,511 points. The companies continued on page 30
delayed their IPOs on the wake of market
uncertainty coupled with the lost sentiment from The Indian Financial Market Meltdown - It's Not
the Foreign Institutional Investors. Just the Coronavirus
continued on page 16
For the first time since 2009, circuit-breakers
were applied in both the NSE and the BSE, to
Green Banks: The Future of Finance.. prevent the stock markets from falling further.
continued on page 32
In 2020, businesses saw many changes. The
most significant change in the sustainability
narrative has been the entry of banks and large Evolution & challenges of life insurance industry
financial institutions which have made
substantial commitments in financing the The sector with tremendous growth potential –
transition to a clean, green economy. Of the that is how the life insurance sector is often
world’s largest fifty banks, twenty-five banks touted as, thanks to the low insurance
have made public sustainable finance penetration and density in the country among its
commitments totaling more than USD2.5 trillion. comparable peers.
continued on page 6 continued on page 26

INSIDE THIS ISSUE...

Faculty Zone
Green Banks: The Future of Finance from Prof. Utkarsh Majmudar
Q&A with Prof. Prateek Sharma
Q&A with Prof. Bhavya Singhvi
IPO Analysis- 2020: The Year of Blockbuster IPOs Amidst the Uncertainties
Alumni Zone
The Evolution and Challenges of Life Insurance Industry
Do You Know About These Technologies in Finance?
The Indian financial market meltdown - It's not just Coronavirus
A Financial Adversity of the 21st Century: The US-China Trade War
Is Insolvency and Bankruptcy Code,2016 Useful Reform to Recover Back Bad Loans?
Amazing stock market facts
Personalities of the year
Glimpses of the year
Arth-Samvaad 2019 5
 FACULTY ZONE

GREEN BANKS: THE FUTURE OF FINANCE

-PROF. UTKARSH MAJMUDAR

Prof. Utkarsh Majmudar is the visiting faculty at IIM

Udaipur. He is a part of the Finance and Accounting
domain at IIM Udaipur. He did his FPM in 1997 from IIM
Ahmedabad and PGDM in 1991 from IIM Lucknow.

In 2020, businesses saw many changes. The most significant change in the sustainability narrative has
been the entry of banks and large financial institutions which have made substantial commitments in
financing the transition to a clean, green economy.

Of the world’s largest fifty banks, twenty-five banks have made public sustainable finance
commitments totaling more than USD2.5 trillion. For instance, Goldman Sachs plans to spend USD750
billion over the next decade financing and advising companies focused on climate transition and
inclusive growth. Many banks have signed up to the new UN-backed Principles for Responsible Banking
and a host of other initiatives such as Science-Based Targets or RE 100 which commits to source 100
percent of energy from renewable sources.

All this has come about due to two key developments. First, The Paris Agreement created Nationally
determined contributions that will help limit global warming to well below 2 degrees, preferably to 1.5
degrees Celsius. Second, the UN came out with sustainable development goals (SDGs) that are
"blueprint to achieve a better and more sustainable future for all. " The 17 goals are required to be
achieved by 2030 and are known as Agenda 2030.

Given the massive scope of work involved in climate change mitigation arising out of the Paris
Agreement and the scale of work required to achieve Agenda 2030, significant funding needs are
envisaged. It is estimated that $93 trillion may be needed for investment in infrastructure investment
by 2030. Banks often lack the specialist knowledge to cater to the growing need to fund green
projects. This has led to the development of the concept of green banks.

According to OECD, “a Green Bank as a public, quasi-public or a non-profit entity established

specifically to facilitate private investment into domestic low-carbon, climate-resilient infrastructure
(LCR) and other green sectors such as water and waste management. ” According to the Coalition for
Green Capital (CGC) -- a non-profit Green Bank advisory organization -- a Green Bank is fundamental "a
focused institution, created to maximize clean energy adoption. ”

6
 A green bank is not to be confused with green banking which is undertaken by commercial banks
which involves being conscious of lending decisions, operating from “green” building, reducing power
consumption, using paperless technology, etc.
The new institutional mechanism of green banks leverages public funds to make private investments
in clean technologies. They can become a focal point in helping implement NDCs and achieving SDGs
by creating financial products to address market barriers. Many of the projects linked with NDCs and
SDGs' achievement often find little support with either large investment banks or venture
capital/private equity funds.
So, how are green banks different from other financial institutions? We can distinguish green banks in
several ways:
1. They focus on commercially viable technologies.
2. The source of capital is dedicated to a social or environmental purpose.
3. The focus is on leveraging private investment.
4. It is based on the relationship with the policymakers and the government.
How does a green bank work? Typically a green bank will raise resources from public and private
sources. Private sources include bilateral and multilateral assistance and institutional funding. Public
sources of funds include funding from the government mainly in the form of grants. They may also
raise capital of their own. However, these banks typically do not take deposits. These funds are then
deployed in green projects that scale up climate solutions and enable multiple co-benefits, including
job creation, pollution reduction, energy access, etc. These goals are achieved through the creation of
several products and tools. These include co-lending/financing (debt and equity), risk mitigation and
credit enhancement (guarantees, first loss, green bonds), innovative financing (tax credits, lien-based
financing), debt forgiveness for decarbonization, etc. They fund projects in areas like renewable
energy, energy efficiency, clean transportation, coal plant retirement, waste management, bioenergy,
adaptation and resilience, agriculture, and land use. The benefits are climate change mitigation, clean
air and water, resilient infrastructure, etc. through active interventions with support from funds from
green banks.
Figure 1: Working of Green Bank

Source: Adapted from Adriana Becerra Cid et al., State of Green Banks 2020, Green Bank Design Platform,
https://www.nrdc.org/sites/default/files/state-green-banks-2020-report.pdf

7
There are several green banks around the world. In the US there is the Connecticut Green Bank, the
UK Green Investment Group in the UK, Technology Fund Switzerland, The Green Finance Organisation
in Japan, Masdar in UAE, Green Tech in Malaysia, India’s Tata Cleantech Capital Limited (TCCL), etc.

Role of Green Banks

Green banks play a critical role in helping a country meet its NDC and SDG targets. This is done
through many means.
1. They are getting together providers of climate finance through consortium arrangements with
development finance institutions and other players. They act as local partners and investors in
projects that decarbonize through climate-resilient projects.
2. They increase the bankability of the projects by creating financial products to mitigate investor
risk on initial transactions in low-carbon, climate-resilient sectors.
3. Given the control they exert on projects, they can drive project developers and investors to adopt
impact metrics. This helps track progress toward national climate and sustainability targets.
4. They help by guiding investors on the technical and economic feasibility of new technologies.
5. They help build a knowledge base and capacity within the financial sector.
6. They can assist policymakers by assisting them in understanding technologies that create
enabling environments for low-carbon, climate-resilient projects.

Case Study: UK Green Bank

Its definition of 'green impact' relates to the positive contribution to five specific measures. These
are reduced greenhouse gas emission, increase natural resource efficiency, protect the natural
resources, protect biodiversity, and, promote environmental sustainability. They call them 'Green
Purposes.' Every investment must contribute to at least one of the purposes, and many contribute
to more than one.
UK Green Bank has arranged or committed capital in excess of GBP 20 billion. 198 MtCO2e
greenhouse gas emissions have been avoided. This is equivalent to removing 2.5 million cars from
the road. It has supported 568,243 GWh renewable energy generation, equivalent to the energy
consumption of 5.8 million homes.

Source: UK Green Investment Group, https://www.greeninvestmentgroup.com/assets/gig/corporate-

governance/GIG_ProgressReport_2020.pdf

Case Study: Green Liberty Bond Program

In July 2020, Connecticut Green Bank in the United States launched an innovative Green Liberty
Bond program modelled on the World War II Series E bonds: 10-year, small-denomination bonds
that allowed ordinary citizens to invest in the war effort. The Green Liberty Bond program issues
small denomination ($1,000) green bonds that are used to fund rooftop solar, and that are
accessible to individuals. Projected revenues from solar home renewable energy credits that two
Connecticut utilities will be purchasing from the Green Bank at a previously agreed-upon price
over the 15-year life of the bond are about $25 million. Through their use of proceeds for green
projects that combat climate change, these bonds aim to contribute to several SDGs: poverty
eradication, reduced inequalities, good health and wellbeing, affordable clean energy, decent work
and economic growth, and sustainable cities and communities.

Source: State of Green Banks 2020, https://rmi.org/insight/state-of-green-banks-2020/

8
 Risk mitigation

Not only do green banks provide financial support to lenders, but they also help mitigate risks.

Credit risk: One of the key issues in lending is that assets can become stranded. The bank is
unable to recover its lending as fossil-fuel-based technology comes to a stop, and renewable
energy gets deployed. The cash flows of the fossil-fuel-based technology are disrupted, leading
to an inability to pay interest and/or principal. Green banks can help mitigate risks through their
arsenal of tools.

Legal risk: Compliance with legal, environmental rules could have repercussions for banks and
investors. Companies and banks may have to share legal risks. Green banks mitigate this risk by
shifting to cleaner technologies.

Reputation risk: Green banks help companies reduce reputation risk by helping them shift to
cleaner technologies. Not only they help save reputation loss from dirty technology they may
help companies enhance their reputation by utilizing cleaner technologies. Reputational risk is
also mitigated by focusing on social concerns.

Green banks have proven to be a successful model for channelling climate funds. They help drive
the private sector into clean technology investments and developing new green markets. Green
banks are helping companies transition to low carbon and climate-resilient technologies. This
helps bring companies and countries to align with the Paris Agreement by creating capabilities
and capacity for the transition. Capital pools such as pension funds and sovereign wealth funds
are increasingly being utilized to capitalize on green banks. They are also partnering to co-invest
in projects that promote energy transition. Green banks are becoming a focal point to access
available but hard to secure funding. Given these trends, green banks are slowly occupying the
banking space where doing good goes in tandem with doing well.

1. https://www.euromoney.com/article/b1j97rjr74vd00/sustainable-finances-biggest-problems-by-the-people-who-know-best
2. https://www.unepfi.org/banking/bankingprinciples/
3. https://sciencebasedtargets.org/financial-institutions/
4. http://there100.org/
5. https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement
6. https://en.wikipedia.org/wiki/File:A_RES_71_313_E.pdf
7. https://www.oecd.org/environment/green-investment-banks.htm
8. https://read.oecd-ilibrary.org/finance-and-investment/green-investment-banks_9789264245129-en#page1
9. https://coalitionforgreencapital.com/what-is-a-green-bank/

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 FACULTY ZONE

Q&A WITH PROF. PRATEEK SHARMA

Prof. Prateek Sharma is a part of the Finance and

Accounting domain at IIM Udaipur. He completed his
PGDM in 2011 and FPM in 2015 from IIM Lucknow. Prof
Prateek is currently researching investor behavior in
transactions involving cryptocurrency in collaboration
with professors from IIM Calcutta.

1. What are some of the broad factors ailing the Indian Economy leading to fluctuating GDP growth
rate?

Even if one looks at the pre-pandemic period, the Economy was in a steady decline for the last 3 to 4
years. You can see this in the growth rates of core sectors like manufacturing, construction, and
agriculture. There are several structural problems; the implementation of GST is plagued with various
issues that are disproportionately severe on the informal sector of the Economy. This is on top of the
shock of demonetization that again led to a severe loss of employment and economic activity in the
informal sector. As an economy develops, labour force migrates from the agrarian sector towards
construction that is both labours intensive and also provides low-skill employment. However, the
construction sector in India is really depressed both from the demand side and also from the liquidity
side. Construction activity has a lot of effect on allied industries such as cement, steel, housing
finance companies, among others. The automobile sector is facing a similar cyclical downturn due to
demand-side pressures for some time now, leading to large job losses. The relation between GDP
growth and unemployment rate has broken, where even profitable growth in GDP numbers is not
generating a commensurate increase in employment opportunities. This erodes the purchasing power
of consumers and engenders demand-side stress. Corporate earnings are stagnating and declining
sharply as a proportion of GDP, the ratio has almost halved in the last 3-4 years.
There can be some justifications for this effect. Still, to the extent we think that listed companies'
corporate earnings is a reliable (audited) number, it creates some uncertainty measurement of GDP.
That is another reason why GDP numbers could have fluctuated, and I do not have an in-depth
understanding of the issue. In 2015 India changed the method for estimating GDP. It has been roundly
criticized as providing an overestimate of the GDP by the IMF and notable economists like former
Chief Economic Advisor Arvind Subramanium. I do not know enough to comment here, however, if GDP
is indeed overestimated that can explain why corporate earnings to GDP ratio is declining and would
also explain the anomaly of the high unemployment rate (some estimates suggest unemployment is at
a 45 year high) which doesn't square with the high GDP growth reported in some of the past years.
Of course, all this gets compounded by COVID-19 pandemic where India is one the worst hit in terms of
decline in GDP. However, it is noteworthy that GST collections were at a 19-month low in September of
2019, well before the COVID-19 crisis.
10
2. With the increasing awareness about financial scams due to social media and OTT platforms, how far can
the common people comprehend and mitigate financial risk?

While increased awareness, better media coverage, and more information are always welcome. I am not sure to
what extent it actually helps common people mitigate financial risks. First, an information overload does not
necessarily help you in making sound financial decisions. Second, more information channels do not
necessarily mean that information asymmetry between firm insiders and outsiders is reduced. We see this
repeatedly happening almost with a scam of the month with ILFS, LVB, Karvy. Access to information after the
event has limited utility in managing financial risk. Comprehending this flood of information is another
challenge. Then, there is an issue of credibility of your information source with many sources spewing
disinformation or having poor journalistic credentials; it is easy to get mislead by disinformation. More
information also accentuates behavioral biases—for example, confirmation bias where we seek selective
information that confirms by the existing view. So, I think burger king is a great stock I should subscribe to its
IPO at 60, then the price doubles I should still buy it at 130 because everyone on social media or money control
forum is buying it, then the price becomes 200, and there are countless people justifying why it should be 300
next week, maybe because burger king has great expansion plans, and then you buy at 220, and then it crashes.
You start with a prior that burger king is a good stock, and you find enough sources online now to confirm your
priors. This leads to risky behaviour by unsophisticated investors who do not fully appreciate the risks they are
taking. More information is not necessarily good for financial decision making.

3. With the increased impetus in the "Boycott China" trend followed by the change in government in the
USA, how is the global financial market going to respond to the scenario?

This is an interesting problem, and Professor Vishwanathan and I explore the global restructuring of supply
chains away from China. Several drivers for this phenomenon have been proposed in, such as increased
tariff, national security concerns, and capital flows towards more ESG sensitive business, diversification of
supply chain to mitigate risks of disruptions, political sentiment, and tax policies that favour reshoring and
domestic manufacturing, among others. One way global markets can respond is they ascribe premium to
companies that compete with Chinese businesses and have similar advantages in low wage levels. So
maybe a firm from the Philippines or Thailand gets a share of a manufacturing business that is in the
process of moving away from China. Another thing to examine could be valuation discounts due to the
substantial costs of supply chain restructuring. So are financial markets, implying that long-term earnings
of certain companies will be affected because they have a large foreign asset which they might need to
liquidate as they restore operations towards home countries and closer to their consumers. These are
testable hypotheses, and we are looking to examine some of these questions.

4. The Fed has been pumping money in the equity and the money markets. Why is Fed playing an
unconventional role when compared to other central banks?

Actually, the Fed is not playing an unconventional role; this is a concerted effort by global central banks to
stave off a major financial crisis by proving almost infinite liquidity and backstopping all risky assets. So,
Bank of Japan, for example, is directly purchasing Japanese equities, something that the Fed has never
done (and does not intend to do in the near future). So much so that BOJ is now the largest investor in
Japanese equities. The European central bank is now outpacing the Fed in the monetary stimulus (QE)
providing to European economies. Basically, buying even more bonds than the Fed.

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5. Due to COVID, the market sentiment hit rock bottom but for big companies' stocks, the share price
rose back at a very high rate. How does news improve the investors' confidence in the market?

The primary reasons for the increase in stock prices are rock bottom interest rates and a massive
injection of liquidity. Following are the three main justifications for high stock valuations.

I. Stock market is not the Economy. Stock market price (in fact, any market price) is forward-looking. This
means the price of an asset is the discounted present value of all future cash flows. Which for stocks are
all the cashflows that equity holders receive. Forever, which means this quarter's/year's earnings, even if
they were horrible no longer matter, this cashflow is done and no longer matters. What matters is the
prospect for future earnings, and the market seems to think that prospects for future earnings of saying
an HDFC Bank is awesome given that interest rates will increase going forward making banks much more
profitable than they currently are.

II. Inflation is not just an increase in food prices or oil prices, assets also inflate. Look at the attached
image, the synchronized increase in money supply in unprecedented. The M2 money supply has almost
quadrupled. All this money needs to be parked somewhere. In a healthy economy, money goes towards
investments, building plants, factories, etc. In an unhealthy economy, money is essentially hoarded in
non-productive assets gold, equities and real estate, and speculative gobbledygook like bitcoins. It is not
just the stock markets that are at a tear. US Homeowners are $1 trillion richer thanks to the pandemic-
driven housing boom, yes that is a trillion with T. https://www.cnbc.com/2020/12/10/homeowners-gain-1-
trillion-from-pandemic-driven-housing-boom.html

III. Look at US interest rates or any other country's interest rates: https://tradingeconomics.com/united-
states/interest-rate. Think about what happens to prices when discount rates go down by 2-3 percentage
points. Equities are perpetual assets which means they can be thought of as really long-duration bonds,
really sensitive to interest rates, especially cashflows that you the equity holder are supposed to receive
far out in the future 10,20 30 years down the line. So prices of equities will increase if interest rates are
cut sharply. Does it mean we are not in a bubble? No, absolutely not, the valuations are extremely high
based on the companies' earnings, the Market Cap to GDP indicator that Mr. Buffett likes to use to get a
sense of how expensive stock market is. It is at an all-time high.

6. The IPO market has been doing really well, even during such times. What makes the investors want
to park their funds in newly listed companies instead of the previously listed public companies?

For many of the same reasons I mentioned earlier. With IPOs, it is a general practice that offers price is
usually at an attractive level, a phenomenon known as IPO underpricing. Where companies are trying to
place their initial issue of shares successfully among investors at the primary market price the issue
very attractive so that these initial investors have a decent upside. We are currently in turbocharged
liquidity fuelled rally, where anything even mildly perceived as cheap or undervalued is being lapped up
very quickly. This explains the recent outperformance of traditionally lagging stocks in the PSU pack as
well. This liquidity boom is fuelling IPO speculation like in the base of the Burger King IPO, where the
stock tripled in three days after listing. With new firms and limited data history, it is also difficult to get
a sense of the intrinsic value of the stock which further fuels this speculative behaviour. As of now, IPOs
are being perceived as a certain lottery where you double your money on the listing. Happy times I
guess; unfortunately, they do not last forever.

12
7. Gold prices remained stable throughout most of this decade but shot up during the crisis in 2011
and 2020. What is the reason for this inverse correlation during this crisis?

Gold has two basic features; it acts as a safe haven asset, and it serves as a hedge against inflation.
Safe-haven assets are those assets where investors invest in times of heightened uncertainty. Inflation
in the current scenario would mean that currencies, Rupees, or dollars are losing their purchasing
power due to large liquidity infusions, so you could park your money in assets such as gold or real
estate and ride this inflation wave as the prices of these assets increase. If you stay in cash, then
everyday inflation erodes some amount of your purchasing power. Both these drivers work at full
throttle at the beginning of a crisis, high level of panic and uncertainty and a large amount of liquidity
being infused to control the panic. However, as recovery sets, QE is tapered off, and liquidity is slowly
removed from the system, both these drivers become ineffective, there is no panic post recovery and
liquidity reduction strengthens the purchasing power of the currency. This will happen at the
culmination of the current crisis cycle, but it is still some way off as the Fed has signalled loose
monetary policy at least till 2023.

8. Can we ask you about your present research underway?

Following a surge in Bitcoin prices, some companies are trying to exploit investor sentiment towards
bitcoin by changing their corporate names to include cryptocurrency-related buzzwords like "bitcoins"
"blockchain" etc. I am currently working with a colleague in IIM Calcutta to study the investor behaviour
around such corporate name change announcements. Anecdotal evidence is interesting so far. For
example, an ice tea company, Long Island Tea changed its name to the Long blockchain. The stock
price jumped by 289 per cent on this announcement. However, that is all that they did; they still sell the
same ice tea, which would then justify this increase in value is an interesting question to explore.

13
 FACULTY ZONE

Q&A WITH PROF. BHAVYA SINGHVI

Prof. Bhavya Singhvi is part of the Finance and

Accounting domain at IIM Udaipur. An alum of
Indian School of Business, Hyderabad, and Ph.D.
from BITS Pilani, Hyderabad, Prof. Bhavya is a
Chartered Accountant and a commerce graduate
from Mohan Lal Sukhadia University, Udaipur.

1. What is earnings management? How does positive and negative earnings management impact
company? What are some of the interesting aspects of earnings management?

Earnings management is any action taken by the management to intentionally manipulate earnings; in
other words, report an earnings number different from the actual earnings. One should note that it is
different from making unintentional errors in estimation. It is usually done to meet a benchmark
earnings number- greater than 0, meeting or beating analysts' forecasts, or beating the trends,
smoothing the earnings trend etc. The underlying motivation lies in the management's assumption
that the earnings number is one of the most important pieces of information used by market
participants for valuing the business and thus it is important that the disclosed number meets the
market expectations. As a result, at times, management also tries to manage the expectations of the
market participants. In case a higher than expected earning number is obtained, managers have
incentives to smoothen the trend to safeguard from higher expectations in the next period. This gives
rise to downward earnings management. Earnings management is a very broad topic of discussion,
and numerous research papers have looked into this phenomena. These studies have unearthed many
determinants and consequences of earnings management. Earlier it was believed that managers only
use manipulation in accounting estimates to achieve this. However, recent studies show that
managers take various real decisions, like changing the level of investment in R&D, to achieve their
target earnings number. This is called real earnings management. By indulging in earnings
management, the management shirks from its responsibility to provide a true and fair view of the
business' performance. It also impacts the quality of the business' information environment, which
then creates issues for price discovery in the stock market, as shown by numerous studies. The role
of corporate governance in checking this behaviour is another area of active research, and numerous
studies show that stronger corporate governance is negatively associated with earnings
management. The most interesting aspect about earnings management for me is identifying it, i.e.
how one can differentiate between intentional earnings management and unintentional estimation
errors or impact of some business decisions that show up as manipulated earnings in the data.
Another interesting aspect is the use of machine learning models to identify these instances to raise
red flags during audits.
14
2. How big a challenge is remote auditing for the auditors since they are unable to visit client
sites now and have little peer support working from home? What are the emerging risk areas that
auditors are facing during COVID?

This year has been challenging for all professions, but we are all a resilient bunch and have
innovated and adapted tremendously in these times. The audit profession is not insulated from the
pandemic. It has been a year of multiple regulatory extensions to audit timelines which shows that
it is widely accepted and expected that the profession is facing a lot of issues, including access to
clients. The pandemic raised doubts on the validity of the assumptions underlying estimates used
in areas like revenue recognition, impairment of non-financial assets, fair value measurement etc.
The models used to assess the validity of going concern assumption must have been calibrated
too. However, we have also seen the profession making efficient use of online and digital
technology. The professional bodies were also really proactive in issuing guidelines to steer the
auditors through these unforeseen times. As a researcher, I find it really interesting to analyse the
overall impact of the pandemic on audit quality. While it is amply clear that auditors' access to
clients was hindered, but I believe that technology cushioned the overall impact this could have had
on the audit quality. The industry now has access to software solutions which comprehensively
capture the audit trail and provide it on the cloud. The competition in this space has led to price
rationalisation, increasing the accessibility, and technical upgradation, increasing the efficacy of
these solutions. Additionally, it will be interesting to analyse the impact of the pandemic induced
uncertainty on auditor attributes, like professional scepticism, which have a direct impact on audit
quality.
3. How will accounting go forward change owing to firms' convergence towards AI in accounting
and auditing?

In my opinion, there are three important changes that are happening to Accounting owing to
technical advancements in AI. First, there is a push towards automating the accounting function. At
face value, this looks like an end of the profession, but in reality, this moves costly resources from
the mundane to the interesting. The freed-up resources will be more actively used in generating
more insightful reports to help the stakeholders in their decision making. So I see a movement from
the technical aspects of accounting towards the more analytical aspects of accounting- a shift in
the long-held identity of accountants as book-keepers. This is going to reduce human errors in
accounting and make the information more timely and reliable. Better information will obviously
lead to better decisions by the stakeholders, thus increasing the value of accounting. Second, given
the increase in the timeliness of accounting, we will slowly see the profession move towards real-
time audits from the present practice of ex-post audits. Once again, the basic aspects of audits,
dealing with the audit trail- vouching and verification- will be automated, and the auditors will be
able to devote their time on analytics to better identify frauds and errors, thus increasing the value
of audits. Third, given this overall improvement in the quality of information, we will see
improvements in the forecasting abilities of the management. This will help in moving towards
more proactive management rather than reactive management of issues faced by new-age
businesses aided by a stronger and more relevant accounting function. While these look like great
outcomes, it is not that AI will lead to all positives. A possibility is that the technology will also be
used to reverse engineer better methods to fraud the systems. But that possibility is omnipresent,
even absent AI. In my opinion, the development is a net positive. I am hopeful that the regulators
will be better equipped to find these instances in a more timely manner aided by AI. I am also
hopeful that we will be able to build checks and balances in the systems to make this technology
an information equaliser instead of an aid to a few in the know.

15
 COVER STORY: IPO ANALYSIS

2020: The Year of Blockbuster

IPOs Amidst the Uncertainties

2020 was a year full of roller coaster rides. A year Incorporated in 1998, SBI Cards and Payment
full of extremes not only for mankind but also for Services Limited is a subsidiary of SBI,
the financial markets in totality. NSE Nifty Index India's largest commercial bank in terms of
hit the, then all-time high in Jan 2020 at 12,430 deposits, advances and the number of
points but fell to a 3.3 year low on March 24 to branches. The company is the 2nd largest
7,511 points. The companies delayed their IPOs on credit card issuer in the country, with an
the wake of market uncertainty coupled with the 18.1% market share of the Indian credit card
lost sentiment from the Foreign Institutional as of November 30, 2019
Investors (FIIs).
SBI Cards offers a wide range of credit cards
The year started out badly for the stock markets
to individual and corporate clients, including
and even for the primary market. The investors
lifestyle, rewards, shopping, travel, fuel,
moved to side-lines in the first two quarters with
banking partnership cards, and corporate
FIIs and NIIs pulling out money from the capital
cards, etc. SBI Cards has partnered with
markets. But post the June recovery, the IPOs
several leading names across industries,
surprisingly delivered a ground-breaking
including Air India, Apollo Hospitals, BPCL,
performance.
Etihad Guest, Fbb, IRCTC, OLA Money and
By all accounts, 2020 was a year of contrasts: Yatra, amongst others.
investors buffeted through a pandemic-induced
bear market, a V-shaped recovery in stock prices,
an economic recession, and a turbulent political
slugfest all in the space of 9 months. Even as
stocks get roiled in the penultimate week of 2020,
the benchmark 50-share Nifty is still up a
respectable 8 per cent year-to-date; and from its
March lows, the recovery is a stunning 78 per cent.
Below are the blockbuster IPO’s of 2020 that
showed a spectacular performance in the capital
markets.
SBI Cards Ltd
Note: CAGR of the above numbers have been calculated
on annualised figures of FY20

Note: Market cap and PE multiple pertains to figures on

the issuance

Note: The above chart shows the price movement from listing
date, i.e. March 16, 2020, to December 23 2020
16
 Rossari Biotech Ltd IPO
Note: The above chart shows the price movement from listing
date, i.e. July 23, 2020, to December 23 2020
Incorporated in 2009, Rossari Biotech Ltd is a
manufacturer of textiles speciality chemicals. It
provides customised solutions to the apparel,
animal & poultry feed, and FMCG industries by
offering a diversified product portfolio. Rossari
Biotech operates in 18 countries, including India,
Bangladesh, Vietnam, and Mauritius. As per the
F&S Report published on September 30 2019, it is
the largest textile speciality chemical
manufacturer in India. The business of the
company can be classified into three main
categories which are textile speciality chemicals;
animal health & nutrition products; and home,
personal care & performance chemicals. The
company has 1,948 different products range
under these three categories.
Note: Market cap and PE multiple pertains to figures on the
issuance
Happiest Minds Technologies Ltd IPO
Note: The above chart shows the price movement from
listing date, i.e. September 17, 2020, to December 23 2020
Incorporated in 2011, positioned as "Born Digital.
Born Agile" Happiest Minds Ltd is a Bangalore
based IT service provider company. The business
of the company is divided into three categories:
Digital Business Service (DBS), Product
Engineering Service (PES) and Infrastructure and
Management Security Service (IMSS). The DBS
unit offers digital application development &
modernisation, assistance in designing & testing
of operations, management of the platform,
consulting and domain led offerings. PES unit
helps by transforming the potential of digital by
making the product secure and smart. Wherein,
IMSS provides an end-to-end monitoring and
management capability for applications and
infrastructure of the clients.
17

Note: CAGR of the above numbers have been calculated on
annualised figures of FY21
Note: Market cap and PE multiple pertains to figures on
the issuance
Route Mobile Ltd IPO
Note: The above chart shows the price movement from listing
date, i.e. September 21, 2020, to December 23 2020
Incorporated in 2004, Route Mobile Limited is
among the leading Communications Platform as a
Service (CPaaS) provider and a tier-one
application-to-peer (A2P) service provider. Its
enterprise communication services include new-
age solutions in Messaging, Voice, Email, and SMS
Filtering, Analytics & Monetization.
The company operates in 3 business verticals:
1. Enterprise: The Company provides a cloud-
communication platform as a service to
enterprises, over-the-top players, and mobile
network operators around the world. 2. Mobile
Operator: Services in this segment include SMS
analytics, firewall, filtering, monetisation, and
rubbing solutions. 3. Business Process
Outsourcing (BPO): The Company provides a
range of BPO services including client support,
technical support, booking, and collection
services. The company's clients include some
of the world's largest organisations, including
several Fortune Global 500 companies.
Note: CAGR of the above numbers have been calculated on
annualised figures of FY21
Note: Market cap and PE multiple pertains to
figures on the issuance
18
 Chemcon Speciality Chemicals Limited IPO

Note: Market cap and PE multiple pertains to figures

on the issuance

Computer Age Management Services Ltd

Note: The above chart shows the price movement from

listing date, i.e. October 01, 2020, to December 23
2020

Incorporated in 1988, Chemcon Speciality

Chemicals Ltd is a manufacturer of specialised
chemical products, i.e. HMDS and CMIC. Its
product portfolio includes oilfield chemicals
(Calcium Bromide, Sodium Bromide, and Zinc
Bromide), Pharma intermediates, Silanes, and
chemicals contract manufacturing work. Chemcon
Chemicals is a leading manufacturer of
Pharmaceutical chemicals and generates
maximum revenue from this particular segment.
Hetero Labs Limited, Laurus Labs Ltd, Aurobindo
Pharma Ltd, Lantech Pharmaceuticals Ltd,
Macleods Pharma Ltd are the key customers of its
Pharma chemical business
Note: The above chart shows the price movement from
listing date, i.e. October 01, 2020, to December 23 2020
Computer Age Management Services (CAMS) Ltd
is a technology-driven financial infrastructure and
service provider. It is India's largest registrar and
transfer agent of mutual funds. As per the Crisil
Nov 2019 report, it has a 69.4% mutual fund
aggregate market share. CAMS currently provides
technology-based services including dividend
processing, transaction origination interface,
payment, transaction execution, dividend
processing, intermediary empanelment, report
generation, investor interface, settlement and
reconciliation, compliance-related services, and
brokerage computation.

19

Note: CAGR of the above numbers have been
calculated on annualised figures of FY21
Note: Market cap and PE multiple pertains to figures on
the issuance
Mazagon Dock Shipbuilders Limited
Note: The above chart shows the price movement from
listing date, i.e. October 12, 2020, to December 23
2020
Incorporated in 1934, Mazagon Dock
Shipbuilders Ltd is India's leading Defence
public sector undertaking shipyard under the
Ministry of Defence. Mazagon Dock is primarily
engaged in constructing and repairing warships
and submarines for the MoD and other types of
vessels, i.e. cargo ships, multipurpose support
vessels, barges and border outposts, tugs,
dredgers, water tankers, etc. for commercial
clients. It is the only shipyard to build
destroyers and conventional submarines to be
used by the Indian Navy. The business has two
key operating divisions - Shipbuilding division
that undertakes to build and repairing of naval
ships, whereas Submarine and heavy
engineering division includes building,
repairing, and refitting of diesel-electric
submarines. Till 2020, the company has built
795 vessels, including 25 warships, four missile
boats, three submarines, 6 Leander class
frigates, 3 Godavari class frigates, 3 Shivalik
class frigates, three corvettes, and six
destroyers
Note: Market cap and PE multiple pertains to figures
on the issuance
20
 Burger King India Limited
Note: The above chart shows the price movement from the
listing date, i.e. December 14, 2020, to December 23 2020
Burger King is India's fastest growing quick-
service restaurant chains. It is the second-largest
fast-food burger brand with having 216 Burger-
King restaurants and 8 Sub-Franchised Burger
King restaurants.
It has an exclusive right to establish, develop, and
operate Burger King branded restaurants in India.
It aims to cater to the Indian tastes and
preferences through adding new food offerings to
its product portfolio. The company establishes its
branches in high traffic areas in key metropolitan
areas and cities across the country.
Note: CAGR of the above numbers have been
calculated on annualised figures of FY21
Note: Market cap is on the issuance
Mrs Bectors Specialities Limited
Incorporated in 1995, Mrs Bectors Food
Specialities Ltd is one of the leading companies
in the premium bakery segment and premium and
mid-premium biscuit segment in North India. The
company's product portfolio mainly consists of
two categories of products; Biscuits (cookies,
creams, crackers, digestive, etc.) and Bakery
products (bread, buns, pizza bases, cakes, etc.).
All of its products are manufactured in-house
across six strategically located manufacturing
units in 5 different cities, i.e. Maharashtra,
Karnataka, UP, Himachal Pradesh, and Punjab.
The company has a very strong distribution
network of 154 super-stockists and 644
distributors supplying products through 458,000
retail outlets and 3,594 preferred outlets. It sells
its products to 23 states in India and also exports
its products under its own brand name and third-
party private labels to 64 countries all over the
world.
Note: CAGR of the above numbers have been calculated on
annualised figures of FY21
Note: Market cap and PE multiple pertains to figures
on the issuance
21
Companies such as Route Mobile, Mazagon Docks, Happiest Minds Technologies, and Burger King
India, among others, saw multifold oversubscriptions, and nearly all IPOs were priced at the upper
end of the price band. Even after listing, most have continued to sail through smoothly, in line with
gains in the broader markets.
But what concerns market watchers and investors today are whether these IPO buys are based on
the fundamentals of the companies, or if these are profit-taking moves by promoters and retail
investors. Retail investors have skewed the markets marginally.

This new breed of investors namely ‘Robinhood’ investors — are mostly people who took up online
trading via emerging platforms such as Groww, Zerodha, Paytm Money, Upstoxx and others during
the pandemic-induced lockdowns. With more time on their hands, increasing awareness of cost-
effective online trading platforms, and a collective push by these start-ups to get more people to
“grow their money even when they’re asleep”, mom-and-pop investors have flooded the markets.
Despite short-term gains, the market is largely still looking at solid businesses with robust balance
sheets that are insulated from broader industry fluctuations.
Sectors that outperformed in the IPO markets this year included technology and healthcare. Route
Mobile, Happiest Minds Technologies, Rossari Biotech, and Gland Pharma saw solid IPOs and
debuts and were among the biggest IPOs overall in 2020

22
The above chart shows the humongous money that has been mobilised by the Indian IPO market in the
year 2020 amidst the uncertainties prevailing on account of the novel coronavirus.
On the one hand, the economy is struggling to pick up demand pertaining to private investments and
rural consumption, and on the other hand, good investor sentiment is gauged in the capital markets
from across the category of investors. Retail investors on an average have oversubscribed for around
30x on these specific IPO's mentioned above. HNI investors, on the other hand, have shown a
phenomenal positive sentiment by oversubscribing by 338x on an average in all the above IPO’s. QIB’s
on an average have bet on the issues by oversubscribing for 94x.
Total Potential subscription depicts the total subscription money mobilised by the Indian capital
markets for the IPO’s over and above their equity offering by the companies. In absolute terms, the
total equity offered by the companies stood at Rs 16,510 Crores in 2020 whereas the total market
demand for these IPOs depicted by the total potential subscription stood at Rs 9,11,568 Crores in
totality. Looking at the hawkish trend in the amount of money rolling in this segment, Companies that
had withdrawn or delayed their IPOs are now returning to the market.

Historical Nifty movements Vs Historical median PE

23
Source: https://nifty-pe-ratio.com/

The historical movements of the nifty 50 index have given a compounded annual growth rate of 13.25
% from 890 points to 13,749 across 22 years. At the same time, the median ratio of price to earnings
multiple across 50 different stocks in the Index has grown at a compounded rate of 5.41% for the
respective period. Although, the PE ratios are mean reverting and hence would not be on the similar
lines as above. The current median PE of the Index is trading at a multiple of 37.81x coupled with the
data being four std deviations from the mean indicating an outlier statistically. This either shows the
confidence of Foreign Institutional Investors in the Indian equity markets amidst the current
pandemic scenario or certainly heavy corrections on account of profit bookings may be a possible
scenario in the foreseeable future. The potential earning capacity of businesses could be a major
driving force behind the capital inflows.

Fundamental Valuation Ratios across the Globe

Source: https://www.starcapital.de
24
The chart shows the current Median PE multiple of countries across the globe. Countries having their
price multiples above the mentioned median are in Red. Markets are forming a part of the BRICS
nations, which are perceived to be the most potential lot amongst the emerging markets category.
Three countries, namely China, South Africa and Russia, are below the median and hence look
undervalued relatively. Besides, India and Brazil are in the prominent Red zones indicating either an
overvaluation (bound to take corrections) or perceived as strong emerging economies for the
upcoming post-pandemic recovery.

Developed markets have higher relative valuation across all price multiples in totality. Few other large
economies like China, United Kingdom and Russia are trading below aggregate book values and
turnover relative to their respective category of markets. However, United kingdom has lower
mentioned multiples than the emerging markets weighted average in spite of being a developed
market. India being a BRICS nation has higher price multiples than the developed markets weighted
average whereas Brazil is still lacking behind in demanding multiples pertaining to aggregate book
value and sales
IPOs to watch out for in 2021

Sahil Waingankar
Akshit Jindal
( IIM Udaipur)
25
 ALUMNI ZONE

The evolution and challenges of the Life

Insurance industry

The sector with tremendous growth potential

– that is how the life insurance sector is
often touted as, thanks to the low insurance
penetration and density in the country among
its comparable peers. And that is visible with
premium growth at CAGR of 16% between
FY15 and FY20, although just 3% growth in
the number of policies sold highlights
challenges being faced by the industry in
improving overall reach to customers. While
the industry has progressed well since its
privatization in 2000, it has witnessed
significant disruptions only over the last half
a decade. Driven by regulators, technological
developments, and customer behavior, these
disruptions have completely altered the
sector’s landscape and have presented First, with open architecture coming in,
unique challenges to be solved in the near bancassurance has gained prominence, improving
future. its contribution from 47% to 55% over the last five
years, as shown in chart 1*. Next, digital
disruptions have helped the industry in bringing in
process & cost efficiencies. And lastly, recent
developments in analytics have helped the players
in putting the focus back on the number of policies
sold, and more importantly, the number of lives
covered. Chart 2* demonstrates how the industry
has recovered from a steady fall in a number of
policies between FY12 and FY16 to slow but steady
growth, although the outbreak of covid-19 did put a
temporary break to it in FY20.

Let us deep dive into how each of these 3 disruptions – open architecture, digital evolution, and
analytics to see how they have impacted the industry over the last few years and what challenges they
have presented.

26
*For private players; source: IRDAI Annual Reports and Life Insurance Council New Business Performance Report
A. Open Architecture:
The framework published by the regulator in 2015
allowed corporate agents (including banks) to
partner with up to 3 life insurers. The aim was to
provide more choices to customers while
correcting the skew created by insurers having
large bank partners. This instilled a threat for
incumbents while presenting opportunities for
others. The move resulted in bancassurance
gaining even more prominence and triggered
efficiency measures across the industry as each
player either wanted to ring-fence existing
partnership or impress the potential partners.
While the success of the policy so far is
debatable, the limited instances in the industry
present a win-win situation for banks & insurers.
HDFC Life partnering with Tata AIA and Aditya
Birla Sun Life Insurance is a perfect example. The
two insurers have grown at 39% and 27%
respectively between FY18 and FY20 post their
tie-up with HDFC Bank, without really impacting
the incumbent – in this case, HDFC Life Insurance
(growth of 12%, in line with past growth). Another
example one can site is AU Small Finance Bank
helping Future Generali Life to gain some lost
ground.
Today, insurers continue putting in efforts to get
more bancassurance partners because of its
importance. However, success has been limited
because of some key challenges presented by the
ecosystem.
Key Challenges:
(i) Reluctance from banks: ICICI Bank, SBI, and
Kotak Mahindra Bank – 3 of the largest banks
continue to operate with their incumbent partners,
which happen to be their group companies.
Secondly, smaller players continue getting
avoided by banks because of the lack of reach
and experience in managing larger networks. This
defeats the purpose of open architecture and
needs more intervention from the regulator to
make it a success.
(ii) Overdependence & commercial battleground:
All large bancassurance partners currently
contribute over 40% of their partners’ new
business. This has created a significant
dependency on a single partner for insurers as the
exit of the bank from partnerships threatens the
insurer’s existence. The byproduct is the high
bargaining power with the banks, turning the
framework into a commercial battleground –
whoever offers better commercials wins the race,
putting customer preferences on the backburner.
A balanced approach would be needed by all the
involved parties to resolve this scenario
B. Digital Revolution with AI / ML
Post Open Architecture, it became critical for
insurers to have better partner & customer
experience capabilities, and the industry took
advantage of the rapid changes in digital space.
Today all major players source over 90% of the
new policies on electronic platforms, and 70%+
customer service requests are placed through
digital channels. Innovations have taken place
across the policy life cycle:
(i) Customer onboarding: Followed by electronic
onboarding platforms, the industry has embraced
emerging technologies like AI-based intelligent
OCR engines to automatically validate KYC
documents and face recognition & liveliness
checks to replace pre-issuance verification calls.
These measures have helped the players to
reduce processing time while also optimizing
costs.
(ii) Underwriting: This critical aspect of life
insurance has undergone a transformation with
players leveraging their large data sets to develop
intelligent engines replacing traditional, static
rule engines helping them improve cycle time
while enhancing productivity. As an illustration,
manual underwriting of a policy takes over 2
hours (and a salaried employee) vs. a few
seconds taken by the AI-based rules engine.
27
(iii) Servicing: Conversational ecosystems are the
highlight of transformation in life insurance
servicing. The advent of chatbots, WhatsApp, and
voice assistants has allowed customers to place
a service request in just a few clicks or a couple
of voice commands. It has also enabled insurers
to do away with costly contact centers.
(iv) Claims: Today, insurers continue helping
claimants through branches because of the nature
of death claims. However, at the same time, few
players have invested in creating instant claim
settlement platforms integrated with external
ecosystems like death registries and intelligent
risk scoring models to mitigate inherent risks.
Despite all these developments, the industry still
has a lot of ground to cover owing to some
peculiar challenges presented by the country’s
demographic and infrastructure.
Key challenges:
The divide between India and Bharat still exists,
and companies having significant penetration in
semi-urban/rural India and operating in higher age
groups (40+ years) get lower uptake on digital
platforms. Further, the internet infrastructure in
India is still left with much to be desired.
Frequent network issues force distributors to
switch to traditional methods, limiting the usage
of digital assets. Lastly, stringent regulatory
guidelines, limitations of some technologies (e.g.,
OCR for handwritten documents), and high costs
associated with wrong decisions mean that the
companies trade cautiously and slowly. However,
given the pace of technology evolution, some of
these challenges would not live for long.
C. Analytics riding on the digital wave:
The most recent of all disruptions in the life
insurance industry is analytics, where a lot of
progress has happened over the last couple of
years. While a few players are trying out emerging
applications like distributor prospecting and fraud
analytics, the most significant use cases in this
area are up / cross-selling and driving renewal
premiums.
(i) Up-selling / cross-selling: Leveraging their
existing customers’ details, enriched with data
from external ecosystem like credit bureaus,
many players have partnered with credit bureaus
to create analytical models for up / cross-selling.
With the propensity scores, tagged with
recommended products and maximum risk cover
that can be offered without underwriting, these
models are giving insurers low cost – high quality
leads with better conversion rates.
Further, the models can be extended to ‘new to
the company’ leads in partnership with fintech
firms who help with data enrichment based on
limited data points such as name, date of birth,
contact number, and e-mail ID. The biggest
benefit of this is leveraging the bancassurance
partners’ enormous databases to identify the right
prospects. While the success in this area is
limited so far, with access to such a large lead
base is expected to transform the way
bancassurance business is done today.
(ii) Renewal premiums: This is perhaps the oldest
application of analytics in life insurance. With
predictive analytics, companies have been able to
identify the potential ‘defaulter’. This has helped
in streamlining the efforts at the right places. For
example, few companies have stopped calling
certain customer segments that are guaranteed to
pay the premiums on time, thus saving a
significant cost. The whole proposition has
helped companies improve their persistency
scores across cohorts while optimizing the costs.
Being a recent development, analytics is still
evolving and has presented some challenges of
its own.
Key Challenges:
The most significant challenge in the analytics
arena right now is data security. Compliance
teams are often apprehensive about sharing data
with external ecosystems, including
bancassurance partners. Secondly, the conversion
efficiencies are still low, and the models are not
foolproof due to a lack of enough experience.
28
Better data protection policies would improve
confidence in the analytics space as the players
continue to gain important insights & experience.
What does the future hold?
The outlook for the industry certainly looks bright.
Covid-19 has forced the companies to come out
of their shells and take innovative approaches.
Collaboration between the players is on the rise
with collective efforts to improve awareness
about life insurance among the mass, and at the
same time, fight the frauds. The industry today is
poised to create some novel, out of the box
solutions in traditional spaces like products and
financial advice. Combining those with the
adoption of emerging technologies like
blockchain is expected to help the industry in
achieving operational efficiency while mitigating
the risks.
(i) Sachet Products & DIY combos: Short-term,
simplified products and flexibility to the
customers in creating their own offering would be
crucial factors in driving industry growth in the
medium term. Players as well regulators have
both understood the importance of this aspect
and have started taking steps in that direction.
Products like a 1-year duration term plan or a DIY
3-year plan with a possibility to choose from an
array of riders could soon be a reality, triggering
some innovations while making the offering more
comprehensive through flexibility
(ii) Robo Advisories: Highly automated,
integrated Robo-advisors would play a key role in
the digital sourcing channel, while assisting the
human advisors in other channels. These advisors
could suggest the distributors as soon as they are
within say, 2 km from a hot lead - create a couple
of personalized plans based on the client’s
portfolio detailed fetched from external sources
– trigger a WhatsApp communication to the client
– work on a customized script for the distributor
to initiate client engagement – and finally, make
some real-time recommendations based on the
interaction.
Such Robo-advisories would enable smarter and
better reach to the right customers, thus helping
the industry grow at a faster pace.
(iii) IoT and Hyper-personalization: Availability of
customer behavior details, their health data, their
travel patterns is going to lead to some
breakthrough innovations in life insurance.
One may expect highly personalized offers for the
clients simply based on an existing portfolio and
information sent by a smartwatch. Or loyalty
programs may get launched soon – rewarding
those with better health habits. Or one may
receive a quote for enhanced life cover as soon
as she posts a picture of her newborn on
Instagram, offering to cover the mother and the
baby both. The use of IoT is expected would be a
key in personalized offering while also managing
the risks efficiently.
(iv) Blockchain: Blockchain is expected to play a
key role at underwriting and claims stages to
mitigate significant risks faced by the industry
and counter frauds. Collaborative data sharing
models acting as a backbone for such
blockchains would translate into reduced
investigations, faster settlement for genuine
clients while the instant rejection of fraud cases
without each player having to conduct its own
investigation. Better risk management combined
with the customer experience and cost
optimization, would create a win-win for all the
stakeholders involved.
To summarize, while the life insurance industry
has witnessed a disruptive environment over the
last 5 years, it has used it to its advantage to
improve efficiency and enhance partner/customer
experience. With the collaborative approach taken
by key stakeholders to counter the challenges and
leverage emerging trends and technologies, the
prospects for the industry look bright in the near
future with improved customer reach, faster
growth in the top line, and improved profitability
across the players!
Jaydeep Patwardhan
Pioneer Batch
(IIM Udaipur)
Strategy Professional for 7+ years
29
 DO YOU KNOW ABOUT THESE
TECHNOLOGIES IN FINANCE?

"There is nothing permanent except change." -Heraclitus.

Tinraveling back in time, we realize that change

the financial sector is not a new
phenomenon. From the emergence of the
Double Entry system to Blockchain technology,
everything for once is an innovation.

The past decade, however, saw an exponential

rise in innovations in the Financial sector.
Consumer fintech adoption rates in Money
transfer and payments have increased from
18% to 75% globally from 2015 to 2019. For
Insurance, the adoption rate became six-fold, Source: Statista

from 8% in 2015 to 48% in 2019. It suggests Figure 2

increasing awareness of technologies
Here are some of the new technologies in the
connected with the financial services sector on
Financial Architecture:
a global level.
Technology has made the world a global village,
thus transcending international boundaries.
Now it is a piece of cake to raise funds from all
over the world through crowdfunding platforms.

The total number of fintech start-ups in India is

2,712 across segments like payments, lending,
personal finance management, Insurtech,
blockchain, cryptocurrency, AI/machine
learning, B2B fintech, banking tech, digital
Source: Statista
cards, Neo-banks, capital market tech, and
trade finance.
Figure 1

As per Statista, The investment by private equity

and venture capital in India's fintech sector has
increased from USD52.3 million in 2013 to
USD347.7 million in 2018 due to increased
awareness. It is a clear sign of digitalization in
day-to-day transactions by Indians because the
volume of digital payments across India is
12,518.6 million in FY 2020, which was only 17.9
million in FY 2017. Figure 3 Source: Statista

30
Cryptocurrency has become a buzzword.
According to CoinShares, Total investor flow to
cryptocurrency has had a six-fold increase in 2020
from 2019. But what do you think about the future
of cryptocurrency? Well, after 2020, nobody can
predict the mysteries of the world. However, If the
consumer-friendly interface complements the
complex algorithms and if adequate regulations
foster decentralization, cryptocurrency can be the
country's future – not something impossible- isn't
it?
According to the McKinsey report, by 2030
an individual's risk score can be calculated
by AI considering daily activities with IoT
devices that he or she might be wearing (2).
It can help to save millions for the Insurance
companies by introducing better risk
profiling mechanisms.

What's more- Have you heard of Neo-Banks? If not,

get surprised! Neo-Banks are banks with only an
online presence and no physical counterpart. It is
a financial technology offering internet-only
financial services. However, on a side note, In
India, 100% digital banks are not allowed. In the
market filled with traditional banks, non-banks,
and fintech, will the market enable the space for
Neo-Banks to grow? Figure 4

And that's not all! Do you find it tedious to find But with greater technology comes a greater
financial advisors? Well, if yes, here's a real kicker need for regulations. With massive
for you! You can get investment advice, create automation, the magnitude of data increases
your optimal portfolios, get them managed manifold. Technology is again to the rescue
according to the economic conditions, and get tax- here with Regtech, which uses artificial
loss harvesting automatically done- all this with intelligence to automate compliance.
Robo-Advisor, which uses computer algorithms
and minimizes the need for human intervention. Also Read:
In addition to that, technology is also being used
(1 )https://search.proquest.com/newspapers/
to drive innovative and efficient solutions in the
indias-insurance-industry-is-improving-
Insurance sector. Last year, due to Kerala's floods,
efficiency/docview/2282637707/se-2?
the claim verification process was the biggest
accountid=145432
problem faced by insurers. Reliance General
Insurance decided to deploy a verification process
(2)https://www.mckinsey.com/industries/fin
using the video conversation feature. It resulted in
ancial-services/our-insights/insurance-2030-
the reduction of the claim verification time to just
the-impact-of-ai-on-the-future-of-insurance#
three days from two weeks earlier. Rakesh Jain,
CEO of Reliance General Insurance, announced
that the company is investing USD10-12 million Diksha
every year for technological advancement (1). Yet, Parth Patel
the Share of Insurtech funding transactions in (IIM Udaipur)
India was only 4% in the third quarter of 2020
compared to 72% in the USA.

31
 THE INDIAN FINANCIAL MARKET MELTDOWN
– IT’S NOT JUST THE CORONAVIRUS

For the first time since 2009, circuit-breakers were To understand this phenomenon, we first need to
applied in both the NSE and the BSE, to prevent the understand what bonds are. A bond is a fixed
stock markets from falling further. A circuit breaker income instrument, in which individuals lend out
Prof.
is triggered when the indices (or individual Prateek
stocks) Sharma
money, at ais fixed
a part
rateof ofthereturn,
Finance
for and
a defined
rapidly-decline due to panic-induced Accounting
selling by domain
period. Atat the
IIMendUdaipur. He completed
of the period, i.e. on thehis
maturity
market participants, and they are designedPGDM in 2011
to stop of and
the FPM
bond,inthe 2015 from IIM
investor getsLucknow.
back theProf
original-
any further trades from taking place. ThisPrateek
was the is currently
amount, plusresearching investor
the promised behavior known
rate-of-return, in as
second-time in two weeks, when the transactions
circuit- theinvolving
yield oncryptocurrency
the bond. Yield in collaboration
curves are usually
breakers took effect since the market withhad professors
fallen basedfromonIIM US
Calcutta.
treasury bonds, since they are
more than 10% in a single trading session, on both considered to be the safest out there, and preferred
March-13 & March-23. by a large number of people. Traditionally, long-
term bonds have a higher yield than short-term
The recent market meltdowns observed across the bonds, simply because the money is locked-in for a
world, be it in the US Dow Jones or the Indian stock longer-period. (See figure 1)
exchanges, has been widely attributed to the
COVID-19 pandemic. (Figure 1: This is what a traditional yield curve looks
like, signifying higher returns with increase in duration
of the bond.
Suspension of economic-activities globally through
government-enforced lockdowns, investor-
uncertainty, rumor-induced panic-behavior and
herd-behavior in general, are held responsible for
much of the bloodbath witnessed on the bourses.

However, certain economic-indicators had already

signaled that such a meltdown was evident. To the
surprise of many, sound economic and financial
theory had already predicted the downward trend of
the Indian markets witnessed since late February.

Let us take a look at what those indicators were,

and how we refused to pay heed to these rather
apparent writings on the wall.

INVERTED V CYCLE
Source: Investopedia
This global-indicator has a track record of
predicting recessions with a 100 per cent accuracy
This phenomenon occurs when there exists an
rate. This phenomenon has predicted recessions
environment of high uncertainty amongst investors
11-out-of-11 times and is a sure-shot indicator of
regarding the future, i.e. they are not sure if their
upcoming turbulent times in the short-to-medium
bonds would be repaid in the long-term.
term.

32
From here, it’s basic supply-demand at play; the
demand for short-term bonds increases, pushing up
their yields, whereas, an over-supply of long-term
bonds pushes down their return. It is symbolic of
investors losing faith even in the safest of assets
i.e. the US treasury bonds, and highlights the
uncertain environment for mid-to-long term
investments. Such a situation leads to an inverted
yield curve. (See figure 2)
THE MARKET CAP-TO-GDP RATIO
Also known as the "Buffet Indicator", after its
inventor, the legendary value-investor - Warren
Buffet, it is a rough measure of the value of a
country's stock market. It is precisely what it
sounds like - a ratio of the total market
capitalization of a country's stock exchange to that
country's GDP.

(Figure 2: This is what an inverted yield curve looks like.

It shows that short term bonds yield more than long-term
ones.

The value of a country's share market is assessed

through the ratio, i.e. when the buffet indicator is
below 75%, it is said to be modestly undervalued.
At a range of 75%-90%, it is considered to be at
fair-value, or slightly expensive. However, debate
still exists regarding the appropriate range of
values to declare a market undervalued or fairly
priced. Yet, it is universally agreed that the value
converges to its long-term average of around 70-
75%. Since the past two-years, the value for the
Indian market has stayed in the high-80s, signifying
a slightly overvalued-market. And with the GDP
growth numbers continuously deteriorating since
the beginning of 2019, it was evident that the GDP
Source: Investopedia numbers aren't going to shoot. Thus, then the only
way the Market cap-to-GDP ratio could revert to its
From here, it’s basic supply-demand at play; the long-term-mean in the coming years would be a fall
demand for short-term bonds increases, pushing up in the market-cap of the Indian stock exchange, i.e.
their yields, whereas, an over-supply of long-term a bearish market.
bonds pushes down their return. It is symbolic of
investors losing faith even in the safest of assets Rational economic theory had predicted the current
i.e. the US treasury bonds, and highlights the scenario, yet investors choose to ignore such signs
uncertain environment for mid-to-long term blatantly.
investments. Such a situation leads to an inverted
yield curve. (See figure 2) PRICE-EARNINGS RATIO
The yield-curve inverted in both August 2019, and The P/E ratio is a commonly used valuation ratio,
February 2020, yet investors, worldwide, failed to which in layman terms, states how much an
pay heed to such a critical macroeconomic investor is willing to pay for a stock of the
indicator. company, per dollar of company’s earnings.

33

Now a high P/E ratio can be received positively as
well as negatively by the investors. A high P/E ratio
usually entails the following indications for the
company:
Long-term expected growth prospects
Competitive Advantage to allow sustained
profitability
Proper Capital Allocation and Transparent and
Fair Governance
Hence, it is evident that attributing the entire blame
of the crash to just the pandemic is unfair.
Historically, a P/E ratio north of 23x has signaled
over-valuation of the underlying market, and such
high valuations have seldom been sustained. The
ratio has always reverted back to its long-term
mean in the low 20s. The market indicators had
persistently given out warnings; Rationally, taking
account of the unsustainable high-valuations,
people should have exited, and the market would
have corrected itself, in due time.
Sustainable and scalable profitability.
A higher P/E multiple is generally accepted as an
indicator of good performance in the market, only if
there exists supporting evidence for the occurrence
of all the above aspects; but if the market displays
divergence from the above factors, then a high P/E
ratio hints towards over-valuation of the stock.
Furthermore, history shows that an unchecked high
P/E ratio is a recipe for disaster. It must be noted,
that the Sensex P/E has exceeded 26x just three
times in the last 24 years:
April 2000, following which there was the
dotcom burst and the Sensex fell by 40%.
December 2007, following which was the global
financial crisis; the Sensex fell by 56%.
The most recent being in January 2020,
following which the Sensex fell by nearly 40%.
PRICE-TO-BOOK RATIO
The Price-to-Book Ratio, or more commonly known
as the P/B ratio, is equal to a company’s share
price divided by its book value per share.
It is a value ratio showing ‘how many times a
company’s stock is trading per share compared to
the company’s book value per share’ and gives an
indication of how much shareholders are paying for
the net assets of a company.
34
Now, a low P/B ratio shows the market sentiment
towards the company earning poor or negative
returns or its assets’ value being overstated. A
higher PB ratio shows belief in the company’s
ability to create more value out of its current
assets but can also be seen as the risk of the stock
being overvalued. Things get interesting when the
P/B ratio and the Return on Equities (RoE) start
diverging. RoE indicates how much profit a
company generates from shareholders' equity.
Image Data Source: https://tradingeconomics.com/india/stock-market
But on the contrary, a research report by the
Business Standard states that “the RoE for BSE 500
companies has been edging lower ever since the
global financial crisis of 2008-09 and stands at 9.5
per cent in FY19, lowest in the last 16 years.” - The
red flag was up, and there were clear signs of
divergence between PB Ratio & companies’ RoE, but
no corrective measures were taken.
The levels of P/B ratios witnessed since 2019,
which were well north of 3x, and way above the
long-term average of 2.6x, had constantly pointed
out that these assets had been overpriced beyond-
measure.
Timely rational measures would have led to a
correction in the overvalued nature of these stocks,
correcting the PB ratio of the market, but the faith
investors had in the market was unshakable.
If a market’s overall P/B ratio is growing so should
the RoE and vice-versa. Overvalued growth markets
frequently show a combination of low RoE and high
P/B ratios.
The graph below shows the performance of the P/B
ratio for NIFTY 50 in the January-February 2020
period to be at an all-time high, which could be an
indication that the market was performing well,
right?
WHY DID THE INVESTORS IGNORE SUCH
INDICATORS?
Despite strong global warnings as well as the
slowing domestic economy, investors, both
domestic and foreign, continued to pour in money
into the Indian stock markets, pushing valuations
to unsustainable levels. Multiple policy changes
and expectations can explain this herd behaviour of
investors.
Since the late 2010s, both corporate-earnings and
private-investment had been lagging behind the
pace of growth, of the overall-economy. An
eventual catch-up was expected soon, to be
reflected in terms of increased corporate-profits, in
the form of a higher Earnings-per-share (EPS)—this
which would have cooled down valuations to a
sustainable-level.
35
Additionally, the recent cuts in the corporate tax-
rate, down to 22% from 30% for existing companies
and to 15% from 25%, for new manufacturing
industries, made India a country with one of the
lowest corporate tax rates, amongst all major
economies. Thus, not only would a lower tax-rate
be reflected in terms of an increase in profits but
also attract more MNCs to set up their businesses
in India, increasing foreign investment. Together,
these factors painted an extremely rosy picture of
the Indian stock market. This apparent “promise of
good times to come” nudged investors of all sorts,
ranging from FIIs, to domestic funds as well as
private individuals, to continue having a bullish-
view of the market, when a downturn was clearly
evident.
CONCLUDING NOTES
In conclusion, through the performance of these
four fundamental-KPIs of the market, we can
conclusively say that COVID-19 pandemic,
financially, is probably “the worst second once-in-a-
lifetime” for any millennial, but it surely isn’t the
big-bad, that can be blamed for the Crash of 2020.
Suspension of economic activity did take a
heavy toll, the cost of health, productivity and
the consequent fiscal deficits do play an
important role in affecting the market sentiment,
the panic and the dismal hope about the “After
Corona World” had its fair share in shooting
down expectations, but still, still this crash was
not completely out-of-the-blue. The red-flags
were all there, but people chose to believe in
what can now be only termed as a market cliché,
“This time, it’s different.” There’s no point in
expecting things to turn out differently by the
sheer force of will, but there’s merit in learning
from this incident - a simple learning, that
financial fundamentals do work, and financial
theory does live up to its name. Maybe next
time, the market and its investors will be more
rational.
Nishant Kumar Satyam
(IIM Indore )
36
 A FINANCIAL ADVERSITY OF THE 21ST CENTURY :
THE US-CHINA TRADE WAR

Amidst geopolitical conflicts and economic President Trump consistently emphasised that
tensions around the globe, the ‘x’ generation of the China is stealing jobs from the US, and engaging in
21st century is faced with a seemingly unfair trade practices, something which even Saudi
unresolvable issue, one that is iconic to the Arabia seemed to agree to. Not surprisingly in the
Prof. Prateekgame
founding values of this century – globalization, Sharma is a part ofandthe geo-economics,
of geopolitics Finance and the
Accounting
multilateralism and international co-operation. The domain
foundationat IIM Udaipur.
of the He was
trade war completed his on the
also based
trade war between two global superpowers, PGDM thein 2011 andthat
fact FPM 67%in of
2015
thefrom IIM Lucknow.
US trade deficit inProf
the world
United States and China, has problematizedPrateektheis currently
was caused researching investor
due to imports frombehavior in
China. Adding on
transactions involving cryptocurrency in collaboration
fabric of international trade and connectivity, to this was China’s very aspiring “Make in China
thereby looming as an economic and with professors
financial fromvision,
2025” IIM Calcutta.
one which aims to manufacture 100%
threat over all nations of the world. of the products in the Chinese economy, and work
towards making China the economic number 1 in
Starting in March of 2018, the 16-month long trade the world in the next 30 years, by making the yuan
war significantly hurt the economies of both currency value stronger than that of the US Dollar.
parties involved, and of those caught in the cross-
fire. Paula Meyers has rightly said, “Business is a However, this vision also relied on the fact that
battlefield.” In light of this statement, while this China will allow other countries to trade in their
trade war commenced with ulterior political na-tion, only once they reveal all of their trade
motives, trade and taxes became the perfect secrets, and that China is constantly coercing its
weaponry. corpo-rates to align their vision with the
Communist Party (CCP)’s Make in China 2025
It all began with Donald Trump becoming the vision. The com-mon consensus among US
President of the United States. Since his election government officials is that a huge trade deficit
in 2016, the States developed an all-round between the US and China accounts for greater
mercantilist commercial policy, aiming to indebtedness for the US, something which the
strengthen the US economy in a shut economic Trump government cer-tainly doesn’t want. Not to
system, and leaving the world wanting more. forget, China owns US $1.13 trillion in US Treasury
Trump’s preoccupation with China, however, was Bonds.
limited to three barriers :

1) The threat that China’s increasing ambitions

undermine the US’ position as a global superpower
and its military strengths,

2) The trade imbalance of $378.6 billion in 2018

between the US and China (the former being in
deficit), and

3) The Trump view that China’s trade vision and

practices go against the World Trade Organisation
(WTO)’s regulations, because technically under
WTO, China is still a developing country and there-
fore, its markets should be very welcoming to
The US-China Trade Deficit | Source © : US Census
imports from developed countries.

37
Now, the task of tariffs is to act as a tax; an
additional amount to be paid on top of the cost of ex-
ports. It is important to note here that the main items
US imports from China are Aluminum, steel, electrical
machinery, furniture and of course, cheap labor, while
China imports technical parts such as chips and
soybeans from the US. Part of the task of a tariff is
also to protect indigenous companies of a nation
against market competition while also allowing this
competition to enter the country at the cost of a
tariff. And this is exactly what President Trump
pursued in March of 2018. Realizing the huge trade
imbalance in US-China trade, on March 1st, 2018, he
announced a 25% tariff on Aluminum imports and 10%
on that of steel, effective from March 15th, 2018.
Moreover, Trump announced an additional import tax
of $60 billion as “punishment” if China chose to
retaliate, which it did, fortunately, or unfortunately.
Not only this, but he also labelled China as a
“currency manipulator”. Thus hitting a common weak
spot, President Xi Jinping of China taxed the US
imports of Soybean which is not just a major protein
source for all of China, but the Soybean export from
the US to China went from around 37.5 million metric
tonnes in 2017 to negligible, in 2018
For a long time, the States have benefited from the
cheap labour provided by China, and have been on the
gaining side of the trade imbalance.
However, ironically, 60% of the exports from China to
the US are products manufactured by American firms
in China, who moved their production abroad to meet
with high manufacturing demands and benefit from
the low costs of input and labour. Walmart alone
purchased USD18 Billion in products from China,
making it China’s 8th largest trading partner. It is
difficult to say if US claims on China’s unfair trade
practices are meritable or not, based on the CCP’s
history of heavily regulating its markets, and the fact
that almost all nations in the world have a trade
deficit with China.
This scenario is also evident in the US ban on the
Chinese company Huawei, the only tech giant in the
world to have produced internationally networkable
5G.
While the CCP also has a history of city
surveillance, media and communication
blackouts, and im-posing massive regulations
on its tech firms, the 5G is a revolutionary
technology that drastically enhances data
analytics, automation, machine-to-machine
connectivity and network speed, making it a
game-changer in networks and
telecommunications in the world. While an
average 4G network can cater to a population of
2000 per square kilometre, a 5G network
provides the benefits men-tioned above to a
population of about 2.6 million people per
square kilometre. For wide-area net-works, a 5G
network can capacitate a traditional base
station’s network service by 20 times, while
keeping it 3 times smaller than 4G. Not to
forget, just like the US trade sanctions on
China, the Huawei ban has affected almost all
nations across the world and has caused a
worldwide state of “dilemma”.
The total tariffs applied by the US on Chinese
companies exclusively total to approximately
US $550 billion, while those applied by China on
the States equal approximately US $185 billion.
China redirected its state-owned firms to stop
buying any agricultural products from the US.
These measures have significantly disrupted
the lives of American businesses and
consumers. While the prices of cars, gadgets,
furniture, beer and plane tickets, the agro-
industry of America took a deep hit – China’s
25% tariff on Soybean and pork caused US
agricultural exporters to suffer major loss-es,
and the cost of soybean faced a ten-year low in
the US markets.
Stressed by the tensions in international
agricultural trade, the US farmers even plead
the govern-ment to find alternative markets and
work out possible solutions for the trade feud;
solutions which do not involve a tit-for-tat with
tariffs. While American steel industries
suffered back when China heavily exported
steel to the country, the hiked up prices of steel
in America now is worse for the consumers.
38
The Wall Street faced its worst day on 2nd August
2019, when the Dow plunged more than 750 points on
the Stock Exchange. This was worsened by the other
trade wars the US had go-ing on with Mexico, Canada,
Turkey and the European Union (EU).
The US also wishes to strengthen cross-border
relations with others it upset by empowering
trade contacts and treaties, one of which is the
North American Free Trade Agreement (NAFTA),
signed among the US, Canada and Mexico.

While the US pork industry is losing $12 per animal due
to Mexico’s retaliatory tariffs of 20% on American
cheese, pork, steel, apples and potatoes, the EU
threatened to heavily tax imports of Levi’s Jeans,
Bourbon Whisky and Harley Davidson motorbikes from
the US, when Trump declared plans to tax EU steel and
Aluminum imports.
Today, both nations are in trade talks, hinting
towards what Trump calls a full-blown trade
agreement that would settle long-running
disputes over tariffs, currency rates, technology
sharing and intellectual property laws.

Basically, President Trump justified taxes on imported

steel and Aluminum by saying that they were a threat
to the US economic security, and its two largest
trading partners, China and Canada (respectively),
were deeply upset. Subsequently, Canada began
imposing tariffs worth US $12.6 billion on US goods
from 30th June 2019, as retaliation for the Trump
administration’s new taxes on Canadian steel and
aluminum imported to the United States
On the other hand, the American tariffs have hurt
Chinese manufacturing, the industry suffering losses
of about US $15 billion. China owns 1/3rd of the
technological equipment production in the Asian
region, and ever since the US tariffs were imposed, a
significant chunk of manufacturers shifted their
industries to parts of Singapore and Taiwan, two major
competitors against China in the field of The Many Trump Trade Wars | Source © : BBC
manufacturing tech parts. Research

Amidst the ongoing trade war, the Shanghai Composite

Index, the strongest indicator of China’s Stock Market
competence, plummeted by approximately 18%.
Moreover, the US sanctions are expected to cause
considerable unemployment, especially in the East
Coast of China.
It is difficult to say if free trade is the best solution to
the problem, given the fact that openness in the
economy has caused many nations to become poor,
(India being an example), but openness in trade
negotiation is need of the hour to purge some heat in Trump and Jinping meeting at the sidelines of the
the global trade environment. 2019 G20 Summit | Source © : A P News

39
Analysts expect the US to continue to use non-tariff
measures to push back against China. Re-strictions on
Chinese investment into the US, limits on the ability of
US firms to export technology to China, and further
pressure on Chinese companies are all recommended
tools. “Non-tariff measures don’t get the attention
from markets that tariffs do, partly because their
impact is harder to quantify, but they can have far-
reaching impact,” says Michael Hirson, Asia director at
the consul-tancy firm Eurasia Group.
Steps to resolve the trade war may also involve
strategic communications between two countries,
ministerial dialogues, and formulating ways to
resolve trade imbalances. As for China, the country
faces a national issue that needs to be addressed.
Firstly, China should save its sliding currency,
Renminbi (RMB/ Yuan), which depreciated by almost
8% during the trade war months. The country is
already facing a socially unstable economic trend of
excessive household savings, and a further plummet
in RMB can worsen the situation and devalue the
currency greatly, creating a deflationary bubble. So
as an immediate solution, the CCP can sell its
foreign exchange reserves to maintain RMB value
(currently, China owns the US $3.1 trillion in FER).
Secondly, China needs to encourage citizens to
invest more, consume more and save less. The
nation must also establish a social safety system
that enables the citizens to invest in safe, liquid
assets such as market receivables and account
securities, and not just maintain household savings.
The US preoccupation with China has continued for a
long time. Now the question remains: What is it that
the US wants? Is it market access, reform of
intellectual property rights and forced technolo-gy
transfer, improved ease of doing business in China
or restructuring of the entire Chinese econo-my? The
path and motivations of the trade war have been
uncertain, and have been further per-plexed by
inconsistencies in the US government and China’s
restless ambition to be on top. Given the economic
power that the two countries yield in the
international political economy, there needs to be
more clarity and cooperation to finalize the terms
that could lead to a gradual easing of these
sanctions, so that the threat of a global economic
slowdown can be dampened to a certain ex-tent.
However, the scope of this war goes beyond
economic and market motives, for it clearly is a
power play – a play between two giants who want to
be number one and in the process, they step on many
others, hurt economies, and still have a need to think
outside their thick skin.
Anushka Saxena
Lady Shri Ram College for Women, University of Delhi
40
 IS INSOLVENCY & BANKRUPTCY CODE, 2016
USEFUL REFORM TO RECOVER BACK BAD LOANS

To simplify and understand the topic, I have IBC brings to an end a complex maze of multiple
decided to split this article into two parts. laws that we had in India for stressed asset
resolution.
1) BANKRUPTCY IN INDICONCEPTUAL ISSUES &
STRUCTURAL FRAMEWORKS The veryisfact
Prof. Prateek Sharma a that
partpromoters may fear and
of the Finance losing the
firm to the highest bidder
Accounting domain at IIM Udaipur. He completed his should incentivize the
In its most recent Financial Stability Report
PGDM(FSR), firmFPM
in 2011 and to inprotect creditIIMculture
2015 from Lucknow.and Prof
not over-
the Reserve Bank of India predicts thatPrateek
in a "veryis currently researching investor behavior in should
borrow. Ideally, bankruptcy regulations
severe stressed scenario", the gross non-performing bring down
transactions involving the time needed
cryptocurrency for resolution so
in collaboration
assets (NPA) of the banking sector could riseprofessors
with to as that the firm/asset
from IIM Calcutta. starts producing cash flows
high as 14.7% of total loans by March 2021. Under again and /or the recovery rate improves for
the baseline scenario, the gross NPA ratio could rise firm/ assets that can’t be turned around. IBC
to 12.5%. The Reserve Bank of India (RBI) stress test fixes a timeline for resolution in 330 days.
covered 53 scheduled commercial banks. Data suggest that till now, the average time for
completion of 250 cases ending in approved
Are the banks adequately capitalized to withstand resolution plans was 423 days, which came
such high volumes of unexpected losses is a down to 380 days, excluding the time excluded
question that will be answered once the COVID crisis from the Corporate Insolvency Resolution
blows away? The FSR, though, states that the capital Process (CIRP) by the adjudicating authority.
adequacy ratio can fall by 133 bps to 13.3% by The time taken for the 955 cases yielding
March 2021, which is fairly adequate. liquidation orders was 312 days. The recovery
rate increased from 26.5% in 2018 to 71.6% in
Bankruptcy is a problem of capital structure and 2019, and the time is taken in recovery
management. Managing a problem company, taking improved from 4.3 years in 2018 to 1.6 years in
adequate action on early warning signals, the 2019.
process of resolution and turnaround is like flying a The second issue is reducing agency problems.
plane. Balance is the key. On the one hand, it is This needs strengthening the regulatory
important to protect the sanctity of debt contracts framework so that depositors and small saving
and reinforce a sound credit culture, but it is equally are protected from big scale defaults. Weak
important to make sure that clauses don’t become credit discipline in banks, particularly with
so onerous that the spirit of entrepreneurship starts regard to follow-up and monitoring (I will not
getting affected. get into appraisal/sanction stage issues) often
leads to building up of stressed assets. RBI
In India, the Government, RBI, and Insolvency and needs to strengthen the risk-based supervision,
Bankruptcy Board (IBBI) have defined the pillars for so that divergence between provisions and
efficient resolution or liquidation of stressed assets NPAs reported and inspected is reduced. In this
so that balance sheets may be de-clogged. regard creation of and Enforcement Department
is welcome for deterrence. Also, as now SEBI
The first issue is to reinforce credit culture and makes it mandatory for listed entities to
debtholders senior claim on assets. For this, the disclose defaults within one working day will
legal framework has been strengthened through the perhaps also lead to rating agencies timely
Insolvency and Bankruptcy Code 2016 (IBC) and its revising their grades with attendant
later amendments, including the 2019 and 2020 implications for risk weights and capital
ones. requirements for banks.

41
The third issue is information asymmetry, and in
order to reduce it institutional framework has been
strengthened with the establishment of Central
Repository of Information on Large Credit (CRILC),
Joint Lenders Forum (JLF) mechanism, and
overseeing committee.
The final issue is the fiscal dimension often driven
by political will. Resolutions need haircuts and
higher provisioning.
Capital raising from markets/Government, mergers
based on strategic fit, sale of non-core assets, etc.
needs to be pushed, and tough decisions will have
to be taken.
In conclusion, the process of bankruptcy resolution
will evolve as the history of NCLT/NCLAT
judgements build up. There will be pains and costs,
especially after the pandemic ends, but if we keep
resolving it structurally and asking the right
questions conceptually, this will lead the way for
sustained growth.
2) IBC – A BOON FOR RESOLUTIONS OR A
PANDORAS BOX OF LITIGATION?
The Insolvency and Bankruptcy Code, 2016 (IBC)
was supposed to be the one-stop solution for
revival and restructuring of stressed assets and
relief to creditors. Earlier, creditors could only have
recourse to the SICA, SARFAESI, or provisions
under Section 391 of the Companies Act. These
provisions were strenuous, time-consuming, and
confusing. It was the aim that the IBC would
streamline the Corporate Insolvency Resolution
Process (CIRP), promote the revival of business
while also protect the interests of stakeholders.
Till June 2020, financial creditors had realized a
total of more than ₹1.88 lakh crores from 250 (of
which 81 companies were defunct) resolution
plans. This sum was 1.8x the amount of the
liquidation value of those 250 companies
(Insolvency and Bankruptcy Board of India, 2020).
The amount will be greater if we account for cases
of settlements before the initiation of CIRP.
However, this recovery represents only 44.70% of
the claims admitted in the CIRP (Insolvency and
Bankruptcy Board of India, 2020).
Further, high recoveries in a few high-quality
assets have skewed this amount. More than 60%
of the total amount has come from just 5 cases
(Insolvency and Bankruptcy Board of India,
2020). In the majority of the cases, recoveries
are <20% of the claims admitted.
(Figure 1: Distribution of Amounts recovered )
There are procedural issues that are preventing
the full benefits of the CIRP to be realized. The
statute lays down a timeline of 180 days to
complete the CIRP, extendable by 90 days.
However, the vast array of compliances and
litigations has ensured that the average time
for approval of the resolution plan is 380 days
(Insolvency and Bankruptcy Board of India,
2020). More than half of the ongoing CIRPs as
of 30th June 2020, had crossed the 270-day
mark.
During the CIRP, the Resolution Professional
(RP) has to run the company as a going
concern, focusing on finding an applicant
capable of reviving operations. In most cases,
operational activity has ceased, and the CoC is
reluctant to invest further. Bound by the law to
proceed with the CIRP and squeezed for cash-
flow, the RP has to bring funds from his pocket
and wait for the CoC to reimburse. Beyond a
certain extent, operations and compliances
cannot be done in a way that “maximizes value”
for the creditors.
42

(Figure 2: Status of ongoing CIRPs as on 30th June 2020)
What the law has failed to anticipate is that small
company are plagued with PUFE transactions.
Financial creditors fail to initiate CIRP early on. The
companies are taken to CIRP, late, and more with the
intention of liquidation than resolution.
Flogging the dead horse shifts the focus on
preferential transactions and fraudulent transactions.
The RP stops receiving cooperation from the
directors suspended.
References:
Dutt, K. (2020, 26th May). Is IBC suspension antithetical to pandemic protection? The New Indian Express. Retrieved 21st
September 2020, from https://www.newindianexpress.com/opinions/2020/may/26/is-ibc-suspension-antithetical-to-pandemic-
protection-2147967.html
Faced with strict timelines and compliances, he
is left with no alternative but to focus on saving
himself from allegations of negligence, rather
than finding a successful resolution. All tricks
are employed by the suspended directors and
the financial creditors to hide their past, and
out comes a plethora of litigations.
The IBBI and the Government has been very
proactive about amendments. Recently, the
minimum default amount has been increased
from ₹5 lakhs to ₹1 crore, and new applications
(after 25th March 2020) for initiating CIRP have
been suspended. The argument is that this
would provide protection to small businesses
and prevent sale at “COVID valuations” (Dutt,
2020). But how will it affect the ever-distressed
banking sector? Would this lead to
complacency among the small businesses, for
whose benefit such amendment was passed?
Would operational creditors having debts less
than ₹1 crore be at the mercy of their debtors?
Can pre-pack resolutions be a game-changer?
These questions have no black and white
answer. The IBC must focus on resolution,
rather than digging dirt and punishing past acts
of offenders. This was not in the preamble of
the IBC and is best left to other government
departments.
Pradeep Kakar & Prerna Bhatia
(IIM Lucknow)
43
 AMAZING STOCK MARKET FACTS

The United States constitutes over 40% of Berkshire Hathaway Inc. Class A is the
global market capitalization. world’s costliest stock. One share is
priced at over INR 2 Crore.

When master blaster Sachin Tendulkar The Bear and Bull analogy comes from
used to play international cricket, his California.
dismissal adversely affected the Indian
stock market

44
The first Stock Market Bubble dates back Most Overvalued Automobile company
to 1720. It is known as the South Sea Bubble. in the world as in December 2020

There are a total of 23 stock exchanges in India.

The Stock Market is more than 400 years old!
Global stock market value is $85 trillion as of November 30, 2020.
Tata Consultancy Services and Reliance Industries Limited have a combined market
capitalization higher than Karachi Stock Exchange (KSE).
Changes in stock prices in the US were expressed as fractions until the year 2000.

Akshit Jindal
IIM Udaipur

45
 PERSONALITIES OF THE YEAR

Mr. Saurabh Mukherjea is the Founder and Chief Investment Officer of

Mr. Saurabh Mukherjea
Marcellus Investment Managers. He has written three bestselling
books: Gurus of Chaos: Modern India's Money Masters (2015), The
Unusual Billionaires (2016) and Coffee Can Investing: The low-risk
road to stupendous returns (2018). He has a B.Sc. and M.Sc. in
Economics from the London School of Economics. He is also a C.F.A.
Charter holder. He is the former C.E.O. of Ambit Capital and played a
crucial role in Ambit's rise as a broker and a wealth manager. When he
left Ambit in June 2018, assets under advisory were USD800 million.
Before Ambit, he co-founded Clear Capital, a London-based small-cap
equity research firm created in 2003 and sold in 2008. Under him,
Marcellus has become one of the fastest-growing asset-management
companies in the past two years, with over INR 3,100 crore of assets
under management. Its quantitative framework, forensic accounting
and capital allocation have helped it fetch a top place on the
performance table. The fund's Consistent Compounder scheme has
delivered a CAGR return of 25.9% over two years, and their Little
Champs scheme has given 47.30% in absolute terms over one year.

With an initial investment of Rs. 20000, Mrs. Rajni Bector started

selling ice-creams and eventually grew the business into making
bread, biscuits, and sauces. From biscuits to bread, spreads and
sauce, Mrs Bector's Food Company has penetrated the Indian market
to value Rs 540 crore in the market. An initial public offering (I.P.O.)
for public subscription on 15 December 2020, was reported to be
fully subscribed within a couple of hours of the bidding process.
After her three sons went to boarding school, Rajni enrolled in a
bakery course in Punjab Agricultural University.
After becoming famous for her baking recipes and ice-creams among
friends, she started a small business with an investment of Rs 300 to
buy an oven and churned ice cream in her backyard.
Overwhelmed by the orders and unable to make profits, Rajni soon
incurred losses. Her husband Dharamvir intervened and supported
her with Rs 20,000 to start an ice cream manufacturing unit in 1978.
Since then, there has been no looking back. The company has grown
across all verticals in the FMCG sector.
In 1995, Cremica bagged the honour of supplying buns to
McDonald's. With the brand growing in multiple segments, the Mrs.Rajni Bector
company earned revenues worth Rs 100 crore by 2006. Extending
further, the company made annual sales of Rs 650 crore in 2011-12
and overtime made clients with Pizza Hut, Papa John's, Domino's
Pizza, Indian Railways and Burger King.

46
 Paul R Milgrom and Robert B Wilson were jointly awarded the Nobel
Memorial Prize in Economic Sciences to improve Auction Theory and
inventions of new auction formats. They used their insights to design
new auction formats for goods and services that are difficult to sell in
a traditional way, such as radio frequencies. Their discoveries have
benefited sellers, buyers, and taxpayers around the world.

Paul R Milgrom is the Shirley and Leonard Ely Professor of

Humanities and Sciences at Stanford University, a position he has
held since 1987. Milgrom is an expert in game theory, specifically
auction theory and pricing strategies. Milgrom graduated from the
University of Michigan in 1970 with an A.B. in mathematics. He
worked as an actuary for several years in San Francisco at the
Metropolitan Insurance Company and then at the Nelson and Warren
Paul R Milgrom consultancy in Columbus, Ohio. Milgrom became a Fellow of the
Society of Actuaries in 1974. In 1975, Milgrom enrolled for graduate
studies at Stanford University and earned an M.S. in statistics in 1978
and a Ph.D. in business in 1979. Milgrom received the Erwin Plein
Nemmers Prize in Economics in 2008 "for contributions dramatically
expanding the understanding of the role of information and incentives
in various settings, including auctions, the theory of the firm, and
oligopolistic markets."

Robert Butler Wilson is an American economist and the Adams

Distinguished Professor of Management, Emeritus at Stanford
University. Nebraska and earned a full scholarship to Harvard
University. He received his A.B. from Harvard College in 1959. He
then completed his M.B.A. in 1961 and his D.B.A. in 1963 from the
Harvard Business School. He worked at the University of California,
Los Angeles, for a very brief time and then joined the Stanford
Robert B Wilson University faculty. He has been on the faculty of the Stanford
Business School since 1964. He was also an affiliated faculty
member of Harvard Law School from 1993 to 2001.

Aditya Puri was the managing director of HDFC Bank, India's largest
private sector bank. He has worked in the banking sector for over 40
years, in India and other countries. Puri was the longest-serving
head of any private bank in the country. He became the C.E.O. of
Citibank, Malaysia in 1992. In September 1994 he returned to India
as managing director of HDFC Bank.

He presided over HDFC's acquisitions of Times Bank Limited 2000

and Centurion Bank of Punjab in 2008. He officially stepped down
from his position in HDFC Bank on 26 October 2020. He is now a
Senior Advisor of the Carlyle Group.
Mr. Aditya Puri

47
 Mr. Ma Huateng is the founder, chairman and chief executive officer
of Tencent, Asia's most valuable company, one of the largest Internet
and technology companies, and the most significant investment,
gaming and entertainment conglomerates globally.

The company develops China's most influential mobile instant

messaging service, WeChat. Its subsidiaries provide media,
entertainment, payment systems, smartphones, internet-related
services, value-added services and online advertising services, both
in China and globally. He has a 7% stake in Tencent.

Mr. Ma Huateng His wealth has grown by $10.8 billion in 2020. This year Ma Huateng
surpassed Alibaba's co-founder Jack Ma's fortune with a net worth of
USD59.9 billion to become China's richest person.

48
 GLIMPSES OF THE YEAR

January
• Reliance Jio becomes the biggest telecom operator by subscriber base.
• Rahul Bajaj steps down as Bajaj Finance chairman, and son Sanjiv Bajaj takes over.
• RBI announces open market operation of Rs 10,000 crore government bonds.
• Adani Capital acquires Essel Finance's MSME loan business.

February
• India Bulls Housing finance posts 44% decline in Q3 net profit at Rs 547 crore.
• India emerges as the world's fifth-largest economy by overtaking the UK and France.
• S&P reaffirms India's rating at 'BBB-', says growth likely to recover.
• Volkswagen plans to invest Rs 8,000 crore in India.

March
• Sensex plummeted over 9000 points and tanked nearly 25% in March.
• Yes Bank share price climbs 31% after SBI announces investment of Rs 20,000 crore.
• Shares of Shriram Transport dips 18% after Fitch downgraded its long-term issuer default ratings.
• EPFO cuts interest rates to 8.5% for 2019-20, a seven-year low.

April
• The price of WTI crude future contract traded at around negative $37 per barrel.
• The unemployment rate in India rises to 23.52% due to COVID-19 lockdown.
• Franklin Templeton shuts down six of its mutual funds in India, valued at $3 billion.
• Sri Lanka to seek $400mn debt swap facility from RBI to meet its financial needs.

May
• PM Modi unveils second stimulus package of $266bn to revive the Indian economy.
• FDI in India grew by 13% to a record of $49.97 billion in the 2019-20 financial year.
• The services PMI plunged by 43.9 points to 5.4 in April, the lowest in the world.
• Bharti Airtel scores massive market share gains against Reliance Jio in Q4 FY20.

49
 June
• Reliance becomes debt free after it raises Rs 1.6 lakh crores from global investors.
• Moody’s downgraded India's sovereign credit rating to 'Baa3', maintaining its negative outlook.
• Reliance Industries becomes India's first company to hit $150bn in Market value.
• Muthoot Finance shares climbed 18% after the company reported a 52.4% jump in net profits.

July
• GOI bans 59 Chinese apps including amid rising tensions after the Galwan Valley clash.
• The index of industrial production (IIP) plunged to 88.4 in May from 135.4 a year before.
• Indiabulls Housing Finance raises Rs 2000 crore from 7 PSB,s including SBI and BOB.
• Alibaba-Owned UC web suspends operations in India, lays off 90% of its employees.

August
• GDP of India contracts by 23.9% in the April-June quarter.
• India's Agri exports up 23.24% to over Rs 25,500 crore in the period from March to June.
• L&T finance plans to raise Rs 3367 crore through a rights issue.
• PAG to acquire 51% in investment banking, wealth management biz of Edelweiss for Rs 2,244 Cr.

September
• Reliance Industries becomes India's first company to hit $150bn in Market Value.
• Indian companies have raised a record $31 billion in equity capital in 2020.
• Finance Minister introduces Banking Regulation Amendment Bill in Lok Sabha.
• Vodafone Idea plans to raise $3.4 bn selling shares to restore its financial health.

October
• India IPO market raises Rs 6,200 crore with 8 IPO's in the September quarter.
• Fresh to home raises $121 mn in funding from investors including DFC, ICD, Invest Corp and
Allana.
• Upstox becomes India's second-largest stockbroker after Zerodha.
• Walmart India’s losses up 74% in FY20 even as revenue increases 20% to Rs 4,926 crore

50
November
• GDP of India contracts by 7.5% in the July-Sept quarter.
• Joe Biden wins the US presidential elections and defeats ex-president Donald Trump.
• Consumer Price Index inflation stood at 7.61% in October, highest since May 2014.
• UPI crosses 2 billion transactions milestone in October, up 80% from a year ago.

December
• DBS bank India gets Rs 2,500 cr capital support from a parent for the Lakshmi Vilas bank merger.
• RBI announces that (RTGS) will be available all round the clock on all days of the year.
• Facebook India revenue jumps 43% with total expenses at Rs 1,046 crore in FY20.
• Maruti Suzuki becomes India's first OEM to launch an online car finance platform.

51
 ARTH SAMVAAD 2019

A rth-Samvaad is the annual finance symposium of IIM Udaipur conducted during the annual
management fest, Solaris. It provides the student community with the opportunity to interact and
discuss with the industry stalwarts and understand the nitty, gritty involved in the financial decision
making and about the market scenario. The event also includes an interactive panel discussion
presided by the club members. Arth-Samvaad 2019 was conducted on the theme, "Unshackling the
Credit Markets".

The following industry leaders graced the event:

Mr. Maneesh Dangi is currently the Co-Chief Investment Officer

Mr. Maneesh Dangi
at Aditya Birla Sun Life Asset Management Company. With
twenty years of extensive experience in Finance and Research,
he spearheads the Fixed Income Investment at Aditya Birla Sun
Life AMC. Presently, he leads a team of twenty-two individuals,
comprising of fund managers and analysts, managing over INR
1.6 lakh crores. He manages funds such as ABSL Banking and
PSU Debt Fund, ABSL Corporate Bond Fund, ABSL Medium Term
Plan, ABSL Credit Risk Fund, ABSL Short Term Opportunities
Fund, and ABSL Dynamic Bond Fund. He has been with Aditya
Birla Sun Life AMC for about fifteen years now. He joined Aditya
Birla Sun Life Asset Management Company in 2006 from
Pioneer InvestCorp, an integrated financial services company
where he led their Fixed Income consultancy and Merchant
Banking division. He has also been conferred with 'the best
fund manager of the year for 2010' award by Crisil-CNBC.

52
Mr. Sandeep Upadhyay joined Centrum Capital Limited in June
2008 and is currently serving as MD and the CEO of Centrum
Capital Ltd (Infrastructure) since July 2015. In his current role,
he is responsible for sourcing and executing fundraising and
corporate finance advisory deals across Transportation,
Logistics, Conventional, and Renewable energy sector. He has
around seventeen years of extensive experience in Investment
Banking and Corporate Finance Advisory focused on
Infrastructure, Energy and Logistics Sector, with exposure to
leading Private Equity, M & A, PIPE, IPO, Project Finance, NCDs,
Structured Debt &Financial Restructuring, SDR, Insolvency &
Bankruptcy process. Before joining Centrum, he worked with SBI
Capital Markets and IL & FS Transportation Networks Limited
(part of IL & FS Group) in financial advisory Syndication &
Financing for marquee Infrastructure Projects in India.
Mr. Sandeep Upadhyay

Mr. P. Rakesh is the Gr. President II, Financial Markets at Yes

Bank. He leads the Debt Capital Markets Team at Yes Bank.
Rakesh has an overall experience of 20 years spanning across
Investment Advisory and Debt Capital Markets. In his almost
16-year stint with YES Bank, he has been instrumental in
executing fundraising mandates across corporates, banks,
financial institutions, and NBFCs. In his current role, Rakesh is
responsible for the origination and syndication of debt capital
market mandates. He is also responsible for providing an
overall business direction for the Debt Capital Markets group in
line with the economic environment and the Bank's strategy.
Over the years, the Debt Capital Markets team at Yes Bank has
successfully executed several marquees and pioneering debt
capital raising transactions, which has led to building one of
the finest DCM franchises in the market.
Mr. P.Rakesh

53
 CROSSWORD
Across:
1: The Indian analytical company which is a
subsidiary of S&P Global (Acronym)
4: Also referred to as "Fear Index."
5: The financial market where buyers and sellers
engage in trade of financial securities like
Stocks
6: An account held by a trusted third party on
behalf of two parties in a transaction
7: The indicator which states that one or more
securities held in margin account have
decreased in value
9: An online Commodity Stock exchange in India
that has an Independent Board of Directors
(Acronym)
12: A person/company that provides coverage
from financial losses by way of policy
17: A security indexed to inflationary gauge to
prevent a decline in purchasing power of
investors' money (Acronym)
19: An instrument of monetary policy to alter the
liquidity in the economy (Acronym)
20: The marketplace where various currencies
are traded (Acronym).
Down:
2: The level where uptrend in price is expected to
stop due to selling off of securities
3: The significant price level established when a
stock fails to penetrate it to up or downside
8: The model which describes the relationship
between expected return and risk of investing in a
security
10: Also known as a fixed-income security
11: Any resource with economic value that an
individual/ company owns with future expectation
of returns
13: The 1992 scam resulted in elevating its status
to a statutory body from a regulatory body
14: Plan-based business strategy that aims to
identify, assess, and prepare for any dangers or
hazards that may interfere with an organization's
operations and objectives (Acronym)
15: A period of a sustained increase in the prices
of stocks, bonds, or related indexes
16: Limit set by an investor to protect gains or
limit losses when the price of a stock falls
18: Process of verifying the identity of the
customers before starting a business with them
(Acronym)
54
 Team Finomina
Senior Finomina Team

(From top left to bottom right): Ayushi Birla, Ayushi Mishra, DVS Naveen, Jatin Deshwal, Kanaad Shetty,
Lovish Mittal, Pulkit Gupta, Sai Siddarth, Shraddhey Shukla, Shubham Jindal, Snigdha Agrawal, Vishanth V
Junior Finomina Team

(From top left to bottom right): Akshit Jindal, Atrei Mukhopadhyay, Ashutosh Dekatey, Diksha, Harsh
Tharani, Harshvardhan Rastogi, Manas Mamtani, Parth Patel, Rajat Mohta, Sahil Waingankar, Sameer
Chaudhari, Shivam Sharma, Shreya Saloni

55
Transcending Ideologies...

56
 Stay Invested
"INVESTMENT IN KNOWLEDGE PAYS THE BEST INTEREST"

-BENJAMIN FRANKLIN

Happy Reading!!

57
Arth-Aarth