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August 21, 2022 ` 150

BUSINESS
CONFIDENCE
SLIPPING
STOCK
MARKETS
LOW
EXPECTATIONS

BETTING
ON INDIA
 FROM THE EDITOR
IKEA’s India
Gambit
F
or regular international travellers, particularly to Europe,
IKEA is, quite literally, a household name. The $42-billion
Swedish home furnishings giant has been known for its
massive stores and trademark furniture style. So it was no
surprise that, given India’s booming aspirational economy,
the opening of its first store—called the Blue Box because of its look—in
Hyderabad in 2018 saw massive crowds eager to see what was on offer.
Four years and five stores later, IKEA, which in a sense was testing the
Indian waters so far, has decided to amp up its India play. The reasons
are not far to seek. With a huge millennial population that is keen to
live well, India is a lucrative market for IKEA. Besides, internationally,
despite its global presence, the company is still heavily dependent on
Western Europe and North America, economies that are stagnating and
facing their own set of challenges. India, then, stands out in IKEA’s list
of growth options. As IKEA India’s CEO Susanne Pulverer tells Arnab
Dutta in our cover story, “It’s a big, big country and we have just started
to enter. There is so much to do.”
Indeed, Pulverer and her company now have their aggressive strategy
chalked out. Having pumped in close to `10,000 crore so far in India,
IKEA is now upping the ante on expansions. And importantly, it has
also tweaked its fabled strategy of setting up massive stores outside city
confines and is now putting up smaller size stores closer to the customer
to ensure footfalls. But as many multinationals have realised to their
peril, India is not an easy market to crack. There are several home-grown
players—Godrej Interio and start-up Pepperfry just two among them—
which will give the Swedish giant tough competition, not to forget the
countless mom-and-pop furniture shops dotting Indian cities with their
loyal base of customers. IKEA will have to contend with all of this and
have to wage a long-drawn battle for leadership in the Indian market.
Elsewhere in this issue, Ashish Rukhaiyar talks to several leading
stock market experts and players to put together a story on how they see
the markets playing out over the rest of the year. The broad consensus
seems to be that while the worst may be behind us, it’s not a rosy picture
just yet for the near term. And the reasons are many: inflation, monetary
tightening, recessionary trends in the US and Europe, supply chain
disruptions—the list is long. The latest findings of the quarterly Business
Today Business Confidence Index mirror most of these concerns. After
hitting a seven-year high at 55.2 last quarter (on a scale of 100), the BCI
fell to 51.2 for the April-June quarter of 2022 as macro concerns weighed
heavy on business leaders. But despite the concerns, there’s a lot of hope.
As India turns 75, we also bring you a stellar line-up of the country’s top
business leaders who tell us their vision for India for the next 25 years. As
their views show, there’s much to aim for, and celebrate.
sourav.majumdar@aajtak.com
@TheSouravM
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 THE BUZZ:

CONTENTS August 21, 2022 | Volume 31 | Number 17

12 PHOTOGRAPHIK

Baby Steps
The central govern-
ment has banned 19
single-use plastic
items. Here’s why the

IKEA
move is important

14 THE BUZZ:
THE POINT

The Multiplier
Effect

BETTING
Overpopulation is a
major concern for
India amid limited
resources

ON INDIA 16 THE BUZZ:

BRIEFINGS

Commodity
DESPITE SUFFERING Prices Cooling
LOSSES, THE GLOBAL COVER STORY
FURNISHINGS GIANT Prices of key agri-
commodities are

36
HAS PUMPED IN NEARLY
`10,000 CRORE AS IT expected to fall.
PURSUES AN AGGRESSIVE And more...
GROWTH STRATEGY IN
THE COUNTRY
PHOTO MONTAGE BY VARUN GUPTA

18 THE BUZZ:
SPOTLIGHT
,
NSE s Bull
Ashishkumar
Chauhan has taken
over as MD & CEO
of the NSE.
And more...

ECONOMY 66
20 UPDATE
THE NEXT 25 YEARS
On the occasion of 75 years of India’s Slipping and
Independence, some growth tips from Sliding
industry doyens for the road to 100 years
The rupee is likely
to maintain its
COVER BY NILANJAN DAS downward trend for
the rest of the year

Business Today 21 August 2022

 ECONOMY 46
Worried
Growing unease with the volatile
economic environment dents the morale
of businesses and sends BT’s Business
Confidence Index sliding from the
previous quarter’s levels. But while there
are areas of concern, top economists
point to strong signals of positivity
90
START-UPS:
KITCHEN TECH

The Taste
of Tech
Foodtech start-ups
are powering the
robotic kitchen
revolution in India

94
MARKETS THE BT INTERVIEW START-UPS:
50 56 HEALTHTECH
,
An Unpleasant Consensus Uptick in capex likely, on the
back of public capital New-age Health
Experts have already lowered their Managers
expectations from the stock market Sanjeev Krishan, Chairman of PwC
this year. They believe that the bulk in India, explains how India Inc. Riding on innova-
of the correction is behind us, but are can move ahead by navigating the tions, new-age
not yet ready to paint a rosy outlook current challenges healthcare start-ups
are disrupting India’s
insurance space

98
POLICY

VENTURE CAPITAL
Starry
Nights
As regulations bar
any substantial
night-time econo-
mic activities, India’s
night owls barely
82 HEALTHCARE 86 have anywhere to go

Cloudy Weather R.I.P (2020-2022)

Climate tech offers strong financial Once in short supply during the peak 104
returns to investors and an opportunity of the pandemic, vital paraphernalia
to create outsized environmental and used in the prevention and treatment
THE GOOD LIFE:
social impact. Yet, the sector is far of Covid-19 remain unsold or unused, TRENDS
from becoming a priority for VCs putting manufacturers in a spot
The Return of
the Record
An Feature
Growing interest
From time to time, you will see pages titled “Focus”, “An Impact Feature”, or “Advertorial” in Business Today. among young listeners
These are no different from an advertisement and the magazine’s editorial staff is not involved in their is leading to a revival
creation in any way. of the vinyl

Business Today 21 August 2022

 THE BUZZ
PHOTOGRAPHIK THE POINT BRIEFINGS SPOTLIGHT

8|

PHOTOGRAPHIK
Photo by GETTYIMAGES / DIBYANGSHU SARKAR
BABY STEPS
THE CENTRAL GOVERNMENT RECENTLY
Text by RAHUL OBEROI
BANNED 19 SINGLE-USE PLASTIC (SUP)
ITEMS. IT TAKES AROUND 1,000 YEARS
SOURCE: CENTRAL POLLUTION CONTROL BOARD, FOR A SINGLE SUP BAG TO BREAK DOWN.
THERMOFORMERS AND ALLIED INDUSTRIES HERE’S WHY THE MOVE IS IMPORTANT
ASSOCIATION, MEDIA REPORTS Business Today 26 December 2021
 |9

200,000
TONNES
Amount of SUP consumed
by Indians annually; it is 3
per cent of the total plastic
produced in the country
`10,000
CRORE
The size of India’s SUP
industry that employs
200,000 people directly
and 450,000
Business Today 26indirectly
December 2021
3.5
MILLION TONNES
Amount of plastic waste
India generates annually,
according to the
environment ministry
 NO ROOM TO
MANOEUVRE
India’s population will be
twice that of China by
2100, according to the
THE POINT UN’s median projection#
(Figures in million)

By RAHUL OBEROI
Graphics by LABOUR PAINS
TANMOY CHAKRABORTY With the population rising, any
further drop in labour force
702 participation rate may impact
613 FY26* India’s GDP growth
FY22 (All-India labour force
489
FY12 393 participation rate as a percentage
FY21 of the working-age population)
72 71.4 71.1 67.5 66.3 65.6
50 DOMINO EFFECT Male
FY01
Rapid growth in population may
43.4 43.3 42.9 40.6 39.8 38.8
lead to a further rise in total
imports, which has already Total
jumped 12 times since FY01
IMPORT BURDEN (Total imports in $ billion;
*Estimates)
Imports of select commodities
will increase further to meet
domestic demand
Petroleum
(*Estimates;
imports in $ billion) 197 & crude
products
162
155 RISKS AHEAD
With the population rising,
82 it will be a challenge for
India to remain a net food
surplus country

22
21.1
OFF BALANCE 2011-12

Rising imports may put 17.4

-1.6 2021-22
1991-92 additional pressure on the
-7.6 overall trade balance
2001-02
(Trade balance in (Net exports of
$ billion; *Estimates) agricultural &
2.6 2.7 allied products
1991-92 2001-02 in $ billion)
-183.4
2011-12
-191 -207.9
2021-22 2025-26*
-273.4
2022-23*
 Overpopulation is one of the major concerns for India amid the limited supply of
resources. The latest projections by the UN show that India will overtake China as the
most populous country next year. Higher demand for products may lead to greater
disparity in the country in terms of job security, forex reserves, trade balance and GDP,
among other concerns. Here’s how the broader picture looks for India

263
MILLION
The number of
people India
may add to
its population
between 2021 and
2050

183
MILLION
The number of
people likely to join
the working age
group of 15-64 years
in India between
2020 and 2050

22
PER CENT
The percentage
of the incremental
global workforce that
will come from India
over the next three
decades

8
BILLION
The likely
population of
the world by
November 15,
*Projections by CMIE
2022, as per UN Economic Outlook; #UN’s low
estimates projection for India’s population is
1,002 million in 2100

Source: United Nations World

Population Prospects 2022 report;
CMIE Economic Outlook
 THE BUZZ BRIEFINGS

COMMODITY
PRICES
COOLING
After scaling new heights in the first half
of 2022, prices of key agri-commodities
are expected to fall and bring relief to
consumers. In fact, the price of palm oil has
already halved in the international market.
This, coupled with softening prices of

BANKING ON
THE BEST
THE BANKING SECTOR has posted a
strong performance in the first quarter
of FY23 on the back of robust growth
and improving asset quality. Consider
this: ICICI Bank, the country’s second-
biggest private sector lender, has
registered a 50 per cent year-on-year
(YoY) rise in profit after tax at `6,905
crore as against `4,616 crore in the cor-
responding quarter last year. Similarly,
IndusInd Bank and Axis Bank have also
posted jumps of 61 per cent and 91 per
16 | cent in net profit at `1,603.29 crore and
`4,125 crore in the first quarter, respec-
tively, mainly due to a fall in bad loans.
—TEENA JAIN KAUSHAL
RAY OF HOPE
FOR PAYTM?
Global and domestic institutional
investors turned gung-ho on the stock of
beaten-down Paytm’s parent One 97 Com-
munications in the June quarter. Latest
shareholding data with the BSE show that
FIIs upped their stake to 5.45 per cent in
the company from 4.42 per cent on March
31. Likewise, MFs raised their holdings to
1.14 per cent from 1.05 per cent in the same
period. On July 27, shares of the company
traded at `713.65, down nearly 67 per cent,
against the issue price of `2,150. Is there
light at the end of the tunnel?
—RAHUL OBEROI
crude oil and a normal monsoon in India,
is bringing down the cost of packaging
and logistics, apart from raising hopes
of a better crop yield. As packaged food
majors are planning to increase grammage,
experts anticipate the return of a volume-
led growth cycle in the second half of FY23.
—ARNAB DUTTA
THE NEXT
GENERATION
The auction of 5G
telecom spectrum—
which concluded
recently—has yielded
the government over
`1.5 lakh crore. In a
process spread over
a week and after 40
rounds, it emerged
that Reliance Jio
had spent the most
at `88,078 crore to
pick up airwaves, which includes
the expensive 700 MHz band,
followed by Bharti Airtel (`43,084
crore) and Vodafone Idea (`18,799
crore). For the consumer, access to
5G translates to better voice and
data services. The bigger question
is how much the customer will pay
on the back of companies having
coughed up such large amounts.
Companies are expected to
launch 5G services by October.
—KRISHNA GOPALAN
The Coming
Gig Wave
THE NITI AAYOG, the govern-
ment’s think tank, says the
country’s gig workforce is
expected to shoot up to 23.5
million by 2029-30, from 7.7
million in FY21. At present,
around 47 per cent of the gig
work is in medium-skilled
jobs, 22 per cent are in high-
skilled ones, while low-skilled
jobs make up the balance,
says the report, titled ‘India’s
Booming Gig and Platform
Economy’. It adds that the
trend shows that the con-
centration of workers with
medium skills is declining
gradually, while that of those
with low skills and high skills
is increasing. “It may be ex-
pected that while the domina-
tion of medium skills would
continue till 2030, gig work
with other skills will emerge,”
the report says.
—RAHUL OBEROI

THE AVERAGE RISE IN INCOME OF FARMERS

1.3-1.7 ACROSS INDIA BETWEEN FY18-FY22, AS PER
SBI. IN SOME CROPS LIKE SOYBEAN IN MAHA-
times RASHTRA AND COTTON IN KARNATAKA, INCO-
MES HAVE DOUBLED DURING THE SAME PERIOD

Business Today 21 August 2022

BIG BATTLE OVER BIG TECH
TOP EXECUTIVES of leading technology start-ups including Flipkart, Paytm,
Zomato, Swiggy, OYO, Ola and MakeMyTrip met a group of parliamentarians
to discuss anti-competitive practices by the Big Tech firms. The domestic
e-commerce leaders brought a slew of issues to the notice of the
parliamentarians, including predatory pricing and the lack of a level-playing
field. The Big Tech companies such as Amazon, Google, Meta and Twitter are
expected to meet the committee to present their side of the story soon.
—BINU PAUL

Monkeypox RENEW THE

Alert OBLIGATION
Under revised targets set by
India has so far recorded at least four the Ministry of New and Renew-
cases of the viral Monkeypox disease. Cur- able Energy (MNRE), power
rently, smallpox vaccines and some antiviral distribution companies need
drugs such as Tecovirimat are used in its to source 24.61 per cent of the
treatment. The Indian pharma industry is energy supplied in their areas
considering developing new drugs, vaccines from renewable energy sources
and diagnostics to counter Monkeypox. in FY23. By the decade’s end,
There are no manufacturers of the smallpox they are expected to procure
vaccine in India as the country has eradicat- 43.33 per cent of their total
ed the disease, but Serum Institute of India consumption from renewable
is planning to develop an mRNA vaccine energy and another 4 per cent
with its global partner Novovax. | 17
through energy storage obliga-
—NEETU CHANDRA SHARMA tions, say official estimates.
However, meeting the targets
won’t be easy.
—MANISH PANT

TURBULENT

$70
WEATHER
Following repeated in-
stances of “degraded safety
margins”, aviation regulator
DGCA has curtailed the
number of flights operated
by SpiceJet by 50 per cent for BILLION
the next two months. DGCA
has also said it will maintain FALL IN FOREX
“enhanced surveillance” on RESERVES SINCE
the airline for the next eight
weeks. Meanwhile, the airline SEPTEMBER 3,
claimed the order won’t impact 2021. THE FIGURE
DOWN BUT NOT OUT operations as it had already
rescheduled flights owing to
PLUNGED BY
Amid high inflationary pressure and tight- lean demand. NEARLY 11 PER
ening of monetary policy across the world, —MANISH PANT CENT TO $572.71
the IMF has slashed India’s GDP growth BILLION ON JULY
outlook for FY23 to 7.4 per cent, which is a
downward revision of 0.8 per cent. Despite 15, 2022 FROM
the downward revision, the growth estimate $642.45 BILLION
by IMF is slightly higher than RBI’s latest es- ON SEPTEMBER 3
timate of 7.2 per cent. Despite the downward
revision, India is projected to grow faster than LAST YEAR,
developed economies like the US and China. ACCORDING
—RAJAT MISHRA TO THE RBI

Business Today 21 August 2022

 THE BUZZ SPOTLIGHT

NSE’s Bull
ASHISHKUMAR CHAUHAN took
over as MD & CEO of the NSE on
July 26, a day after relinquishing his
corner office at the BSE. It would
be interesting to see how Chauhan,
who was with the NSE earlier, man-
,
ages the country’s largest bourse
known for its monopoly in various WHAT S
segments, including equity deriva-
tives. Chauhan—an avid propo- NEXT?
nent of wealth creation and capital
formation via stocks—has often re- PRASHANT JAIN is one
ferred to the country’s high equity- of the most high-profile
to-derivatives ratio as encouraging fund managers of the
speculative activity. mutual fund industry. At
HDFC MF, he was man-
—ASHISH RUKHAIYAR aging three schemes
with assets totalling
nearly `90,000 crore

THE SOFTWARE DID IT before he decided to

quit after a 19-year stint.
Many in the industry
Volkswagen CEO Herbert Diess, who joined the

ASHISHKUMAR CHAUHAN PHOTO BY MANDAR DEODHAR; KISHORE BIYANI PHOTO BY RACHIT GOSWAMI
believe the signals were
German automaker in 2018 when it was recovering from the loud and clear late last
2015 Dieselgate scandal, will step down on September 1, three year when HDFC MF got
years before completing his term. Industry insiders say his fail- a new CEO from a rival
ure to turn around Cariad, the company’s software unit—that fund house. Going by
led to delays in launches of several new models of Porsche, the history of such star
18 | Audi and Bentley—seems to have cost him his job. fund managers, a new
investment firm could
—PRERNA LIDHOO
be on the anvil soon.
—ASHISH RUKHAIYAR
The failure to turn around the
carmaker,s software unit Cariad
may have cost Volkswagen CEO
Herbert Diess his job

TWIST IN New Avenues

THE TALE
The debt-laden Kishore
Biyani-promoted Future
Retail will now have its lenders
initiate insolvency proceed-
ings. After a protracted battle
for ownership between e-
commerce major Amazon and
Reliance Retail, this is a fresh
twist. Interestingly, the latter
already has possession of a
large number of Big Bazaar and
Central outlets belonging to
Future Retail. How the battle
will play out from this point
onwards will be interesting as
a bruised Amazon may not be
in any mood to give up.
—KRISHNA GOPALAN
Airbnb Co-founder
Joe Gebbia will remain on
its board after stepping
down from his role at the
company. In a letter ad-
dressed to the Airbnb Com-
munity, he said his “brain is
bursting with more ideas to
bring to the world,” and he
will be working on projects
including documentary
film-making, philanthropy
and a complementary
product to Airbnb.
—BINU PAUL
The Change
Agent
A SLEW of changes has
been introduced in the
insurance sector since
Debasish Panda became
Chairman of regulator IRDAI.
The latest is to empower
insurers to empanel hospi-
tals that meet the standards
and benchmarks set by their
boards. Earlier, hospitals
had to register for empanel-
ment with the Insurance In-
formation Bureau's Registry
of Hospitals in the Network
of Insurers (ROHINI). The
move will help health insur-
ers broaden their spectrum
of healthcare networks.
—TEENA JAIN
KAUSHAL

Business Today 21 August 2022

 UPDATE RUPEE

SLIPPING
AND SLIDING
The rupee has depreciated against the dollar in
recent times and, according to experts, is likely to
maintain its downward trend for the rest of the year
20 |
BY RAJAT MISHRA

X THROUGH THE TURMOIL of the

past few months, one thing has re-
mained constant: the slide of the ru-
pee against the US dollar. In recent
months, the Indian currency has
touched new all-time lows and ex-
perts say the downward ride is not
over yet. The rupee has declined by
about 25 per cent against the dollar
since December 31, 2014, Finance
Minister Nirmala Sitharaman told
the Lok Sabha recently, citing data
from the Reserve Bank of India. On
December 31, 2014, the exchange rate
stood at `63.33 against the dollar,
while on July 11 this year, the number
was at `79.41, Sitharaman had said in
GRAPHICS BY PRABAL BISWAS

Parliament in response to a question.

Why did the rupee depreciate, es-
pecially in recent months? According
to Sitharaman, global factors such
as the Russia-Ukraine conflict, soar-
ing crude oil prices and tightening
of global financial conditions were
the major reasons for it weakening
against the dollar. As of July 29, the

Business Today 21 August 2022

rupee has declined 7 per cent against
the dollar in the past one year.
There seems to be no respite in
sight for the rupee. According to
some experts, the Indian currency
will continue to remain under pres-
sure for the rest of the year—espe-
cially with the US Federal Reserve
raising rates by a total of 150 basis
points (bps) in June and July, and sig-
nalling that it could raise rates again,
if necessary, in September. With the
US Fed raising rates, emerging mar-
ket economies like India are likely to
see a flight of capital, which in turn
would exert more pressure on the
Indian currency, leading to it depre-
ciating further. Industry watchers
estimate that in the backdrop of the
aggressive rate hikes by the US Fed
and India’s rising trade and current
account deficits, the exchange rate
could be at `81-82 to a dollar by the
end of the year.
For instance, Abhishek Goen-
ka—Founder and CEO of forex advi-
sory firm IFA Global—expects the
rupee to head towards `81 to a dollar
by the year-end. According to Anil
Kumar Bhansali, Head of Treasury
at Finrex Treasury Advisors, a trea-
sury and forex consultancy firm,
the rupee will fall to 80.50-levels
by September, and stabilise around
this level until December. Agrees
Jigar Trivedi, Research Analyst at
Anand Rathi Shares & Stock Bro-
kers. He says that the rupee will hit
80.5-81-levels by the end of 2022.
However, according to financial
services major Nomura, the Indian
currency may reach `82 to a dollar
between July and September be-
cause of a number of negative fac-
tors—including the year-long US
Fed rate hikes and India’s deterio-
rating balance of payments dynam-
ics. Ratings and analytics firm Cri-
sil, however, is a bit more optimistic:
it expects the exchange rate to settle
at `78 to a dollar by March 2023.
THE SILVER LINING
But every cloud has a silver lining.
The depreciating rupee is likely to
SOUTH BOUND
The rupee has fallen 7 per cent against the dollar in the past year
68
70
74.61
72
79.74
74
76
78
80
82
JUL 23, 2021 JUL 29, 2022
` VS $; INVERTED SCALE; SOURCE CMIE ECONOMIC OUTLOOK
EBB AND FLOW
FPIs have pulled out ``2,12,370 crore from the markets so far in 2022
10,000 JULY
JANUARY FEBRUARY MARCH APRIL MAY JUNE
0
-39,993.22
4,988.79
-33,303.45
-35,591.98
-50,202.81
-41,123.14
-10,000
-20,000
-17,143.75
-30,000
-40,000
-50,000
-60,000
FII EQUITY FLOWS IN ` CRORE; SOURCE ACE EQUITY
boost the localisation of compo- company’s products. “With more
nents in the consumer durables seg- than 90 per cent of Haier products
ment. “Wherever possible, we are [being] manufactured at our two in-
trying to localise these raw materi- dustrial parks in Ranjangaon, Pune,
als. However, the local manufacturer and Greater Noida, we are hopeful
is still dependent on imports of key that the ‘Made in India’ products
raw materials, and hence we cannot will” see a limited impact on their
eliminate the impact of rupee depre- prices, he says. “We are constantly
ciation completely. Localisation can striving to minimise the impact of
help reduce the impact of customs these factors on our consumers.”
duty,” says Kamal Nandi, Business Amidst the economic uncer-
Head and Executive Vice President tainty, it is good to have some fac-
of Godrej Appliances, which is a part tors that remain constant. However,
of Godrej & Boyce. most would agree that a spiralling
However, Satish N.S., President of rupee is one constant we could have
Haier Appliances India, is of the view done without.
that the depreciating rupee will have
a limited impact on the pricing of his @RajatMishra9518
Business Today 21 August 2022
 UPDATE AVIATION

22 |

AKASA’S
So, to what extent will it be
able to shake up the market?

FLIGHT PLAN
“Akasa is flying into an intensely
competitive market with razor-
thin margins. It is also a market
where the top two players, name-
As India’s newest airline prepares for take-off, here’s ly IndiGo and the Tata group air-
what its future may hold in the country’s intensely lines, command more than 80
per cent market share,” says Sa-
competitive aviation market BY MANISH PANT tyendra Pandey, Managing Part-
ner at aviation advisory AT-TV.
Given Akasa’s financing
X WHEN INDIA’S NEWEST scheduled airline Akasa Air takes prowess and management
to the skies on August 7, it will be launching in the world’s team, it is expected to put up a
fastest expanding aviation market that also faces a clutch of strong fight in sectors where it
challenges. The low-cost carrier, backed by billionaire in- launches operations. The airline
vestor Rakesh Jhunjhunwala, will thus have to offer a prod- plans to scale up to a fleet of 20
uct that is both disruptive and different. aircraft within 18-20 months
PHOTO COURTESY BY AKASA

The expectations are high from the carrier. This was evi- of launching commercial op-
dent after tickets for its maiden flight were sold out within erations. AT-TV estimates that
hours after bookings opened on July 22. “As professionals, AKASA AIR Akasa should be able to capture
PLANS TO SCALE
we have spent one and a half years on developing a competi- UP TO A FLEET around 4 per cent market share
tive cost structure from day one,” says Founder & CEO Vi- OF 20 AIRCRAFT in the next few years. “This will
WITHIN 18-20
nay Dube. A quick check reveals that Akasa’s ticket prices MONTHS OF also help them leverage benefits
are lower than its competitors by over 22 per cent on average LAUNCHING of scale, amortise costs and set
COMMERCIAL
in the Mumbai-Ahmedabad sector. Similarly, in the Benga- OPERATIONS up operations to fly interna-
luru-Mumbai sector, its fares are lower by nearly 5 per cent. tionally. However, success also

Business Today 21 August 2022

depends on demand patterns and
geopolitical dynamics,” says Pandey.
Referring to the airline’s pricing
strategy, Karan Khanna, an Analyst
with Ambit Capital, says, “It is lower
than other airlines in the time slot
they are operating as of now, which
should help them achieve better load
factor at the start itself.”
Rohit Tomar, Partner at advisory
Caladrius Aero, doesn’t foresee a
major upheaval because of Akasa’s
entry in the near term. “In the me-
dium term, however, there are a lot
of expectations from the market to
get better quality of service while
having the preference of low fares.
It is very typical of a growing mar-
ket, where the number of trips per
person increases more than the in-
crease in base—of new entrants—in
air travel,” he says. The Indian mar-
ket now has a substantial number of
frequent travellers.
A Price-sensitive Market
Domestic airlines carried 57.2 mil-
lion passengers in the January-June
2022 period vis-à-vis 34.3 million
passengers in the corresponding pe-
riod of the previous year, registering
an annual growth of more than 66
per cent and monthly growth of over
TAKING TO THE SKIES
Market share of scheduled domestic carriers
AIRASIA
INDIA
5.7%
AIR
INDIA*
7.5%
VISTARA
9.4%
SPICEJET
9.5%
*INCLUDES AIR INDIA EXPRESS; FIGURES IN PER CENT; SOURCE DGCA
237 per cent, says data from aviation
regulator the Directorate General
of Civil Aviation (DGCA). And the
post-Covid-19 recovery is expected
to sustain.
Also, as the Indian flyer is very
cost-sensitive, ticket pricing is one
of the key determinants of market
demand. “Without competitive
fares, airlines risk losing passengers
to other modes of transport, or risk
a scenario where passengers choose
not to travel at all,” says AT-TV’s
Pandey. Therefore, he sees Akasa
pricing tickets competitively as it
expands its network.
Amid a sharp increase in jet fuel
prices, apart from the partial roll-
back of salary cuts, profitability for
the industry has been materially im-
pacted, despite an uptick in demand,
says Ambit’s Khanna. “Conse-
quently, there has been an increase
in air fares across the existing car-
riers, with yields reaching historical
highs,” he adds. With the entry of
new carriers like Akasa, the revival
of Jet Airways and the consolidation
of the Tata group-owned carriers
Air India, Air India Express, Vistara
and AirAsia India, passengers may
get some relief in airfares amid in-
creased competition.
ALLIANCE
AIR
1.1%
STAR AIR
0.2%
FLYBIG
0.2%
INDIGO
56.9%
GO FIRST
9.5%
Business Today 21 August 2022
However, elevated crude prices,
and a depreciating rupee can further
amplify the impact of fuel on costs.
Today, fuel accounts for approxi-
mately 50 per cent of the operational
expenditure of an airline in India.
“Would I like to see crude back at
$40 a barrel? Absolutely! Would I
like to see the rupee at 60 to the US
dollar? Absolutely! Having been in
aviation for 32 years, I can tell you
that you don’t get into this business
if you are scared of forex or crude
spike; you plan for ups and downs,”
discloses CEO Dube.
Turbulence Ahead
So, what are some of the challenges
Akasa will have to contend with? Un-
constrained capacity, fare wars and
structural challenges, especially the
high cost of jet fuel, are some of the
immediate concerns, says Pandey.
In the near term, it will also face a
challenge with prime slots at metro
airports although this will ease over
time with new airports and addi-
tional airside capacity.
For an airline launching in a mar-
ket with high passenger volumes,
cut-throat competition and re-
stricted infrastructure, consistent
delivery of services will be a con-
stant challenge. “Consistency is the
key in such a market, ranging from
consistency in cost structure, con-
sistency in services and consistency
in growth,” says Tomar of Caladrius.
But the benefit of starting with
a clean slate may be Akasa’s biggest
advantage. “This also means that
they fight it out alone, winning one
battle at a time. Far too many people
have underestimated the complex-
ity and competitiveness in the In-
dian market, and how this plays out
remains to be seen,” says Pandey.
Meanwhile, a bullish Dube says,
“In terms of growth in demand, it’s
going to be staggering for the next
20 years plus in India. We don’t need
to take someone else’s market share,
or steal someone else’s traffic!”
@manishpant22
 UPDATE IPOs

FIRE SALE
Incidentally, Zomato’s shares
had tanked over 10 per cent dur-
ing intra-day trade on August 23

COMING SOON last year when the one-month

lock-in period for its anchor in-
vestors came to an end.
The coming months could see selling pressure But it’s not only about Zom-
ato. Last year was a stellar year
intensify for stocks of companies that listed in the
for IPOs as a total of 63 compa-
second half of last year as the one-year lock-in for nies launched their public is-
their pre-IPO shareholders comes to an end sues to raise a record `1.2 lakh
crore—the highest in a calen-
BY ASHISH RUKHAIYAR dar year.
Since many companies listed
on the bourses in the second
X IT WAS JUST ANOTHER MONDAY FOR THE STOCK MARKETS, but for online food half of last year, the lock-in peri-
delivery major Zomato, July 25, 2022 turned out to be a day of reckoning. Its stock ods of their pre-IPO sharehold-
price fell over 14 per cent during the day’s trade to touch a low of `46. It had listed ers are set to expire soon. That,
at `76 last year. So, what happened? in turn, could intensify the sell-
The crash was triggered by the fact that the digital platform’s stock had complet- ing pressure on the companies’
ed a year of listing, and hence, the lock-in period for its pre-IPO shareholders had equities amidst the weak out-
come to an end. As per the guidelines of markets regulator Securities and Exchange look and ongoing volatility.
Board of India (Sebi), all investors who buy a company’s stock through pre-IPO The focus will be on online
placements and anchor allotments are subject to certain lock-in periods—such as majors like Paytm, Policyba-
a month for anchor investors, and a year for pre-IPO shareholders—following the zaar, Nykaa and CarTrade Tech,
24 | expiry of which, eligible shareholders can sell their holdings in the open market. among other tech companies, as
they commanded massive valu-
ations before their IPOs. But
ILLUSTRATION BY RAJ VERMA barring Nykaa, most of them
have seen their share price crash
following their market debut.
Among the start-ups that got
listed last year, only Nykaa has
managed to stay above its issue
price of `1,125, even as shares
of Paytm and Policybazaar are
down over 67 per cent and 52
per cent, respectively, from
their issue prices.
“The latter half of 2021 saw
tech-platform companies rul-
ing the roost. The majority of
them had no profits, and hence
were valued at multiples of rev-
enue or gross merchandise val-
ue (GMV),” says Arun Kejriwal
of Kejriwal Research & Invest-
ment Services.
“Taking Zomato’s example,
[investors should] expect other
similar tech-platform compa-
nies to face shareholder panic
when their lock-in expires. It
is quite likely that with market
price being half, or even lower

Business Today 21 August 2022

compared to the issue price, inves-
tors could rush to sell and realise
A YEAR AT THE BOURSES
whatever [return is] possible. While Company Date of Issue CMP % change*
the share prices are substantially listing price (`) (`)
lower, it does not mean every in- One 97 Communications 18-11-2021 2,150 699.45 -67.47
vestor is selling at a loss, simply be- (Paytm)
cause most of these allotments were CarTrade Tech 20-08-2021 1,618 672.85 -58.41
made at substantially lower prices,
Windlas Biotech 16-08-2021 460 214.35 -53.40
and the issue price was ramped up
when they tapped the capital mar- PB Fintech (Policybazaar) 15-11-2021 980 471.7 -51.87
ket,” he explains. Zomato 23-07-2021 76 41.65 -45.20
This assumes significance as,
Nuvoco Vistas 23-08-2021 570 322.5 -43.42
in the case of Zomato, the average
cost of acquisition for Info Edge Krsnaa Diagnostics 16-08-2021 954 566.9 -40.58
(India)—a pre-IPO shareholder of Glenmark Life Sciences 08-06-2021 720 475.7 -33.93
the company—was only `1.16 per Aptus Value Housing 24-08-2021 353 275.35 -22.00
share. In other words, it would still Finance
make a huge profit if it decided to Chemplast Sanmar 24-08-2021 541 470.5 -13.03
sell its holding at the prevailing
FSN Ecommerce 11-10-2021 1,125 1,453.15 29.17
market price. Ventures (Nykaa)
Again, Zomato is not alone. A Devyani 16-08-2021 90 157.55 75.06
close perusal of the disclosures International
made in the draft document of digi- Rolex Rings 08-09-2021 900 1,848.75 105.42
tal companies that went public last
Tatva Chintan 29-07-2021 1,083 2,265.75 109.21
year shows that each of them has Pharma Chem
private equity (PE) and venture cap-
ital (VC) shareholders who acquired CURRENT MARKET PRICE (CMP) AS OF JULY 26, 2022; *OVER ISSUE PRICE; SOURCE NSE
shares prior to the IPO at a fraction
of the issue price. More importantly,
all these PE/VC shareholders will of `2,150. The company’s shares see heightened selling pressure with
soon be able to sell their shares in closed at `715.70 on July 28. the lock-ins coming to an end, other
the open market. In the case of Nykaa, which is companies that listed last year could
a profitable start-up, entities like also meet a similar fate as their pre-
Lighthouse India Fund III and Light- IPO investors would be looking to
EXIT ROUTE house India III Employee Trust ac- book profits.
Sample this: In the case of Policy- quired its shares at `76.65, and saw The coming months will see the
bazaar that listed on November 15 the value of their investments jump one-year lock-in period ending for
last year, SoftBank’s arm SVF Py- nearly 15 times when the issue price companies such as Windlas Biotech,
thon II (Cayman) acquired shares was fixed at `1,125. Its closing price Nuvoco Vistas, Krsnaa Diagnostics,
at an average price of `289.95 while was `1,400.95 on July 28. Glenmark Life Sciences, Aptus Val-
the issue price was fixed at `980— Simply put, the PE/VC firms may ue Housing Finance and Chemplast
a premium of nearly 238 per cent still sell their holdings once their Sanmar, among others. All these
compared to the average price of ac- lock-in expires, even if the market shares are currently trading below
quisition. Its share closed at `459.50 price is below their respective issue their respective issue prices and
on July 28. prices as they would still be making pre-IPO shareholders may partially
Similarly, in the case of Paytm, a decent profit, while investors who offload their stakes to cut losses.
SAIF III Mauritius Company ac- bought shares during the IPO would That’s not all. Even companies
quired its shares at `15.40 while be reeling under heavy losses. like Devyani International and Ro-
Elevation Capital V FII Holdings For instance, shares of Paytm lex Rings that are nearing the first
bought them at `77.70. The acquisi- may well be trading over 65 per cent anniversary of their listing and trad-
tion prices for SAIF Partners India lower than its issue price but SAIF III ing above their listing price could
IV at `305.60; Elevation Capital V at Mauritius Company could still see see sell-offs, even while doing well
`441.80; and Alibaba.com Singapore its investment swell nearly 44 times. in a dull market.
E-Commerce at `583.40 were also According to market partici-
much lower than Paytm’s issue price pants, while online majors could @ashishrukhaiyar

Business Today 21 August 2022

 UPDATE MOTOR INSURANCE

ILLUSTRATION BY RAJ VERMA

A combination of the PAYU
and PHYU concepts is Bajaj Al-
lianz General Insurance’s cover
called the ‘pay as you consume
(PAYC)’ plan. Under it, your car
is insured based on your vehicle
usage, and the premium is calcu-
lated according to the distance
driven annually, along with
the policyholder’s driving be-
haviour. Generally, in such use
cases, the driving behaviour is
analysed based on data collected
by a telematics device installed
in the vehicle. The driving met-
rics can also be recorded on the
firm’s mobile app.
“The PAYC product was
first conceptualised by us
and launched in the IRDAI’s
sandbox framework. When we
witnessed the positive uptake
of the product, and how it sur-
passed the success parameters
set by the IRDAI, we decided to
launch it in its entirety. PAYC

Mileage Protection
gives customers the freedom
to choose their insurance
premium based on their vehicle
usage,” says Tapan Singhel, MD
A regulatory push is creating a flurry of usage-based motor and CEO of Bajaj Allianz.
insurance policies in India Similarly, Go Digit General
Insurance has launched a ‘pay
BY TEENA JAIN KAUSHAL as you drive (PAYD)’ feature for
OD policies. Under it, policy-
holders get a discount that ap-
plies to anyone driving less than
X THERE IS GOOD NEWS for car owners who do not drive a lot, but have to keep 15,000 km per year from the
their vehicles insured nonetheless. Insurers are increasingly starting to use time the current owner bought
telematics data from vehicles to determine the premium rates of motor-vehicle the car from the showroom.
insurance policies based on a policyholder’s risk exposure, and the distance The company uses odometer
driven. The ‘pay as you drive’ motor insurance policies charge you a premium readings, telematics, and the
based on the usage of the car, which translates into a lower premium payment distance opted by the policy-
when the vehicle is driven less, and higher when it is driven more. holder to give this discount that
This economical evolution in motor insurance policies has happened follow- can go up to 25 per cent.
ing the introduction of a regulatory sandbox by regulator Insurance Regulatory These usage-based policies
and Development Authority of India (IRDAI) that has allowed general insur- are cheaper for those with less
ance companies to introduce tech-enabled concepts in motor own damage (OD) usage, such as people living in
policies. For instance, ICICI Lombard has launched a ‘pay as you use (PAYU)’ small towns and people with
policy where the premium will be based on the extent of the vehicle’s actual, or multiple vehicles. It also suits
potential, use during the policy’s coverage period. In case the distance covered people who do not drive their
by the plan is exhausted, the policyholder can top up the distance covered dur- car a lot, but still have to pay
ing the policy period. A variation of its PAYU plan is the insurer’s ‘pay how you higher premiums.
use (PHYU)’ plan that charges a premium as per the driving behaviour score of
the policyholder. @teena_kaushal

Business Today 21 August 2022

 UPDATE INVESTING
Hunkering Down
Big bull Rakesh Jhunjhunwala has kept his
portfolio largely unchanged during the April-June
quarter amid the bloodbath in the market
BY RAHUL OBEROI
X IT IS WISE not to be overtly adventurous during a storm, say the
wise. This also holds true when the markets are in churn. Ask Rakesh
Jhunjhunwala (pictured), often referred to as the Warren Buffett of In-
dia. The billionaire investor has largely kept his portfolio unchanged
in the first quarter of the current financial year, amid the volatility in
the market. That was wise: the benchmark indices—the BSE Sensex
and the Nifty50—tanked over 9 per cent each because of rising con-
cerns over inflation and heavy foreign outflows, with investors losing
around `20 lakh crore.
Watch-to-jewellery maker Titan Company was Jhunjhunwala’s big-
gest bet in Q1FY23. The big bull (as Jhunjhunwala is often called) and
PHOTO BY BANDEEP SINGH
28 |
Business Today 21 August 2022
his wife Rekha continue to hold 5.05 per
cent stake in the company, according to
corporate database ACE Equity. The cu-
mulative value of Titan in their portfolio
stands at nearly `10,300 crore as of July
26, 2022. His stake also remained un-
changed in Star Health at 14.39 per cent;
Fortis Healthcare at 4.23 per cent; Ca-
nara Bank at 1.96 per cent; and CRISIL
at 2.92 per cent, among others. His wife,
too, continued to hold 3.10 per cent in
Star Health and 2.56 per cent in CRISIL.
Jhunjhunwala’s only buy in the last
quarter was mid-cap company Escorts
Kubota, where he picked up 1.39 per cent
stake. In contrast, the market maven
sold 3 million shares of Tata Motors dur-
ing the June quarter. He also pruned his
stake in Indiabulls Housing Finance to
1.17 per cent from 1.28 per cent. His stake
in Delta Corp, Indiabulls Real Estate,
Nalco and TV18 Broadcast dropped be-
low 1 per cent. Despite the latest churn,
Jhunjhunwala and his spouse together
held shares worth over `27,300 crore as
of July 26. The couple had stake in over
30 companies as of June 30, 2022, com-
pared to 35 at the end of the fourth quar-
ter of FY22.
So, should you follow the big bull’s in-
vestment mantra?
Kolkata-based Abhishek Basumal-
lick, Founder and Chief Equity Advisor
of research firm Intelsense Capital, is
sceptical about “cloning” his process.
“However, we can use the stock names
we get from chasing famous investors as
a starting point for research. If it makes
the cut based on our criteria, then we
can decide to buy it.” But, it has to be a
“conscious and studied decision,” he
cautions.
Kanpur-based Ekansh Mittal, Found-
er of research firm Katalyst Wealth,
agrees. “One should never chase big
investors, as complete allocation and
investment rationale are not available.
There is a considerable delay in the in-
formation. Further, every investor has
a different objective, horizon and risk
appetite. Therefore, investors should do
their due diligence or seek professional
advice for investment.”
@iamrahuloberoi

The End of Cycles?
The world’s economic graph over the next few decades may resemble jagged
shards of broken glass, with many tips pointing downwards
BY UDAYAN MUKHERJEE
34 |
E
EVEN THOUGH the economic
world is accustomed to periodic
ups and downs, most seasoned
observers place their faith on a
certain rhythm to this ebb and
flow—namely, that corrective
policy action and market forces
will inevitably address the causes
behind any downturn, paving the
way for the next upswing. And life
will go on. This cyclicality, almost
akin to the seasons of nature, lies
at the core of most long-term fore-
casting and preparation. But what
if repeated assaults on the edifice
of this cyclicality have brought
things to a point where familiar
patterns begin to disappear, mak-
ing the future far more difficult
to envisage with any degree of
accuracy? A sense of helplessness,
albeit self-induced, may begin to
take root, shaking the world out of
its smug complacency. We are at
that crossroads today.
The dominance of the US
in global economic affairs, and
its obsession with the world of
finance, has led us to view all
matters through the prism of
money. A firm belief that there is
practically nothing in the world
that cannot be addressed through
a monetary or fiscal manoeuvre—
tweaking interest rates or printing
money. So, for many Americans,
the best example of a Black Swan
event would be the Lehman Broth-
ers collapse, almost as much as the
9/11 attack. But, as the events of the
last two years have shown, and the
severe heatwaves of this summer
portend, far bigger calamities prob-
ably lie in store in the years ahead,
to which there is no quick fix known
to man.
This is particularly germane to
the economic world, as the damage
would not only show up in loss of life
or livelihood in some remote part of
the globe, which the western world
can dismiss with some polite, insin-
cere acknowledgement. This time it
is showing up in hard, quantifiable
losses running into trillions, and
threatening to become even worse.
Taiwan, the world’s chip factory, is a
good example. Since last year, it has
been witnessing the worst drought
in five decades, as typhoons have all
but disappeared and monsoons rare.
Chip factories are water guzzlers and
production has had to be curtailed
severely, leading to shortages across
Business Today 21 August 2022
COLUMN Animal Spirits
industries. Whereas a drought in a
small Asian island wouldn’t even
have made for a footnote in the
western media, now everyone, from
California to Gurugram, seems to be
praying for rains in Taiwan.
Or take the case of China, where
the government has chosen such a
strict tolerance policy against Co-
vid-19 that shutdowns have brought
economic growth to a standstill. In
the second quarter, GDP growth
slowed to 0.4 per cent, and most
analysts believe that too was an over-
stated number. More than two years
after its onset, this is how heavy a
price the pandemic continues to
exact on global economic growth.
The most recent instance of
alarm has been the series of con-
tinuing heatwaves sweeping across
the western world. 40 degrees
Celsius, mostly unheard of in the
Continent, is par for the course
this summer. And there is more at
stake than a sweaty brow. Wheat
prices are going through the roof as
production plummets in Europe;
olive oil prices soar as Italy grapples
with its worst drought in 70 years.
The Food and Agriculture Organi-
zation or FAO’s Food Prices Index

ILLUSTRATION BY RAJ VERMA
has been on a tear this year, even as
food inflation crossed 10 per cent in
June in the US, and nothing that the
European Central Bank or the US
Federal Reserve can do will reverse
it easily. The gods of the financial
world seem powerless in front of the
forces of nature.
Now what if these events were
not one-off aberrations, but the tip
of the iceberg? Everyone in the eco-
nomic universe is always in a tearing
rush to proclaim the end of a crisis
and ‘move on’ to the next phase of
growth and profits, even as wiser
men warn us against it. Bill Gates
and the World Health Organization
are on record saying that there will
be more pandemics soon, perhaps
even deadlier than the present one.
If this prediction, of a Covid-19-like
pandemic every few years, was to
come true, where would it leave pros-
pects for global growth?
The World Meteorological
Organization or WMO warns that
heatwaves and forest fires will
become recurring features, heavily
impacting crops in years to come.
Will food inflation be tamed then,
through interest rate hikes?
These days, it is not uncommon
to hear people talk about the pos-
sibility of another Black Swan event
in the financial markets, triggered
by the recent inflation and reces-
sion concerns. But, in this milieu
of climate change, how far are we
from a colossal natural disaster like
the 2004 Asian tsunami or the 2011
earthquake in Japan? The prospect
is too painful to even contemplate,
though the threat so very real.
It may suit politicians to under-
play these perils, but the general
public is not fooled. As populations
recognise this inability of their
elected governments to undo the
damage and address their woes,
unrest is creeping in. With inflation
and cost of living issues spiralling
out of control, political instability
of the likes seen in Sri Lanka or Bra-
zil may become more widespread,
further imperilling an already
fraught world.
The truth is that we have pushed
our planet beyond a tipping point.
The future is now full of unknown-
unknowns, though it would be fairer
to call them known-unknowns as
this is all our doing, and we should
have seen it coming. None of this
should surprise us, really.
Business Today 21 August 2022
We are used to a
world where periods
of expansion dwarf
intermittent bouts
of contraction, but
could soon be simply
lurching from one
crisis to another,
with the very notion
of a regular cycle
fundamentally
altered
Slowly, it is beginning to dawn
upon CEOs of giant corporations,
and leaders of the western world, | 35
that the planet is in a scary place.
For too long, they have focussed
only on the benefits of growth,
ignoring all the costs. Now, the
chickens are coming home to roost
and there is no place for them to
hide. Till recently, they would say
tactful things about climate change
and ESG, only to roll their eyes in
private and dismiss it all as alarm-
ist, leftist tripe. Not any longer, for
now the fire has reached their own
doorstep. This is no longer an Afri-
can or Asian nightmare they
can afford to ignore. But it is too
late, already.
We are used to a world where
periods of expansion dwarf inter-
mittent bouts of contraction, but
could soon be simply lurching from
one crisis to another, with the very
notion of a regular cycle fundamen-
tally altered. The world’s economic
graph over the next few decades may
not resemble the gentle undulating
humps of a camel’s back inexorably
sloping higher, but jagged shards of
broken glass. Many of those tips will
be pointing southwards.
 COVER STORY IKEA

INDIA
CHALLENGE
36 |

THE SWEDISH HOME FURNISHINGS

GIANT IS AGGRESSIVELY PUSHING
INTO THE INDIAN MARKET, BUT
LEADING DOMESTIC BRANDS ARE
NOT READY TO GIVE UP MARKET
SHARE WITHOUT A FIGHT
BY ARNAB DUTTA
ILLUSTRATION BY NILANJAN DAS & TANMOY CHAKRABORTY

Business Today 21 August 2022

 COVER STORY IKEA
It was a typical June
morning in Bengaluru. The
garden city showed off its best
weather—temperature at a
cool 23-25 degrees, marginally
overcast sky, slight drizzle at
times, the sun peeking through
now and then to spread
warmth and cheer.
Traffic, though, was quite the
opposite. Crowded. Exasperating.
Especially on NH75 near Nagasan-
dra. Traffic had come to a stand-
still. But the reason was not only
rush hour. If you looked closely,
38 | you could see cars queued up to
enter a new, elegant, blue building
bearing the legend “IKEA”. Once
your car got in and got parked, you
had to endure another serpentine
queue of smiling, curious folks.
The store opened at 10 am, but
chances are you spent three hours
in various queues before you final-
ly got inside the building.
Not that this dampened the
enthusiasm of Bengaluru resi-
dents, who thronged the maze of
aisles and rows of the 460,000-sq.
ft store in the thousands to take
a peek at IKEA’s signature fur-
niture, Japanese kitchen knives
and other snazzy products. A
grinning Ram Babu and his fam-
ily were caught up in the frenzy.
Babu, a bureaucrat and father of
three teenagers, was checking
out the vast range of affordable
cutlery on his wife’s invitation,
but had great difficulty managing
an uncompromising crowd that
conveniently ignored his elbow
jabs, even as his daughter Sheetal
Business Today 21 August 2022
lost herself in search of decora-
tive plants. The 1,000-seater
restaurant on the second floor of
the Blue Box—the nickname of
a standalone IKEA large-format
store—could be accessed after
enduring a wait of an hour as
Swedish meatballs and mango
pastries flew off the shelves. But
the thousands of visitors, the Ba-
bus included, were in no mood to
check out anytime soon.
As the crowds surged around
her, the tiny, frail-looking Susanne
Pulverer was caught in a heavy
stream of downward-moving visi-
tors on a broad staircase. Decked
up in IKEA’s signature yellow top
and blue skirt, the Swedish na-
tional looked delighted, gauging
the mood of her customers. (Swe-
den, incidentally, regularly ranks
among the 10 happiest countries
in the world.) Despite the crowds
and the visible enthusiasm of con-
sumers towards the brand, the
62-year-old Pulverer, CEO and
Chief Sustainability Officer of
IKEA India, has a big task ahead.
Nobody needs to tell her that.
Pulverer knows India well, having
spent two stints here, the first as a
sourcing manager for the country
starting 2007. The soft-spoken
IKEA veteran also gathered mar-
ket experience from her stint as
Local Community Leader and was
present during IKEA’s first store
launch in Hyderabad in mid-2018.
No surprise, then, that in January
2022, the global executives in the
Netherlands put their bet on Pul-
verer for their India gambit to suc-
ceed. “It’s a big, big country and we
have just started to enter. There is
so much to do,” says Pulverer. She
adds that India is a “very impor-
tant growth market for IKEA”, and
while it has five stores here, “this
is just the beginning”.
For the $42-billion Swedish-
founded, Dutch-headquartered
home furnishings giant, cracking
the India market is important.
IKEA clinched the title of the larg-
est furniture retailer in the world
in 2008. Yet, despite its presence
in 64 countries across five conti-
nents, including the oil economies
of the UAE, Kuwait and Saudi Ara-
bia, and emerging economies like
China, Russia and India, IKEA
continues to depend heavily on
the stagnating economies of West-
ern Europe and North America.
Nearly 73 per cent of its stores are
located in these two regions, with
Europe alone housing 277 Blue
Boxes, of a total 472 worldwide. In
comparison, the market in India is
growing faster and with per capita
consumption of furniture remain-
ing low, opportunity beckons.
However, India is not an easy
market to crack, as several mul-
tinational companies have found
to their dismay. The character of
the Indian consumer is hard to
understand and serve. There’s
competition lurking everywhere.
In the case of IKEA, competition
would range from large organ-
ised players like Godrej Interio to
new-age upstarts like Pepperfry
to the thousands of unorganised
players in the ‘furniture markets’
dotting India’s cities. The com-
pany has also been making losses
ever since it entered India. Add
to that the fact that India has the
lowest per capita income of all

PHOTO BY SANDESH RAVIKUMAR

markets IKEA is present in, and
you begin to get the scale of the
challenge the company faces.

I
KEA’S FIRST INDIA store came
up in Hyderabad in August
2018, but its India plan began
to unfold seven months later.
On March 4, 2019, IKEA India’s
board of directors gathered for an
extraordinary general meeting at
its registered office in DLF Tower- “It’s a big, big country and we have just
A at South East Delhi’s Jasola Dis- started to enter [India]. There is so much
trict Centre. As the government
prepared to relax local sourcing
to do. [And India is] a very important
norms for overseas single-brand growth market for IKEA”
retailers, the board decided to
raise four-fold the company’s au-
thorised share capital, the maxi-
SUSANNE PULVERER
mum amount allowed to be raised
CEO AND CHIEF SUSTAINABILITY OFFICER,
legally through a share issue— IKEA INDIA
from `2,655 crore to `10,000
crore. The move was crucial. Since
its incorporation in August, 2013,
IKEA India had sucked in funds
from its Netherlands-based par- PRIMED FOR
ent for expansion through every
possible avenue it had. However, GROWTH
for further capital through equity
IKEA is bullish about growth in India amid slowing
1
infusion, raising the authorised
share capital was imperative. western economies
That move was a vote of con-
fidence in the Indian market’s It is ramping up store expansion with big-ticket
growth opportunity. As per IHS
Markit, in 2019, per capita con-
2 investments targeted at millions of Indian millennials

sumption of furniture in India

3
A fast-growing furniture market and investments by
stood at $5 (`400) while in IKEA’s
branded players have led to growing interest among
two largest markets—the US and
Germany—the figures were $733 consumers
and $661, respectively. Industry
Local players—both branded and unbranded—remain
veteran Swapneel Nagarkar, Se-
nior Vice President & Business
Head at Godrej Interio, estimates
4 IKEA’s biggest hurdles

5
the overall furniture market in In- The Swedish home furnishings giant has changed its
dia at $16 billion (`1.3 lakh crore), go-to-market strategy with a ‘closer to the customer’
and poised to double by 2027. The approach and increasing local sourcing

Business Today 21 August 2022

 COVER STORY IKEA
organised part of that market, by
value, stood at `50,000 crore in
2019, as per estimates by PwC,
which further projects the organ-
ised market to grow to `1,95,200
crore by 2035. The big opportu-
nity: in spite of newer players
entering the market, branded
companies sell only a tenth of all
furniture sold in India.
IKEA’s plan is to capture the
millions of young Indian consum-
ers who are on the verge of start-
ing their family—either alone in
a new city or with their partners.
According to Bedraj Tripathy, a
branded furniture industry vet-
eran and currently Co-founder
& CEO of UnboxSpaces, IKEA is
eyeing a fraction of the vast home
furnishings market for now. “Typ-
ically, it is the younger consum-
ers that are exposed to the IKEA
brand. This group comprises
40 | about 200-250 million consum-
THE `9,325-CRORE JOURNEY
JUL 2014
`49-crore
equity infusion
by Ingka Group
AUG 2013 JUN 2015
IKEA India `50-crore
incorporated in equity infusion
Delhi-NCR by Ingka Group
NOV 2013
`21-crore
equity
infusion by
Ingka Group
DATA TILL JUNE 6; SOURCE REGISTRAR OF COMPANIES, MINISTRY OF CORPORATE AFFAIRS, COMPANIES, INDUSTRY
Business Today 21 August 2022
ers,” he says. Young millennials,
consumers who may have started
earning but are yet to turn rich,
are the ones who currently fit its
target profile.
The millennial is just one piece
of the long-term puzzle. If India’s
home furnishings market is set
for a bull run, IKEA is preparing
to ride the animal. The company’s
market researchers noted in a re-
cent report: “The current level of
growth in output (supply) is not
sufficient to meet this demand.
Based on the business-as-usual
scenario, the sector’s output will
expand to about 1.5 times by 2035,
from $6.96 billion in 2019 to ap-
proximately $10.4 billion by 2035,
which is quite below the expected
domestic future demand by 2035.
Thus, it reflects that systemic in-
efficiencies will ensure that the
furniture industry in India will
continue to depend on imports
AUG 2015
`332-crore
equity infusion
by Ingka Group
JAN 2016
`423-crore
equity infusion
by Ingka Group
APR 2016 DEC 2016
`890-crore
`300 crore via masala bonds by
equity infusion
IKEA Asia Treasury Centre Ltd
by Ingka Group
(Hong Kong, China)
for meeting demands of finished
and intermediate goods.” In this
scenario, IKEA hopes its global
network of suppliers will place it
at an advantage over local players.
At the same time, Pulverer
says the company has set a target
of locally sourcing half of what it
sells in India, up from 27 per cent.
Over the years, IKEA has secured
sourcing partners for textiles, car-
pets and smaller home furnishing
accessories at constant quality.
Now it is looking to begin sourcing
mattresses locally. “Then sofas,
metal furniture and then wooden
furniture. That’s a very big step,
where we need partners to invest
to build [supply] capability,” she
says. The criticality is apparent
because wooden furniture still
makes up the bulk of IKEA’s sales
and forms its primary identity
amongst consumers. Increasing
local sourcing is crucial for its suc-
JAN 2018
`1,370 crore via
NCDs by IKEA
Asia Treasury
Centre (Hong
Kong, China)
FEB 2018
`700 crore via
NCDs by IKEA
Asia Treasury
Centre (Hong
Kong, China)
APR 2018
`750-crore
equity infusion
by Ingka Group
 cess in India. As the cost of a single
Blue Box beats the annual budget
of most of its rivals, Pulverer and
team would require to keep cost
of products affordable in order to
drive volume sales growth.
group entity based in Hong Kong.
As it geared up to open its Hy-
derabad store in 2018, with stores
in Mumbai and Bengaluru in the
pipeline, IKEA’s India invest-
ments gained pace. In January
2018, the India unit reached out
show, between its inception in
2013 and June 6, 2022, IKEA India
has raised at least `9,325 crore.
In comparison, IKEA India’s
net sales stood at `608 crore in
2020-21—7.4 per cent higher
than the `566 crore it had posted

G
IVEN THE KIND OF money it
is pumping in, IKEA is clear-
ly in India for the long haul.
Over the past few years, it
pumped in thousands of
crores to put the local unit on a
strong footing. In the run-up to
its first Blue Box in Hyderabad, as
per documents available with the
Registrar of Companies (RoC),
the global management from its
Leiden (Netherlands) office in-
fused at least `1,650 crore into the
local unit between mid-2015 and
end-2016. Plus, IKEA India raised
`300 crore in masala bonds from
IKEA Asia Treasury Centre Ltd, a
to Hong Kong again. By February,
IKEA India raised `2,070 crore
in two tranches against non-con-
vertible debentures (NCDs), of
which `1,370 crore, raised in Janu-
ary, was meant for purchasing
land parcels in Hyderabad, Mum-
bai and Bengaluru, IKEA India
said in RoC filings. Following an-
other `750-crore equity infusion
in April and raising its authorised
share capital the next year, till
June 6, 2022, the company has se-
cured at least `4,400 crore against
fresh equities, masala bonds and
NCDs from group entities spread
across Ireland, China and the
Netherlands. RoC documents
a year ago. Its operating expenses,
however, jumped to `1,092 crore
from `1,067 crore in 2019-20. As
a result, IKEA’s net loss expanded
to `808 crore in 2020-21, from
`721 crore in 2019-20. According
to industry experts like Tripathy,
IKEA’s vast scale of physical retail
outlets is a key factor in its high
initial costs. Its long-haul stance
for the market allows it to invest
such large sums of money without
having to break even within the
short- to medium term.
Take its flagship Navi Mumbai
store, for instance. Spread across
500,000 sq. ft, the store may have
cost IKEA in excess of `600 crore. | 41

Tracking IKEA’s investment trail and its

milestones in the country

FY20 DEC 2021 JUN 2022 JUL 2022

`1,790 crore via denominated First smaller Third Blue Box Second
(masala) bonds by IKEA Asia format city at Bengaluru city store in
Treasury Centre (Hong Kong, store in Mumbai
China) Mumbai

AUG 2018 AUG 2020 MAR 2021 JAN 2022

First `550 crore via `650 crore of `850 crore of
Blue Box NCDs by IKEA equity infusion equity infusion
in India Asia Treasury by Ingka by Ingka
(Hyderabad) Centre (Hong Holding (Leiden, Holding (Leiden,
Kong, China) Netherlands) Netherlands)

MAR 2019 DEC 2020 JUN 2022

Authorised share Second large- `600 crore via
capital raised to format outlet in NCDs by Fami
`10,000 crore Navi Mumbai Ltd (Dublin,
from `2,655 crore Ireland)

GRAPHICS BY RAHUL SHARMA

Business Today 21 August 2022

 COVER STORY IKEA
Anuj Puri, Chairman of real es-
tate consultant Anarock Group,
says that an estimated `12,000
per sq. ft could be the cost of land
and construction alone. Then
there is running cost. According
to Parineeta Cecil Lakra, Coun-
try People & Culture Manager at
IKEA India, it takes nearly 1,000
people to run its large-format
stores. Comparatively, leading in-
dustry players like Godrej Interio
or Pepperfry have so far launched
their largest stores measuring
about 10,000 sq. ft in markets like
Bengaluru and Delhi.
But it is not just the stores that
guzzle IKEA’s funds. Being in the
furniture business means setting
up and maintaining large ware-
houses and fulfilment centres
closer to key markets in top met-
ros. Apart from keeping logistics
42 |
SHAKY START
IKEA India has been incurring losses for the past few years
1,500
1,000
500
0
TOTAL REVENUE NET SALES
-500
-1,000
FY17 FY18 FY19 FY20
SOURCE: REGISTRAR OF COMPANIES, MINISTRY OF CORPORATE AFFAIRS
costs in check, these centres also
allow swift delivery. As the com-
pany now plans to venture into
Delhi-NCR, Pulverer says setting
up a fulfilment centre in the re-
gion would be imperative before
IKEA opens its doors to consum-
ers. After setting up its flagship
large-format stores in Hyderabad,
Mumbai and Bengaluru, IKEA’s
next big move is expected to come
in Noida and Gurugram. But un-
like other cities, here the company
is planning to open shops inside
high-street malls that will be built
by its parent Ingka Group.
G
ODREJ INTERIO’S Nagarkar
is, however, unfazed by
IKEA’s massive plans.
“Players like IKEA coming
in will further accelerate
NET PROFIT/
(LOSS)
OPERATING
EXPENDITURE
FY21; FIGURES IN ` CRORE
Business Today 21 August 2022
the shift from the unorganised
to organised sector, because con-
sumers would be inclined to ex-
plore what all is available before
making their decision. And IKEA
definitely carries its brand name
and global reputation,” he says.
Godrej Interio, the largest player
in the branded furniture market
with `2,500 crore in annual sales,
has chalked out its own expan-
sion plan. The company, which
has some 1,200 outlets including
500 branded stores, now aims to
add 100 outlets every year. Ac-
cording to Nagarkar, the com-
pany expects its sales to grow
at 20-25 per cent a year, up from
its current rate of 15-20 per cent.
“The next goal is to be at `3,000
crore yearly sales. And eventual-
ly, in the next three to five years,
take it in the direction of about
PHOTO BY SANDESH RAVIKUMAR
BIG OPPORTUNITY For $42-billion Swedish
cracking the fast-growing India market is
 `5,000 crore,” he says. To back its
plan, Godrej has invested close to
`300 crore in the past three years
to ramp up its manufacturing ca-
pacity and R&D, and another `60
crore to strengthen its online in-
frastructure. Currently, the com-
pany manufactures 75 per cent of
its products in-house.
Then there is Pepperfry,
which claims to be the largest
home furnishings marketplace
in the country in terms of prod-
uct range and retail reach. It has
its footprint across 500 towns,
including 175 physical stores in 91
cities, and a strong online pres-
ence. According to Ashish Shah,
Co-Founder & COO of Pepperfry,
unlike many of its competitors,
the company has set up studios in
comparatively remote areas like
the North-East—apart from larg-
er cities—that enables it to cater
to customers who were otherwise
unattended. To improve its mar-
gins, it has introduced seven pri-
vate labels that now contribute
40 per cent towards its top line.
According to Shah, the dy-
namics of the market have
changed significantly in the past
10 years since Pepperfry began
its journey. “Earlier, when con-
sumers used to buy furniture or
cars, they expected to use them
for over a decade. However, now
there are consumers who are
ready to change their furniture
in five years. Coupled with this,
promotional spend by brands like
IKEA and Pepperfry is boosting
consumers’ interest for branded
home furnishings. Now people
are talking about furniture. Ear-
lier, nobody used to talk about
this category,” he says. Shah, who
himself adores IKEA’s accesso-
ries, has done enough research
to keep himself appraised on the
potential threat.
Like Nagarkar, Shah refuses to
panic from IKEA’s heavy spend-
ing. In spite of the buzz around the
brand, he feels Pepperfry would
remain immune to IKEA due to
the latter’s weakness in the variety
of materials offered in furniture.
“Our motto is: don’t play God to
the consumer. Show them as much
variety as possible in terms of de-
sign, material and price range, and
let them choose,” he says. Pepper-
fry offers furniture made of every
popular material—from solid
wood to particle boards. IKEA,
however, he says, is heavily depen-
dent on its engineered materials to
keep costs in check.

| 43

24.4
25
GAINING
STRENGTH 20 17.2
Demand for 15 11.7
furniture is growing
10 7.6
multifold in India 6.2
FIGURES IN $ BILLION 5
*PROJECTION 0
SOURCE PwC 2019 2020 2025* 2030* 2035*

LOCAL SUPPORT HOME RUN

The furniture market continues to be Home furnishings is driving
dominated by local unbranded players India’s furniture market growth

10% 6%
(`32,000 9%
CRORE)
25% 60%

90%
(`2,88,000
CRORE)
HOME COMMERCIAL/OFFICE
BRANDED PLAYERS UNBRANDED PLAYERS HOTELS/RESTAURANTS OTHERS
home furnishings giant IKEA, MARKET SHARE IN PER CENT SOURCE INTERNATIONAL TRADE PROMOTION
important SOURCE INDIAN BRAND EQUITY FOUNDATION COUNCIL

Business Today 21 August 2022

 COVER STORY IKEA
Such retail realty investments
point towards a long gestation
period... Typically, a store like IKEA’s
in Navi Mumbai requires a cost of
`12,000 per sq. ft just for land and
construction”
ANUJ PURI
CHAIRMAN,
ANAROCK GROUP
Players like IKEA coming in will
accelerate the shift from the un-
organised to organised sector, bec-
ause consumers would be inclined
to explore what all is available
before making their decision”
SWAPNEEL NAGARKAR
SENIOR VICE PRESIDENT & BUSINESS HEAD,
GODREJ INTERIO
...Promotional spend by brands
like IKEA and Pepperfry is boosting
44 | consumers’ interest for branded
home furnishings. Now people are
talking about furniture. Earlier,
nobody used to talk about this”
ASHISH SHAH
CO-FOUNDER & CHIEF OPERATING OFFICER,
PEPPERFRY
IKEA is clearly not our
competitor. The design and
style of their furniture, I feel,
is not aligned with Indian
consumers’ preferences”
LOKENDRA RANAWAT
CO-FOUNDER & CHIEF EXECUTIVE OFFICER,
WOODEN STREET
Eventually we would expand our
local sourcing to all types of products
and increase the share from 27 per
cent. The long-term objective is to
offer a more affordable range
through economies of scale”
ERIK-JAN MIDDELHOVEN
HOME FURNISHING & RETAIL DESIGN
MANAGER, IKEA INDIA
Business Today 21 August 2022
Udaipur-based Wooden Street
is on an expansion mode, too. The
company, till recently, offered
only solid wood furniture. Post-
Covid-19, it offers particle boards
due to rapid demand arising from
the work-from-home culture. Ac-
cording to Lokendra Ranawat,
Co-founder and CEO of Wooden
Street, the `300-crore company
has set a target of launching 300
outlets in three years. Currently, it
has some 60 stores across 35 cities.
“IKEA is clearly not our competi-
tor. The design and style of their
furniture, I feel, is not aligned with
Indian consumers’ preferences,”
says Ranawat, who had been an
IKEA consumer himself during
his corporate stint in London.
According to him, in spite of
some reduction in buying cycle,
Indians continue to prefer last-
ing furniture while IKEA makes
big bucks selling furniture to Eu-
ropean customers, who tend to
change their sofas and beds every
Christmas. “Also, a large section
of the consumers in Europe flock
to IKEA because they are the
cheapest there. But that’s not the
case in India, where thousands of
local players would beat them fair
and square when it comes to pric-
ing,” he adds.
Additionally, Indian consum-
ers’ lack of interest in do-it-your-
self culture and IKEA’s remote
store locations are major hin-
drances to its growth in India. As
a result, Indian furniture majors
argue, IKEA will find it difficult to
crack the local furniture market
like it has managed to do in Eu-
rope or the US. Pepperfry’s Shah
and Ranawat from Wooden Street
say, while thousands may have
thronged to IKEA’s new stores
immediately after their launch,
they ended up buying accessories
like kitchen knives or decorative
plants. Not the furniture.
 PHOTO BY SANDESH RAVIKUMAR
IKEA is aware of the chal-
lenges. To make its products
more accessible, the company
has adopted an omni-channel
strategy, says Pulverer. It had ini-
tially planned to open 40 outlets
in the country. It plans to stick
to the number, but after open-
ing five stores and with the ex-
perience it has gathered from its
market research, that number
may take some time to fulfil. For
now, it wants to reach closer to
the consumer instead of attempt-
ing to pull them only towards its
large-format stores. “We more
and more see that omni-channel
is the way to go, which requires
different formats. And go closer
to the customers, where they
stay,” says Pulverer. “So, we can’t
just have a big-sized store; we
need other formats in between.”
To reach closer to Indian homes, POPULAR CHOICE Customers braved three-hour-long queues to enter the
IKEA has already launched two IKEA store in Bengaluru when it opened in June this year
smaller-format city stores in
Mumbai, where its Blue Box is lo-
cated 30 km away from bustling
consumer hubs like Bandra. It is
IKEA’S PLAN IS TO CAPTURE THE
also gearing up to launch simi- MILLIONS OF YOUNG INDIAN
lar stores in Bengaluru, Pune, CONSUMERS WHO ARE ON THE
Ahmedabad, Surat and Delhi.
According to Tripathy from VERGE OF STARTING THEIR
UnboxSpaces, while IKEA show- FAMILY —EITHER ALONE IN A NEW
cases some 10,000 SKUs (stock-
keeping units) at its flagship
CITY OR WITH THEIR PARTNERS
large-format stores, the smaller
stores can offer customers up to
6,000 items in spite of cutting may have triggered the move. four years of market research and
down on real estate cost signifi- As consumers remained locked 2,000 home surveys before final-
cantly. The size of its second city inside their homes for over two ising the blueprint for the Bengal-
store in Mumbai is about 75,000 years, IKEA had to shut a couple uru store. The global management
sq. ft, compared to the 500,000- of stores in China, where it had seems to have taken a leaf out of its
sq. ft Blue Box in Navi Mumbai. been running large-format stores voyage in Japan during the 1970s.
Pulverer says IKEA is increasing- for over 24 years and had 37 out- Even after 12 years of effort, the
ly adopting the smaller format, lets pre-Covid-19. company had to leave the market,
closer-to-home outlets model To strengthen its prospects in only to re-enter in 2006 with a
for expansion of late as consum- India, IKEA has resorted to exten- new store design and format.
ers have less time to travel. Ex- sive market research. According In India, though, its journey
perts point towards the changing to Erik-Jan Middelhoven, Home has only just begun.
market dynamics and consumer Furnishing & Retail Design Man-
behaviour post-Covid-19 that ager for IKEA India, his team did @arndutt

Business Today 21 August 2022

 ECONOMY BUSINESS CONFIDENCE INDEX

WORRIED
GROWING UNEASE WITH THE VOLATILE ECONOMIC ENVIRONMENT DENTS THE
MORALE OF BUSINESSES AND SENDS BT ’S BUSINESS CONFIDENCE INDEX SLIDING
FROM THE PREVIOUS QUARTER ’S LEVELS . BUT WHILE THERE ARE AREAS OF
CONCERN , TOP ECONOMISTS POINT TO STRONG SIGNALS OF POSITIVITY

BY ALOKESH BHATTACHARYYA
GRAPHICS BY RAJ VERMA

THE PEAKS AND THE TROUGHS

BCI SLIPS AFTER RECORDING A HIGH IN Q4 OF 2021-22

46.3 48.2 45.5 49.6 55.2

47 43.8 43.2 48.4 51.2

On a scale of 100

Jan-Mar 2022

Apr-Jun 2022
Jul-Sep 2021

Oct-Dec 2021
Jul-Sep 2020
Apr-Jun 2020
Jan-Mar 2020

Jan-Mar 2021
Oct-Dec 2020

Apr-Jun 2021
 ON A SLIPPERY SLOPE THE GRIND MIXED SIGNALS
Industries of all types have seen a fall Is the domestic market Inflation, both wholesale and retail,
in confidence in Q1 of 2022-23… enough to sustain seems to be moderating
demand for your
Jul-Sep 2021 Oct-Dec 2021 company’s products? WPI (%) CPI (%)
Jan-Mar 2022 Apr-Jun 2022 18
16 15.18
55.5

56.4
14
54.1
Yes No Can’t say
49.8

50.4
50.1

50.6
48.5

Inflation (%)
51.2

52.1
46.9

48.2
12
10 7.01
8 6.73
6
22% 4 -0.25
2
67% 11% 0
-2 Jul ’20 Jun ’22

Services Light Heavy Industrial production (IIP), too, has

industry engineering Is the depreciating rupee
recovered in the past couple of months
…so have industries across hurting your business?
160
size categories 140
120
57.6

100
56.4
53.7

53.8

53.2
52.4
51.4

50.2

80
49.3
50.3

49.5
49.2

49.1
46.4
48.1

56% 44%
47.7

60
40 -16.55 13.81 6.74
20
0
-20
Are input costs rising -40Jun ’20 Apr ’22

for your business? In a press release, NSO has stated that it would
Big Mid-sized Small Micro
not be appropriate to compare the IIP of April and
business business business business
14% May 2020 with indices of earlier months

(Big business: turnover > `500 crore; Mid-sized:

turnover = `100-500 crore; Small: turnover < `100 The trade deficit is widening
crore; Micro: turnover < `5 crore) 86% Exports ($ billion) Imports ($ billion)
On a scale of 100
66.32
70.00
Is your business seeing 60.00
$ billion

HOPES DASHED growth rates comparable 50.00

40.00
29.12
Businesses’ expectations before Q1 of to pre-pandemic rates?
30.00 40.14
FY23 began have been belied… 20.00
10.00 23.78
Apr-Jun 2022 forecast Apr-Jun 2022 actual 3% 0.00
Jul ’20 Jun ’22
6.1 6.2 61% 36%
5.5 5.9 5.4 5.7
5.4 5.6
5 4.9 Stock markets are beginning to move
up again
Sensex Nifty
Are the government and 90,000.00
RBI doing enough to curb 80,000.00
inflation? 70,000.00
60,000.00
Overall Financial Demand Hiring Profit 50,000.00
economic situation conditions conditions margins 40,000.00
conditions 21% 30,000.00
20,000.00
…and their forecasts for the next 63% 16% 10,000.00
June 1, 2020 June 1, 2022
quarter are even lower
Jul-Sep 2022
But GDP growth is sliding again after
5.3 5.2 5.4 rising over FY22
4.4 4.5
Source: The BT-C Fore 25.0
Business Confidence Survey 20.0 20.1
conducted between March 15.0
GDP growth (%)

30 and April 12, 2022, of 500 10.0 4.1

5.0
CEOs or CFOs representing 0.0
various industries and -5.0 Jun ’20 Mar ’22
Economic Overall Demand Hiring Profit company sizes across -10.0
prospects economic conditions conditions Delhi, Mumbai, Chennai, -15.0
-20.0
of your situation Hyderabad, Bengaluru, -25.0 -23.8
business Kolkata, Chandigarh, Lucknow, -30.0
Nagpur, Kochi, Visakhapatnam
On a scale of 100 Data source: CMIE Economic Outlook
and Bhubaneswar

W Says Rajiv Kumar, former Vice Chairman of NITI
WORRY. DEEP WORRY. That’s the clear vibe seeping
through the latest edition of the Business Today-C Fore
Business Confidence Survey, for the first quarter (April
to June) of 2022-23. While the Business Confidence In-
dex (BCI) settled above the halfway mark of 50 (on a
scale of 100) at 51.2, it was way lower than the 55.2 of the
previous quarter, which was the highest level it attained
in seven years. The sentiment echoed across industry
48 | types and sizes (see charts ‘On a Slippery Slope’). That the
survey encapsulates the views of 500 companies across
all sizes and industries only underlines India Inc.’s sense
of unease with the current economic environment.
The broad reasons are well known—the Russia-
Ukraine war, rising inflation, fuel prices on a roller-
coaster ride, commodity prices shooting up and then
cooling off, foreign exchange reserves dipping, trade
deficit (or current account deficit) widening, and so on.
Greater clarity on the survey’s core message comes from
top economists that Business Today spoke with. Says Ab-
heek Barua, Chief Economist and Executive Vice Presi-
dent of HDFC Bank: “The domestic situation is pretty
good on the sales or revenue side. The problem is really
in input costs. Apart from fuel, coal has been a big prob-
lem for steel users, for instance. Then this sudden shift
in the monetary environment both globally and domesti-
cally has proved to be difficult. It has meant that raising
money abroad has become more expensive. The rupee
has depreciated, so for importers it’s been a problem. And
there’s huge uncertainty about where things are headed.”
Agrees Omkar Goswami, Founder of CERG Adviso-
ry: “No one is worried about a recession in India. They
are worried about costs, no question. Most manufac-
turing companies have had to deal with relatively high
costs. They are worried about cost of finance and inter-
est rates, and there is a general sense of worry about the
rate of growth of the economy.” Cost—of inputs and
capital—is certainly seen as a matter of concern by most
economists and business leaders. The latter, especially,
impacts long-term loans as well as working capital loans
for industry, and with the RBI raising interest rates to
bring inflation under control, that cost has risen. In fact,
86 per cent of the survey respondents said that input
costs had risen for their business.
Aayog and currently Chairman of Pehle India Founda-
tion: “This quarter has been marked by all the news that
have caused a great amount of uncertainty in the envi-
ronment. Whether it is the fear of recession [in the US],
Fed raising rates, Ukraine war, inflation, oil prices going
up and down, etc. All of that has generated a lot of uncer-
tainty in investors’ minds.”
So, it’s not a surprise that the survey respondents’
sentiments changed dramatically from what they had
themselves predicted for Q1. During the survey for Q4 of
FY22, when the respondents were asked about their pro-
jections for Q1 of FY23, they were bullish on all param-
eters—overall economic conditions, financial situation,
demand conditions, hiring conditions and profit mar-
gins. But their actual sentiment for Q1 when captured in
July, showed their disappointment on all fronts (see chart
‘Hopes Dashed’). And the survey respondents’ expecta-
tions for the current quarter (July-September 2022) seem
to have been coloured by the deep worry they faced in Q1.
On all parameters (as mentioned above), their predicted
index value is lower than that of the April-June quarter.
The economists, though, have quite the opposite
view, and in one voice, they feel the next quarter would
be better. “Looking ahead, with commodity prices hav-
ing corrected, this would be a net positive for the Indian
economy and possibly would result in better confidence
in the current quarter,” says Aditi Nayar, Chief Econo-
mist of ICRA Limited. “CPI inflation has peaked and
now with the correction in commodity prices, it should
translate into lower inflation over the next few months.
And with that the confidence of both businesses and
consumers should start to improve. It won’t improve
sharply right away, but at least we should see some glim-
mer of pickup in confidence levels.”
That inflation has peaked is a common refrain among
the economists. CPI has moderated from a high of 7.79
per cent in April to 7.04 per cent in May and 7.01 per cent
in June; and WPI has moderated from 15.88 per cent in
May to 15.18 per cent in June. That may seem marginal,
but it still signals a move away from the rising inflation
curve, and possibly indicates early signs of success of
RBI’s strategy to raise interest rates. Says HDFC Bank’s
Barua: “The inflation situation [in India] is much better
than abroad. In terms of the dent on consumer incomes
and so forth, it really hasn’t been that significant.” In-
terestingly, 63 per cent of BT’s survey respondents don’t
think the government and RBI have done enough to curb
inflation. But the economists whole-heartedly disagree.

“No one is worried
about a recession in
India. They’re worried
about costs. Most
manufacturing firms
have had to deal with
relatively high costs”
OMKAR GOSWAMI
FOUNDER, CERG ADVISORY
“The government
and RBI have taken
substantial steps both
on the supply and the
demand side, and
therefore we might see
inflation having peaked”
RAJIV KUMAR
EX-VICE CHAIRMAN, NITI AAYOG
“The domestic situation
is good on the sales
or revenue side. The
problem is in input costs.
Apart from fuel, coal has
been a big problem for
steel users, for instance”
ABHEEK BARUA
CHIEF ECONOMIST AND EXECUTIVE
VICE PRESIDENT, HDFC BANK
“With commodity prices
having corrected,
this would be a net
positive for the Indian
economy and possibly
would result in better
confidence in Q2FY23”
ADITI NAYAR
CHIEF ECONOMIST, ICRA LIMITED
MANY OF THE CONCERNS
OF THE FIRST QUARTER ARE
GETTING MODERATED NOW
ESPECIALLY BECAUSE OF THE
FALL IN COMMODITY PRICES,
SAY ECONOMISTS
ECONOMY BUSINESS CONFIDENCE INDEX
Says Kumar: “This time the inflation is not so much
about excess demand but about disruption in supply.
And monetary policy, interest rate hike, etc. work only in
curbing excess demand. Having said that, I feel the gov-
ernment and RBI have taken substantial steps both on
the supply and the demand side, and therefore we might
see inflation having peaked.”
In fact, the economists say that many of the concerns
of the first quarter are getting moderated now especially
because of the fall in commodity prices, because crude
oil prices have softened considerably in recent weeks,
and because the RBI has taken measures to fight infla-
tion, which seem to be working.
On the other hand, the increasing gap between im-
ports and exports (see chart ‘The Trade Deficit is Widen-
ing…’) does cause some concern, despite the notion that a
low current account deficit is actually good for the econ-
omy because it means less inflow of money into the sys-
tem and, therefore, less impact on inflation. “It depends
on the size of the trade deficit,” says Goswami of CERG
Advisory. “If you have a balance of payments (BOP) defi-
cit that crosses 2.5 per cent of GDP, which it has, then
there is a concern. As long as trade is increasing, a mar-
ginal trade deficit of half a per cent or even 1 per cent of
GDP is not a big deal. But our trade deficit and BOP defi- | 49
cit are now becoming larger. So, there is a concern.”
ICRA’s Nayar, though, is slightly more positive:
“With commodity prices coming down, the trade defi-
cit should now be somewhat smaller than what it was
earlier, although weaker global growth would dampen
exports. That is also a positive going ahead. For the bal-
ance of payments, we are expecting a deficit in FY23.
But specifically to FII outflows, the worst will certainly
be behind us. Even the rupee may now enter a period of
consolidation, and subsequently if global sentiment im-
proves, we could see a mild appreciation as well.”
What the economists agree on, across the board, is
the economic situation in the US. The 75 bps interest
rate hike by US Fed Chair Jerome Powell was on ex-
pected lines, and he did say he did not believe the US is
currently in a recession. But Indian economists believe
the country is certainly headed that way. (Caveat: These
interviews were taken before Powell’s announcements.)
Says Kumar: “The US will most likely slip into a reces-
sion. That is because the Fed acted too late and now will
go the other way.” Adds Barua of HDFC Bank: “Even if
it’s not a deep recession, there will be a shallow reces-
sion.” That will certainly impact US market demand for
Indian companies engaged in business in that country.
But back home, all metrics point towards slow im-
provement in the ground situation and, hopefully, a
much improved business sentiment next time.
@alokeshb
 MARKETS OUTLOOK

AN UNPLEASANT
CONSENSUS
leading market experts have already lowered
their expectations from the stock market this
year, and while they believe that the bulk
of the correction is behind us, they are not yet
ready to paint a rosy outlook

BY ASHISH RUKHAIYAR

ILLUSTRATION BY RAJ VERMA

Business Today 21 August 2022

 A DREARY FUTURE

I
Most broking firms and experts in India have
forecast a middling performance target for the
Sensex and the Nifty for end-2022

Nifty/Sensex Downward
year-end target revision since
(2022) January
BofA Securities 14,500 Yes
Nomura 16,900 Yes
Motilal Oswal
17,500 Yes
Financial Services
IIFL 17,600/59,000 Yes
ICICIdirect 18,700* Yes
Nikhil Kamath 23,000-25,000** NA
Shankar Sharma 58,000-59,000 No

* 12-MONTH FORWARD TARGET **END-2025 TARGET

SOURCE INDUSTRY

MOVING IN TANDEM
“IN THE LONG RUN, WE ARE ALL DEAD.” The author The BSE MidCap and SmallCap indices have mir-
of this widely quoted sentence is celebrated 20th cen- rored the benchmark Sensex for the past 10 years
tury economist John Maynard Keynes, who is often re- 80
ferred to as the father of macroeconomics—the branch
of economics that deals with interest rates, govern- 60
ment spending and taxes to manage an economy’s 40
growth. The sentence is also perhaps best suited to 20
52 | reflect the current mood of the stock markets, wherein
0
everyone, as always, is bullish on the long-term India 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
growth story. But, there is a wide consensus among -20
market participants on the near-term concerns related -40
to interest rates, inflation and economic growth. S&P BSE SENSEX S&P BSE MIDCAP S&P BSE SMALLCAP
If data is anything to go by, there are strong SOURCE BT RESEARCH
headwinds in the stock markets that also explain the
tumultuous movement of Indian equity benchmarks
that were, till recently, down over 18 per cent when com-
pared to the all-time highs the indices touched last year.
A further 2 per cent fall, and the Sensex and Nifty
PUTTING UP A FIGHT
would technically be in ‘bear market’ territory that While earlier the famed bull runs on the bourses were drive
is typically marked by long bouts of range-bound market in recent times, domestic investors have started pic
movement. The Nasdaq in the US is currently in a bear 80,000
market zone, having dived nearly 29 per cent from the
52-week high of 16,212 it hit on November 22, 2021. 60,000
Back in India, the S&P BSE Sensex touched its 40,000
(IN ` CRORE)

all-time high of 62,245.43 on October 19, 2021, and

20,000
on June 17 this year, it touched a low of 50,921.22—a
drop of 18.2 per cent. To be sure though, the indices 0
have partially recouped their losses, and are currently -20,000
down around 11 per cent from their all-time highs.
-40,000
CHECKING THE MARKET PULSE -60,000
Jan ’21
Aug ’20

Sep ’20

Oct ’20

Nov ’20

Dec ’20

Feb ’21

Mar ’21

Apr ’21

May ’21

Jun ’21

Jul ’ 21

BT reached out to some prominent and widely regard-

ed stock market participants—ranging from foreign
and domestic broking firms to individual experts and
FPI FLOWS DII FLOWS (LHS)

GRAPHICS BY RAHUL SHARMA

 A ROSTER OF MARKETS OUTLOOK
CHALLENGES
Market experts in India are
concerned about a range
of upcoming headwinds
Inflation mutual funds—to understand their outlook on the mar-
Aggressive rate hikes kets. The consensus among them seems to be that the
Monetary tightening markets will be higher than the current levels by the
Recession in the US and Europe end of 2022, but it comes with a word of caution, and the
Rising interest rate hurting demand complete absence of a bullish undertone.
Geopolitical issues While there are the usual concerns around foreign
Crude oil prices outflows and earnings downgrades, the single-biggest
Earnings cuts headwind currently perceived is regarding inflation,
Commodity prices and its effects on economic growth. According to
Supply chain disruptions experts, some other concerns are commodity prices,
Tightening dollar availability geopolitical issues, recessionary pressures in the US
Chip shortage and Europe, and the intermittent negative news flow
SOURCE INDUSTRY
related to Covid-19, coming especially from China.
The current end-2022 Sensex or Nifty target of most
experts is lower than what they had forecasted at the start
of the year. Nomura, for instance, now has a Nifty target
QUEERED PITCH of 16,900, down from its earlier target of 18,150. Similarly,
FPIs have pulled out from Indian stock markets in BofA Securities has lowered its Nifty target from 19,100
2022 due to various extraneous reasons to 14,500. The markets may fall further than what
30 experts are forecasting in the backdrop of such material
24.4 23.01
20.1 macro uncertainty, is how Saion Mukherjee, MD & Head
20 16.1 14.4 of Equity Research, India, at Nomura Capital, describes
10 7.8 the current situation.“As base case, we are not expecting
3.2 3.2 3.8
0 any material disruption in India. Bank balance sheets
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022*
and corporate balance sheets are in good shape. This | 53
-10 -4.4
gives support to the market, and makes the case against a
-20 very steep fall. The risk is if India’s medium-term growth
expectations come down materially,” he adds.
30
-29.4 Along similar lines, Amish Shah, Head of India
*TILL JULY 20, 2022; ANNUAL FPI FLOWS SINCE 2012
FIGURES IN $ BILLION; SOURCE NSDL Research at BofA Securities, says he continues to remain
cautious on the markets in the near-term as “most risks
are skewed to the downside”. He lists global macro con-
cerns including the rising risk of a recession in the US;
the potential for crude oil to sustain at higher levels with
the risk of a spike to $150 a barrel, if European sanctions
n by FPIs, with foreign investors pulling out of the Indian limit Russian production; and the likely earnings miss by
cking up the slack corporates in FY23, given the lofty estimates of over 20
14
per cent by D-Street, as prominent risk factors.
12
10
AN EYE ON INFLATION
8 Every expert BT spoke to has identified inflation in the
IN PER CENT

6 domestic and global arena as a major concern when asked

4 to list the top headwinds facing the Indian stock mar-
2 kets. “The biggest concerns for the markets are currently
0 emerging from the very high inflation in the US economy
-2 that is forcing the US [Fed] to significantly hike rates,”
-4 says Samir Arora, Founder of Singapore-based fund He-
-6 lios Capital. “This creates its own problems as the US
Jan ’22
Aug ’21

Sep ’21

Oct ’21

Nov ’21

Dec ’21

Feb ’22

Mar ’22

Apr ’22

May ’22

Jun ’22

Jul ’22

currency appreciates against other currencies like the

euro, yen, sterling, and indeed the Indian rupee. Weak-
ness in currency and other associated risks are making
SENSEX CHANGE (RHS); SOURCE BSE, NSDL

Business Today 21 August 2022

 “Indian market “India is in “We do continue “The sentiment
returns have been a structural to remain around Indian
very low in the long-term bull cautious on equity markets
past 12-13 years. run. However, markets in the has deteriorated
Only the last two the current near term, given significantly.
years have been down-cycle can that most risks The external
good. Hence, easily last a few are skewed to environment is
there is plenty quarters. We have the downside: tightening with
of headroom been bearish for a global macro rising inflation
available, given while. We expect concerns and higher oil
that the overall a little more [and] likely prices. It is quite
return potential downside from earnings cuts… possible for the
is 15 per cent per here over the next amongst other Indian market to
annum” three months” factors” fall further”

SHANKAR SHARMA NIKHIL KAMATH AMISH SHAH SANJAY MOOKIM

FOUNDER, CO-FOUNDER, HEAD-INDIA RESEARCH, STRATEGIST & INDIA
FIRST GLOBAL ZERODHA BofA SECURITIES HEAD OF RESEARCH,
JPMORGAN

foreign investors sell Indian (and Asian emerging mar-
54 | ket) stocks in record amounts.”
In the US, inflation touched 9.1 per cent in June, the
highest since November 1981. The UK is also witnessing
its highest ever inflation in 40 years at 9.4 per cent in
June. Japan’s core consumer inflation has stayed above
its central bank’s 2 per cent target for the third consecu-
tive month in June. In Germany, inflation hit 8.2 per
cent in the same month, even as its central bank expects
a further spike in September. Incidentally, nearly half of
the 19 countries in the Eurozone are now facing double-
digit annual inflation with the overall rate at the high-
est point since 1999, when the group was created.
Meanwhile, inflation in India eased slightly to 7.01 per
cent in June from 7.04 per cent in the previous month,
but it has stayed above the Reserve Bank of India’s upper
limit of six per cent for six consecutive months now.
Simply put, central banks globally hike rates to rein
in inflation, and that in turn affects the flows into
the stock markets, especially from FPIs, in emerging
markets, including India. Hence, it does not come as a
surprise that FPIs have pulled out a record $28.6 billion
in the current calendar year (till July 27). More impor-
tantly, overseas investors have been net sellers for nine
consecutive months starting October 2021, and have
sold shares worth a cumulative $33.6 billion till June.
Experts appear divided on the outlook for foreign
flows, but all agree that it depends on how central banks
act in the coming months. Nikhil Kamath, Co-founder
of stockbroking firm Zerodha, believes that FPIs have
been reallocating capital amidst a rise in global interest
rates, and this will continue till further rate increases
happen in the global markets.
Sanjay Mookim, Strategist and India Head of Re-
search at JPMorgan, says an immediate reversal of the
trend in FPI flows looks difficult. “The US Fed is raising
rates while the Indian economy is slowing. Unless oil
prices ease meaningfully, it will be difficult for flows to
return,” he says. Interestingly, the current month has
seen a slight slowing of sorts as FPIs have been net sell-
ers at a modest $179 million till July 27. But according to
market participants, it is too early to call it a trend.
“We have already seen a reduction in the pace of sell-
ing in the last few days. In recent months, FPIs were net
sellers to the tune of around `2,500 crore a day, which
has come down to around `1,000 crore a day in the last
10 days... We expect FPIs to be net buyers in the days to
come when the global uncertainties settle down,” says
domestic broking firm IIFL.
Siddhartha Khemka, VP and Head of Retail Research
at Motilal Oswal Financial Services, expects FPI selling
to reverse around September this year “once the full
impact of inflation plays out on corporate earnings”.
“By that time, the performance of the monsoon and
its impact would be known to the market. H2FY23 also
marks the start of the festive season, which could bring

Business Today 21 August 2022


demand back and revive the economy. Inflation might
also peak out by that time while central banks might get
over with the aggressive rate hike cycle. All these factors
can lead to FPI flows returning,” he adds.
More importantly, experts believe that domestic
institutional investors or DIIs—that include mutual
funds, insurance companies, banks and financial
institutions—would continue pouring huge amounts
of money into stocks, and support the markets like they
have been doing for the past several months. “I expect
domestic liquidity to be very strong,” says Shankar Shar-
ma of First Global while adding that the worst seems to
be over for India. Citing the headroom available, he says
that there is an overall return potential of 15 per cent per
annum for the Indian market.
THE SAFE BETS
Irrespective of the state of the markets, experts always
have a set of sectors that they believe are safe bets from a
long-term investment horizon. Rakesh Arora, Managing
Partner at Go India Advisors, says that investors should
focus on domestic oriented sectors like cement, industri-
FOR MARKETS, WHILE THERE ARE THE USUAL
CONCERNS AROUND FOREIGN OUTFLOWS
AND EARNINGS DOWNGRADES, THE BIGGEST
HEADWIND IS INFLATION
als, and banks while staying away from global sectors like
metals and IT, among others. “It will be best to stick to
large-caps, and debt-free mid-caps,” he says.
For First Global’s Sharma, renewable energy and
small-sized FMCG companies are the safe bets, though
he believes that large-caps will disappoint. “The main
area of focus has to be small-caps. I see Indian small-
caps being the best equities in the world,” he adds.
Zerodha’s Kamath advises investors to stay away
from growth stocks and IPOs, even as he is bullish on
banking. Interestingly, ICICI Prudential Mutual Fund
also believes that investors should avoid platform-based
businesses and chemical businesses owing to valuations.
For Pankaj Pandey, Head of Research at ICICIdirect, the
sectors that could do well include banks, automobiles,
capital goods & power, and retail & hospitality. BofA
Securities prefers a defensive strategy, and is overweight
on the energy sector due to high energy prices along with
sectors such as staples, healthcare, and utilities.
Business Today 21 August 2022
MARKETS OUTLOOK
IS THE WORST BEHIND US?
“I think the worst is over for India,” says Sharma, though
he believes that a worst-case scenario could see a further
10 per cent fall in the benchmarks. While the benchmark
Sensex was up nearly 5.3 per cent in the current month till
July 27, it has come on the back of three successive months
of fall that saw the index drop over 5,500 points, or nearly
9.5 per cent. The Nifty, meanwhile, is currently down over
10 per cent when compared to its record high of 18,604.45
touched in October 2021 but experts believe it is too early
to conclude that the market has bottomed out.
Arora believes that the Nifty could bottom out be-
tween 14,500 and 15,000, whereas Nomura’s Mukherjee
pegs the bottom at around 14,500 by assigning a 16 times
multiple to FY24 consensus earnings, and assuming 5
per cent lower-than-projected earnings. IIFL expects
the Nifty to trade in the range of 14,800 to 16,800 during
the next few months, adding that “it is too early to call it
a bottom with a medium-term perspective”.
Kamath is of the view that India is in a “structural
long-term bull run,” though the current downswing
could easily last a few quarters, and a fall between 5-10
| 55
per cent is possible. “The sentiment around Indian
equity markets has deteriorated significantly… It is quite
possible for the Indian market to fall further along with
weaker global equities,” says Mookim of JPMorgan.
Perhaps nothing sums up the investors’ mood better
than the latest edition of the Bank of America Global
Fund Manager Survey that was conducted in July. “Dire
level of investor pessimism… expectations for global
growth and profits are at all-time lows; cash levels are
highest since 9/11; equity allocation is at the lowest since
Lehman... global growth expectations have slumped to
net -79 per cent, an all-time low; and recession anticipa-
tion is at the highest since May 2020,” the report states.
Most investors do not like to see the market fall but
it appears that there is an unpleasant consensus when
it comes to the near-term outlook. In the long term, as
Keynes said, all are anyway dead.
@ashishrukhaiyar
56 |

THE BT INTERVIEW

‘We should see an

uptick in capex on the
back of public capital’
Sanjeev Krishan, Chairman of PwC in India, explains how India Inc. can move
ahead by navigating the current challenges

PHOTOS BY RAJWANT RAWAT


S anjeev Krishan,
51, has long been
regarded as PwC’s
go-to man for
business deals in
India. He rose from
an articled trainee
to occupy the top job at the consulting
major in January last year. As Chairman
of PwC in India, he is developing
capacity to help the corporate sector
with digitalisation, risk management,
ESG compliance, and the supply chain
network. In a conversation with
Business Today’s Sourav Majumdar and
Anand Adhikari, Krishan talks about how
India Inc. is dealing with the current
difficult period of rising prices and
interest rates globally. Edited excerpts:
Q: What is your sense of how India is coping
with the current challenges? What are the key
things it should watch out for?
A: From India’s perspective, whenever there is a US
rate hike, India, unfortunately, has to mirror it. The
good news is that India is still in a good position. Over
the last two and a half years, most large Indian corpo-
rations have significantly de-leveraged their balance
sheets. The balance sheets today are much stronger
than they were prior to Covid-19. As a result, they are
in a far better position to withstand any of the current
challenges. The Insolvency and Bankruptcy Code
and the consolidation have helped to a large extent.
As long as the demand remains, I don’t see a big chal-
lenge for India Inc. at this point in time.
The government itself has put out a significant
amount of money for the revival of the capital cycle.
We should see an uptick in capital expenditure, par-
ticularly on the back of public capital. I would like to
believe that it is going to help the private sector have
the confidence to enhance [its capacity]. From a geo-
political perspective, there are two other things that
are playing out very well for India. I think India’s rea-
sonably neutral stand has helped us. We have man-
aged to benefit from the low crude oil prices from
Business Today 21 August 2022
THE BT INTERVIEW SANJEEV KRISHAN
Russia. Clearly, India is in a sweeter spot. The ability
to do that [business] at scale and the presence of a
huge local market positions India quite well. If
everybody starts to think about localising manufac-
turing and even localising services at some point in
time, India’s demographic dividend will come into
play. I’m very positive about the whole captive space
in India because that’s where the demographic divi-
dend is going to show up. Globally, a big challenge
is the shortage of right-, high-quality talent at an
affordable cost.
Q: Demand is also a function of interest rates,
which are on the rise. There is talk of a reces-
sion in the US. Don’t you think at some point
demand will be crimped as a result?
A: As a student of economics, all I would say is that
if the differential between the US and Indian rates is
beyond 6 per cent, it is going to create challenges for
the currency. Today, we are almost at 4.9 per cent in | 57
terms of the benchmark repo rate. I believe that we
could go up to 160 basis points higher in the next nine
months, whereas the composite effective federal funds
rate is 2.33 per cent. The RBI is already squeezing a lot
of liquidity from the system to control inflation. To
my mind, a large part of the inflation problem is supply
driven. Inflationary pressure is primarily caused by a
supply-side anomaly… In a globalised world, the sup-
“The dry powder available
globally has recently
crossed $900 billion. Just as
globalisation is a disruptor,
there is so much private capital
available globally that it is also
a disruptor”
ply is in some places [countries] and the demand is in
others. How will you make sure this changes? Today we
are talking about creating local capacity, but it will not
be created immediately… That’s the piece we are miss-
ing—that a large part of inflation is supply driven. And
we need to make enough efforts so that supply-side
challenges get sorted out.
 Q: How are companies dealing with problems
with their supply chains or addressing the
long-term issue of supply chain localisation?
A: I think everybody is starting to think about the
localisation of supply chains. But it’s not easy. It’s not
like a switch that you can turn on and off. Take, for
instance, the pharma sector, where the production-
linked incentive (PLI) for drugs means you want to
produce the end product, but you need inputs, and
[those] primarily come from China. You need to be able
to say that there is going to be incentivisation. And a
large part of the incentivisation from the government
and other bodies should be focussed on localisation of
these supply chains, which, on the pharma side, was
done at the peak of Covid-19.
The localisation of supply chains is bound to hap-
pen. I think that is going to happen everywhere, not
just in India. And wherever and whoever can local-
ise quicker, will be able to come through reasonably
unscathed. Wherever you can’t, there will be challeng-
es. The other piece is regional cooperation. I do believe
you will see a lot more regional cooperation. It could
be a collaboration between [countries in] the Asean
region or parts of the region. You can see the signing of
58 | FTAs [free trade agreements]. India has already signed
13 FTAs. Can we do something with Bangladesh,
Myanmar, and the like? The bilateral [trade agree-
ments] will support the localisation of supply chains.
That is going to be the order of the day. India is talk-
ing about signing an FTA with the UK. The FTA with
European Union will be the bigger one.

Q: The PLI schemes apart, what are the

encouraging signs you see for businesses?
A: At a broader level, there are quite a few encouraging
things we are working on—the new SEZ policy, the cli-
mate change piece, the vehicle scrappage policy, etc. For
instance, the vehicle scrappage policy means [consum-
ers] buying a new car at some point in time. It will drive
production and global corporations will get excited
about India. The [Bharat Forge Chairman & MD] Baba
Kalyani-headed committee is re-examining the entire
SEZ policy to make it easier. The Vodafone retro tax set-
tlement issue is also a positive development. I think it’s “The bilateral [trade
a combination of all these things, which hopefully will agreements] will support the
position India a bit better. I must say that multinational localisation of supply chains. I
corporations with deep manufacturing capacity, which
are present in India, are generally happy. Crossing the
think that is something that is
hump of coming to India—that is the challenging part. really going to be the order of
the day. India is talking about
Q: The SEZ policy has not had much success. signing an FTA with the UK. The
What are your expectations from Baba FTA with the European Union will
Kalyani’s report on SEZs? be the bigger one”
A: What we are expecting is that the infrastructure

Business Today 21 August 2022

 THE BT INTERVIEW SANJEEV KRISHAN

that has already been created, how does ON THE something that is not going to withstand the
LOCALISATION
one continue to leverage that and not OF SUPPLY vagaries of the VUCA world and that I might
make SEZs ghost towns? A lot of it was CHAINS as well sell this business.
predicated on financial giveaways. So how Private equity capital is available, but
do you leverage that infrastructure and It’s not like a they [the PE funds] are looking at your met-
make it more productive? That’s one of the switch that you rics. For decent businesses, private capital
can turn on
key things. The second question is how to is usually available. I believe that portfolio
and off. But the
align the broader SEZ policy with what we localisation of rationalisation is going to be key as we move
want to do in general, such as PLI and Aat- supply chains is forward. When you go beyond the top 20
manirbhar Bharat. How do you align vari- bound to happen, corporates, there is clearly a focus on port-
ous government initiatives? China is also and happen folio rationalisation and not doing the same
everywhere. And
focussing on inputs. That’s very important. wherever and
things over and over again. At the end of the
Clearly, the intent in India is also to focus whoever can day, everybody wants to create value. When
on what is absolutely critical, whether it is localise quicker, scaling up, forward and backward integra-
chemicals for pharmaceuticals, whether will be able to tion would be prioritised over inordinate
it is semiconductors or chips for your come through expansion. We are also seeing a generational
reasonably
automobile industry. So, whatever you are unscathed. shift with many family businesses and
good at or wherever economics works for conglomerates, changing perspectives and a
you, you really need a back end. We have to more favourable approach to M&As.
ON DEALS
make it through the broader SEZ and other
government policies. The SEZ law will re- Deals will Q: When you took over last January,
inforce India’s position as a manufacturing continue to you talked about a five-year strategy.
hub and key investment destination. happen. Until How much progress has been made?
now, all deals A: We articulated our aspiration of being
Q: Despite low capacity utilisation took place for | 59
growth reasons,
more relevant to Indian businesses. When
and demand, there has been consoli- but today a lot of we looked at our portfolio, we needed to
dation and M&A activity. How do you them are going increase the work that we were doing with
justify this appetite of India Inc. for to take place for Indian businesses and create more rel-
deals? consolidation evance for them. And we identified certain
reasons.
A: The good news is that deals will continue sectors and areas like emerging technolo-
to happen, and as a deals person, I’m very gies, cloud, ERP, analytics, cybersecurity,
happy. Until now, it [the deals] has all been ON CAPITAL etc. If you look at the amount of money that
EXPENDITURE
for growth reasons, but today a lot of it is India Inc. is spending on digital transfor-
going to be for consolidation reasons. In the The government mation, you will see that a large part of
first quarter of 2022, if we look at the start- has put out that is going into cloud and cybersecurity.
up ecosystem, the amount of private capital a significant For instance, look at financial services or
that the start-ups raised was very sig- amount of money consumer businesses. They are the ones
nificant. The dry powder available globally for the revival of
the capital cycle.
that have a lot of consumer interface. They
has recently crossed $900 billion. Just as We should see an are adopting the cloud, AI, bots, etc. As rural
globalisation is a disruptor, so much private uptick in capital area consumption [of technology] goes up,
capital available globally is also a disruptor. expenditure, the next level is local language capabilities.
Today, private capital is a major disruptor. particularly Blockchain is one area where there is a huge
on the back of
public capital. possibility of use cases. I think these are the
Q: There was a time when corporate I would like to technology areas in which we are continuing
India or the experts used to talk believe that it will to make investments. We recently signed an
about focussing on core competence. help the private agreement to acquire Venerate Solutions, a
Today, big corporations are diversi- sector have digital company. We will look at a couple of
the confidence
fying into multiple areas. Do you see to enhance its acquisitions in the technology space in the
a rationalisation of portfolios in the capacity. next two to three years. A part of our strat-
large- or mid-corporate segment? egy is also to support India’s $5-trillion GDP
A: I think the question is that when money aspirations and we are looking at increasing
gets dearer, you want to do fewer things. I’m our relevance in the domestic market.
noticing that people are doing a big review
of their portfolios and saying that this is @TheSouravM, @anandhikari

Business Today 21 August 2022

 MORE THAN
650 SME COMPANIES
HAVE LISTED SINCE
2012

IPO

S M
I
SMES HAVE RAISED
NEARLY `8,000 CRORE
THROUGH IPOs V I B R
D E S P I T E L I M I T E D T R
T H E I R D E D I CAT E D
B O U RS E S L I ST E D S M
ST E A DY G ROW T H
BY A S H I S H

I L L U S T R AT I O N B Y

OVER 250
COMPANIES HAVE
MIGRATED FROM
THE SME PLATFORM
TO THE MAIN
BOARD SO FAR
 FUNDS RAISED
BY SMEs THROUGH
IPOs IN 2022 HAVE
ALREADY BREACHED
THE 2021
QUANTUM

O SMES

A L L
S
A N T
NEARLY 50 SME
COMPANIES HAVE
GONE FOR IPOs TILL
DATE IN 2022

R A D I N G T R ACT I O N O N
P L AT FO R M S AT T H E
E s H AV E R EG I ST E R E D
OV E R T H E Y E A RS
RU K H A I YA R

ANIRBAN GHOSH

IN 2018, A RECORD
141 SME IPOs
WERE LAUNCHED
 48,400
CRORE
APPROXIMATE MARKET
CAPITALISATION OF
ALL LISTED SMEs IN INDIA AS
ON JULY 11, ACCORDING
TO THE EXCHANGES

L
ET US GO BACK a decade. Then, the business for good. “The best thing to come with list-
India already had a vibrant ing is the level of professionalism in our company,” says
stock market with many well- Rahul Batra. “When we decided to get listed, we brought
known business families and on board a professional CFO who helped us save a lot on
conglomerates having listed interest costs. We got experts in HR, sales, data manage-
their companies on the bourses. ment and almost for everything. Once you are listed in the
But a missing link was a dedi- market, you have to deliver good results and that pressure
cated platform for small and helped us perform better. If we had not listed, we wouldn’t
medium enterprises (SMEs)— have brought in this kind of professionalism,” he adds.
often considered the backbone One of the reasons for improved professionalism is
of any economy. For context, the fact that listing brings with it institutional investors
government data shows there as the SME arena has been seeing traction from them.
are nearly 9.8 million registered “The SME segment has grown significantly year on
micro, small and medium enter- year, especially during pre-Covid-19 times. Many of our
prises or MSMEs in the country. IPOs witnessed participation from mutual funds, alterna-
Such a platform was always on the minds of market tive investment funds, and ultra HNIs,” says Mahavir Lu-
participants—something on the lines of the London nawat, Founder, Pantomath Capital, an investment bank-
Stock Exchange’s Alternative Investment Market or AIM ing firm that has managed more than 100 SME issues.
platform—wherein such companies could be provided He adds that the issues have provided exits to PE/VC
with a lenient set of listing rules, which would prepare funds, while there have been cases of acquisitions, fur-
them to migrate to the main exchanges after a few years.
Eventually, such a segment was launched—both on
the BSE and the National Stock Exchange (NSE)—in
March 2012. Soon after, the first SME listed. If the num-
bers are anything to go by, the segment has registered
consistent growth since inception. That’s commendable,
considering that its trading turnover pales in compari-
son to the benchmark indices. For example, on the BSE
SME, the average daily trading turnover in July is pegged
Given that listing
at `18.5 crore with the cumulative turnover at nearly `315
crore; on the BSE, the comparable figures are `3,211 crore
has its benefits and
and `54,588 crore, respectively. The segment has also
helped companies grow and scale to the next level by pro-
there are a lot of
viding them the benefits of listing, like increased visibil-
ity, better access to finance and better compliance and
SMEs wanting to get
processes, along with the respect a listed entity enjoys. listed, there is strong
THE BENEFITS OF LISTING
Brothers Rahul and Varun Batra are Directors of Beta
potential for growth
Drugs, an SME listed on NSE Emerge. Theirs was a busi- of both SMEs and the
ness like any other family-managed venture, and it was do-
ing pretty well before being listed. But listing did change segment
Business Today 21 August 2022
 SME IPOs IN 2022
This year, March and June saw the highest
number of IPOs by SMEs, with 27 of them
raising `487 crore in total

300 16
250 14
12
200
10
150 8
100 6
4
50
2
0 0
January February March April May June

ther fund-raising and significant expansions after listing TOTAL ISSUE AMOUNT IN ` CRORE (LHS)
in several cases. “This segment has emerged as a true al- NUMBER OF SME IPOs (RHS) SOURCE PRIME DATABASE
ternative for early-stage businesses to raise growth capi-
tal without the interest burden,” he says.

THE NUMBERS GAME THE LISTING GAME

When the segment launched, each of the two exchanges In the past 10 years, 655 SMEs have raised a
wanted to achieve supremacy by getting more compa- total of `7,792 crore by listing on the bourses
nies to list on its respective platform. The BSE took the
lead in the first four years, with nearly 120 SMEs listing
2,500 160
on its platform against 11 on NSE Emerge; NSE claimed it 140
was focussing on quality, not quantity. While the BSE has 2,000
120
maintained its lead in most of the years since launch, the 1,500 100
NSE did manage to outpace it in 2017 and 2018, by getting 80
1,000 60
a total of 159 SMEs on its platform against the BSE’s 118.
500 40
Till June 2022, a total of 383 SMEs had entered the 20
capital markets by listing on BSE SME while NSE Emerge 0 0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022*
saw 257 listings. And in terms of the number of compa-
nies migrating from the SME segment to the main board, TOTAL ISSUE AMOUNT IN ` CRORE (LHS)
the BSE leads with 147 entities against the NSE’s 109. NUMBER OF SME IPOs (RHS)
Ajay Kumar Thakur, Head of BSE SME & Start-up, SOURCE PRIME DATABASE; *DATA TILL JUNE
BSE, attributes this trend to the awareness efforts put
in by the exchange along with markets regulator Sebi,
state governments, merchant bankers and industry asso-
ciations. “We have got companies listed from 20 states...
BEATING THE BENCHMARK
This will help them in getting equity funding, create vis- While minuscule in size, the SME indices have
beaten the Nifty and Sensex in the past three
ibility and transparency and unlock their value,” he says,
years
adding that growth in the sector will create employment.
In the current calendar year till June, as many as 45 1,200
SMEs launched IPOs—nearly thrice the number of issues
1,000
on the main board—to get listed, with the cumulative
800
size of the public issues pegged at nearly `800 crore. The
600
first six months of CY22 have already seen the quantum of
funds raised move past last year’s total of `746 crore, as per 400
data from Prime Database. The amount, however, is lower 200
than what was witnessed in 2018 when 141 SMEs entered 0
the capital markets while raising a record `2,287 crore. -200
2017 2018 2019 2020 2021 2022

STORMY WINDS NSE EMERGE BSE SME NIFTY 50 BSE SENSEX

The numbers may show that the SME segment is robust YoY change in per cent; SOURCE BSE, NSE
and growing but it did have its own share of controversies.
In 2015, a few companies in the segment, along with GRAPHICS BY RAHUL SHARMA

Business Today 21 August 2022

 IPO SMES
The SME platforms have helped firms scale to
the next level by providing them the benefits of
listing like increased visibility, better access to
finance and better compliance and processes
their directors and promoters were barred
from the markets for allegedly using the
exchange platforms for money laundering,
tax evasion and manipulation.
“The schemes, plan, device and artifice
employed in this case, apart from being a
possible case of money laundering or tax
evasion which could be seen by the con-
cerned law enforcement agencies sepa-
rately, is prima facie also a fraud in the se-
curities market in as much as it involves,
manipulative transactions in securities and
64 | misuse of the securities market,” stated an
80-page order issued by Sebi in June 2015.
In all, nearly 240 entities were barred
from the securities market after the regu-
latory probe. “It appears that the entities…
created demand for the supply of shares
from preferential allottees and pre-IPO
transferees and provided hugely profitable
exit to them at an unrealistic price achieved
through price manipulation,” stated the
Sebi order, highlighting the fact that the un-
usual price rise was without any significant
improvement in the companies’ financials.
Even today, the platforms see quite a few
instances of stock prices registering a huge
spike, though market participants feel that
the wrongdoings in the SME segment are a
thing of the past with the current regula-
tory framework being much more evolved
and stringent than what it used to be dur-
ing the early days of the segment.
“Barring a few stray instances, we
have not come across any such undesir-
able cases. A more pertinent issue, in my
view, is how vulnerable are businesses, and
whether they are sustainable. The quality
of businesses is a very critical barometer,
especially given the fact that early-stage
investing is high risk, high return. We must
think of a more robust mechanism for en-
Business Today 21 August 2022
suring that sustainable businesses are
brought to the public in order to strive
for next-level growth,” says Lunawat.
STRONG POTENTIAL
As for those who have taken advantage of
“The success the platform diligently, the benefits are
of this platform many. “The SME platform prepares you
has brought to migrate to the main board and since
positivity the regulatory framework of the SME
among SMEs segment is a bit lenient compared to the
and other main board, a company gets two to three
years to make the requisite changes and
stakeholders…
We have got be ready to move to the main board,”
says Ashish Saraf, President of Manora-
firms listed
ma Industries, a Chhattisgarh-based
from 20 states”
SME that jumped to the main board af-
AJAY KUMAR ter being listed in the SME segment.
THAKUR The amount of respect and prestige
HEAD, BSE SME & definitely goes up after migrating, Saraf
START-UP, BSE adds, highlighting the fact that he gets
enquiries from many Chhattisgarh-
based SMEs as they want to understand
the experience and benefits of listing.
Firms can migrate to the main board
after staying listed on the SME plat-
forms for a minimum of three years, of
which they should be profitable for at
least two years.
Given that listing has its benefits
“This segment and there are a lot of SMEs wanting to
has emerged as get listed, there is strong potential for
a true alternative growth of both the SMEs and the seg-
for early-stage ment. With exchanges doing a lot in
businesses to terms of creating awareness, the coming
raise growth years should be interesting for the seg-
capital without the ment, provided good quality companies
interest burden” come to the arena and stock prices are
MAHAVIR influenced by fundamentals instead of
LUNAWAT entities with vested interests.
FOUNDER, PANTOMATH
CAPITAL @ashishrukhaiyar
THE
NEXT
25
YEARS
On the occasion of 75 years
of India’s Independence,
some growth tips from
industry doyens for the
road to 100 years
BY TEAM BT

VERY FEW COUNTRIES GLOBALLY are as fascinat-

ingly poised as India is when it comes to being
at the intersection of a growth story. With this
being the 75th year since we gained our Inde-
pendence, the next step is 2047. The best voices
across professional spheres attempt to unravel
what India@100 might look like. That’s not the
easiest of tasks when one is in the middle of a
serious economic challenge globally, and one is
still to find out what the impact on India will be.
It makes for a heady concoction, and there is a
good chance that our ability to be greatly resil-
ient will be questioned several times. However,
big opportunities don’t come by often, and this
is one of those times. In the following pages,
read about what the captains of India Inc. per-
ceive will be the country’s growth path.

Business Today 21 August 2022

 Digital, the
New Driver
fK.V. KAMATH
CHAIRMAN, NATIONAL
BANK FOR FINANCING
INFRASTRUCTURE AND
DEVELOPMENT (NABFID)

THE BUILDING BLOCKS of achieving sustained high growth are very clear.
There has to be a mindset to drive infrastructure at a pace and, at the same
time, get your equation in terms of water and agriculture right. You should
have an industrial sector that should be able to build on its own in terms of
positive cash flows and margins. You need a financial system that can sup-
port all these things. That, too, happens when you have clean balance sheets.
In our case, banks’ balance sheets are clean and corporate India is also de-
leveraged. The capital market, especially the equity market, has come of age.
There is also a new driver—the digital revolution. In a digital world, every-
thing becomes more efficient, more competitive and more productive.
All these together—the unfinished agenda in infrastructure, unfinished
agenda on water, growth agenda on industry and manufacturing, and com-
pletely new opportunities from digital—will propel us down this runaway.

A Global
Growth
Engine
f KEKI MISTRY
VICE CHAIRMAN & CEO,
HDFC LTD

INDIA WILL REALISE its true potential in the next 25 years. It stands apart from
its emerging market peers as it is not a one-trick pony. Further, a stable govern-
ment committed to sustainable policy measures to facilitate strong growth,
create jobs and improve living standards augurs well for the economy. India is
a consumption-based economy with strong macroeconomic fundamentals.
Its growth drivers are self-sustaining owing to favourable demographics,
demand, rising aspirations, growing middle class, rapid urbanisation and en-
trepreneurship. There is huge under-penetration in financial services, which
implies a tremendous potential for growth. Continued focus on financial sec-
tor reforms, technological initiatives, employment creation and infrastructure
development will make India one of the engines of global growth.

Business Today 21 August 2022

 ECONOMY INDIA@100
Focus on
Per Capita
Income
f MANISH SABHARWAL
CO-FOUNDER &
VICE CHAIRMAN,
TEAMLEASE SERVICES
INDIA@75 may be ranked fifth
in the world in total GDP but
is 134th in per capita GDP. My
hope for the next 25 years is that
we make raising our per capita
income our primary policy goal
68 | by raising the productivity of five
places of which only two are geo-
graphic: our states (Karnataka
and Uttar Pradesh have the same
GDP but a 4x difference in popu-
lation); our cities (Bengaluru and
Patna may have a 50x difference
in per capita GDP); our sectors
(software is only 0.8 per cent of
the labour force but produces 8
per cent of the GDP); our firms
(there is a 24x productivity dif-
ference between our biggest and
smallest manufacturing firms);
and our skills (two children of
the same age with the same paper
qualifications now have a 4x dif-
ference in salary based on their
soft, functional and industry
skills). My vision of India@100
is a new tryst with destiny where
our 3Es of employment, employ-
ability and education create an
infrastructure of opportunity
that ensure that the two most im-
portant decisions an Indian child
does not make today—pin code
and parents—become irrelevant
to their prospects, prosperity
and potential.
REDEFINING
THE
CONTOURS
OF GROWTH
f S.N. SUBRAHMANYAN
CEO & MD, LARSEN & TOUBRO
INDIA@100 must attempt to redefine the traditional contours of develop-
ment. Infrastructure must be sustainable. Skill development must be broad-
based, and requirement-driven, technology and IT-enabled services must be
human-intensive, automation should eliminate hazards and aid precision,
mobility must be non-polluting, and growth must be even. I am confident
that we will be able to create sustainable and mass affordable housing, water,
and waste management infrastructure. One way to achieve such sustain-
ability would be to utilise hydrogen in hard-to-abate sectors. E-commerce
platforms as we know today might be reinvented. Transportation will be
end-to-end multi-modal. We have bypassed the normal route of financial
inclusion using cellphones and products such as UPI. This must be aided by
mega-scale renewable power and clean fuels including nuclear energy. In
tangible terms, we should attempt to be at least 30 per cent of global manu-
facturing and contribute a good 15 per cent of the world’s GDP.
INDIA TO LEAD THE WORLD
f PARTH JINDAL
MD, JSW CEMENT & JSW PAINTS
INDIA WILL BE A $12-trillion economy
and a healthy middle-income country
[by 2047]. The country will use its
young demographic, engineering
and IT prowess to ‘make in India for
the world’. It will be a pioneer in the
use and advent of green energy—
from renewables to green hydrogen.
Equally important will be ensuring
universal healthcare, education and
food for all. While India is on the cusp
of a fascinating development story,
we must work towards reducing the
unacceptably high levels of inequality
prevalent today. On the technology
front, nothing can come in the way of
India taking a dominant position on
the global stage. I have no doubt we
will be at the forefront of high-quality
infrastructure.

A Fount for
Hundreds of
Unicorns
f RITESH AGARWAL
FOUNDER & GROUP
CEO, OYO
WE WILL LOOK BACK at the
current period as one when the
foundations for a New India
were laid down. A time when
India’s long-promised poten-
tial is materialising through
a combination of progressive
and enabling government
programmes, and development
of physical and virtual infra-
structure that organisations—
young and established—are
harnessing to the hilt. India’s
welfare schemes are also get-
ting more efficient, targeted
and effective. The country’s
start-ups are solving problems
through tech and by creating
jobs—leading to spending
increasing—and by bringing
commerce to the smaller
towns of India. Today, the
small town is the new big town
for entrepreneurship. By 2047,
I see India as having elimi-
nated that distinction: every
corner [of the country] will be
a fount for hundreds of uni-
corns. India’s golden decade of
growth would have established
us among the top three econo-
mies, and hopefully among
the top two nations when
measured on soft power. I do
clearly envision the coming 25
years to be truly the commonly
envisaged ‘Amrit Kaal’.
FINTECH TO
DRIVE MSME
GROWTH
f NIRMAL JAIN
FOUNDER & CHAIRMAN,
IIFL GROUP
INDIA IS THE FASTEST-GROWING fintech market in the world with 87 per cent
adoption of fintech compared to the global average of 64 per cent. As per
data available, in 2020, India processed 25 billion real-time transactions
compared to 15 billion in China and only 1.2 billion in the US. The govern-
ment’s successful push of JAM (Jan Dhan Yojana, Aadhaar and mobile num-
ber) accelerated financial inclusion of the masses. UPI has already revolu-
tionised payments. The next stage of innovation is set with OCEN (Open
Credit Enablement Network) and AA (Account Aggregator), which are the
engines for propelling digital delivery of credit to hitherto credit-deprived
MSMEs. To create millions of jobs and bring exponential economic growth,
credit and banking services to the unbanked and under-banked small en-
trepreneurs will happen through the innovative neo-banking platforms.
| 69
Banking
Will be
Transformed
f AMITABH
CHAUDHRY
MD & CEO, AXIS BANK
BANKING IS GOING through a transformative phase in which contextualisation,
personalisation and democratisation will be the key drivers. Contextualisation
means that banking services will increasingly be embedded in the contextual
journeys of customers. For example, rather than going to a bank for mortgage,
customers will get instant funding while selecting their dream home on a real
estate search site! Personalisation means that power will shift from vanilla
product manufacturers to platforms that create exceptional experiences, and
customers will be in control of what they want to consume, when and how. For
instance, a credit card was a vanilla product, and now BNPL options are provid-
ing on-demand credit, while multiple fintechs are offering cards configurable
by individual customers to suit their individual needs. Democratisation of data
and credit through India Stack and OCEN will allow every Indian with basic
identity to have access to credit. For example, a small company offering tax
uploading facilities could offer on-demand credit using OCEN.
Business Today 21 August 2022
 ECONOMY INDIA@100
India to be
Among the
World’s
Top Three
Economies
f PUNEET CHHATWAL
MD & CEO, IHCL
WITH A RICH HISTORY going
back centuries, India has al-
ways charted its own path. Ow-
70 | ing to its immense potential,
expansive resources and strong
talent pool, the country is today
on the path of transforma-
tion as a leading global player
across the fields of business,
infrastructure development,
innovation and socio-economic
growth.
As we proudly celebrate
75 years of Independence, I
believe there lies a tremen-
dous opportunity for India to
become one of the world’s top
three economies. This will
be further boosted by India’s
travel and hospitality sector,
which will continue to grow in
the coming years, buoyed by
the country’s diverse offerings
and a burgeoning economy.
If developed strategically,
led by global standards and a fo-
cus on sustainability, the sector
will play an even more pivotal
role in contributing towards
economy and job creation, as
India continues its journey to
become a nation to reckon with
on the global stage.
BALANCED GROWTH PATH
f ZARIN DARUWALA
CLUSTER CEO, INDIA AND SOUTH
ASIA MARKETS, STANDARD
CHARTERED BANK, INDIA
IN 30 YEARS, at the current long-term,
currency-adjusted nominal growth rate
of 5 per cent, India’s GDP would rise to
$15 trillion; at a reform-led 8 per cent rate,
it would double to $30 trillion. In this
journey, digital and green are key as India
aims to simultaneously industrialise
and de-carbonise. Standard Chartered
estimates India will need additional re-
sources of $12.4 trillion to meet its long-
term net-zero goals. A catalyst for this
balanced growth is the PLI (production-
linked incentive) where 55 per cent of
capex is expected to be green. PLI com-
bined with landmark trade agreements
(FTAs) will integrate India into global
supply chains, propelling it towards the
government’s target of $1 trillion exports
by 2030 and manufacturing share in GDP
of close to a third by 2047.
FOCUS
ON CLEAN
ENERGY
f MOHIT MALHOTRA
CEO, DABUR INDIA
THE THIRD-LARGEST ECONOMY in the globe, the factory to the world and a
leading name in alternative medicines harnessing the power of Ayurveda
and yoga. This, for me, summarises India@100. India would be amongst
the most prosperous nations in the world with a high per capita income and
probably the youngest demography. And the one area where I feel India will
take the lead is clean and green energy. In line with the government’s focus
on safeguarding the environment and promoting a greener India, we have
engaged electric vehicles in our operations, thereby reducing emissions and
protecting the environment. I am confident that this move will also help us
propagate the use of electric vehicles even in the hinterland, helping India
achieve its green energy mission faster.
Business Today 21 August 2022

Skilling
the Need
of the
Hour
f NITHIN KAMATH
FOUNDER & CEO,
ZERODHA
INDIA IS LUCKY ENOUGH to
have the youngest popula-
tion among the developing
countries—meaning we
have a substantial and stable
population of working-age
adults. But this also poses
a challenge because a big
chunk of this population has
a massive skill gap, as can be
seen in the unemployment
statistics. The other impor-
tant thing is we [need to] do
whatever it takes to stop the
brain drain and ensure start-
ups register at home and
contribute to our tax base.
The country is also one of
the very few bright spots in
an otherwise gloomy global
economy. If we are to realise
our economic potential, we
need to do whatever it takes
to upskill our youth to make
them ready to face what
promises to be an age of
disruption. We also must not
forget that growth has to be
equitable, while taking great
care to ensure that we con-
sider the environmental and
ecological costs of growth.
All said and done, I’m long
on India.
A GLOBAL
PRODUCTION
HUB
f H.M. BANGUR
MANAGING DIRECTOR,
SHREE CEMENT
INDIA’S STORY AS A FAST-GROWING ECONOMY will continue and it is possible
to sustain that at 6-7 per cent for the next 25 years, even on a larger base. That
means the GDP can easily increase by 4x from where we are today. Critically,
the growth rate of our population will also start to decrease. These two fac-
tors together become very important since that translates to a better quality
of life and a wide choice available to the consumer. That scenario when we
have a buyers’ market is an indication of a developed economy. The basic
foundation for all this will be laid over the next 5-10 years to make sure the
world comes to India to deploy its funds and not anywhere else. I see a clear
opportunity for us to become a global manufacturing hub and that will be the
big transformation. Nothing can be more significant than that.
| 71
Energy
Security
the Key
f PRAVEER SINHA
MD & CEO, TATA POWER
INDIA IS CHARTING a new economic growth road map to emerge as a truly
self-reliant energy secure nation by 2047. The pace at which economic de-
velopment is happening will enable India to become a global economic and
technology powerhouse in the next 25 years. As the world’s fastest growing
economy, it is adopting an aggressive carbon-reduction approach. Energy se-
curity will be a giant step for India in becoming a global superpower. The en-
ergy demand of the country is growing at a fast pace and renewables will play
a major role in meeting this demand. The country has taken multiple initia-
tives and is accelerating the adoption of clean energy technologies to trigger
a new wave of sustainable growth. Technology will play a key role in driving
the entire energy transformation. My vision for India in 2047 is of a secure, ef-
ficient and clean energy nation, connected with the rest of the world through
an interconnected grid in the spirit of ‘Vasudhaiva Kutumbakam’.
Business Today 21 August 2022
 The Future
is Green
f MAHUA ACHARYA
MD & CEO, CONVERGENCE
ENERGY SERVICES (CESL)

WHEN INDIA REACHES 100, the transformation to green will have been reached.
By then, all hydrocarbon-powered vehicles will be gone. Cars will be fuelled by
batteries charged with renewable energy, biofuels from agricultural crops, and
hydrogen from water. New jobs will be based on tech, universities will have inter-
Putting
disciplinary degrees, and sustainability will provide the top jobs. CESL believes
that with the level of ambitious and continued steer the government is driving,
People
India will be ahead of the world in achieving its climate commitments. First
f UMESH REVANKAR
VICE CHAIRMAN & MD,
DARE TO DREAM SHRIRAM TRANSPORT
FINANCE COMPANY
f SUNIL MATHUR,
MD AND CEO, SIEMENS LIMITED MY VISION FOR INDIA@100
INDIA@100 WILL SET AN EXAMPLE of being a clean is one where everyone gets
and united country. An economic powerhouse where equal opportunity to do
there is enough for everyone’s need but not greed. his/her economic activity.
Quality education and healthcare will be available to Put people first to create an
each citizen. Smart cities will attract the best talent entrepreneurship culture
by providing them with a sustainable environment that helps communities
and facilities that are integrated. India will demon- find economic solutions
strate that bureaucracy, industry and civil society can and create wealth. By
work together to provide equal opportunity for each empowering the com-
citizen. I dream of an India which plays a leading role mon man, with a focus on
in smart manufacturing, software and technology. financial inclusion, we
can democratise access to
finance. Women form a
disproportionately large

Macro Discipline share of India’s unbanked

and underserved, and

to Power Progress that needs immediate

attention. Without fully
including women, we will
f KAUSHIK SHAPARIA be unable to solve the
CHIEF EXECUTIVE OFFICER, INDIA, financial inclusion puzzle,
DEUTSCHE BANK end extreme poverty, and
promote shared prosperity
I ENVISAGE INDIA@100 as a more confident India. An India where capital account in India. Financial inclu-
convertibility should have happened along with internationalisation of the sion, however, is not only
rupee, bond index inclusion, a renewable energy proponent on the fast track to a goal but also a means
net-zero emissions, home to some of the leading unicorns in the world, with agri- to an end as an enabler,
tech driving an integrated agricultural landscape and India becoming the world’s multiplier and accelerator
food bowl. All this is contingent on macro indicators. The government needs of economic growth. My
to monitor debt-to-GDP, fiscal deficit, tax regulation, etc. Additionally, India’s vision for India’s future
demography hinges on economic policy reforms to improve demand, remove is not one of despair but
supply constraints, and pump in huge investments in infrastructure. of hope.

Business Today 21 August 2022

 VENTURE CAPITAL CLIMATE TECH

CLOUDY
82 |
WEATHER
A MATURING ASSET CLASS, CLIMATE TECH
OFFERS STRONG FINANCIAL RETURNS TO
INVESTORS AND AN OPPORTUNITY TO CREATE
OUTSIZED ENVIRONMENTAL AND SOCIAL
IMPACT. YET, THE SECTOR IS FAR FROM
BECOMING A PRIORITY FOR INDIAN VCs

BY BINU PAUL
ILLUSTRATION BY ANIRBAN GHOSH
 S
USTAINABILITY IS THE NEW DIGITAL.
Companies did not have a digital function 20 years
ago. And today, you cannot imagine a business
without digitalisation embedded in it. The same
thing is happening to sustainability. Climate and
sustainability are not only the biggest problems
to be solved, but also the biggest opportunities
available for the next 20 years,” says Anjali Bansal,
Founder of Avaana Capital, a climate-tech focussed early-stage
venture capital (VC) firm.
She bases her investment thesis on the enormous opportunity
that climate and sustainability presents and compares it to the
opportunity created by the digital revolution. On this principle,
the Mumbai-based VC firm is currently raising its second climate
-tech focussed fund with a target corpus of $150 million. VC firms
such as Avaana Capital are among a growing tribe of dedicated
early-stage climate tech focussed funds that are providing the
missing piece of the puzzle of growth-capital requirements for the
climate-tech ecosystem.
Climate tech as an attractive asset class for pure-play VC
investors, and not as impact funding or ESG investment targets, has
just begun to gather steam. Globally, climate tech start-ups raised
a little under $40 billion across 600+ deals in 2021, as per a report
from Climate Tech VC, a climate tech research and publication
outlet. According to PwC’s “State of Climate Tech 2021” report,
climate tech accounts for 14 cents of every venture capital dollar.
 VENTURE CAPITAL CLIMATE TECH
In contrast, Indian climate tech
businesses received just $1 billion in
VC funding between 2016 (when the
Paris Agreement was signed) and
2021, reveals a report by London
& Partners and Dealroom.co. Ad-
hoc investments by impact funds,
global foundations and generalist
VC firms account for most of the
climate-tech investments in India.
On the other side of the equation
is a set of private equity (PE) players
like Warburg Pincus, TPG, Green
Growth Equity Fund (GGEF),
and GEF Capital Partners (GEF)
who primarily invest in climate-
tech infra companies. In the past
few years, a number of global
development finance institutions
(DFIs) such as the UK’s British
International Investment (formerly
CDC) and the Netherlands’ FMO
have been doing direct investments,
or co-investing with funds in which
they are the limited partners (LPs).
84 |
I
N INDIA, TOO, a few early-stage
climate-tech focussed VCs
have set up shop. Nature-Fix
Climate (NFC) Ventures—a
$200-million climate-tech-focussed
VC fund launched by impact
investor Harsha Moily and former
Abraaj India MD Balaji Srinivas—
is looking to tap into the massive
climate-tech start-up opportunity.
IIM Ahmedabad’s incubator-
cum-accelerator, the Centre
for Innovation Incubation and
Entrepreneurship, is also planning
to launch a new climate tech
fund—named Bharat Innovations
Fund—with a target corpus of $100
million. Investment advisory firm
Unitus Capital is raising a dedicated
climate-tech fund, too, sources say.
The emergence of these dedicated
early-stage funds is indicative of the
opportunity present in the climate-
tech space. There is a sense of
urgency among enterprises to start
their net-zero journeys, and fulfil
the sustainability commitments
made to the board and shareholders.
GREEN
FUNDING
Sustainable investments
account for 10-15 per
cent of the total AUM
being managed by PE/
VC firms in India
The total value of these
investments in 2021 was
estimated to be $18.80
billion. It is expected to
grow to $125 billion in
the next five years
It includes ESG
and sustainability
investments across
offline/infra companies
and digital firms
Renewable power,
e-mobility, agri-tech, and
waste management are
the sectors attracting
investments in India
Key challenges include
a lack of quality data,
measurement criteria,
traditional mindsets,
a limited record of
sustainable funds, and
a lack of awareness
SOURCE: SUSTAINABLE
INVESTMENTS REPORT BY
BENORI KNOWLEDGE
Business Today 21 August 2022
Indian corporates are also striving to
bring transparency in their carbon
footprint reporting to meet the
stringent sustainability standards
on sourcing and supply chains
being set by their global clients.
In addition, the societal need for
sustainability across sectors is being
felt like never before, and policy
support from the government offers
tremendous thrust to the cause.
However, climate-tech start-
ups and investors are staring at a
classic chicken-and-egg situation.
Avaana’s Bansal says that her firm
is seeing 200 start-up investment
opportunities/pitches in a quarter,
but admits that there is a severe lack
of early-stage capital for them.
Shyam Menon, Partner & Co-
founder at Bharat Innovations
Fund agrees. “The equity gap in
pre-Series A, Series A and B, from
$1-2 million to all the way up to
$10-15 million is real. Once you
cross the Series B mark, and the
business hits $10-15 million top line
with reasonable unit economics, it
is easier to get growth capital. It’s
a pure business opportunity for
investors, irrespective of whether
it is climate, or not,” he says.
Capital is stuck in the late stages
as most PE funds have capital
allocation for climate, but the deal
flow and pipeline are weak. PE
firms typically look for companies
that have gone through the journey
from idea to Series B for large-ticket
investments.
“There aren’t many late-stage
tech companies in India. Close to 60
per cent of climate-tech start-ups
are in the idea- and R&D stage, the
rest are in commercialisation and
scale-up phase. Climate-tech firms
need a longer gestation period, so
it will take a while to build large
businesses in this segment, but we
are getting there,” says NFC’s Moily.
Bansal feels VCs alone cannot
cater to the massive requirement
of the space, and that patient,
science-based capital for creation
of new solutions should come from
different sources like corporations,
labs, universities and foundations.
“To create a real ecosystem for
a new sector, you need different
types of capital. Avaana focusses on
providing equity capital for a start-
up enterprise’s growth and scaling.
Patient risk capital, required to
support creation of new science,
comes from foundations and most
large corporations are now looking
to invest here,” she says.
However, a majority of climate-
tech funding goes to EVs, micro-
mobility and other transit models,
and not to tech that is directly
cutting emissions. According to
PwC, less than 20 per cent of funds
go to critical areas—solar, wind
and hydrogen energy, food waste
technology, and alternative foods/
low greenhouse gas proteins—that
represents over 80 per cent of the
emissions reduction potential.
Why are VCs not backing
technologies that have a more direct
impact on emissions? The answer
lies in the strict fund lifecycles and
return expectations of VC funds,
making it tough for them to find
alignment with climate tech, which
needs a larger gestation period.
“If 100 per cent of a VC’s fund
comes from LPs whose only goal
is carbon mitigation, and nothing
else, you have the perfect alignment
between your LP, who is your
investor, and general partner (GP)
who is managing the fund. But VC
funds have multiple LPs—regular
investors who expect a return
of 20-25 per cent IRR (internal
rate of return). The challenge,
then, is investment philosophy—
maximum carbon mitigation
potential versus maximum returns
potential,” Menon says. He adds
that as the game moves towards
high carbon-mitigation-potential
heavy industries like steel, cement
and chemicals, commercial IRR and
carbon mitigation will be high, too.
Moily, on the other hand, says
that NFC is structured as a 12-year
fund, unlike typical 8-10 year VC
“To create a real
ecosystem for a new
sector, you need grant
capital, which is the
patient risk capital
required to support
creation of new
science”
ANJALI BANSAL
FOUNDER, AVAANA CAPITAL
“If a VC’s funds come
from LPs whose goal
is carbon mitigation,
there is perfect
alignment between the
LP and GP. But VC funds
have multiple LPs, who
expect a return of about
20-25 per cent IRR”
SHYAM MENON
PARTNER & CO-FOUNDER,
BHARAT INNOVATIONS FUND
“Climate-tech firms
need a longer gestation
period, so it will take
a good while to build
large businesses in this
segment, but we are
getting there”
HARSHA MOILY
FOUNDER, NATURE FIX
CLIMATE (NFC) VENTURES
Business Today 21 August 2022
fund lifecycles, to accommodate
the longer gestation period required
for climate-tech ventures to reach
commercialisation.
“For them (VC investors) to
make a start, there are enough
innovations out there. It’s just
that they need to be patient, and
understand that going from proof-
of-concept to commercialisation
can take anywhere between two
to 10 years, depending on the type
of the problem area,” says Mainak
Chakraborty, Director and CEO of
GPS Renewables. The bio-energy
tech firm has raised close to $20
million in equity capital from a
slew of investors including Neev II
Fund managed by SBICap Ventures,
the Netherlands-based Hivos-
Triodos Fund, and Hyderabad-
headquartered Caspian Impact
Investments.
Despite the large opportunity
present today, the clean-tech
boom that went bust about a | 85
decade ago still makes investors
jittery, especially as the world is
facing another potentially harsh
financial crisis. This time around
though, investors are cautiously
optimistic. Unlike the previous
cycle, the tech solutions are asset-
light businesses, and investors
are mostly backing market-ready
business models. There is a strong
commercial need for such products
as consumers today are more aware.
Policymakers and businesses, too,
are making genuine sustainability
commitments.
“When we start seeing returns
being generated from investments,
we will see a lot more VC and PE
capital coming into this space.
We are just at the beginning of
that journey, which is why I say,
sustainability is the next digital.
What we saw in digital in the last 20
years, we will see in sustainability
for the next 20 years. It is just the
beginning,” says Bansal, optimistic
about the future of climate tech.
@binu_t_paul
HEALTHCARE COVID-19 ACCESSORIES

R.I.P
(2020-2022)

Business Today 21 August 2022

 O N C E I N S H O RT SU P P LY D U R I N G T H E P EAK OF
THE PANDEMIC, VITAL PARAPHERNALIA USED IN
THE PREVENTION AND TREATMENT OF C OVID-19
REMAIN UNSOLD OR UNUSED, PUTT ING
MANUFACTURERS IN A SPOT

BY N E E T U C H A N D R A S H A R M A
ILLUSTRATION BY ANIRBAN GHOSH

R
AMBA SINGH, A DELHI-BASED medi-
cal equipment distributor, is ea-
gerly waiting to free up space in his
warehouse, now occupied by over a
dozen oxygen concentrators that he
bought in March 2021 when India
was reeling under the second wave
of the Covid-19 pandemic. The Chi-
nese concentrators, which Singh had
bought from domestic companies
for `25,000 each and rented out for
at least `10,000 a day to Covid-19
patients, haven’t been used for over a
year. “Since there is no demand, I offered these to small local hospitals
at throwaway prices, but they didn’t want them,” says Singh, who plans
to donate them to charity since he has already recovered their cost.
Ventilators, oxygen concentrators, personal protective equipment
(PPE) kits, oxygen cylinders and many other items that were consid-
ered life-savers during the initial days of the pandemic are now gath-
ering dust at hospitals and manufacturing units. These commanded
premium prices when Covid-19 was at its peak, but with the infection
curve seeing a downward trend after December 2021, these products
are no longer in demand.
CHALLENGING TIMES
“These are very challenging times for manufacturers of Covid-19-criti-
cal medical devices who had invested in plants and production lines for
FFP2 (N95-equivalent) masks, surgical masks , oxygen therapy (venti-
lators, oxygen concentrators, high nasal flow oxygen equipment), sy-
ringes, etc., as demand has ebbed sharply and manufacturers are left
with huge capacities of plant and machinery and unsold inventories,”
says Rajiv Nath, Forum Coordinator, Association of Indian Medical
Device Industry (AiMeD).
Not just Indian companies, even multinational conglomerates like
3M are facing a slump in demand. For over 50 years, 3M’s respirators
such as the N95 have been used across industries, during natural disas-
ters, and outbreaks such as the Covid-19 pandemic. “We approximately
doubled global capacity of manufacturing
respirators to support the frontline work-
ers during the pandemic,” says Ashutosh
Shirodkar, Executive Director and Country
Business Group Leader-Safety & Industrial
Business Group, 3M India, adding that with
the pandemic waning, there has been “re-
duced demand for respirators from the | 87
healthcare sector”.
According to AiMeD, nearly one-third of
the country’s medical device manufactur-
ing capacity is lying unused. Vivek Tiwari,
Founder & CEO of Medikabazaar, a B2B
store for hospital supplies, says that during
the second wave, manufacturers ramped
up production of ventilators, PPE kits and
masks to meet demand. “As a result, hospi-
tals and supply-chain partners are still car-
rying a large number of unused equipment
and most of this is lying in the top 20 cities
of the country,” he says, adding that before
the pandemic, India used to manufacture
only 6 million PPE kits per annum, which
was ramped up to over 230 million.
“Similarly, capacity for ventilators and
surgical masks had gone up by 10 times dur-
ing the peak of Covid-19,” he says. While
there has been a sharp decline in demand
with the pandemic receding, the recurring
demand for PPE kits, masks, gloves and
sanitisers is still higher than pre-Covid-19
levels due to increased awareness and en-
demic protocols. “But medical equipment
and devices like pulse oximeters, thermom-
eters, oxygen concentrators and ventilators
have seen a decline in demand.”
Medikabazaar’s operating revenue grew

Business Today 21 August 2022

WORLDS APART
Makers of Covid-19 paraphernalia saw a huge jump in production since the pandemic began

PPE KITS GLOVES VENTILATORS

BEFORE AFTER BEFORE AFTER BEFORE AFTER

20 140 20 30 8 24

6.24 232.07 2.11 2.31 3,360 744,225

MILLION MILLION BILLION BILLION
PIECES/ANNUM PIECES/ANNUM PIECES/ANNUM PIECES/ANNUM PIECES/ANNUM PIECES/ANNUM

SWABS RNA EXTRACTION KITS DIAGNOSTIC KITS (PCR KITS)

BEFORE AFTER BEFORE AFTER BEFORE AFTER

0 5 0 20 0 52

0 536 0 446.03 0 3.87

MILLION MILLION BILLION
PIECES/ANNUM PIECES/ANNUM PIECES/ANNUM PIECES/ANNUM PIECES/ANNUM PIECES/ANNUM

GRAPHICS BY ANIRBAN GHOSH

3.3x to `558.95 crore in FY21 from `168.55 crore in FY20. Being an end-
to-end hospital supplies and equipment procurement platform, the
company saw a huge surge in Covid-19 protection and treatment-relat-
ed products and equipment. “We sold close to 1,000 ventilators during
Covid-19,” says Tiwari, adding that there have been no orders for venti-
lators in the past two quarters, while demand for oxygen concentrators
was negligible. As for face shields, the company has seen no demand in
the past few months.
SETTING OFF LOSSES
Industry experts say that with the pandemic showing signs of reced-
ing, the central government lifting provisions of the Disaster Manage-
ment Act, and state governments easing restrictions, a large number
of Covid-19-related supplies, equipment and accessories remain un-
utilised. Manufacturers are trying to repurpose their products to miti-
gate financial losses.
AiMeD’s Nath says that those manufacturers who were in existence
prior to Covid-19, and were exporting these products “are relatively
better off as they have a more sustainable supply chain to cater to”. But
those who entered the medical device manufacturing space recently
as they saw it as a golden opportunity “are
now facing liquidity challenges and scaling
down production or shutting operations or
selling off their machinery. We are encour-
aging them to seek QA Certification so that
they can export surpluses.”
For instance, in the first wave of Covid-19,
Max Ventilator, a manufacturer of medi-
cal ventilators and allied medical devices,
achieved growth of 100 per cent and in 2021
saw business of `100 crore. But now, the
company is looking at other products. “Many
of those ventilators were Covid-19-specific
machines which is why they have now lost
their utility. And probably after the Covid-19
demand has saturated, there won’t be much
demand for them. So, we have another three
products that are meant for ICUs, but not
necessarily for Covid-19, and that could re-
sult in 25 per cent growth for the company,”

Business Today 21 August 2022

 HEALTHCARE COVID-19 ACCESSORIES

Total number of manufacturers Total manufacturing capacity; data as of January 13, 2022

SANITISERS GOGGLES SURGICAL MASKS

BEFORE AFTER BEFORE AFTER BEFORE AFTER

35 50 0 18 25 78

19.46 51.63 0 32.47 313.6 4.03

MILLION MILLION MILLION MILLION BILLION
LITRES/ANNUM LITRES/ANNUM PIECES/ANNUM PIECES/ANNUM PIECES/ANNUM PIECES/ANNUM

RAPID TEST KITS N95 MASKS VTM*

BEFORE AFTER BEFORE AFTER BEFORE AFTER

0 39 5 38 0 30

0 964.3 13.82 536.86 0 2.32

MILLION MILLION MILLION BILLION
PIECES/ANNUM PIECES/ANNUM PIECES/ANNUM PIECES/ANNUM PIECES/ANNUM PIECES/ANNUM

*viral transport media, used to carry samples; Source: Association of Indian Medical Device Industry

says CEO and Founder Ashok Patel.
Besides these, almost all diagnostic
companies came out with some form of Co-
vid-19 test kits or other. Now, some that had
invested in Covid-19 test kits are looking
at other markets for exports. For example,
Mylab Discovery Solutions, which makes
Covid-19 test kits along with other diag-
nostic products, is looking at international
markets that have demand for such kits,
says MD Hasmukh Rawal. The company
had a 30,000 sq. ft facility, and the neces-
sary approvals to manufacture critical
molecular diagnostic products before the
pandemic. When Covid-19 struck, Mylab
“decided to redirect our resources to make
Covid-19 test kits”. Now, it is focussing on
other diseases. “We have invested around
$15 million in our manufacturing facility,”
adds Rawal.
According to health industry experts, an estimated 20,000 oxygen
concentrators are lying unsold or unused. As a majority of Indians are
vaccinated against Covid-19 and the infections are mild, the surplus
items, experts say, can have other use cases. “We have close to 25,000
primary health centres (PHCs) in rural areas. The government can con-
sider moving simpler equipment and devices like oxygen concentrators
to PHCs and community health centres in rural areas that can act as
first-level treatment for the patients,” says Medikabazaar’s Tiwari.
Agrees Dr Rana Mehta, Healthcare Industry Leader and Partner at
PwC India: “With the demand for these products going down due to low-
er incidence of coronavirus cases, these manufacturers need to reinvent
these products as the opportunity for growth of hospitals is clearly vis-
ible. Repurposing these products for larger healthcare needs is required
for the twin purpose of usage of the unused products, and boosting the
healthcare sector.” Policy support and special duty waivers to facilitate
the export of unused equipment could also help, say experts. Medical
device manufacturers stuck with unsold Covid-19 inventory would be
hoping that some of these suggestions come good.
@neetu_csharma

Business Today 21 August 2022

START-UPS KITCHEN TECH

F O O D T E C H S TA R T - U P S A R E P O W E R I N G
THE ROBOTIC KITCHEN REVOLUTION IN
I N D I A T O H E L P D E L I V E R Y P L AT F O R M S
L I K E Z O M AT O A N D S W I G G Y F U L F I L T H E I R
1 0 - M I N U T E D E L I V E R Y D R E A M 

B Y P R E R N A L I D H O O 
ILLUSTRATION BY NILANJAN DAS
 TARTING IN 1987, the US televi-
sion series Star Trek: The Next
Generation featured Captain
Jean-Luc Picard ordering the
Food Replicator for “Tea. Earl
Grey. Hot!” This captured the
imagination of millions as they
got a peek into a futuristic alternative reality.
Sadly, the Food Replicator is still far from reality,
unlike a dozen other sci-fi predictions such as
self-driving cars and space travel. But there’s
hope, with home-grown robot companies and
cloud kitchen start-ups like Mukunda Foods,
Xook and RoboChef working to make this a real-
ity. In fact, some of them used the Replicator as
an analogy when starting out to build robotic
solutions for commercial kitchens.
“Food replication might be sci-fi today, but
the industry is certainly moving towards special
focus products, and then towards multi-purpose
machines focussing on specific kinds of food.
That will become a more pervasive reality in the
food robotics segment. Automation is a must for
companies that want cooked food delivered in 10
minutes,” says Rajagopal Natarajan, Co-founder
of Bengaluru-based start-up Xook that offers
meal preparation robots, co-working office
spaces and apartment complexes. While custom-
ers can personalise their food based on taste
preferences like spicy, sweet, creamy, or saucy,
these machines can rustle up salads and six other
types of dishes within two minutes!
A new phenomenon in the country, a dozen
tech start-ups like Xook are operating a kitchen-
as-a-service (KaaS) model in the Indian food ser-
vice delivery market that is expected to double in
value to $13 billion by 2025, according to research
firm RedSeer. A report by Motilal Oswal pegs
the market in India to grow at over 30 per cent
CAGR between 2021 and 2026. Meanwhile, the
global online food delivery services market size
is expected to grow from $115.11 billion in 2021 to
$128.32 billion in 2022 at a CAGR of 11.5 per cent,
according to the Business Research Company.
Bengaluru-based Mukunda Foods is another
kitchen robotics firm leveraging this trend.
Founded nearly two decades ago as a quick ser-
vice restaurant (QSR), today it is powering food
delivery platform Zomato’s 10-minute delivery
dream. Earlier this year, Zomato bought a 16.66
 START-UPS KITCHEN TECH
per cent stake in the company, an acknowledgement
of the potential of these start-ups. “For an order to be
delivered in 10 minutes, food must be ready and out of
the kitchen in three minutes. People start ordering when
they’re hungry. If they get tasty food [delivered] faster,
they might actually pay a premium for the convenience
they’re getting,” explains Mukunda Foods Co-founder
& CEO Eshwar K. Vikas. “The No. 1 filter that’s used
on Zomato and Swiggy is speed. That’s where we come
in. We don’t regenerate the food; we cook it faster and
people know the difference.”
According to Vikas, building a physical product (hard-
ware) has many challenges because unlike a software
product, changes cannot be made on the go. The prod-
uct’s development is tedious, and usually takes four to five
years with huge expenses. The other challenge for these
tech firms is to get the taste of the food right because
it’s more of a culinary art than a mechanical one. Hence,
apart from the challenges of designing efficient hardware,
taste and recipes play a major role. “The availability of
quality talent in food tech, globally, is less, and you have to
build the talent, which is time consuming,” he adds.
W
92 | ITH THE AVERAGE PRICE of its robots between
`35,000 and `2 lakh, Mukunda Foods has so
far automated over 3,000 commercial kitch-
ens in over 22 countries. Working with 250 players, such
as ITC and Chaayos, it is helping chefs make this ‘tech-
tonic’ shift. In the past two years, it claims to have sold
more than a thousand robots, and the demand is growing.
THE INDIAN FOOD
DELIVERY MARKET
IS EXPECTED TO
DOUBLE IN VALUE
TO $13 BILLION BY
2025, ACCORDING
TO RESEARCH FIRM
REDSEER
Business Today 21 August 2022
So, how do these robot chefs prepare your
favourite shahi paneer once you order? A shahi
paneer recipe can be made within three minutes
using a Mukunda Foods kitchen robot called
‘Wokie’. First a chef makes the base gravy, the
automated wok then adds paneer, cream and
other spices in the perfect proportion at the
touch of a button. And, your favourite shahi pan-
eer is ready. Not just that, a whole list of recipes
can be prepared. For example, another machine
called ‘Misty’ can make momos from scratch,
while ‘Dosamatic’ can churn out delectable do-
sas in two minutes. There are many other such
machines these start-ups have designed, and
many more are under development.
While cooking can be automated, what about
taste? “We spend at least two to three years in
getting the taste right. Nobody will buy the ma-
chines for its tech, if the food doesn’t taste nice.
That’s why we work with a lot of in-house chefs,”
says Vikas of Mukunda Foods. His machines,
Vikas says, have solved the challenge of stan-
dardisation of taste, temperature and quality for
QSRs and cloud kitchens. Other beneficiaries of
their smart kitchen include brands such as Aun-
tie Fung’s, edabba, Biggies Burger and Meraki,
among others.
RoboChef, another company in the automat-
ed kitchens space, has taken the tech to the next
level. Its kitchens are fully automated with mini-
mal need of a chef to be present. Currently, its
equipment is in use in about 50 kitchens in Chen-
nai, Hyderabad and Singapore. It runs a multi-
vessel system with digital recipes that are used
to make biryanis and curries, and other dishes. If
a QSR or cloud kitchen can shell out `1 crore for
its solution, then churning out 20,000 portions
of biryani in a few minutes is child’s play.
Not just KaaS start-ups, this trend has also
led to a rise in cloud kitchens that are exclusively
focussed on order delivery, and they are increas-
ingly using technology and automation to re-
duce their daily production and delivery times.
“A very natural behaviour is that you start think-
ing about food when you’re hungry. So, there are
a lot of relevant use cases for 10-minute food
delivery for consumers. Coming to the execu-
tion side of things, it’s a tricky problem to solve,”
says Rohan Agarwal, Partner at RedSeer. “De-
liveries are where it takes the most time, which
means that the food preparation time needs to
come down. That’s where these [kitchen tech]
solutions will come in handy. They will be able
to speed up the preparation, [and make the pro-
cess] fail-safe, tech driven and consistent. It also
helps you improve margins on the kitchen side
because the cost of manual labour comes down,”
he adds. According to RedSeer, cloud kitchens
 MUKUNDA FOODS
Founded: 2012
Total funding:
$9.1 million
Speciality:
Kitchen robotics
Customers: ITC, Wow!
Momo, Chaayos,
Zomato

COOKING GHOST KITCHEN

UP A INDIA
Founded: 2019
STORM Total funding:
$1.2 million
REBEL FOODS Speciality:
Founded: 2011 Multi-brand cloud
Total funding: kitchen
$527.3 million In-house brands:
Speciality: Multi- Starboy Pizza &
brand cloud kitchen Shakes, Wakka Makka,
Customers: Wendy’s, MomoGuy, Badmash
Naturals, Mad Over Biryani
Donuts, SLAY Coffee

are set to be a $2-billion industry in India by 2024, up from
$400 million in 2019.
Meanwhile, Mumbai-based Ghost Kitchen India has
a portfolio of 30 in-house food delivery brands, including
Starboy Pizza & Shakes, New York Waffles & Dinges and
Wakka Makka, across cuisine categories. “Technology is
heavily influencing the food delivery industry. [It plays a
big role] in our operations,” says Karan Tanna, Founder
and CEO of Ghost Kitchen India. Apart from robotics, AI
is used to predict the amount of ingredients to be used in a
particular recipe. Similarly, ML and open data are key tools
that enable access to real-time and aggregated data visibil-
ity that helps in inventory or stock management.
Tanna says foodtech is not only about leveraging dis-
covery platforms but also using tech that is customised to
your operations. “We use AI to predict the requirement
of raw material in our kitchen so that we never run out of
them; the availability ratio of menu items is always tar-
geted above 95 per cent. Now it’s not only about food, but
also about how to best leverage the customer who shops
online and deliver him the experience that increases the
stickiness of the brand,” he says.
Rebel Foods, a Mumbai-based company that operates
over 45 cloud kitchen brands including Faasos and Beh-
rouz Biryani, uses software, robotics and automation for
food preparation. The company uses a lot of embedded
systems, AI, and IoT in collaboration with its
partners. “We are also building smart kitchen
appliances and machinery that are already op-
erational in the kitchens. We are also develop-
ing machines that understand recipes,” says
Prakash Dutta, Global COO, Rebel Foods. For
instance, the company uses a rotating wok that
simulates a chef’s stir-frying motion. The wok
also controls the temperature and the amount
of oil dispensed. Dutta says the company has
also attached a video screen and an app to the
wok. At different stages of cooking, the machine
instructs the chef when to add the different in-
gredients as per the recipe. “While chefs will
come and go at Rebel Foods, intelligent robots
are passing down recipes,” says Dutta, adding
that these machines enable the company to run
multiple brands—including those of its part-
ners—from the same kitchen. “The future of
food is very exciting—deep personalisation, au-
tomation, farm to fork tracing, complete trans-
parency, and safety,” adds Dutta.
Well, it looks like the Food Replicator isn’t
too far into the future.
@PLidhoo

Business Today 21 August 2022

 START-UPS HEALTHTECH

NEW-AGE HEALTH
MANAGERS
RIDING ON INNOVATIONS SUCH AS SUBSCRIPTION-BASED AND BITE-SIZED
PLANS, NEW-AGE HEALTHCARE START-UPS ARE DISRUPTING
INDIA’S INSURANCE SPACE

BY TEENA JAIN KAUSHAL

ILLUSTRATION BY PRABAL BISWAS
 F
FOR ASSAM-BASED Bhavjot Kaur,
34, the motivation to innovate on
the healthcare experience in India
came from personal suffering. Her
father was diagnosed with diabetes
in 2006 and even after months of
hospitalisation, they could not save
him; he passed away in 2010. Not
only did the ordeal strain her family
emotionally, but also drained their
finances. “We did not have any
health insurance to take care of the
financial impact. So, the family was
emotionally and financially torn,”
she says. The incident was a mo-
ment of realisation for Kaur, an IIT
Roorkee student then. It showed
her how broken healthcare was in
India. Eight years later, along with
her husband, orthopaedic surgeon
Suraj Baliga, she set up Clinikk.
“For me, it was important that I
work on something that changed
how healthcare is experienced in
this country. That’s the motivation
behind our company,” says Kaur.
Clinikk operates 16 primary
care centres across Bengaluru,
and two in Hyderabad, known as
Clinikk Health Hubs. It offers vir-
tual consultation, unlimited access
to doctors, medicines, diagnostics
and specialist consultation, all in
exchange for a subscription fee.
Till now, it has partnered with Hero
MotoCorp and Vodafone, tech plat-
forms like Ola, Rapido and Shadow-
fax and the Government of Goa to
serve over 2 million customers.
All these services are available
in just one plan—something un- to $222 billion by FY26 from $117
heard of in a health plan, but these billion in FY21, driven by a grow-
new-age health insurance start- ing middle class, increasing digital
ups—that call themselves man- penetration and new online distri-
aged-care service providers—have bution models.
got you covered. And, while some As these start-ups innovate, ex-
don’t have a direct licence from perts divide them into three cate-
the regulators yet, these firms are gories: One, those offering employ-
gaining traction as they transform ee insurance and wellness plans,
the space with innovations like such as Plum and Nova Benefits.
subscription-based and bite-sized Second, retail-focussed compa-
plans. For instance, Onsurity of- nies that offer OPD subscription-
fers plans exclusively for SMEs. based plans, like Clinikk and Kenko
The idea was born when Founders Health. Third are embedded insur-
Yogesh Agarwal and Kulin Shah ance providers such as Zopper that
realised that there were no SME- democratise access to insurance.
focussed insurers in the country. Riding on this innovation wave is
“SMEs are underserved. When we Bengaluru-based Kenko Health that
talk about product offering and offers instant benefit on all medi-
product servicing by the tradition- cal bills, including out-of-pocket
al insurers, they generally cater to expenses for medicines, lab tests,
retail customers. That’s how we doctor consultations, emergency
started building Onsurity,” says services, at-home care, mental
Agarwal, who is also the CEO. health and the like. “Our subscrib-
ers don’t rely on tedious paperwork,
AN EMERGING SECTOR third-party agents or different apps
According to a recent report by to access healthcare services. They | 95
consultancy firm RedSeer, India’s get all these benefits on a single app.
insurance market is poised to grow From an operational perspective,
COVER YOUR BASES
The monthly subscription-based model
1 of managed-care service providers is
gaining traction among people
2 These new-age start-ups cover doctor
consultations and offer discounts on
pharmacy and lab tests
3
They also provide health insurance to
cover the cost of hospitalisation
4
Some of these start-ups, however, do
not have a licence from regulator IRDAI
The regulator has issued notice to
5 exercise caution while dealing with
unregulated entities
Business Today 21 August 2022
 THE INNOVATORS
CLINIKK
Launched: 2018
Founders: Bhavjot Kaur and
Dr Suraj Baliga
Funding: Raised $6.4 million
in seed and pre-Series A
round
Number of subscribers:
More than 50,000 families
USP: Operates its own
health hubs with an in-house
tech helps us deliver faster benefits
transfer and proof-processing, and
better risk assessment with afford-
able pricing,” says Co-founder An-
iruddha Sen. The common thread
among these start-ups is strategy:
they break down large premiums
into smaller payments, making the
product affordable and accessible.
Consumers want to try out a service
before committing, and it means
greater flexibility and control over
services without burning a hole in
their pockets.
“Currently there’s a lot of trac-
tion for the idea of group health
insurance being sold to smaller
companies who are not targeted
[by traditional insurers]. It’s a good
idea because group health [insur-
ance] was largely in the domain
of large brokers, and for them it
medical team
Offerings: Subscription with
unlimited free OPD care; and
cashless hospitalisation of
`5 lakh (plus up to `50 lakh
with super top-up)
Premium: `500-800 per
month
Network: 16 health centres in
Bengaluru, 2 in Hyderabad
wasn’t efficient to cater to com-
panies that have 10-100 employ-
ees,” says Shanai Ghosh, CEO and
Executive Director at Edelweiss
General Insurance. Their grow-
ing popularity can be observed in
funding. Recently, Onsurity raised
$16 million in a Series A round led
by Quona Capital, alongside exist-
ing investors Nexus Venture Part-
ners. Clinikk, too, raised $6.4 mil-
lion in seed and pre-Series A round
led by MassMutual Ventures, while
Kenko Health raised $12 million as
part of its Series A round led by Se-
quoia Capital India.
REGULATORY HURDLES
The rising interest in subscription-
based insurance models makes the
sector a high-growth market. But,
there is the hurdle of clear regula-
Business Today 21 August 2022
KENKO HEALTH
Launched: 2019
Founders: Aniruddha
Sen and Dhiraj Goel
Funding:
$12 million in Series A
Number of
subscribers: Over
100,000
Offerings: 20-90%
off on medicines,
tions. The Insurance Regulatory
and Development Authority of In-
dia (IRDAI) provides two types
of licences: One is a distribution
licence and the other is the tough-
to-get insurer (manufacturing) li-
cence. “There are two types of risks
in forming an insurance company.
First is the capital risk that requires
insurance companies to set aside
capital to meet a policyholder’s
PHOTOS BY SANDESH RAVIKUMAR
claims. Then there are regulatory
risks that are required to be met to
protect the interests of policyhold-
ers,” explains Abhishek Poddar,
Co-founder and CEO of Plum, an
employee benefits-focussed firm.
Hence, while companies like
Plum and Nova Benefits are li-
censed distributors under IRDAI’s
ambit, managed-care players like
Kenko, Onsurity and Even Health-
 START-UPS HEALTHTECH

ONSURITY
doctor consultations, Launched: 2020 subscription basis; super app for
diagnostic tests; it healthcare and wellness
Founders: Yogesh Agarwal
also offers dental care,
and Kulin Shah Offerings: Health cover, tele-
mental health, vision
care, preventive care Funding: Raised $16 million consultations, medicines on
and at-home care discounts, lab tests, wellness
Number of subscribers: programmes
Premium: Over 2,500 SMEs with more
`299-1,499 than 300,000 members Premium: NA (Offered only through
per month corporate policies)
USP: Offers group health
Network: Over 200 plans to small and medium Network: Over 6,000 hospitals
hospitals businesses on monthly across metros

care are not under the direct regula-
tory purview of IRDAI. It is for this
reason that on April 13 this year the
regulator issued a notice regarding
Even Healthcare that offers health
plans through monthly subscrip-
tions. It advised people to note that
they are dealing with the start-up
at their own risk, and clarified that
only IRDAI-registered insurance
companies, or their appointed
agents and intermediaries, can
sell insurance products. The IR-
DAI did not respond to a request
for comment.
Experts say that the space must
be closely watched as it involves
the collection of money from the
public. Bhabatosh Mishra, Direc-
tor of Underwriting and Claims at
Niva Bupa Health Insurance, says,
“The collection of money is a mat-
ter not just under insurance regula-
tory purview, it could be under the
purview of the banking regulator
as well. In anything of this nature
where public money is collected, we
need some safety net.”
Onsurity’s Agarwal disagrees.
“As a healthcare membership plat-
form, we have insurance compa-
nies providing us a Group Master
Policy that is governed by IRDAI
guidelines. This is similar to how
companies like travel portals and
banks provide bundled insurance
with their offerings like tickets, or
credit/debit cards. Similarly, our
membership comes with group
health insurance”.
“IRDAI approves insurance
companies. We’re much more than
that. But we do partner with IRDAI-
approved companies to provide
healthcare benefits with our plans,”
concurs Sen of Kenko Health.
“We have a managed-care model
with a strong grievance redressal
mechanism. And since we are an ear-
ly-stage start-up, we take customer
grievances very seriously. Also,
IRDAI is thinking about creating a
regulatory framework for managed-
care models. We are working with
IRDAI-approved insurers under its
group insurance ambit where our
subscribers can opt into a health in-
surance plan that they get as a group
cover,” says Clinikk’s Kaur.
These new-age healthcare start-
ups are bridging the gaps in the
sector. However, there is a need for
tighter regulations so that the inter-
ests of subscribers stay protected.
@teena_kaushal

Business Today 21 August 2022

 POLICY NIGHT ECONOMY

STARRY NIGHTS
WHEN THE WHOLE WORLD SLEEPS, NIGHT OWLS
PROWL THE STREETS OF INDIA’S MEGACITIES.
BUT WITH REGULATIONS BARRING ANY
SUBSTANTIAL ECONOMIC ACTIVITY DURING
NIGHT-TIME, THEY BARELY HAVE ANYWHERE TO GO
BY RAJAT MISHRA
PHOTOS BY RAJWANT RAWAT

MEMORABLE NIGHTS
Khubani in Andaz Delhi
hotel hosts various
theme-based nights
every week
 I
IT’S 1 AM IN A STILL, MUGGY NIGHT in Delhi.
In a corner of the city, at the Aerocity area
near the international airport, Khubani
in Andaz Delhi hotel is brimming with
people decked in their swankiest attires.
Men and women sway to the soft, soul-
ful music wafting through the place, with
some looking in from the balcony of what
100 | you might describe as a ballroom. Each
patron seems to be in thrall of the song be-
ing sung by a Sufi singer. While the crowd
is mesmerised by the melody, people in
uniform are busy weaving through those
swaying to the music, serving drinks and
snacks among the patrons. Even the bar is
bustling with orders.
The stream of people coming in to en-
joy every Wednesday evening’s Sufi ren-
dition doesn’t stop till late into the night.
“We enjoy coming to the outlet, which
is safe and where we can enjoy at night.
Sometimes, we want to stay beyond 1 am
but the bar staff starts pushing us to leave,
and that irks us,” says a couple who fre-
quents Khubani and other similar outlets.
Khubani is one of the few nightclubs
in Delhi that remain open late into the
night. “You can count outlets like Khu-
bani on your fingertips in Delhi. Being
the national capital, Delhi is still very far
from becoming a night-time economy,”
says Sharad Madan, Co-founder of Imper-
fecto and Khubani. Madan owns 12 such
establishments in Delhi and Gurugram,
and says that there are hardly any people
out having a good time in Delhi after 1
Business Today 21 August 2022
am. However, when you travel across the
world, the party begins at night.
But the case for a night-time economy
is not only to cater to the demand of revel-
lers. The former Night Mayor of Amster-
dam, Mirik Milan, once said: “Late night
culture is a massive motor for a city’s eco-
nomic well-being.” Meanwhile, the night-
time culture in India is a little different.
As people in the megacities of the country
seek the warmth of their beds, even the
parts of the economy that can function
at night, and add substantial value to the
overall economy, go into a slumber. But
there are some pockets in the country
where a night-time economy is an evolv-
ing phenomenon.
The latest stride in this direction has
been taken by Haryana. To compete with
New Delhi’s new liquor policy that looks
to upgrade the city’s liquor vends and in-
tensify competition among private play-
ers (the policy was recently rolled back),
Haryana has given bars and restaurants an
option to operate 24x7 across cities in the
state. According to its new liquor policy,
there will be no cap on timings for outlets
that pay an additional liquor licence fee of
`20 lakh per annum. However, pubs and
restaurants that would like to close their
establishments at 2 am instead of 1 am can
operate on older licences, and pay the usu-
al annual liquor licence fee of `18 lakh. The
new policy allows for pubs and restaurants
to start serving liquor from 8 am, while the
old policy that was modified in April this
year extended the closing time for pubs
and restaurants from 1 am to 2 am.
Vikrant Batra, owner of the Cafe Delhi
Heights chain—that has not opted for the
new 24x7 regime introduced by the Hary-
ana government—says that extending the
5-10
closing time of cafes and bars from 1 am to 2
am has resulted in a revenue hike of over 25
per cent for them. “Just an extension of one
PER CENT hour has resulted in a steep revenue rise,
THE EXPECTED and an increase in job creation by 15 per
GROWTH IN THE
HOSPITALITY cent. Imagine if we are allowed to be open
SECTOR IF IT through the night [without the need for an
IS ALLOWED additional licence], what kind of boost it
TO OPERATE
THROUGH THE will give to our revenue, and subsequently
NIGHT to our nation’s economy as well,” he adds.
SOURCE INDUSTRY But the liquor policies of state gov-
 POLICY NIGHT ECONOMY

ernments are a sideshow to the potential

growth that a full-fledged night-time pol-
icy can bring to the country. For instance,
an industry veteran who wishes to remain
anonymous says that if the hospitality in-
dustry is allowed to operate through the
night, tax revenues can go up substantial-
ly, and job creation, too, will get a boost of
at least 15-20 per cent.
Globally, too, it’s not only cafes, bars
and nightclubs that make up the night-
time economy. In cities with an active
nightlife, apart from going to pubs and
restaurants, a wide array of activities ex-
ist to complement the hospitality sector.
The impact of these are felt in increased
AN HOUR’S WORK Just an hour’s extension for Gurugram’s hospitality revenues and employment generation.
industry has led to a steep rise in revenue and created more jobs
For context, according to a report re-
leased by the London mayor’s office,
CITIES THAT DON’T SLEEP around 1.6 million people—constituting
a third of everyone working in the city—
worked at night in 2017. Of these, 191,000
worked in health, 178,000 in professional
services, while the hospitality sector em-
ployed 168,000. These were closely fol-
LONDON NEW YORK SAN FRANCISCO lowed by transport, automotive, informa- | 101
tion technology and education sectors.
Meanwhile, the UK’s total night-time eco-
nomic output was pegged at £112 billion,
around 5.1 per cent of the country’s GDP
AMSTERDAM BERLIN PARIS before the pandemic started, according to
a study conducted by the UK’s Night Time
MAPS ARE FOR REPRESENTATION ONLY AND NOT TO SCALE
Industries Association.
Similarly, in New York City, in 2016
(the year for which standardised data sets
WHY CREATE A are available), the night-time economy
NIGHT-TIME ECONOMY? supported nearly 299,000 jobs with $13.1
billion in employee compensation, and
The night-time economy has the potential to become a $35.1 billion in economic output. The pubs
massive driver of direct and indirect economic growth for and restaurants sector’s economic output
India’s megacities was measured at $2 billion from night-
time sales, with tax revenue for the city
It is a valued “third space” in society that is neither one’s coming in at $697 million. Plus, the pubs
and restaurants sector generated around
GRAPHICS BY RAHUL SHARMA

home nor office, where people can take a break from their
hectic city life in the fast lane
A thriving night-time economy in India’s megacities has the
potential to make them favoured tourist destinations, and not
just transit points to other tourist locations in India
The night-time economy is vulnerable due to a lack of
regulation, and requires the care and protection of the local
government in order to thrive
13,400 jobs and $492 million in wages at
night for the year, according to a report
commissioned by the New York Mayor’s
Office of Media and Entertainment.
Australia is no different. With a vibrant
night-time economy in place, the nation
witnessed a total turnover of $128 billion
in sales in 2019-20, although this was a de-
cline of $12 billion from the previous year,

Business Today 21 August 2022

 according to a report commissioned by
The Council of Capital City Lord May-
ors. Sydney, which has Australia’s most
vibrant nightlife, generates more than
$3.64 billion in night-time revenue each
year, with around 4,600 businesses em-
ploying more than 32,000 people, ac-
cording to the city’s administration.
In that context, the Indian econo-
my, too, stands to gain if a structured “If we get the “If a night-
night-time economy is established in the government’s time policy is
country’s cities. “If a night-time policy is
implemented along with concessions for
support in implemented along
the shopping sector, then we can expect terms of policy, with concessions,
around 20-25 per cent increase in job op- I am sure what then we can expect
portunities across maintenance, securi- business we are around 20-25 per
ty, and managerial roles. We can expect doing throughout cent increase in
around 20-25 per cent more revenue to the day, we will job opportunities
be generated if malls are allowed to open do that business across maintena-
throughout,” says Jayen Naik, Chief Op-
in 4-5 hours nce, security and
erations Officer of Nexus Malls.
While most metropolitan cities in In-
at night” managerial roles”
dia have some regulations allowing the
operation of workplaces at night in in- SHARAD MADAN JAYEN NAIK
dustries such as IT & ITeS, a more holis- CO-FOUNDER, IMPERFECTO CHIEF OPERATIONS OFFICER,
102 | tic approach to policymaking is required AND KHUBANI NEXUS MALLS

to establish a thriving night-time econ-

omy in the cities. The benefit of such a
change will not only be reflected in more
places for the city’s residents to visit
during the night, but also allow Indian
cities to compete as tourist hotspots
with global peers that are considered
the doyens of city nightlife. According to
Batra of Cafe Delhi Heights, since Delhi
does not have an established night-time
ecosystem, it has become a transit city
for many international tourists in India.
“Goa’s nightlife is the big attraction, and
that is why international tourists com-
ing to India go to Goa. Sometimes for-
eigners, or my relatives come to India,
and then we feel embarrassed thinking
about where to take them,” he says.
Around the world, the most sought
after tourist destinations have one
thing in common: a thriving night-time
economy. Barcelona, Madrid, San Fran-
cisco, London, Berlin, Sydney and New
York are just some examples of a vibrant
night-time economy, and that is why
these cities get the sobriquet of ‘the city
that never sleeps, or the city of owls’. “In
Spain’s Barcelona and Madrid, 6 am in
the morning is like 6 pm in the evening in
Delhi. Barcelona and Madrid are quintes-
sential examples of thriving night-time
economies,” says Khubani’s Madan.
But Indian metropolitan cities are
slowly and steadily moving towards the
concept of creating a flourishing night-
time economy. Many states are trying to
give fresh impetus to economic growth.
In this year’s budget of the Delhi govern-
ment, Finance Minister Manish Sisodia
announced the preparation of a policy
15-20 that would allow food trucks to operate at
designated places in the city from 8 pm to
2 am. This step was aimed at strengthen-
PER CENT ing the night economy of Delhi, and create
THE EXPECTED
JUMP IN JOBS IF more jobs. Even Delhi’s former Lieutenant
RESTAURANTS Governor Anil Baijal last year said that the
AND HOTELS ARE Delhi Master Plan 2041—which will be no-
ALLOWED TO
OPERATE THROUGH tified later this year—is a continuing and
THE NIGHT prospective document that aims to make
SOURCE INDUSTRY Delhi an internationally acclaimed night-

Business Today 21 August 2022

 POLICY NIGHT ECONOMY

hugely to the ecosystem. In India, a lot

HOW THEY STACK UP needs to be done from the perspective of
New York City’s night-time night-time economies,” he says. He adds
that one reason for Delhi’s night-time
economy supported nearly economy being at a nascent stage is be-
299,000 jobs, and $35.1 billion cause the Delhi Metro operates only till
in economic output in 2016, 12 am, and cabs are not readily available
according to the Mayor’s Office of throughout the city.
Media and Entertainment While the challenges of establishing
a safe and thriving night-time economy
Sydney’s night-time economy are many, the opportunity it presents is
generates more than $3.64 also massive. “If we want the night-time
billion in tax revenue each year, economy to grow, we need to have uni-
form regulations. This ecosystem has
and employs more than
the potential to add to growth, but it’s
32,000 people, according to the not like it will add a per cent of growth to
city’s administration India’s GDP. However, it can add 5-10 per
cent into this industry. It will lead to job
London’s night-time economy creation,” says Madan Sabnavis, Chief
contributes £26.6 billion to the Economist of Bank of Baroda.
UK’s GDP annually, and employs According to economists, the top 10
around 1.6 million people cities contribute about $500 billion to In-
according to a report by the UK’s dia’s $3-trillion gross domestic product
(GDP). If we assume that the night-time
Night Time Industries Association
economy will add even 6 per cent to the
SOURCE: REPORTS urban output, it amounts to $30 billion. | 103
That is the quantum of growth the Indi-
an economy is expected to accrue with a
flourishing night-time economy.
“I think with security, and a robust
time economy. He had said that a 24x7 city infrastructure in the city, it will lead to a
will not happen overnight, and it has to be manifold jump in our revenues. If we get
achieved through an incremental process. the government’s support in terms of pol-
icy, like businesses are getting in western

T
countries, I am sure, what business we
HE CHALLENGES of creating a are doing throughout the day, we will do
night-time economy are enor- that business in 4-5 hours at night,” says
mous. “There are a lot of factors Khubani’s Madan on the potential of the
that need to be considered before night-time economy in Delhi.
forming a night-time policy. Basic Batra of Cafe Delhi Heights opines
things can be considered such as that it’s not only food and drinks that
concessions on electricity rates, flexibility make a night-time economy functional.
in labour laws and working hours, and em- “We should have grocery stores, malls,
powering other sectors to work through and a mix of entertainment to create a
the night,” says Naik of Nexus Malls. 360-degree night market. Why can’t I
According to Khubani’s Madan, secu- have a haircut at midnight? Why can’t I
rity and infrastructure play vital roles in go to study in a library at midnight? We
the growth of a night-time economy. “In should have all the options,” he says.
a city like Delhi, we have very patchy in- Those options, of course, are a little
frastructure at night, no metro or public way away. As they say, the night is young,
transport, etc. However, in top night- and full of expectations.
time economies, infrastructure and
public transport along with security add @RajatMishra9518

Business Today 21 August 2022

 THE GOOD LIFE
TRENDS

THE
Bengaluru-based
Record Room, a
vinyl and craft beer
bar, encourages
people to explore
the world of vinyls
through its listening
station

Growing interest
among young listeners
who are attracted
to the more tangible
quality of the
analogue format is
leading to a revival of
the vinyl
BY SMITA TRIPATHI
 THE GOOD LIFE TRENDS
THE RADIO & GRAMOPHONE House
in New Delhi’s Connaught Place
established in 1951 invokes nos-
talgia. As you climb up the steps
to the first-floor store, you hear
Lata Mangeshkar’s crystal clear
voice singing “Lag ja gale ki phir...”
It’s a vinyl record of a collection of
her songs playing on a turntable.
Everything about the whole set-up
is very old school—just like the
name of the store—rows and rows
of vinyls, a couple of gramophones,
106 | several turntables—except for the
customers. Rajul Yadav, 31, and
Shikha Sinha, 29, became vinyl
heads—a term used to describe
those obsessed with the analogue
medium—during the pandemic
when a friend introduced them to
records. “Once you go analogue you
don’t go back,” laughs Sinha who
works in a Delhi-based publishing
house. Agrees Yadav, an HR man-
ager in a global firm: “The quality
of music on analogue is so superior
that I can’t bring myself to listen to
the same song on Spotify anymore.”
While vinyl records may seem
like a relic of a time gone by, they
are making a comeback and are
attracting an increasingly younger
audience. At Radio & Gramophone
House, between 25 and 30 per cent
of the customers are in their 30s or
below, says Sunil Jain, the propri-
etor. The store, which sells digital
players, Bluetooth speakers,
stereo systems and all things elec-
tronic, gets nearly 70 per cent of its
sales from records and turntables,
says Jain.
It’s the same story across the
1
GLOBALLY, THE VINYL MAR K
IN 2021 AND IS EXPECTED TO R
2027, AT A CAGR OF 8.4 PER CE
REPORT BY MARKET RESEA R
country at Mumbai’s Revolver Club,
a vinyl store established in 2017.
“There are two types of collectors:
either those who have already been
collecting… these are typically
older people with access to more
disposable income. The second is
the younger generation that is see-
ing more references to records in
pop culture. A large number of TV
shows today have a reference to a
turntable or record. Younger people
are being exposed to records, en-
couraging them to get into the hob-
by,” says 35-year-old Jude de Souza,
Founder of the Revolver Club.
Nearly 40 per cent of his clientele
is Gen Z, and he sells between 800-
1,000 records a month. “There’s
definitely a revival of the record.
We are growing nearly 100 per cent
year-on-year,” says de Souza.
Globally the vinyl market
Business Today 21 August 2022
size was $1.5 billion in 2021 and is
expected to reach $2.6 billion by
2027, at a CAGR of 8.4 per cent, as
per a report by market research
firm IMARC.
Nehal Shah, a self-confessed
vinyl lover, set up India Record
Co.—an online store for all things
analogue—in November 2020.
“The image of a vinyl collector used
to be a 50-plus man sitting with
his whisky and cigar, dropping the
needle and listening to slow jazz
music. That whole thing is chang-
ing now. The younger generation is
looking at vinyl as a medium to con-
nect with the artist and bring the
artist home. It is pure music, no ads,
no screen, no algorithms,” she says.
Nearly 45 per cent of Shah’s buyers
are below 30 and while maximum
demand comes from Bengaluru,
she also has customers in Ranchi,

2 turntable. While the sky is the limit
KET SIZE WAS $1.5 BILLION
REACH $2.6 BILLION BY
ENT, ACCORDING TO A
RCH FIRM IMARC
Raipur, Jodhpur, Bhopal, etc.
Recently the Record Room,
a vinyl bar, opened in Benga-
luru. Presented by Nakul Bhonsle,
Akshar Halgali and Karthik Chan-
drasekaran, it serves craft beer and
has a listening station to cater to
both the vinyl connoisseur and the
vinyl curious. “The three of us had
our respective affairs with vinyl
at very different times in our lives.
We were collaborating to work on
craft beer together. That’s when
we realised we had this common
love for vinyl. And we thought this
would add a very interesting layer
to the existing craft beer scene in
the city,” says Chandrasekaran,
Co-founder of Record Room. In the
past two months since they opened,
they have seen a large number of
young people come in to enjoy
the music. “We see a good range
of young people who are holding
a record for the first time in their
lives and experiencing the joy of
analogue through our listening
stations,” adds Bhonsle. The Record
Room that has a full-time vinyl
programme director has a versatile
music collection from 1940 to
2020— across genres, from rock
to pop, funk, jazz, and blues—and
organises events such as vinyl juke-
box and ‘Bring Your Own Vinyl’ to
encourage more listeners.
In Goa, Bulund Shukla, an au-
diophile opened For The Record, a
vinyl bar in Panjim in January 2020,
fashioned around the vinyl bars of
Tokyo, where the focus is on the
music and local spirits. He also has
a vinyl store which pre-pandemic
only catered to foreign tourists.
“When I started, people came only
for the curiosity factor. Now they
Business Today 21 August 2022
1. Nehal Shah of India Record Co.
says vinyl is a way of preserving an
artist’s work and keeping it alive
2. For The Record in Panjim is
fashioned on vinyl bars in Tokyo
come to buy for themselves or pick
up a gift. Thirty per cent of my
clientele that comes to the bar has
already heard music on vinyl.”
While love for vinyl is growing
in the country, it is an expensive
proposition. On an average a record
costs between `2,000-3,000. A
rare one can even go up to `10,000.
Then there is the question of the
for high-end turntables, amps and
speakers, you can get a good turn-
table for under `30,000. This can
be connected to any set of speakers
with an aux wire. “For those starting
out, I recommend a Denon or a Ma-
rantz,” says Shah. However, if you
want the real deal then you need to | 107
buy an amp that will push you back
further by around `60,000. “My ad-
vice for anyone getting into the vinyl
world is to not buy extremely fancy
gear. You can get a full music system,
that is, turntable and speakers for
within `30,000. So even if you have
a larger budget, I recommend that
you start off with a basic system and
focus on building your collection
of 50-100 LPs. That will determine
if the hobby is going to stay for the
long term or not,” says de Souza. He
further adds that once you know
you are in it for the long term, invest
around `2 lakh for a good system
that will last you a lifetime. “The
stereo system tech doesn’t change.”
“It’s an expensive hobby but a
very satisfying one,” says Aneesh
Bhasin, Co-founder of artisanal
tonic water Svami who has around
100 records. “Hearing it on the
vinyl is the closest to hearing some-
one live. Some albums just sound
spectacular on vinyl compared to
any other medium.”
@smitabw
 The Best Advice I Ever Got
SEBI JOSEPH PRESIDENT OTIS INDIA

Otis India is the Indian arm of the global elevator and escalator manufacturer and services brand

What was the problem you were grappling

with?
Otis India installed the first elevator in the coun-
try in 1892, but by the late 1990s, it was losing its
edge. At the same time competition had gained
considerable momentum. We even made losses
in 2011. All arenas of operations were under stress
and employees were demoralised.

Who did you approach for advice?

I had discussions with my leadership team who
gave me the various dimensions we needed to
solve the problem together. I continued to lean
on a distillate of previous and current advice from
my family, bosses as well as ancient scriptures
and learnings from spiritual and management
gurus. I also turned to lessons from my previous
assignments.

108 | What was the advice you received?

The strength of any business is people power.
Employees have emotions and while leaders must
have empathy, we also need to weave in objectiv-
ity in decision-making without giving in to emo-
tions. I also gleaned that one will not always have
the best person for every job, and it is the craft of
the leader to help employees push the limits and
enable them reach their fullest potential.

How effective was it in resolving the

problem?
We looked deep inside, wide outside and came up
with our vision: UDAAN—a flight into a brighter
future—setting the path for an engaged, dynamic
and customer-focussed culture within the organ-
isation. We began working from the ground up;
strategies were re-visited, business models were
revised, and new products were introduced. We
regained lost ground, improved employee satisfac-
tion, share of segment and overall financial perfor-

‘The strength of
mance and began winning prestigious orders.

—VIDYA S.

any business is Vol. 31, No. 17 for the fortnight

August 8, 2022 to August 21, 2022. Released

people power’ on August 8, 2022.

Total number of pages 110 (including cover)

Business Today 21 August 2022