Should We Blame Immigration For Canada's Economic Woes

Should we blame
immigration for
Canada’s economic
woes?
Canada might be headed towards a recession and people are

blaming immigration policies.
So in today’s Finshots, we explain why Canada might be finally

putting a squeeze on its immigration policies.
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The Story
A decade or so ago, Canada realized that it was facing a double
whammy.
Its economic growth was anaemic. And some people blamed it

on a lack of competitiveness. The country was quite dependent
on its natural resources — stuff such as gas and uranium that
it didn’t focus on innovation. For instance, ‘high-tech’ exports of
computers and drugs were only 4% of exports for Canada. But
for other members of the Organisation for Economic Co-
operation and Development (OECD), it was nearly double that.
Another problem was that Canada’s demographic dividend was

waning. Or put another way, the ratio of senior citizens who
couldn’t contribute to the workforce was rising and it would
hurt productivity. While there were 7 workers to 1 senior in the
1970s, that number had fallen to 3 workers to 1 senior.
So when Justin Trudeau came into power in 2015, his idea was
to add an artificial sweetener to growth — immigration. He
felt that if you expand the population and workforce, it
increases the potential growth rate.
How’s that, you ask?
Well, for starters think of the potential growth rate as how much
the economy can grow without adding to inflation. And if you
want to drive growth you need three basic ingredients —
capital, productivity, and labour.
And here’s how the Deputy Governor of the Bank of Canada

explained this last month:
Every year during the holidays, my brother makes tourtière [A

French-Canadian meat pie] to give to his friends and family.
Think about potential output as the number of tourtières my
brother can make in a day. If he wants to make more people
happy, he needs to be able to make more tourtières than he
does now.
He can boost his tourtière output — or increase

potential — in three ways:
• through capital — he could buy a second, bigger stock pot

to make more of his meat filling;
• through productivity — he could rearrange part of his
kitchen and set it up like a production line to assemble the
tourtières more quickly; or
• through labour supply — he could get his kids to help out.
The kids in this analogy are the immigrants. They come in and
help make more of these meat pies and it boosts economic
output without adding to inflation.
And like we said, Canada’s demographics weren’t looking good.

1 in 5 Canadians were close to retirement. That’s a problem
because it could result in a shortage of workers for critical tasks.
Also, the dependency ratio or the number of people who rely on
the working population will rise. It could result in financial
strain on the economy.
So Canada needed outsiders to give a jolt of fresh energy. And it

worked. The economic growth jumped and started to keep pace
with its big neighbour, the US.
But what about the impact of all these immigrants on the

inflation then?
Well, it all depends on the type of immigrants coming into the

country and which sectors they end up working in. For instance,
let’s say that a fair portion of the immigrants are lower-skilled
workers who end up in manufacturing plants. The supply of
labour at a lower cost could be then passed on as lower prices
for the goods being made.
Also, it looks like immigrants are more sensitive to price

fluctuations too. If retailers increase prices, immigrants cut
back on consumption quite significantly. So in order to benefit
from more sales, retailers often end up keeping prices lower just
to attract immigrants too.
Then there’s the matter that many immigrants end up moving
to the country to save up and send money back home to family.
As a consequence, these folks spend less than the average
Canadian.
And when the Canadian central bank put all this into
perspective, they found that the ‘newcomers’ — that’s how
they referred to immigrants — have less than a 0.1% impact
on inflation.
So yeah, the idea seemed to work. And immigration turned out

to be quite a boon to the economy.
But wait…this growth was hiding two things. Two things that
are making Canadians quite unhappy now.
For starters, the International Monetary Fund (IMF) pointed

out that the growth didn’t necessarily improve the living
standards of the average Canadian. They said that since 2016,
the GDP per capita had grown by only 2.4%. In comparison, the
US saw a rise of 11.7%.
So the benefits of these new policies or immigration didn’t really

trickle down to the masses. Or as economist David Rosenberg
put it, “You can create this mirage of economic prosperity, but
in the end that’s what it is, a mirage”.
Secondly, while immigration didn’t affect broader inflation, it

might have decimated the housing market.
See, irrespective of the kind of immigrant moving to Canada,
they need housing. And the issue here is that Canada hasn’t
been able to keep pace with building new homes. The demand
for homes is far outstripping its supply.
The end result?
The vacancy rates — or the units available — collapsed.

From over 7% in 2015 to a little under 4% today. In fact, it’s at a
historic low right now with everyone vying for a roof over their
heads.
As a consequence of this mismatch, rents are shooting up too.

In fact, rental inflation is at a four-decade high.
Now let’s say someone had enough of these exorbitant rents.

They decide that buying a house is better because that way at
least they’ll have an asset in their hands. Well, without enough
new housing to go around, things are even more dire for buyers.
Canada’s price-to-income ratio or how much homes typically
cost when compared to average income is at whopping 9.6
times. For context, it’s at 4.2 times in the US.
So yeah, you can see why Canadians might be inclined to blame

immigration for all its woes. Even if it’s not the entire cause.
So what can the country do now?
Well, for starters, they need to urgently fix the housing issue
urgently. See, while Canada does have an immigration policy to
welcome qualified construction workers, it hasn’t moved the
needle by much. Only 0.1% of annual Permanent Residence
(PR) permits were issued to this segment. So they need more
people who can help boost this construction work now.
But more than anything, Canadians might need to realize that

it’s not immigration that’s the problem. It’s probably the shaky
corporate foundations that don’t encourage innovation. Canada
just needs to look at its neighbour, the US, again for this —
immigrants are 80% likelier than native-born folk to launch a
company. And maybe that’s the kind of competitive spirit
Canada needs to breed if it wants sustainable growth.
Until then…
.
Is Aladdin Jio’s
secret weapon to
disrupt mutual
funds?
In today’s Finshots, we tell you about why everyone believes

that a world-famous tech tool will help Jio make inroads into
the Indian mutual fund industry.

you can just go ahead and read the story
The Story
Mukesh Ambani’s foray into mutual funds business is now
official. A few months ago Reliance Jio announced a partnership
with global asset management company BlackRock. And last
week, the duo finally asked SEBI for permission to disrupt the
industry.
Okay. We say disrupt because that’s what everyone believes is

going to happen. Ever since Reliance set the cat amongst the
pigeons in the telecom industry, the base expectation is that
every industry Reliance wades into will see a mammoth change.
And right now, Jio has the might of the Reliance distribution
network — 450 million telecom users and the physical
presence of over 18,000 stores in the Reliance Retail umbrella.
So will it happen this time?
Well, we don’t know. But it’s not going to be easy.

For starters, there are around 45 rivals already. The ones who’ve
been around for a while have their ‘star’ fund managers who do
their in-depth research before deciding which stocks to buy and
sell. They’re the ones who already have a long track record to
boast of. People will look at the past performance and make
their choices. So if Jio wants to avoid that trap, it’ll have to pull
a rabbit out of the hat and snag someone who’s already a
stalwart in the industry — back in September, there were
rumours that Nilesh Shah, the MD of Kotak Mutual Fund, was
jumping ship to Jio. And that got people excited. Eventually, he
had to quash the rumour, but that’s the kind of person Jio might
need at the top. Otherwise, it’ll take some work to convince
people about Jio’s potential.
Secondly, playing a price game is hard. If Jio could offer ultra-

cheap bundles to lure telecom subscribers, that wouldn’t work
out the same way in the mutual fund world. There are plenty of
low-cost funds already swarming the market and Jio will be just
another one in the pack. Also, they can’t offer freebies or run big
promotions either to entice investors because the market
regulator SEBI frowns upon all that. Or as journalist Debashis
Basu put it, “no one can throw money and buy loyalty.”
So yeah, disruption seems to be a far dream at the moment.
But wait... maybe, just maybe, Reliance could have something

up its sleeve — the partnership with BlackRock could give it
access to the world’s most sophisticated portfolio management
tool. We’re talking about Aladdin, a neat acronym for ‘Asset,
Liability, Debt and Derivative Investment Network’.
See, back in the late 1980s, Larry Fink was a young 30-
something Wall Street banker who was tasting sweet success.
He was the toast of the industry and made millions of dollars for
the investment bank he worked at. But soon, some of his trades
went sour. With his magic dimming, the bank shunted him to
less glamorous positions. But Fink blamed the fiasco on the lack
of a proper risk and portfolio tool.
So he decided to set up his own venture along with a few other

partners. In 1988, BlackRock was born in a tiny one room
apartment in New York. And the focus was simple — use
tech to be the best portfolio manager ever.
And initially, they dabbled in the bond market. They vacuumed

millions of data points so that the tech could study every minute
movement in prices; analyze how random events affected bonds
too. But then, in 2006, it added stocks and the European
markets to its kitty — BlackRock bought Merill Lynch. And 3
years later, it ventured into getting a data foothold in the
Exchange Traded Fund (ETF) market by buying a unit of
Barclays.
The world had become Aladdin’s oyster. No one else had such a
powerful tool.
And to put this in perspective, some people call Aladdin

BlackRock’s ‘central nervous system’. Or put another way,
Rick Rieder, CIO of BlackRock’s $1.7 trillion fixed-income

business, uses it to track and analyse the risks embedded in his
thousands of complex holdings. He loads his $31 billion
Strategic Income Opportunities Fund to show how the
portfolio will react to different market environments. A
scenario called “Eurozone Breakup” will cost Strategic Income
79 basis points of performance relative to Rieder’s targets,
Aladdin calculates, displaying asset-by-asset and risk-by-risk
where the impact is acute. “China Credit Crunch” would be
twice as painful. Strategic Income’s biggest potential risk?
“Spring 2013”, a repeat of the taper tantrum, when the Federal
Reserve signalled it would unwind its stimulus efforts, causing
bond yields to surge.
Now that’s just analyzing the risks embedded in the portfolio.
But it can even tap into its billions of data points to tell a fund
manager what action to take when an adverse event shocks
stock markets. For instance, say there’s any Chinese incursion
into India’s borders and India retaliates. Aladdin could point
out to the fund manager and say — “Look, these stocks in
your portfolio are now under threat. If you don’t want to
underperform, load up on these safe stocks, or buy these
specific government bonds.”
Of course, it’s up to the fund manager to decide whether they

should execute this call. But you’d imagine it’s tough for a
human to ignore a computer that seemingly has a treasure trove
of historic data points to justify a recommendation, no?
I mean, the US Federal Reserve, the European Central Bank,

and others have all turned to Aladdin’s prowess when financial
markets have been hit. They wanted answers from what’s touted
to be the world’s best portfolio tool.
So yeah, now you see why everyone thinks Aladdin could be a
game changer.
But there’s one thing you must know about this tech.
BlackRock actually rents out this software to other financial

companies in the world. So it's not like other fund houses can't
get their hands on it.
Also, this isn’t BlackRock’s first rodeo in India. It partnered

with the DSP Group for over a decade. You’d think Aladdin
would’ve catapulted DSP to the top then. But that didn’t
happen. So would it be different for Reliance?
These are interesting times for sure.
Until then…
.
Why is everyone
talking about
Bitcoin ETFs?
In today’s Finshots, we oversimplify Bitcoin ETFs and tell you

why everyone’s talking about them.

The Story
In December 2023 Bitcoin's price rallied to nearly $45,000 a
pop. That’s a 170% rise over its value at the beginning of that
year. And just in case you didn’t know, Bitcoin prices had
sharply fallen in 2022, with many predicting that it would never
get back to these levels again. Courtesy, the collapse of crypto
exchange platform FTX and a crisis in the US banking system.
So this sudden price rise is something that crypto enthusiasts
are celebrating.
But why did Bitcoin prices shoot up, you ask?
Well, one good reason was hope. Bitcoin investors hoped that
the US Securities and Exchange Commission (SEC) would
approve something called a Bitcoin Spot ETF. Okay, we know
that sounds confusing or rather scary. Most of us might not
even understand how Bitcoins work. So the term Bitcoin Spot
ETF could seem gibberish.
But the fun part is that these ETFs help exactly the kind of
people who are new to Bitcoin investments or consider it risky
to directly invest in it. Here’s what we mean. See, Bitcoins are
invisible currencies. They’re created or minted by computers
that validate a set of transactions happening on a network called
a blockchain. Now, there are only 21 million Bitcoins which
could be fully mined by the year 2140. So they’re limited in a
way. Add to that the fact that they’re not regulated by any kind
of central bank or authority, and you’ll understand why Bitcoin
prices can be extremely volatile. They could spiral up or down
based on even a simple social media rumour. And that means
investing in it is a risky business.
Enter Bitcoin ETFs. ETF stands for Exchange Traded Fund. And
a bitcoin ETF is a fund that invests in or buys Bitcoins. These
funds get listed on formal stock exchanges and can be traded.
Investors can buy or sell them like they do with stocks. So when
Bitcoin prices rise or fall, the prices of these ETFs move in
tandem too.
Now, we know what you’re thinking. Why would someone who’s

worried about Bitcoin’s riskiness even bother about investing in
an ETF that tracks its prices?
It’s simple really. If you own a Bitcoin you have to store it in a

wallet of sorts. You have to make sure that this wallet is secure,
so digital thieves don’t steal your Bitcoins. And that means
remembering a complex password and keeping that password
safe too! On top of that, you have to worry about the tax rules
your profits will attract in case you ever choose to sell your
Bitcoins. It’s a lot of hard work. Bitcoin ETFs on the other hand
give you exposure to Bitcoins without having to actually invest
in them.
But here’s a little twist to the hopeful story of Bitcoin ETFs. This
week Bitcoin shed nearly 10% of its rallying price simply
because a financial services firm called Matrixport spread fear
that the Bitcoin ETF may never be a reality. And its report may
have some substance. Over a dozen companies including
Grayscale Investments, BlackRock, Invesco, ARK Investments
and others have applied to the US SEC to get their Bitcoin ETFs
approved. But the SEC hasn’t been keen about giving them a go-
ahead. It has rejected multiple applications to launch Bitcoin
Spot ETFs in recent years, starting with Winklevoss Bitcoin
Trust in 2013. Its reason?
It believes that the prices of these ETFs could be manipulated.

You see, a Bitcoin ETF derives its price from Bitcoins itself. And
if they start trading on unregulated platforms it could be as
risky as investing in the real thing. Moreover, these ETFs
actually hold Bitcoins. So if cybercriminals steal those or even
worse, create spoofs of the real Bitcoin it could wreak havoc for
these ETFs and their prices. It could shake investors’ confidence
who were risk averse in the first place.
This was also the reason why the SEC rejected an earlier
application by Grayscale for Bitcoin Spot ETF in 2022. But
Grayscale didn’t sit quietly. It appealed to the Court.
Because here’s the thing. Bitcoin ETFs aren’t new. In June 2023
the SEC allowed something called a Bitcoin Futures ETF. These
are quite different from Bitcoin Spot ETFs which folks like
BlackRock and Grayscale are vying for. Sure, they’re derivatives.
But they don’t derive their prices directly from Bitcoin. Instead,
they depend on legal contracts between investors that give them
the right to buy or sell Bitcoins sometime in the future. These
contracts expire every month and they’re also regulated by the
Commodity Futures Trading Commission. So manipulating
them could be more challenging than manipulating Bitcoin Spot
ETFs. That’s probably why the SEC approved them.
But that may have been a grave mistake simply because here’s
what the court told the SEC when it heard Grayscale’s case
“Hey, you approved a futures-based bitcoin product. The
futures and the spot market are “like” products. If you approve
one, you have to approve the other.”
So the SEC had to agree to review Grayscale’s application. And

the Bitcoin fraternity has been hopeful ever since. But we’ll only
know if Bitcoin Spot ETFs will even be a real thing by January
10, the deadline for the SEC to approve or reject it altogether.
Which way will its decision sway? We’ll only have to wait and
see.
Until then…
.
How do Japan's
businesses survive
disasters?
In today’s Finshots, we tell you how Japan’s businesses have

continued to survive for ages despite frequent disasters.

The Story
If you glanced at the morning paper or scoured through internet
headlines you probably know that Japan is in distress. Yet
again. The New Year didn’t begin very well in the country of the
rising sun. Courtesy, a major earthquake that struck central
Japan. Thousands of people have been displaced and the death
toll slowly seems to be picking up.
But this isn’t new for Japan since it’s among the most
seismically active countries in the world. It regularly stays in the
news for damage caused by disasters so much so that quakes
have become a part of people’s lives. In fact, Japan has about
1,500 earthquakes every year that people can feel. And some
kind of seismic activity is recorded about once every five
minutes. So after a point people get used to them, as the BBC
puts it.
Yet, Japan is the fourth largest economy in the world. And it has
had one of the most impressive per capita GDP growth rates
between 2012 and 2019, second to just the US during the same
time. And mind you, these were the years just following the
Great East Japan Earthquake that killed nearly 20,000 people
in 2011.
So here’s something to ponder about. How does Japan’s quake-
prone economy bounce back every time?
Well, you could say that Abenomics has had a role to play.
When Japan was hit by a crisis nearly 13 years ago, its former
Prime Minister Late Shinzo Abe stepped in to contain the
damage. He believed that Japan could make progress if he could
get the multiple levers that drove its economy to work together.
He visualised renewed Fiscal Policy, Monetary Policy and
Structural Reforms, and got them to work in unison, to achieve
just one thing — Growth. Interest rates on debt were
lowered to help people and businesses get better access to
credit. And it materialised into higher spending, increased
demand and a better economic picture.
But that’s just on the broader side of things. Japan’s disasters

and crises have taught it to always be on its toes. The country
has invested heavily in disaster prevention measures and early
warning systems. Since 1980, its government has poured in
about $6.4 billion on average every year in disaster prevention
measures including earthquake insurance for businesses.
Besides, a lot of money also goes into revival and support

measures. To begin with, the Japanese government goes beyond
its means to cover most of the costs required to rebuild
businesses in disaster-affected areas in the form of tax
measures.
See, when a region is affected by a natural disaster, businesses

find it hard to expand in that area again. So incentives like
special treatment for lost assets in the form of income and local
tax deductions can help. Areas affected by parallel calamities,
say a tsunami get real estate tax exemptions. So if businesses
were to invest in these affected areas to build their office spaces
and other infrastructure they get tax incentives and financial
subsidies.
Small and medium enterprises enjoy these benefits too. So

companies never shy away from springing back to normalcy.
But here’s something people may not often talk about when it
comes to Japan’s business resilience. Businesses here aren’t just
survivors. They’re also entities that last really really long.
You see, more than 52,000 companies in Japan are over a

century old. They’re also called shinise which translates into old
shops in Japanese. For more context, the country houses the
world’s oldest hotel Nishiyama Onsen Keiunkan which opened
in the year 705. It also boasts the world’s oldest tea house Tsuen
Tea, which poured its first brew in Tokyo in 1160. And beat all of
that, the world’s oldest company Kongō Gumi also survives in
Japan. It’s a construction company that has been surviving for
over 1,400 years and counting.
And these businesses probably didn’t have the kind of disaster

preparedness that modern-day governments brought about.
Then how did they even survive?
Well, the secret might lie in the fact that most of these long-
surviving businesses have thought beyond the sole objective of
generating profits.
A beautiful example of this could be Ichiwa, a small mochi
(snack) shop founded by a Japanese family in the year 1000.
Even today it serves toasted mochi — the only item on the menu
— to visitors of the shrine next to which it runs its business. It
obviously had multiple opportunities to expand its business. It
could sell more stuff like tea or cakes. But Ichiwa never even
thought of them. Because making a quick buck was never the
goal. Rather, it just stuck to serving customers who stopped by
when they visited the shrine with one simple snack. In short, it
prioritised long-term sustainability over short-term profits.
And here’s something a study by the Bank of South Korea found

out about this practice. Most Japanese companies that focused
on their core businesses also rebuilt their businesses easily
when disasters struck.
And that’s not the only secret sauce. Japanese businesses also
tend to invest in rebuilding the community in turbulent times.
It’s something they choose above minimising losses during a
disaster.
When the 2011 disaster hit Japan, one of its popular

convenience stores Lawson decided to deliver nearly 200,000
meals to victims. It could have just shut down and kept its
employees safe while cutting costs. But that’s not what it did. It
chose to help the community without considering how much it
affected its already struggling business. The end result was that
people remembered how the company helped them in times of
crisis. And when the chain opened its store in a disaster-affected
area just 11 days later, customers flocked to boost its business.
Many other popular and young companies like Yakult and
Uniqlo also did what Lawson did. And that could probably
create a lasting impression on customers, giving new-age
companies the shinese label in the future too.
That’s probably why Japan’s businesses are also a cut above the
rest even when their growth curve is disrupted by disasters time
and again.
Time for global businesses to take notes from Japan? Perhaps.
Until next time…
.
Why can't
continents be
single markets like
the EU?
Jacques Delors, former president of the European Commission

passed away last week. He was considered one of the reasons
why the Eurozone got a single currency and a leader who
paved the way for Europe’s free trade market or the EU
(European Union).
That got us thinking about why other economies haven’t had
single markets that stand out like the EU. So in today’s
Finshots, we try to answer just that.
But before we begin, if you're someone who loves to keep tabs

on what's happening in the world of business and finance, then
hit subscribe if you haven't already. If you’re already a
subscriber or you’re reading this on the app, you can just go
ahead and read the story.
The Story
When the Second World War came to an end in 1945, it left a
large part of the European economy in ravages. There was
severe inflation. By 1948, wholesale prices were 200% higher in
Austria and 1,820% higher in France than they had been before
the war. The French government devalued the Franc by 80%,
making a 5,000 French Franc note practically worthless. For
context, you could buy at least 1,500 grams of gold with that
kind of money in the early 1900s. Countries like Germany were
staring at a complete collapse of their monetary system. The
barter system of buying goods with goods was back. And people
often used cigarettes as money.
The European economy naturally needed a pick-me-up. And it

was in the 1950s that Belgium, France, Luxembourg, Germany,
Italy and the Netherlands began economically cooperating with
each other. They laid the foundation for a free economy. And
soon, more countries were attracted to the idea of a single
market. This means that countries within this market could
freely trade with each other. Most of them used the Euro as
their common currency. Even people could move across most
borders for work or travel without restrictions.
If you were to rank the EU on the list of top global economies

today, it would be at number 3 and easily worth $16 trillion. It’s
27 countries strong and goods, services and money can move
freely across most of these countries. There’s more choice, so
more competition and fewer rules for other countries to comply
with. So if countries outside the EU want to sell to an EU
country, they just have to adhere to one standard rather than 27
different ones.
Okay. So if a single market can transform economies so much,

then why don’t we see more of such cooperation among other
countries, you ask?
Well, we do have a few countries that are trying to emulate the

EU but with little success.
There’s the North American Free Trade Agreement (NAFTA)

which almost failed. In 1994, the US, Canada and Mexico signed
a pact to eliminate trade barriers. But a 29% drop in
manufacturing employment in the US between 1993 and 2016
meant that it partly blamed the agreement for its job losses. The
theory is that these jobs may have gone to folks from Mexico,
hitting the brakes on NAFTA in 2018.
South Asia has a similar story too. In 2006, 8 South Asian
countries namely Afghanistan, Bangladesh, Bhutan, India,
Maldives, Nepal, Pakistan and Sri Lanka entered into a free
trade arrangement called the SAFTA (South Asian Free Trade
Area). Their goal was to liberalise trade among each other. But
it didn't move the needle much.
To put things into perspective, even a decade after this

agreement, trade amongst the SAFTA countries remained
insignificant at about 3–6% of global trade. On the flip side, its
Southeast Asian counterparts like Singapore, Vietnam and
others which had a similar trade agreement called the ASEAN
(Association of Southeast Asian Nations) saw tremendous
growth. By 2017, their inter-regional trade progressed to about
25% of global trade on average.
So why do you think NAFTA and SAFTA almost failed?
You see, being part of a single market needs one simple trigger
― unity. And it all depends on how much countries can trust
one another to promote each other’s economies. And both these
agreements may have lacked that. For SAFTA, tariffs were a
dampener of sorts too. Trade was pulled back by something
called a sensitive list. There were hundreds of products in this
list that couldn’t be traded between these countries without
additional tariffs. Countries failed to lower taxes while trading
with each other. So imports and exports naturally stagnated.
But let’s just keep that aside for a bit and look at what would
happen if all South Asian countries were a single market. Well,
unless you’ve been living under a rock you know that our
neighbours Pakistan and Sri Lanka have struggled to tame
inflation levels in the recent past. And a unified market may
have helped them here.
We could simply look at the UK to understand this. In 2020, the

UK officially severed ties with the EU. This may have been
responsible for about a third of UK food price inflation since
2019, adding nearly $9 billion to Britain’s grocery bill. And
that’s simply because the country had to cope with additional
checks to keep an eye on what was entering or leaving its
borders. In the South Asian context, unrestricted movement of
goods and services could help flourishing economies like India
share their resources with countries like Pakistan or Sri Lanka
without too much red tape.
But here’s the thing. The UK remained a part of the EU for

nearly half a century. And it could, because it shared a common
culture with the rest of the lot. But single markets could be hard
to build when there’s a cultural and political divide. It just
makes communication difficult and increases conflicts. And
with SAFTA, you know that’s a problem.
Countries also lose their individual power to negotiate with

countries outside of the single market that they’re part of. For
instance, India intends to reduce its dependence on China. But
maybe Sri Lanka or Pakistan cannot. In a scenario like that, a
single market could be a distant dream, no?
That’s pretty much why economies might still be struggling to

achieve significant success in their hopes for a single market.
But there’s still hope for Africa. The continent has been trying to
create a $3 trillion borderless market to reverse its poverty and
inequality trends with AfCFTA (African Continental Free Trade
Area). Its bounty of products like coffee, sugar and dry fruits
could help its nations trade as a single market with others. But
progress has been slow and it could take a couple of decades for
the continent to take the shape of a single market. So yeah, if
and when that happens, maybe we could see how other aspiring
economies could borrow a cent from its success story too.
Until then…
.
What the heck is
eSoil?
In today’s Finshots, we tell you about electronic soil and why it

might be a boon for food security.


The Story
What if we tell you that stimulating a plant’s roots electrically
can help it grow faster?
That’s what scientists in Sweden discovered anyway. All you

need is water, nutrients, and something called a substrate.
Think of it as a surface that roots can attach to. Then you pass
the electric current through the substrate and voila, the plant
blossoms. In fact, these scientists found that barley seedlings
grew 50% faster in 15 days.
And since there’s no real soil involved in this, they’re calling it

eSoil.
But how did they even come up with such a peculiar idea, you
ask?
Well, it’s not a new idea really. It dates back to at least 600
years before the common era. Some wise folks observed that
despite the dry weather along the Euphrates River, lush green
gardens grew up the walls of an ancient city called Babylon.
We’re talking about the Hanging Gardens of Babylon. The
plants here didn’t have soil. But their roots absorbed nutrients
from the river nearby ― similar to a pulley system of drawing
water from a well.
And many centuries later, precisely in 1937 an American

scientist Dr. William Frederick Gericke figured out that this
water-based farming strategy worked wonders. It just needed
the addition of some chemicals to help it along. This way, plant
roots could utilise nutrients more efficiently than when grown
in soil. And he coined the term hydroponics for this form of
agriculture — part hydro which was Greek for water, and ponos
which meant labour.
After all these years, you’d imagine the world of hydronics was
due for some innovation, no? And that’s probably come in the
form of passing the electric current through a suitable substrate
material.
But why’s this a big deal?
You see, every year we add roughly 83 million people to the

world’s population. And that means the earth will be 10 billion
strong by 2050. So there has to be a way to feed this growing
population.
Sure, we’re trying to increase food production and improve its

global distribution by pooling resources so farmers across the
world have better access to fertilisers and new farming
techniques. But here’s the thing. All of this needs vast spaces of
agricultural land. Now, close to 40% of the global land surface is
agricultural. And we use a third of that — 1.5 billion hectares —
for crops. In case you want to picture it, that’s nearly 3 billion
football fields. Yup, quite a lot to imagine. But even that is
shrinking, thanks to the growing population. More people not
only means more food but also more infrastructure
development. So cropland naturally gets eaten up. For context,
between 1961 and 2016 the global cropland area has fallen from
about 0.45 hectares to 0.21 hectares per capita. We can’t just
wake up one day and reverse that.
Besides, food insecurity has also been on the rise since 2018
because of climate change. Global warming influences weather
patterns, causes heat waves, unseasonal rainfall and even
droughts. To make it even worse, the pandemic and the Russia-
Ukraine conflict took their toll on food production. The cost of
growing food, distributing it and feeding people shot up. This
means that over 828 million people around the world go to bed
hungry every night today.
Now while researchers constantly try to whip up new crop

varieties that are resilient to climate change, increasing food
production is still a challenge.
That’s where hydroponics could make a mark — No agricultural

lands, no fertiliser and no soil too. The much talked about
vertical farming could see a boost. Vertical farms are buildings
filled with a lot of hydroponic systems that grow crops in an
indoor, temperature-controlled environment. And it’s already
live in Dubai, a city that imports 85% of its food. The 330,000-
square-foot facility can produce over 900,000 kilos of leafy
greens annually. And these hydroponic systems need just 10%
of the amount of water that traditional field crops require
because the water is re-used easily. So in a water-scarce world,
that’s a plus.
But wait… won’t all these manmade structures require a lot of

electricity for lighting, water and air pumps and other systems
to control humidity and temperature? That's true, which is why
eSoil tries to solve these very problems.
You see, typical hydroponic systems use mineral wool as a

cultivation substrate. But making it is quite an energy-intensive
process. It’s also not biodegradable. On the other hand, eSoil
uses cellulose and another conductive material that doesn’t suck
too much energy. In fact, the researchers titled their paper - "A
low-power bioelectronic growth scaffold that enhances crop
seedling growth." Low power being the key word.
The only problem is that it's still just one paper. We don't know
if this will scale or whether other scientists can replicate this
success. It's still very very early days. Also, even if it did scale,
how will the world pool in the investments needed to further its
use. Because it’s the low-income countries like those in sub-
Saharan Africa that need this kind of stuff. How will eSoil and
hydroponics work here considering the initial investments can
be sizeable.
Well, hopefully we will figure out a way to do just that before its
too late.
Until then…
.
.
Does Tata ‘own’

Jamshedpur?
Happy New Year everyone! We hope you and your loved ones
have a fantastic 2024 filled with joy and good health.
In the first Finshots edition of the new year, we’ll tell you the
story of how Tata might once again take the keys to the city of
Jamshedpur and the concept of ‘company towns’.
But before we begin, if you're someone who loves to keep tabs

on what's happening in the world of business and finance, then
hit subscribe if you haven't already. We strip stories off the
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The Story
In 1908, the Tatas had an ambitious dream. They wanted to set
up India’s biggest steel companies. And they were out and about
looking for a spot to set it all up. They hired a geologist to find
the most conducive spot. And he came across a village called
Sakchi in the eastern part of the country. It had coal to the
north. There was iron ore to its south. And a railway line and
the port city of Calcutta (now Kolkata) were in close proximity
as well. It was the perfect choice.
So Tata decided this was where its dream would take shape.
The only problem?
It was a village. It didn’t have big city amenities. No proper

roads. No waste disposal mechanisms. No reputed hospitals.
Nothing. Why would workers and management even ponder
moving here? Even if Tata threw money at them, it wouldn’t be
an exciting proposition.
So Tata decided to do something outrageous. It decided to take

matters into its own hands and build a full-fledged town in
Sakchi!
Yup, it leased land from the government and got to work. It set
up the Tata Town Services to handle the infrastructure
needs — treating sewage waste and garbage disposal, making
roads using plastic, getting electricity in place, and even
ensuring security. It began setting up schools and established
the Tata Main Hospital (which still exists). It built parks and
sports infrastructure.
Basically, Tata did everything that you’d expect a local

government to do for a city. And Sakchi became the first
‘planned’ city in India. This simply meant that it was something
that didn’t just emerge organically as people migrated and
companies were set up, but, it was something built brick by
brick with an objective in mind.
But wait…how does Jamshedpur fit into all of this, you ask?
Well, Sakchi* is Jamshedpur. It just took a global war to change

the name.
You see, during World War I, Tata supplied a lot of steel at

cheap rates to the British Empire. And this steel went into
building railways in other parts of the world to help with
transporting troops and supplies. In fact, this was so crucial that
after the war, a British parliamentary report stated, “It would
have been impossible to carry on the campaign without the iron
and steel of India.”
So as a ‘thank you’, the British — who lorded over India

then — decided to rename the town after the founder of the
Tata Group — Jamsetji. That is how Sakchi became
Jamshedpur.
And for 100 years, Tata ran the show in Jamshedpur. It was the
only city with a population greater than 1 million people that
functioned without a municipal corporation — without the
interference of the local government. Jamshedpur was a
‘company town’.
But in 2018, it hit its first major hurdle.
A group of folks filed a Public Interest Litigation (PIL) against

Tata. The petitioners didn’t want a ‘private’ city. The basic
problem was simple — Tata concentrated its efforts on
providing amenities only in the core areas where their
employees resided. They didn’t pay as much attention to the
other parts of Jamshedpur. So the development was lopsided.
Tata didn’t seem to care about the ‘outsiders’ of Jamshedpur.
And there wasn’t any local government body who’d step up and
do the work either.
So Jamshedpur was caught in a limbo.
What was the way out then?
Well, the simplest thing to do would be to hand over the

governing rights to a local body. Set up a municipal corporation
and make the state government responsible for development.
Make it like any other town or city in the country. And that’s
what the Jharkhand government initially decided.
But you can imagine the Tata’s weren’t too happy about it.
They’d built the city from scratch nearly 100 years ago. And they
didn’t want to cede control. They said that people trusted the
city because of the Tata name — I mean it was the only city
in the state where people could, at one point, drink water
straight from their taps too.
So, there had to be an alternative arrangement. And that might

be to declare Jamshedpur as an ‘industrial town’.
What's that? you ask.
See, there is a special provision under the Indian Constitution to

enable a private entity to run a city. There will be a municipal
council, but it will include folks from the Tata Group, some
government nominees, and locals of the area. This way,
Jamshedpur could get the best of both worlds. The residents
know that Tata is unlikely to mess up the functioning of a city
named after its founder. But, the power to run the city will not
be concentrated in the hands of a few. It’s more democratic
since the locals will have a voice. And maybe the outer areas of
Jamshedpur won’t be ignored anymore.
We’ll have to wait and see how it plays out now in what is
probably India’s first and last ‘company town’.
Until then…
.
.
For Softbank-backed
Juspay, mobility is the next
UPI
By Shaswata Kundu Chaudhuri

After not going the whole hog with the UPI app BHIM—Juspay doesn’t want to lose
an opportunity in mobility
11 Jan 2024 / 14 min read

Comment
Shaswata tracks mobility, climate tech for The Ken. Starting out as a journalist in 2019, he wrote across
the beats of culture and climate for publications such as The Independent, The Caravan, Open and
Scroll.
READ SUMMARY
Juspay Technologies—the fintech credited with building India’s first

UPI app, BHIM—has silently been making inroads in the mobility
space, mainly through its Namma Yatri app for booking
autorickshaws.
And the Bengaluru-based company’s ambitions for this business are
now shifting into high gear.
“Plans are in motion to hive off the mobility unit into a separate
entity,” Shan MS, the 11-year-old company’s chief growth officer,
told The Ken over a Zoom meeting in which Magizhan Selvan, the
chief product officer, was also present—the two key people in the
new vertical.
Juspay’s mobility business has expanded to six cities in about two-

and-a-half years. The vertical contributes about 0.25% to its total
revenue, the company’s spokesperson told The Ken.
The company, backed by Japanese investment giant Softbank and last

valued at US$442 million, largely earns by selling payments products
that help merchants accept multiple payments options online. It
recorded revenues of Rs 121 crore (US$14.5 million) in the year
ended March 2022 and has so far raised $87.8 million over four
rounds.
With BHIM under its belt, Juspay had certain technological

advantages in digital payments, said a second person close to the
company. “This brought clients like [e-commerce majors] Amazon
[and] Flipkart, [fintechs] Groww [and] Cred, and [tech major] Google
to Juspay, which is now powering their UPI offerings.”
Large volumes // Juspay handles over 100 million payments daily across the four
categories of merchants, payment gateways, banks, and digital wallets and financial
networks
The company first waded into mobility in 2021, and now, it has ride-
booking apps, such as Yatri in Kochi, Yatri Sathi in Kolkata, and
Namma Yatri in Bengaluru, Tumakuru, Mysuru, and Hyderabad.
Juspay is also looking to expand to the National Capital Region and
Chennai, the second person close to the company told The Ken.
Hiving off mobility as a separate entity, according to Shan, is meant

to bring operational efficiency. “We intend to raise funds separately
[for this vertical],” he said.
At Juspay’s office in Bengaluru, the 100-strong mobility team has a

separate wing, even though it constitutes less than a tenth of the
company’s total workforce, including non-permanent employees.
The focus on mobility also comes at a time when competition in the

payments space is intensifying. Rival Paytm* has developed a new
product suite, becoming a full-stack payment-services provider like
Juspay.
Mobility is also crucial for Open Network for Digital Commerce

(ONDC)—the government-backed initiative to democratise e-
commerce—with 63% of its 5.5 million transactions in December
coming from this segment. Last month, Namma Yatri inked an open-
mobility partnership with ONDC and Google Maps to put together an
ambitious plan to include different transport segments such as cabs,
autorickshaws, metro and local trains.
So now Juspay wants to be reckoned as a mobility-solutions leader

just like it did with BHIM in the payments space. But the only
difference is that while it did not monetise BHIM, this time, it is
getting more hands-on.
By chance or choice?
While it’s unusual for a payments company to get into mobility,
Juspay’s entry in this segment happened organically, according to
Vimal Kumar, founder and chief executive of Juspay.
It started in 2019 when the company was exploring ticketing

solutions to enable digital payments for public transportation. And
more pieces fell in place as parallelly, the Beckn protocol, which
creates open, decentralised networks for economic transactions
across sectors, came into play.
“We saw the potential in an open network, a transportation switch,

and started building use cases around it—similar to how payments
have benefited from switching systems,” said Kumar, who believes
that mobility is a “population-scale problem”.
Juspay launched its first mobility offering, which was based on the
Beckn protocol, in July 2021—the Yatri app for Kochi’s cab drivers.
The app, which now includes autorickshaws, was originally run by the
Kochi Metropolitan Transport Authority. Juspay took over its
operations in September 2023.
After Yatri, which was a testing ground for the world’s first open-
mobility network, Juspay launched Namma Yatri in Bengaluru in
November 2022. Next, Kolkata got the cab-hailing app Yatri Sathi in
October 2023. Around 60% of the city’s independent taxi drivers
came on board within three months.
Building and developing mobility apps was in Juspay’s wheelhouse.

But then came the challenge of operations and people-first
marketing. The mobility vertical didn’t have experience in these key
aspects of a ride-hailing venture.
Juspay is tackling this differently from established ride-hailing

companies, according to the company spokesperson. “On marketing
and operations, we involve drivers and citizens in our open-data
initiatives. Transparency has actually reduced our marketing cost
while gaining positive word of mouth,” they said.
A sizeable chunk of India’s ride-hailing market is controlled by Uber

and Ola. But neither of them has turned a profit even after over a
decade of operations.
SEE MORE VISUAL STORIES
For Juspay, too, mobility is leading to significant cash burn, according

to at least two people close to Juspay. They and several other people
quoted in the story did not wish to be seen publicly commenting on
the company.
The cost of onboarding each driver, ranging from Rs 100–200

(US$1.2–2.4), is a big contributor, one of them said.
The Juspay spokesperson denied these figures and said that the
company largely relies on referrals and word of mouth. “Our
investment is primarily focused on community engagement rather
than traditional customer-acquisition methods.”
It’s not like the company’s core business can afford it the luxury of
investing heavily in the mobility business.
“The payments business is not very lucrative in terms of unit

economics, and the margins are thin,” said a senior finance-industry
executive. And Juspay’s recent initiatives, such as building a robust
checkout-financing product and Smartconvert—designed to improve
payment conversions—did not take off very well, they added.
Juspay, however, maintains that its payments business has been

scaling healthily. “Payments [segment] is the core focus of Juspay. It
is growing 60–70% annually, and 90% of our resources are focussed
on it,” Shan told The Ken.
UPI drives a significant chunk of Juspay’s revenue, and the company
is operationally profitable, he added. The company had posted a loss
of Rs 106 crore (US$12.7 million) in the year ended March 2022.
Losses and wins

With BHIM, Juspay says it was more focussed on building the tech
infrastructure—its core strength. This might also be why it fell short
of achieving unicorn-level status in the payments-processing
business, unlike Paytm and Phonepe.
The company didn’t have the kind of manpower and cash to run the
street-level operations to really scale up the payments-processing
business like Paytm and Phonepe did, said the finance-industry
executive.
But now, it wants to take that challenge head-on.
In mobility, the need for feet-on-the-street engagement is even

higher than in the payments business, according to Shan. So far,
Juspay has been able to onboard thousands of drivers onto the
Namma Yatri app with just a small driver operations team and a
third-party call centre.
It could operate with a small team because when it launched, the app
didn’t charge commissions on rides, further incentivising drivers to
join.
Strong support in its initial days from the Auto Rickshaw Drivers’
Union (ARDU) in Bengaluru, physical campaigning by auto drivers,
and word of mouth also boosted Namma Yatri’s popularity.
Now, Namma Yatri commands over 25% of Bengaluru’s

autorickshaw-hailing market, which was previously dominated by
Uber, Ola, and Rapido.
But monetisation plans caught up with it. So, in September 2023, it

introduced a subscription scheme where drivers either pay Rs 25
(US$0.3) per day or Rs 3.50 (US$0.04) per ride. This remains a far cry
from the roughly 20% commission per ride charged by aggregators
like Uber and Ola.
Issues over pricing, decision-making capacities, and fairness of the

subscription fee have now driven a wedge between Namma Yatri and
the 32,000-strong ARDU.
“Juspay needs to reflect on the governance of the mobility vertical

and make the corporate structure clearer to the general public,” said
Satya Arikutharam, a mobility expert and former chief technical
advisor to the Directorate of Urban Land Transport, Karnataka.
Namma Yatri is in the process of establishing a monthly paid-

engagement model with ARDU leaders Rudramurthy and
Pattabhiram as community enablers, said its spokesperson. They also
clarified that Namma Yatri has always been union-agnostic.
By stating we are union agnostic, we mean
that we don’t hold biases for specific unions
and are open to collaborating with drivers
from all unions. Our goal is to partner with any
group, including unions, that shares our vision
SHAN MS, CHIEF GROWTH OFFICER, JUSPAY
Meanwhile, Namma Yatri has been leveraging innovation to cut

costs, especially on maps and cloud—the biggest expenses—
according to Selvan.
The cost per ride for using Google Maps, according to the second
person close to the company, is as high as Rs 13 (US$0.16) per ride if
one is entirely dependent on them. For its map feature, Namma Yatri
uses Google Maps and Open Street Maps—a free and open
geographical database—depending on the use cases.
Juspay claimed product innovations brought down Namma Yatri’s

total operational costs in Bengaluru to Rs 8.6 ($0.10) per trip in
December 2023—a 96% drop from January 2023.
But the math isn’t quite painting a rosy picture—at least not yet.
Going all in
Namma Yatri, Yatri, and Yatri Sathi together have 175,000 registered
drivers, and about 80% of them are active users.
A back-of-the-envelope calculation shows that the company’s daily

subscription revenue from Bengaluru, where it has 127,000 drivers,
would be Rs 25 lakh (US$30,000) if all the active drivers opt for the
per-day subscription.
But the reality is different, according to Juspay.
The driver subscription revenue stands at about Rs 2.5 per trip

(US$0.03), and the app does a little over 100,000 rides per day, said
Shan. “Though 65,000 drivers have set up autopay, we charge drivers
only when they take two or more rides on the platform.”
As of now, Juspay’s mobility vertical has two income streams—

subscriptions from drivers in Bengaluru, Mysuru, Tumakuru and
Kochi, and a fee per trip in Kolkata, paid by the West Bengal
government.
Besides, for ONDC—on which Yatri and Namma Yatri were the initial
mobility apps to go live—companies like Juspay are important in the
early stages to scale up the mobility vertical, said an executive who
was associated with an ONDC-linked e-commerce platform. “[They
would] make it well-known enough for the big players to come in.
And for Juspay, it would lose out on a huge potential for growth if it is
not part of the network.”
ONDC declined to comment on a detailed questionnaire sent by The

Ken.
While ONDC appears to be critical to Juspay’s mobility ambitions, a

key ingredient is missing.
There’s a lack of interoperability between these multiple mobility

apps of Juspay, which goes against the concept of open mobility,
noted Arikutharam. “ONDC-backed apps like Namma Yatri, Yatri
Sathi, and Yatri have their own specific customer apps. You have to
download city-specific apps to use them in that particular city.”
Meanwhile, aggregators like Uber, Ola, and Rapido have a single

customer application that one can use across cities.
Over the past decade, these ride-hailing aggregators’ business model

of incentivising drivers, controlling pricing mechanisms and vehicle
supply has allowed them to deliver consistent service, and build a
strong customer base.
Yet, as Namma Yatri has shown in Bengaluru, their dominance isn’t

set in stone. And there’s every sign Juspay doesn’t want Namma Yatri
and its other mobility apps to be the missed opportunity that was
BHIM.
*Paytm’s founder Vijay Shekhar Sharma is an investor in The Ken
The article was corrected to remove a source-based assertion that

Juspay made 10% of revenue from mobility. Post-publication, Juspay
clarified that its share of revenue from mobility was 0.25%.
An Indian GenAI startup

raised $41M. Now,
everyone wants to build
LLMs
By Abhirami G
GenAI startups building large language models saw investments pour in over the past
year, with six-month-old Sarvam securing support from an early OpenAI backer. But
what’s the endgame?

10 Comments
Abhirami is a graduate of English Studies from IIT Madras. That might sound like a contradiction - except
it's a reflection of her interest in technology and the place it occupies in society.
READ SUMMARY
For over a year, the tech world turned OpenAI’s ChatGPT into its
sandbox. But the time for experimentation with the generative AI
(GenAI)-powered humanlike chats is over.
Countries are in a race to create cutting-edge large language models

(LLMs)—sophisticated computer programmes capable of generating
fresh content, be it images, text, or music, using learned patterns and
data. Over in India, businesses are actively exploring GenAI’s
integration into their operations.
Naturally, some Indian startups are diving deep into the GenAI pool,
building bespoke LLMs for chatbots and other purposes—and setting
off investors’ enthusiasm for all manner of projects.
Take Sarvam AI, a six-month-old startup that just snagged $41 million
in funding—the highest ever for a GenAI company in India—claiming
to build AI models tailor-made for Indians.
The frenzy is palpable. The burning question, however, is: why is
everyone suddenly so serious about putting the tech into their
processes, and with all the flair, can they really nail it? Especially
since “ clueless” is how some described the general business
response to GenAI in India a few months ago. (Also, didn’t OpenAI’s
Sam Altman once say it’s “totally hopeless to compete with us
[OpenAI] on training foundation models?”)
Yet, per the estimates of tech-industry body Nasscom, startups in this

space pulled in $700 million in the last three years. What gives? Data
with an ‘Indian context’ is the silver lining that developers see: data
that is untouched by the masses of other model builders in the global
market.
Vinod Khosla of Khosla Ventures—an investor in both Sarvam,

OpenAI and recently, ex-Twitter CEO Parag Agrawal’s AI startup—said
during the funding round in December 2023 that many countries are
likely to embark on sovereign initiatives to develop GenAI models
due to their “strategic significance”.
Soon, Sarvam launched the first model from its OpenHathi series, an
LLM that is bilingual (Hindi-English) and built on the Meta-supported
open-source Llama-2. (Its website literally shows an AI-generated
image of a hathi (elephant) sitting atop a llama).
Around the same time, Bhavish Aggarwal—the founder of Ola Cabs—

jumped on the LLM ride with a brand-new startup, Krutrim. With its
claim of being “India’s first multilingual LLM”, it reportedly managed
to raise $24 million in debt funds and is expected to be released
soon.
Then, there are other players in the wings, such as KissanAI and
Corover, each crafting their own language models over the past year.
KissanAI, with a history in agritech since 2019, has been building
language models designed to benefit farmers directly. Corover, which
has been in the chatbot space since 2016, launched BharatGPT—a
model crafted to understand the nuances of Indian languages—
within two months of ChatGPT’s entry.
But in this global AI marathon, Microsoft-backed OpenAI and Google-

Amazon-backed Anthropic are already leading—by a margin—and
Indian startups are only hustling for funding crumbs.
“Currently, I don’t think anyone in India has the capacity to build a

full-fledged foundation model ,” said KissanAI’s founder, Pratik Desai.
“When Meta spends $25 million to train its model [Llama and Llama-
2], it’s no big deal because it has that level of capital. But it’s
unimaginable for an Indian startup.”
Desai also noted that most LLMs—in India and globally—are not
developed from the ground up; instead, they are derivative models
relying heavily on existing open-source models such as Llama-2 and
models developed by Paris-based Mistral AI (founded by ex-
employees of Meta and Google).
Building from scratch is a race you cannot win.
When there are models that can perform
much better than what you build, and you can
use them at a lesser cost, why pour in
resources?
PRATIK DESAI, KISSAN AI’S FOUNDER
So, in the looming shadow of the tech titans, these Indian startups
are either the hunted or the hunters.
Indian model builders, according to at least seven people working in

the GenAI sector, are focussing on areas where they add some value
to the ecosystem. And many of these firms, some claimed, are tight-
lipped about their clientele: they are keeping their plans for the next
three to six months tightly under wraps. Ola, for instance, declined to
divulge more about Krutrim beyond the launch details.
Here’s the thing, though: some of these upstarts may be plotting only
to get acquired, while others take bets toward revenue generation to
last longer.
Going beyond code and into commerce

Not long ago, in November, software giant Adobe acquired
Rephrase.ai, a Bengaluru-based company that runs a text-to-video
generation platform, with plans to infuse GenAI into its Creative
Cloud suite. On the other hand, GenAI’s revenue prospects have been
sparking investor fervour for companies like Sarvam.
“I’m not sure how many of those companies [like Sarvam] will
emerge from India [in the short term]. But from an IP [intellectual
property] perspective, [these] companies are very valuable,” said
Dhanush Ram, an investment manager at VC fund Speciale Invest.
Such companies have two options: either develop new features and
achieve a valuation of $2–3 billion or let a major company from
outside India acquire them, he added.
GenAI companies are lucrative because [they]

can get higher ticket sizes for each [Indian and
international] client, and they’re locked in for
longer. It’s a $100,000–200,000 ticket size for
2–3 years
DHANUSH RAM, INVESTMENT MANAGER, SPECIALE INVEST
Here’s how Ram broke down GenAI efforts into three distinct types:
 Models that serve as the fundamental framework for GenAI

tools. OpenAI and Mistral are the global leaders in this area.
 Applications that use GenAI to function, such as chatbots. For
example, Character.ai is a chatbot that lets users create fictional
characters and talk to them.
 Middleware and developer tools that streamline AI-
development-related tasks. For example, the Indian startup
Portkey.ai helps companies integrate LLM APIs into their
applications. In 2024, according to Ram, a number of Indian
companies will be focussing on this area.
“What we’re seeing is mostly the chat side of things since that’s what
most companies are focussing on. But [GenAI] is essentially a general
purpose technology, and many of its use cases are yet to be
discovered,” claimed Pratyush Kumar, Sarvam’s co-founder and
faculty member at IIT Madras.
Hitch a ride // In 2023, e-commerce leaders such as Swiggy, Zomato, and Myntra
adopted GenAI-powered recommendation engines, while BFSI firms dabbled in
GenAI applications, from fraud detection to market prediction
Debasmita Das, a founding team member and product lead at
Xylem.ai, a startup founded in 2023 that specialises in LLM
deployment, pointed out that the big winners in adopting
personalised models are likely to be the healthcare, BFSI and legal
sectors.
Das said companies are awakening to the goldmine of proprietary

data.
“If you’re just using an OpenAI model’s API to build application
software, there’s a high chance that the legal data it’s trained on, for
instance, is very US- or UK-specific,” she added.
For instance, in corporate compliance, drafting contracts for different

stakeholders is routine. Das cited the example of edtech contracts,
emphasising the need for tailored agreements with teachers,
colleges, and other stakeholders, subject to location, type of
stakeholder, and timeline. Here, traditional AI can only retrieve
information from past contracts based on specific queries. However,
GenAI can generate entirely new contracts by using existing data and
offering customisation based on provided examples, she added.
This is where Indian startups spot a golden goose.
To illustrate, Sarvam’s Kumar shared an anecdote about meeting the

chief justice of India, DY Chandrachud, who proposed the idea of an
automated lawyer for indigent individuals unable to afford legal
representation.
The companies, in the meantime, also understood the privacy and

cost considerations: for businesses dealing with sensitive data,
safeguarding against leaks is non-negotiable. While upfront costs for
a personalised LLM may be a tad higher, the long-term savings
eclipse the ongoing expenses tied to OpenAI’s APIs.
The cost factor // LLMs typically bill per 1,000 tokens, equivalent to around 750
words in English. Take OpenAI’s GPT-4, for instance, priced at $0.03 per thousand
tokens for input and $0.06 per thousand tokens for output
Moreover, businesses using India-specific data for model training find
it easier to connect with Indian customers. Ankush Sabharwal,
founder of Corover, exemplifies with BharatGPT that it’s like having a
multilingual chatbot that speaks the language of Indian users, all
because it’s trained with data entered by them.
“Say, if [an Indian user] wants to travel from Bangalore to Delhi the
day after tomorrow, they can say it in a hundred different ways. A
model trained on general data might not be able to understand what
they might be saying. BharatGPT can,” explained Sabharwal.
Corover refrains from selling BharatGPT to external customers, and it

is only meant to support its chatbot business. “The model is making
our job [of creating virtual assistants] easier anyway,” said Sabharwal,
adding that its customers include public-transport giants like Indian
Railway Catering and Tourism Corporation (IRCTC) and Karnataka
State Road Transport Corporation (KSRTC).
Aim gigabyte, execute megabyte

“If you have huge amounts of data, and if you use large amounts of
comput[ational power] very cleverly, you can solve very complex
problems that previously required very specific domain insights,”
explained Sarvam’s Kumar.
Track record // Sarvam’s other co-founder, Vivek Raghavan, once played a key role
in the implementation of the Unique Identification Authority of India (UIDAI)
In the pharmaceutical domain, for instance, what this means is that if
you type in the right prompt, GenAI tools will use lots of relevant
information—such as prescriptions and regulatory data—and
combine them with advanced algorithms, and important patterns will
magically appear without the need for deep knowledge of the field.
Same as in corporate compliance, achieving such outcomes might not
have been feasible in the past.
Thanks to broad use cases, models span a range of sizes. On one

extreme, there are OpenAI’s GPT-3.5 and GPT-4, with 150–175 billion
parameters and a training cost exceeding $20 million. These giants
process an extensive volume of tokens, the basic units of data for
LLMs.
While most large models keep their token counts under wraps,
Meta’s documentation discloses that Llama-2 is trained on 2 trillion
tokens, indicating a data volume in the terabytes.
On the other side are models like Dhenu, built upon Sarvam’s
OpenHathi model, which, in turn, is based on Llama-2’s architecture.
Dhenu undergoes training with 300,000 instruction sets, roughly
translating to 15–20 million tokens, according to Desai. While this still
is substantial data, it’s a mere fraction compared to the scale of GPT-
4 and Llama-2.
But size isn’t everything in the world of models. Tailoring a model to a
specific use case is key; it should only focus on pulling up information
relevant to its purpose.
And that’s why the price tag of a model boils down to three crucial
elements—the data it’s trained on, the computational power needed
for training, and the labour cost—according to Varshul CW, the co-
founder of GenAI startup Dubverse.ai.
Each of these can cost a pretty penny. Labour alone is expensive,

with trained ML engineers in the US earning anywhere between
$400,000 and millions of dollars. The cost of computation depends on
the volume of data used for training, ranging from $1,000 to
$500,000. Adding to the challenge, there’s a global GPU shortage,
exacerbating the situation in India and beyond.
Also, obtaining and processing data—particularly unique—is a task

neither easy nor cheap. Costs show marked variations, often
spanning orders of magnitude.
“It’s not enough to indiscriminately train your model on everything

you find off the internet—things like Reddit data are utterly
irrelevant,” said Desai. “You have to choose, curate your information,
and process it properly.”
This is where, according to Desai, the crux of expenses for an LLM

builder lies.
New game, new rules: are they ChatGPT ready?
If there were ever evidence of how model builders in India thrive on

constraints, it would be Sarvam.
The company is a spin-off of AI4Bharat, an IIT Madras-based research

lab. Starting in 2019, AI4Bharat has relied on self-funding and
philanthropic support, notably from Infosys co-founder and tech icon
Nandan Nilekani.
Kumar, who co-founded AI4Bharat, sees the lab as a good effort to

tackle AI challenges within an academic framework. After all, it
managed to develop acclaimed open-source translation models. But
it needed more.
Because GPT-3.5 had changed everything.
“We were building language models ourselves but didn’t see this
coming: the fact that if you scale up these models to a great extent,
they can do extraordinary things,” said Kumar. “We realised, ‘Hey,
just academic and philanthropic money won’t cut it’.”
The game had evolved, but Sarvam was ready for the challenge.
While AI4Bharat continues its work in building datasets and models,
Sarvam’s goal is to provide competitive AI models and business
services on a global scale.
Nirant Kasliwal, an independent AI consultant who also runs an
online GenAI-builder community with 2,000 members, is evaluating
Sarvam’s OpenHathi model and GPT-3.5 with a customised Hindi-LLM
evaluation dataset. According to him, to have a working model out
there, open-sourced, in just six months of its operations is a
“meaningful achievement”. “Regardless of how it matches up to GPT,
and it’s not easy to beat GPT, it’s something to appreciate.”
Digital puzzle // OpenHathi tackles a key challenge of tokenising Indic languages,

which requires 4–5X more tokens than English, leading to longer processing times
and higher query costs. Sarvam addresses this with a “custom tokeniser”
GenAI is in its early stages, according to Ram, and it requires time for
companies to establish and prove their value. Despite initial higher
costs and medium-term returns, there’s potential for long-term
revenue from enterprise customers.
Kumar claims the GenAI mania is much like the “dot-com bubble”,
which might see a “little bit of a burst [this] year”. Yet, in the middle
term, there’s potential.
He sees Sarvam’s returns unfolding over a five-year journey.

OpenHathi is just the beginning of a “full-stack” AI solution. “We’re
building custom models for companies. We will make it easy to
deploy them on private or public clouds, and we’ll also build the
components of software required around the model itself to get a
good experience,” he said. Sarvam, however, didn’t share the list of
its clients with The Ken.
The future does hold promise for the Indian GenAI community. It’s
already a boon for developers, builders, and companies seeking tech
integration. But the real test lies in not only decoding success locally
but also in breaking the code code globally.
Ayodhya stocks’ rally. It’s a

leap of faith, say fund
managers
By Aakriti Bhalla
Investors have been stocking up on shares of any Ayodhya-associated company, big
or small, but experts warn that blind faith isn’t the answer

3 Comments
Aakriti is a business reporter spotting trends in consumerism. She works at the intersection of consumer
companies and the food & beverages (F&B), and retail industry.
READ SUMMARY
What do Taj Hotels, Indian Railway Catering and Tourism Corporation

(IRCTC), and a small luxury tent company have in common? They’re in
line to be among the major beneficiaries of the economic windfall
expected to hit Ayodhya, according to some in the stock market.
On 22 January, the town of Ayodhya, situated in the eastern part of

India’s most populous state, Uttar Pradesh, is set to witness the
inauguration of the Ram temple.
And in the past two months, shares of Taj Hotels’ operator Indian
Hotels Company Limited (IHCL), IRCTC, and Praveg Ltd, which offers
tented accommodations, have jumped 14%, 28%, and 54%,
respectively—outpacing benchmark Nifty 50’s 11.5% rise. Stretch it
back six months, and the gap in returns between these stocks and the
broad market index only widens.
Expected to draw 250,000 attendees, the hotly anticipated Ram

temple consecration ceremony has put the spotlight on the
investments headed Ayodhya’s way. The state government, as per its
Master Plan 2031, has set aside roughly Rs 85,000 crore ($10 billion)
for its decade-long redevelopment.
As a result, businesses see this as a lucrative opportunity to boost top

and bottom lines. Some executives, such as SoftBank-backed Oyo
Hotels & Homes’ founder Ritesh Agarwal, are even pegging
Ayodhya—regarded as the birthplace of the Hindu deity Ram—as
another major destination for religious tourism, just like the Vatican
or Mecca.
“With more focus on improving connectivity to these [temple sites]

and developing them as global smart cities, they are equally lucrative
as commercial tourism hubs like Goa,” said Samujjwal Ghosh, chief
executive (CEO) of real-estate firm The House of Abhinandan Lodha.
Ayodhya is being marketed with the same

precision and appeal as premium fast-moving
consumer goods and automotive products
SAMUJJWAL GHOSH, CEO, THE HOUSE OF ABHINANDAN LODHA
The expected economic boom has sparked demand from some

individual investors, small and medium-sized research advisories, and
brokerage firms for stocks based on the “Ayodhya theme”. The Ken
spoke to five such investors and advisors.
Prashanth Tapse, senior vice president of research at Mehta Equities,
said the Ram temple opening is the midsized brokerage’s biggest
investment theme since the 2023 men’s cricket world cup. A
thematic-fund manager at a Mumbai-based brokerage firm
concurred, saying that they have received four to five queries about
investing in stocks with the Ayodhya theme in the last couple of
months. They, and several others quoted in this article, have
requested to remain unnamed as they aren’t authorised to speak
with the media.
On social media, several unregistered research advisors have also

been floating lists of what they call “Ayodhya Ram Mandir stocks”—
listed companies that have either already invested in the city or plan
to expand there soon.
Laying the foundations // IHCL plans to build two hotels in Ayodhya, while Praveg
has built a tent city and a resort in the town. Indigo recently launched direct flights
to Ayodhya from New Delhi, Ahmedabad (Gujarat), and Mumbai (Maharashtra),
respectively.
These include big names such as IHCL and Interglobe Aviation Ltd, the
owner of Indigo, India’s biggest airline, as well as micro caps such as
Praveg.
But the question is: how much influence does the temple wield in this
soaring share price story? Especially when hospitality and aviation
stocks have, anyway, bounced back strongly since the Covid-19
pandemic.
“I would advise investors to exercise caution if they think share prices
could get impacted on just this one factor,” said a senior vice
president of a Mumbai-based brokerage.
They added that share prices for small caps are prone to wild swings
even on small developments and may not necessarily reflect their
underlying value. “I would rather look at it as a short-term trend.”
And these concerns are not out of whack; shares of Ayodhya-
associated hospitality firm Apollo Sindoori Hotels—majority owned
by promoters of India’s largest private hospital chain, Apollo
Hospitals—rose 20% on Monday.
The Ayodhya theme presents equity investors with a familiar

dilemma: stick with investment fundamentals that produce long-term
gains or gamble on fleeting market sentiments with the potential for
outsized returns or big losses.
Go(l)d rush
From building tourism necessities like an airport and railway stations
to drafting grand plans for river cruises and Ram-themed amusement
parks, there’s no shortage of attractions in the works to draw
pilgrims, both from home and abroad.
Naturally, then, any Ayodhya-linked company—especially in

infrastructure and hospitality—would generate investor interest
because of the opportunities that come with a pilgrimage town
opening up, according to Kranthi Bathini, equity-market strategist at
Mumbai-based investment advisor WealthMills Securities Pvt Ltd.
But he adds a crucial caveat: strong demand should persist beyond

the first day and the first few months.
Firms in travel, tourism, and hospitality, such as IHCL and Praveg, are
likely to reap first-order effects .
An individual investor known by username @MadAboutStocks_ on X,

Ron has based his bet on stocks like Praveg, which operate in a niche
space, by drawing parallels between the ongoing hype behind
Ayodhya and the 19th-century California Gold Rush. In the 1850s,
thousands of miners rushed to the American state to unearth the
precious metal, only for Levi Strauss—the businessman—and Jacob
Davis, who is credited as the inventor of modern jeans, to make
massive profits by selling them work pants and shovels.
Praveg’s shares have gone up 170% in the last year and attracted
investments from fund managers such as Tata Mutual Fund and
Kotak Mahindra Life Insurance Company.
One shouldn’t misconstrue the generic nature of investing in some

stocks with their association with Ayodhya, warns Amit Kumar Gupta,
founder of research-advisory firm Fintrekk Capital.
For instance, a generic investment is when investors are attracted to
IRCTC because of its thousands of train lines rather than just the ones
that lead to Ayodhya. This can also be applied to other heavyweight
companies like Indigo, IHCL, travel-services firm Thomas Cook, and
cigarettes-to-hotels conglomerate ITC, among others.
“Indigo runs thousands of flights, so it’s not going to make a big

difference if they add 3–4 more. Taj Hotels has about a hundred
properties, so if they are adding 1–2 properties in Ayodhya, it’s not
going to make a material difference to their business and market
cap,” said a senior portfolio manager at a boutique investment firm.
Praveg, however, can expect a more significant boost to its financials

due to relatively small-scale operations, according to Gupta. It is
anticipated that the opening of the tent city at Ayodhya will witness a
10-15% increase in tourism revenue for the company, he said. This,
coupled with the company’s comparatively premium offering and
asset-light model, has led to Fintrekk placing a “Buy” call on the
stock.
Many eggs, many baskets // Praveg shares leapt another 18% on 8 January, riding
high on investor optimism fuelled by its contract to manage a tent city in
Lakshadweep amid a government campaign
Another Ayodhya-related small cap that Fintrekk is bullish on is
Apollo Sindoori Hotels, which is coming up with a multi-level parking
space across 3,000 square metres near the temple; the same building
will house a company-managed food court.
Despite the hype, a section of stock-market experts remains sceptical
of such rationales that they believe circle more around sentiments
than business fundamentals.
Merely a buzz?
A seasoned investor, a senior executive from a brokerage firm, and
two fund managers advised caution against the logic behind investing
in such thematic stocks, especially small caps.
From a long-term lens, companies like IHCL and Indigo would enjoy
the first-mover advantage in Ayodhya. “But I wouldn’t put my money
on these stocks based on this one factor alone,” said the executive at
a Mumbai-based brokerage firm.
Besides, valuations matter for seasoned investors. Praveg, for

instance, trades at a price-to-earnings (PE) multiple of nearly 107 as
of 8 January, while the broader hospitality industry has a PE of 33,
according to stock analysis platform Screener.
“A year back, the [Praveg] stock was trading at about Rs 300 ($3.60),
now, it is trading at nearly 3X the price, so everything is already
priced in,” the above-cited portfolio manager said. “It’s a Rs 2,300
crore-valued (~$275 million) company, with less than Rs 100 crore
($12 million) revenues and an easily replicable business.”
Despite concerns over factoring Ayodhya into investment decisions,

market participants who spoke with The Ken mentioned that there is
no doubt the town’s economy will grow multifold, considering how
the growth will also be on a low base.
Meanwhile, even outside capital markets, there is a demand surge.
Oyo’s Agarwal recently said that searches for accommodations in

Ayodhya increased 70% on the app on 31 December, outpacing
searches for other tourism spots such as Goa and Nainital. Oyo, along
with other firms mentioned, such as Praveg, IndiGo and IHCL, didn’t
respond to a request for comment.
Similarly, the House of Abhinandan Lodha, which has invested Rs

1,200 crore ($144 million) in Ayodhya to set up luxury residential
property and hotels, claims to have received interest from Indian
customers as well as from those in Singapore and the United
Kingdom. The company’s CEO Ghosh said the state government’s
investments in Ayodhya are indicative of the town being a “strong
and stable investment”.
Share prices and investor interest have seen volatile, theme-related

oscillations throughout the stock market’s history. This is almost
inevitably followed by a more measured evaluation where
practicality trumps hype. In this transition, as and when factors
beyond the temple town are considered, the real winners and losers
will emerge.
.
.
Chennai makes a pitch to

bring back multinationals’
offshore centres. If only it
had the talent
By Narayanan V
Tamil Nadu made early moves to lure large companies into setting up their global
capability centres in its capital city, but has lost ground to nearby tech hubs

7 Comments
Narayanan worked in banking and corporate finance for a decade before finding his true calling:
Journalism.
READ SUMMARY
A multi-billion-dollar conundrum is brewing in Chennai. The coastal
city in the southern state of Tamil Nadu wants to ride the wave of
global capability centres (GCCs)—offshore delivery units of
multinational companies (MNCs)—that is sweeping across India’s
$200 billion information technology sector.
But a peculiar oddity is driving a wedge in its plans ahead of the

state’s flagship Global Investors Meet 2024, which kicks off on 7
January and will host investors from over 30 countries. Prashanti
Bodugum, vice president of e-commerce and U.S. Omni Platforms
Tech at Walmart Global Tech (WGT), the technology arm of retail
giant Walmart, knows this well.
At a recent event, Bodugum stated that the availability of best-in-

class talent and the ability to scale quickly were key advantages of
operating a GCC in Chennai. Then, in a follow-up question, she
remarked that the talent pool in the city still isn’t enough to meet the
demand for new and disruptive technologies.
This experience isn’t unique to Bengaluru-headquartered WGT, which

employs around 2,000 people in Chennai—its second-largest centre.
With more global firms expanding into India to drive their product
innovation and digital transformation, the demand for a deeply-
skilled technology workforce is reaching an all-time high.
But with the majority of its talent focused on engineering and

manufacturing, Chennai’s GCC plans face significant hurdles from
nearby IT hubs like Bengaluru and Hyderabad. In these cities, talent
pools are skilled in the latest digital technologies, such as artificial
intelligence (AI), machine learning, and cybersecurity, among others.
Tamil Nadu has traditionally been an industrial powerhouse. From

automobiles and pharma to textiles and chemicals, the state has a
diverse mix of sectors and is home to around 40,000 factories—the
highest in the country. And Chennai accounts for a significant share
of them.
Moreover, with over 150 engineering colleges and premier

institutions like the Indian Institute of Technology (IIT) Madras, the
city is also a leading educational hub in India.
The Tamil Nadu government is now keen on leveraging its industrial

prowess and abundant engineering talent to fulfil its GCC dreams.
Currently a $46 billion industry, GCCs are the fastest-growing

segment and the largest provider of employment within India’s IT
space. The market size of GCCs is expected to reach $110 billion by
2030, with the total number of these centres jumping 50% to 2,400,
as per a report from accounting firm EY.
What’s more, at a time when the broader IT industry is facing a hiring

slowdown in India, GCCs are expected to more than double their
talent base to 4.5 million by 2030.
These factors have led to many states competing with each other to
attract global firms.
The talent pool in GCCs across India’s top six cities, including
Bengaluru, Hyderabad, Chennai and Mumbai, stood at 1.3 million,
according to a recent report from consulting firm Zinnov. Bengaluru
alone contributed 480,000 workers, while Chennai had only 130,000,
lower than other emerging GCC hubs such as Pune.
Moreover, India added 39 GCCs in the first nine months of 2023.

Here, too, Chennai lagged, adding just three centres as compared to
15 in Bengaluru and 11 in Hyderabad.
Despite its industrial and engineering capabilities, it appears that

Chennai risks missing out on the GCC boat, thanks to its better-
equipped neighbours. But this wasn’t always the case, given it was
among the first movers in this space.
Lost lead
According to former chairman and managing director of IT-services
giant Cognizant Ramkumar Ramamoorthy, Chennai’s desire to
become a GCC hub is a long-held aspiration.
“Chennai had a head start in GCCs compared to other cities,” said

Ramamoorthy, now a partner at growth advisory firm Catalincs. In
fact, many of the large GCCs from the banking, financial services, and
insurance (BFSI) space chose the city as their first destination to enter
India, he added.
In the early 1990s, several BFSI firms, including Citibank NA, Bank of
America, and American Express, set up their GCCs in Chennai.
Then, in 2000, Standard Chartered started its global business services

in Chennai with a 700-person team, which has now grown to 16,000.
Similarly, the next year, the World Bank entered the city with 70
employees; now, the headcount has increased to 1,400, making
Chennai its largest centre outside its headquarters in Washington,
DC.
However, over the decades, the role and definition of GCCs have
evolved significantly, and Chennai has failed to keep up.
In early 2000, captive centres, as GCCs were called then, were limited
to low-end transactional services, such as back-office operations and
business support, and shared services like IT support and
maintenance. Later, they became global in-house centres (GICs) that
were focused on research and development (R&D) services and
supported MNCs’ end-to-end product lifecycle.
Then, the 2010s saw the emergence of GCCs—global centres of

innovation handling everything from engineering and product
development to the application of new-age technologies such as AI
and data analytics.
Fast-forward to 2023, “India is no longer the world’s back-office
capital but an equal partner in deciding the future direction of
MNCs.” That’s how Vikram Ahuja, the co-founder of ANSR, the largest
GCC-as-a-Service provider with over 150 GCC installations to its
credit, summarised the evolution of Indian GCCs.
And as the country moved up the value chain in terms of its GCC
offerings, so did the demand for a highly skilled tech workforce.
This is when matters began to turn in favour of Bengaluru, courtesy

of its well-rounded ecosystem that includes large IT firms, startups,
software-as-a-service companies, and other research centres that
offer a wide range of talent. For instance, Bengaluru has 4,300
startups, while Chennai has 1,110.
It’s no longer about having Java proficiency. “Enterprises are seeking

professionals with expertise in cutting-edge technologies such as gen
AI, machine learning, blockchain, cloud computing and analytics to
meet the evolving demands and rapid advancements of the
industry,” said RS, who works in a senior role at an executive-search
firm and wished to be identified by their initials only as they aren’t
authorised to speak with the media.
They added that while the IT and business-process outsourcing
industries require skills such as language proficiency, service-delivery
experience, and process efficiency, GCCs seek talent that blends
technical expertise and business acumen to drive global firms’ digital
transformation, technology adoption and innovation initiatives.
But talent is just one of the many variables that MNCs consider when
choosing a city to set up a base in India.
When ‘realty’ bites

Besides cost, which is an overarching factor while establishing a GCC,
MNCs look at a city’s attractiveness, ecosystem, cost of compliance
and real estate, among other things.
Bengaluru was top among cities in both talent and ecosystem, as well
as ease of doing business parameters, as per the Zinnov report cited
earlier. Mumbai was ranked highest in attractiveness. Chennai
languished at the bottom in all three parameters.
Therefore, it isn’t surprising that most GCCs want to call Bengaluru

their home. The IT hub also accounted for 44% of GCC leasing across
India’s top six cities, per a research report by real estate consulting
firm CBRE. Hyderabad’s share is 20%, and Chennai’s is 13%. Further,
office space in Bengaluru, at over 200 million sq. ft., is almost 3X that
of Chennai.
Up for grabs // GCCs are likely to lease around 60–62 million sq. ft. of office space in
India between 2023 and 2025, with sectors including technology, BFSI, engineering,
manufacturing, and automobiles expected to expand their GCC operations in the
country, as per CBRE
Chennai adds a very limited supply of office space every year, said
Abhinav Joshi, head of research, India, Middle East & North Africa, at
CBRE. While the two other cities add 10-15 million sq. ft of
operational office space annually, Chennai adds just 6-8 million sq. ft.
Meanwhile, cities are benefiting from the presence of GCCs in

unforeseen ways. The recent boom has also led to growth in global
leadership opportunities based out of India. Since 2013, the number
of such roles in India GCCs has grown by over 40X to over 5,000, as
per an analysis by Zinnov.
Leaders at GCCs in India are mature and have a good understanding

of global business, thanks to their exposure to a broad range of
technologies and support functions of large corporations’ global
supply chain, said Ramamoorthy.
“It is only natural for global firms to choose leaders from India since
many of these leaders have worked on complex engagements and
managed tens of thousands of employees,” he added.
Again, Bengaluru and Hyderabad—matured markets in the IT services
space—trump Chennai. Take the case of RS, who was tasked with
finding a candidate for the position of vice president of product
engineering for a retail giant in Chennai.
“We looked at people from Cognizant, DXC Technology, and HCL [in
Chennai], but we were not getting that finesse… Finally, we have
hired someone from Bengaluru,” they said.
Further, finding senior talent for product development, AI, data

analytics, and cognitive computing is a challenging task in Chennai as
opposed to Bengaluru, they added.
Not everything is for everyone

Nevertheless, Chennai’s GCC dreams still aren’t a lost cause. Several
industry experts and players in this space who spoke with The Ken
believe the city still has the potential to become a GCC hub,
especially in areas such as automotive, pharma, and logistics, on the
back of its existing ecosystem.
Thanks to its early-mover advantage in the GCC space and the scale
of industrialisation, Chennai has a diverse mix of GCCs.
For instance, Tamil Nadu has leveraged its manufacturing backbone

to attract the R&D and shared services businesses of auto giants such
as Ford Motor Company and Renault Nissan to its capital.
Similarly, in healthcare, pharma majors such as Astrazeneca, Roche,
and Pfizer have their R&D centres in Chennai; telecom GCCs
operating from the city include Verizon, AT&T, Qualcomm, and
Comcast.
One way for Chennai to solidify its status among India’s GCC hubs,
according to Ramamoorthy, is to clearly identify its core strengths
and start inviting the largest players in those industries.
Chennai need not be everything to every

company.
RAMKUMAR RAMAMOORTHY, PARTNER AT GROWTH ADVISORY FIRM CATALINCS
Some of Chennai’s most recent GCC entrants show that the city has
already begun playing to its strengths. For example, Chennai, which is
home to GCCs of shipping and logistics majors such as Maersk and
DHL, saw the entry of another logistics behemoth when UPS opened
its first Indian technology centre in the city, paving the way for many
more companies in this industry.
Recently, it was also reported that athletic footwear and apparel

giant Adidas plans to set up a global business services centre in
Chennai.
Moreover, Tamil Nadu seems to be confident of its economic
ambitions.
That was evident when the state’s minister for industries, investment
promotion and commerce, TRB Rajaa, was asked during a recent
event what kind of investments Tamil Nadu is looking to attract in the
Global Investors Meet. “We are not a desperate state. We are very
selective about our investors, and we make sure they bring in jobs
that are relevant to our talent,” he responded.
The state government has already bagged investment commitments

to the tune of Rs 3 lakh crore (roughly $36 billion) and is expecting to
draw much more during the Global Investors Meet.
But as Chennai gears up for the event, concerns over its ability to
meet the demand for highly skilled tech workers and operational
office space loom over its GCC ambitions.
.
How Indian women’s go-to
drug, Meftal Spas, became
a victim of its own
popularity
By Shivani Verma
A government safety alert has confused consumers, baffled health professionals, and
impacted sales of the most-prescribed drug to treat menstrual cramps

Comment
Shivani writes about the impact of business, technology, and public policy on society.
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it in this story.
Disprin is known for alleviating headaches. There’s Dolo 650 to fight

off fever. Then, there is Meftal Spas for easing period pains—a
popular choice among countless Indian women.
However, recent safety concerns have cast a shadow over the
antispasmodic prescription drug, which is largely available over the
counter.
On 30 November 2023, the Indian Pharmacopoeia Commission (IPC),

an autonomous institution under the Ministry of Health and Family
Welfare (MoHFW), issued a drug safety alert on mefenamic acid—
one of the two main components in the Blue Cross Laboratories-
manufactured Meftal Spas.
The advisory urged consumers and healthcare professionals to

remain vigilant regarding a potential adverse drug reaction (ADR)
called DRESS syndrome (Drug Reaction with Eosinophilia and
Systemic Symptoms).
This has dissuaded even some of Meftal Spas’ regular customers, like
Nihan Parveen from Delhi. The 27-year-old has been consuming the
tablet since 2018 but opted against taking it last Saturday when she
was suffering from severe menstrual cramps. “This time, I didn’t take
any medicines and had to bear the pain.”
Her decision to discontinue taking the medication was based on news

reports that inaccurately indicated the advisory was on Meftal Spas
and not mefenamic acid. Another consumer of the drug, Varsha
Patel, concurred that she, too, has largely been exposed to similar
articles.
Several media reports stated that the advisory was issued on Meftal
Spas, even as other antispasmodic medicines such as Mefkind-Spas
and Cyclopam-MF contain the same combination of salts—
dicyclomine and mefenamic acid. What’s more, data by market
research firm IQVIA shows there are over 70 brands that use this
combination, registering sales of about Rs 176 crore ($21.2 million)
for the year ended March 2022. Meftal Spas has captured 87% of this
market.
“Every other girl who’s menstruating knows

about Meftal Spas. Women have been using it
for ages”
— AKTA BAJAJ, SENIOR CONSULTANT AND HEAD-OBSTETRICS GYNAECOLOGY, UJALA CYGNUS HOSPITAL, DELHI
The over 40-year-old medication has been central to Blue Cross

establishing itself as a leading research-based pharmaceutical
company in India. Revenue from Meftal products, which also include
Meftal P and Meftal Forte, was over Rs 250 crore ($30.1 million) for
the year ended March 2023.
An executive from the Mumbai-based company told The Ken that the
market leader in antispasmodic medicine will likely earn over Rs 300
crore ($36.2 million) in annual sales from Meftal products in the year
ended March 2024. They and several others mentioned in the story
declined to be named as they either weren’t authorised to speak to
the media or didn’t want to comment on the subject publicly.
Composition // Founded in 1980 by chairman N H Israni, Blue Cross manufactures

products in segments like pain management, antispasmodics, gastrointestinal
ailments, diabetes, cardiovascular disease management, and cough and cold
remedies. Meftal and TUSQ, a cough syrup, are its most popular brands
The IPC advisory on mefenamic acid has also turned some
pharmacies, doctors, and hospitals cautious. The Ken’s conversations
with five consumers, nine doctors, including pharmacologists, and 12
pharmacists suggest a material impact on sales of Meftal Spas due to
misinformation.
Few pharmacies are already witnessing a dip in their Meftal Spas

sales, and a major chain of private hospitals has recalled the drug and
is no longer prescribing the medication to its patients, a person
familiar with the matter told The Ken.
Health professionals, however, are now raising qualms over the

process behind the issuance of such advisories. They’re calling for
more disclosures from IPC on matters like the number of ADRs, the
dosage taken, and the severity of the reaction, among other advisory-
linked factors.
These transparency issues are likely to rumble on in the face of the

IPC mefenamic acid safety warning, which led to Meftal Spas
becoming a victim of its own market dominance.
WHAT'S YOUR VIEW?

Which medicine do you use to treat your period cramps?
Meftal Spas
Cyclopam
Drotin-M
Ibuprofen
Others
I do not take painkillers
This question does not apply to me
I'd rather not answer this
1/2 questions
300+ responses
Closes in 43:09:43
Your response is private. It will never be shared or used to target you.
Price for popularity

Launched in 1981, Meftal Spas is a relatively economical medicine—a
strip of 10 tablets costs Rs 50 ($0.60). But above all, “it’s the best
drug out there to treat menstrual cramps,” said Dr Kruthi Adidum,
pursuing an MS (OB-GYN) from Bengaluru’s Vydehi Institute of
Medical Sciences. She has been prescribing the medicine to her
patients for over two years.
Medical doctor and health educator Tanaya Narendra added that the
presence of dicyclomine, which stops the spasms or cramps, in
Meftal Spas differentiates it from other standard drugs with
mefenamic acid.
All pharmacists The Ken spoke to indicate that Meftal Spas is the
most, and sometimes, the only drug sold and prescribed by doctors
for menstrual cramps. Other alternatives—which on average have
half the sales of Meftal Spas each—include Drotin-M, Ibuprofen, and
Cyclopam, priced at Rs 213 ($2.57), Rs 70 ($0.84), and Rs 55 ($0.66)
for 10 tablets, respectively.
However, after several media reports on Meftal Spas, consumers are

alarmed. For instance, Parveen has resorted to hot-water bags. Patel
is seeking a substitute for the medicine like many others, who either
question its efficacy or are hesitant to consume it.
“I got hundreds of direct messages and replies after I tweeted about

this. While some thanked me for the information, others already
taking the course questioned whether they could continue to take
the medicine,” liver-disease specialist Cyriac Abby Philips, popularly
known as the “liver doc”, told The Ken.
His post on X (formerly Twitter) on IPC’s advisory garnered over

357,000 views. Narendra, who goes by the moniker Dr Cuterus,
shared similar opinions on an Instagram reel.
Blue Cross, on 9 December, issued a statement, attempting to clarify
any misunderstanding regarding the IPC safety alert on mefenamic
acid. However, that has failed to stem the uncertainty.
“A few customers asked me about the medicine and whether it has

been banned,” said a store manager at pharmacy chain Wellness
Forever in Delhi NCR. They claimed that the store is still witnessing
regular sales of Meftal Spas, though.
All but one of the Apollo pharmacies in Delhi NCR and Bengaluru The
Ken reached out to also reported regular sales.
An Apollo Pharmacy in Bengaluru informed that it sold over 200

strips of Meftal Spas in December 2023 but only 38 strips in the first
ten days of January. A Wellness Forever store in Karnataka sold only
three strips of the medicine compared to eight strips of Cyclopam
after the advisory.
Besides, some stores of e-pharmacy Netmeds in Bihar and Delhi NCR

have also witnessed a 30% dip in Meftal Spas’ sales. Alternatives like
Ibuprofen and Cyclopam saw a rise of 10% in their sales, one
Netmeds pharmacist said. “This may increase further as long as
people are not trusting Meftal Spas.”
They all attributed any decline in Meftal Spas’ sales to IPC’s advisory.
In response to The Ken’s queries, IPC said that “it hasn’t issued the
alert with any specific brand manufactured by a particular
pharmaceutical company” and that “the media wrongly captured it.”
And if pharmacies weren’t enough, a major chain of private hospitals

went a step further and pulled Meftal Spas from its shelves. “The
hospital is now prescribing alternatives to mefenamic acid,” a person
with direct knowledge of the matter said while adding that it’s a
general procedure if a drug alert comes up. However, another person
familiar with the situation indicated that the drug is still available, but
only on a prescription basis.
In response to The Ken’s queries, the private hospital chain said that
it hasn’t recalled Meftal Spas as it isn’t banned by the Indian
government.
The Ken checked with other hospitals such as Prayagraj’s Abhilasha

Hospital & Fertility Center, Rajagiri Hospital, Kochi and Ujala Cygnus
Hospital, Delhi, Kailash Healthcare Ltd, Noida and understands that
they haven’t recalled the drug and continue to prescribe Meftal Spas.
A detailed set of queries to ascertain the impact of IPC’s advisory on

Blue Cross was sent to the manufacturer on 6 January but went
unanswered.
The IPC advisory on mefenamic acid—used globally for over 60

years—has drawn closer scrutiny from some industry insiders. They
question the criteria, data used, and transparency of the government
ministry in issuing safety alerts.
Cause for alarm

Mefenamic acid, a nonsteroidal anti-inflammatory drug (NSAID), not
only alleviates mild to moderate pain in menstrual cramps but also
addresses conditions like rheumatoid arthritis, osteoarthritis,
inflammation, and fever.
“The fact that NSAIDs, including mefenamic acid, can cause DRESS
syndrome—an extremely rare adverse event—is not new,” said
Philips, who added that it’s even rarer for the mefenamic-acid group
to cause DRESS.
“I am unsure why the names mefenamic acid

and Meftal Spas have come into the picture—
it’s classical misinformation and [an example
of] how one shouldn’t put out an advisory.”
— LIVER-DISEASE SPECIALIST CYRIAC ABBY PHILIPS, POPULARLY KNOWN AS THE LIVER DOC
Narendra echoed Philips’ concerns, saying the news was blown out of
proportion and that there hasn’t been a single case of DRESS
syndrome reported in India due to mefenamic acid. Antiepileptic
drugs such as carbamazepine, phenytoin and phenobarbitone are
the most common medications that are associated with DRESS
syndrome.
Given these factors, there are growing doubts over the methodology
used by IPC to issue safety warnings.
Launched by the MoHFW in 2010, the Pharmacovigilance Programme

of India (PvPI) by IPC maintains and develops the pharmacovigilance
database of all suspected severe adverse reactions to medicines
observed. There are over 650 Adverse drug reaction Monitoring
Centres (AMCs), including medical colleges and hospitals
(government and private), which send reports of ADRs to IPC, a
former IPC executive told The Ken.
“Once the reports are received, they are processed by physicians,

pharmacists, etc. Then, a signal is generated, followed by issuing a
drug safety alert,” they added.
Further, according to Ankit Gaur, coordinator of the medical device

adverse event monitoring centre at Kailash Healthcare Ltd,
consumers and healthcare professionals can also report ADRs to IPC.
Usually, more than one report is required to generate a signal,
depending on the event’s seriousness and the information’s quality.
But apart from the drug name and ADR, the IPC advisory didn’t
provide other pieces of key information, like total ADRs reported,
their origin, and severity of the reaction, etc.
In its response to The Ken, IPC said that “the PvPI has received
Individual Case Safety Reports (ICSRs) for mefenamic acid-associated
DRESS Syndrome from its AMCs across the country” but didn’t specify
the locations and the total number of cases.
It added that the drug-safety alert is “based on the qualitative and

quantitative evaluation [of] ICSRs” and that input from medical
experts is also taken.
Meanwhile, Adidum calls for IPC advisories to be more specific. “It

only names DRESS syndrome and the drug name. But it could be
caused because of anything. For instance, what if someone was also
taking antiepileptic drugs in combination with mefenamic acid?”
Also, Gaur believes that the advisory may have only come now
because there were no established systems to report ADRs earlier.
However, he adds that mefenamic acid is completely safe if taken
under the supervision of a medical practitioner. “These are very
uncommon side effects, which only some consumers may develop,”
said the clinical pharmacologist, adding that the advisory was only to
inform the public about the safer use of the drug.
While the advisory is a reminder to consume the drug under the

guidance of a doctor, the adverse effect of the safety alert fell upon
Meftal Spas due to its popularity among Indian women.
“It was completely media-generated,” said the former IPC executive.
“A common person wouldn’t understand what mefenamic acid is. So,
several reports used Meftal Spas’ name to make the general public
aware.”
Unless the IPC adds specificity to advisories and discloses critical

input related to the issuance of a safety alert, other popular drugs,
such as Combiflam and Crocin, face a real threat of undergoing
similar misinformation-linked woes to that of Meftal Spas.
.
Cuemath has
done the math
on its US
expansion
The India-bred startup needs a non-marketing path to
expansion
Monday, 08 January 2024

Indian edtechs have, for over 20 years, tried to connect English-speaking tutors to kids
abroad to teach maths. It was a simple equation really: English speakers + India’s well-
known prowess in maths + internet. For a willing tutor sitting in Bengaluru or Jaipur or
Kolkata, the world could now be their tuition class.
After-school tuition is second nature to Indian kids, and we can safely extend those
parallels to South and Southeast Asia. There’s a market for everything—from that
neighbour who preps you for the final exam to the multi-billion-dollar IIT coaching
institute that preps you for an entire way of life. And companies like WhiteHat Jr even
made after-school tuition look cool and inviting.
That’s why I was in for quite a shock when I learned what the US government is
spending to repair learning losses in schools. It’s an eye-popping US$190 billion, and
schools are expected to spend a large chunk of this on what’s popularly known as “high-
dosage tutoring”. It took me a while to realise that high-dosage tutoring is just the
accented, foreign cousin of what we call “tuition class”. Schools in the US are trying hard
to figure out when and how to deliver this extra help to bring their students up to
scratch. Mathematics scores have plummeted well beyond expectation, a trend that
started even before the pandemic.
I won’t get into why schools find it hard to schedule this time, or appoint tutors to take
these extra classes. But it’s safe to say that there’s a biiig opportunity for edtech
companies to get stuck into—whether it’s through help provided by AI bots or human
tutors.
The growth hypothesis can work extremely well for Indian edtechs too. Byju’s played the
fast game of acquisitions and high marketing spends in the US, but only landed up with
mediumly popular assets and a lawsuit. They had WhiteHat Jr blinkers on. In contrast,
this is how Cuemath’s leaders were thinking:
“For us, the fact we’re from India is hugely relevant,” says Sunder. “Many
believe Western education is weak on maths, there is a strong believe that
maths is poorly taught in the international curriculum, they focus on
personality development.”
Teaching in many parts of the world still relies on rote learning - a method that
discourages the development of critical thinking capabilities. Children prefer to
learn through “tangible stuff” according to Sunder and benefit most from one-
to-one teaching methods.
Cuemath’s strategies may actually be more suited for where the US currently stands vis-
a-vis maths and high-dosage tutoring. Cuemath still uses Indian tutors but teaches
a Common Core-aligned curriculum (Common Core is a national curricular standard
adopted by the US in 2010). The company has always had a one-on-one or small-group
approach that’s too expensive for Indian households, but at US$25 an hour, it’s
potentially a good match for American parents.
Cuemath’s latest move, though, is an indication that it’s serious about how it wants to
expand in the US. Sometime last year, Cuemath opened up its platform to a group of
researchers, signalling that it wants to grow the Kumon or Khan Academy way. It may
not blitzscale, but if Cuemath can show up in the right places, and the right research
papers, it could find itself in the right schools—the ones looking for the perfect “tuition”
class.
Cuemath’s Talkmeter experience

Cuemath opened up its platform to the researchers for an experiment. While India is big
on tuitions, the extra help doesn’t often diverge too much from how we’re taught in
school—it’s a one-sided lecture with little student participation. That goes for broadcast-
style IIT coaching too, where thousands of students log-in to listen to one tutor in front
of a white board.
High-dosage tutoring aspires to be more like an injection. The doses are pre-determined
and the tutor’s attention is concentrated. Different groups of researchers have been
trying to determine what kind of teaching is most effective in these groups. And they’ve
all come to broadly the same conclusion—the kind that gets students to talk more in
class.
In this particular study, a group of researchers from Stanford and Cuemath introduced a
Talkmeter in the edtech’s online sessions. The Talkmeter is programmed to pop-up
every 20 minutes to indicate the ratio of student vs teacher talk-time.
The researchers divided the 724 tutors and their classes into two groups: in one, both
the tutor and the student would see the talk-time split, and in the other group, only the
tutor saw it. This is what the study found:
We find that the Talk Meter increases student talk ratios in both treatment
conditions by 13-14%; this trend is driven by the tutor talking less in the tutor-
facing condition, whereas in the student-facing condition it is driven by the
student expressing significantly more mathematical thinking.
Through interviews, we find the student-facing Talk Meter was more

motivating to students, especially those with introverted personalities, and was
effective at encouraging joint effort towards balanced talk time.
The results also go on to show that even when tutors decrease their talk-time, they still
push more probing or focused questions into their teaching methods. Plus, with more
participation, students are also more likely to use mathematical terms and improve their
reasoning skills.
The researchers believe this is a cheap, quick dipstick to check if high-dosage tutoring is
actually useful in getting students back on track. It’s also a scalable intervention, since
without much effort, tutors are getting feedback on their teaching and engagement style.
Technology is the shorthand in the long arc of academic recovery.
What does this mean for Cuemath?

This study doesn’t capture if Cuemath’s tutors are contributing towards better student
outcomes. For an at-home, after-school solution, that’s probably a harder metric to
track.
But this move may help Cuemath in two ways:
1. It’s an efficient way to improve how its tutors teach. If they are made aware of
how much they talk in a class, what’s superfluous to learning, and how engaged
their students are, it could make for a much superior experience compared to
their peers. Teacher talk-time is also a marketable attribute: does your kids’ tutor
let them talk enough? This could become a huge selling point in favour of one-on-
one tutoring.
2. If Cuemath opens itself up to more scrutiny, it could crack the code with
American schools on the lookout for ready-to-go tutoring solutions. While most
schools do prefer in-school tutoring, there is an option to expand services to kids
who can’t make it to tutoring sessions, or who are very remote or homeschooled.
The opportunity is ripe now for Cuemath, before high-dosage tutoring (possibly)
becomes a has-been experiment of the policy world. It’s also crucial for Cuemath as a
business whose losses widened in the financial year ending March 2023. Cuemath’s
international business will determine if the edtech remains a high-cost, personalised
tutoring service in India, or becomes part of a federally-funded, high-dosage
intervention to improve maths scores in the US.
That’s all for this week, folks! Keep writing to edsetgo@the-ken.com and I’ll see you next
Monday!
Regards,
Olina
A new year for

edtech’s
executives
The C-suite of Indian edtech has its work cut out
Monday, 01 January 2024
Happy New Year! (We made it.)
I’m excited to continue this exploration of the weird and wonderful world of Indian
education with you. Your feedback—good and critical—has helped us grow to over 90
unique editions!
Now firmly in our rearview mirror, 2023 will be the year that edtech tried to shake off its
pandemic blues. Schools were back full-time, and that meant companies either took off,
flamed out, or were sold off. 2023 was also the year that most businesses went hybrid,
and used their VC dollars to find a happy medium between the online and offline
worlds.
But for companies that dominated such a large share of the headlines last year, we still
know little about how they operate. Sure, frontmen and founders like Byju Raveendran
and Gaurav Munjal are always out there, talking about how Indian edtech “is just about
to take off”, but I’ve always been curious—who are the people actually responsible for
the launch?
As edtech startups turn into companies, some hitting the 10- and 15-year marks, the
lieutenants of the edtech business are now in charge of making some pretty definitive
moves for the next few years. It’s interesting that each edtech, depending on where they
are in their journey, has chosen different personalities to lead their operations.
Saving the empire

Arjun Mohan probably hasn’t had much sleep since he took over from Mrinal Mohit as
the CEO of Byju’s. The company has become such a giant machine that parts break
down every day—including a recent lawsuit from Code.org, which alleges that WhiteHat
Jr hasn’t made payments against the use of Code.org’s proprietary coding platform.
From corporate loan sharks to non-profits, Byju’s US operations have been a dud.
Mohan is in-charge of selling off pieces that don’t work anymore, consolidating the
ranks, and somehow, through all of this, build morale for those who are still a part of
Byju’s.
Mohan’s main role, however, may be to reign Raveendran in. Mohan’s not new to
Byju’s—he was previously employed by them and was an advisor even before he was
formally asked to re-join—but he is back in a new capacity. In addition to steadying the
course, Mohan might be the only thing standing between Byju’s and Byju Raveendran.
That’s probably a good thing.
“Arjun is very direct and a front-foot batter. He is one of those guys who would
stand up to Byju (Raveendran); he knows how to manage him. He also has a
knack for navigating the complexities of this business. Byju has known him for
a long time, and is very comfortable working with him,” says a person with
inside knowledge of the company’s transformation.
Crisis at BYJU'S: New CEO Arjun Mohan has a slew of challenges; here's how
he's trying to reset the edtech firm, Business Today
Mohan is different in one key aspect from previous Byju’s deputies. He’s a well-known
executive in his own right. At UpGrad, Mohan was often an independent spokesperson,
unlike at Byju’s, where the founder couple almost always were the faces turned towards
the media. Mohan is also an investor, an author, and till recently, was creating a brand
for himself on Linkedin as an “India startup story” guy. It’s just as well—Mohan needs
all the goodwill he can accrue. He’s going to need it to steer Byju’s through its troubles,
if they ever do end.
Starting an empire
Some companies evolve slowly. Or at least, you can make some educated guesses about
where they are headed. That’s just not been the case with Physics Wallah (PW), the
breakout star of 2023. The company reported a three-fold year-on-year jump in revenue
for the year ended March 2023 from its online and offline properties.
While PW’s profits have ballooned, it has managed to keep its marketing expenses low,
thanks mainly to founder Alakh Pandey’s brand. But the brand has also worked to PW’s
disadvantage, because too much of it was centered on Pandey’s ability as a teacher and
entrepreneur.
Vishwa Mohan’s entry as Chief Information Officer has changed that equation slightly.
Mohan (another one), has risen quickly to become the face of PW Skills, and now the
PW101 offline institute, which offers job-ready skills to students at a fraction of what
they would pay to rival upskilling platforms.
PW’s quick expansion to the skilling space is matched by how quickly Mohan, a former
Linkedin executive and JEE coach, has established himself as the go-to guy at PW Skills.
In true PW style, Mohan’s introduction video was a whole production with slick graphics
and a walk-the-talk type of interview.
Mohan pointed to two things that attracted him to the role. One is obvious: the ability to
provide affordable education to a large number of deserving kids. The other, and
related, reason is the challenge of managing a tech platform that caters to large volumes,
at different speeds and different configurations (based on affordability).
As a PW lieutenant, Mohan has to play the dual role of an executive and thought leader.
He’s a product guy, but he’s also a former educator, which places him perfectly within
the PW universe. As an intra-company entrepreneur, Mohan can confidently project a
role that Pandey was, at best, uncomfortable with. Mohan is a second pillar as the face of
PW Skills, one that draws constantly from his tech career to lend credibility to PW’s new
venture.
Mohan is in building mode, so he’s definitely not shy about putting himself out there.
His LinkedIn profile is an eclectic mix of inspirational videos, gym routines, and
explainers about how big tech platforms hire people. Mohan has his own legion of
followers. In 2024, as PW’s skilling efforts expand, Mohan may need some of this cred
to ward off questions about how PW is able to offer a university-level “degree” through
its institutes. The company still hasn’t revealed which universities it has partnered with
to do so. There’s also going to be more competition as companies tighten their belts; if
they aren’t hiring from other campuses, how will PW guarantee placements after
graduation? Mohan’s on-screen charisma has to be backed up by some operational
chops.
The Change Managers

If last year was about resurgence, and no one came back with a bigger bang than the
home-grown Kota coaching institutes. With Aakash now a Byju’s brand, Allen Career
chose to go the private equity route with a US$600 million dollar raise from Bodhi Tree
Systems and a corporate overhaul for its small, regional business roots. Allen has since
launched Allen Digital, an edtech arm of its coaching business, and a platform called
Next App for medical school aspirants.
Allen seems to have come a long way from when co-founder and director Brajesh
Maheswari triggered a public spat with Unacademy and accused the latter of “poaching”
Allen’s tutors in Kota. Within a year, Allen changed from a clutch of coaching centers
into a full-blown education company. And it has hired talent to match this new image.
Abha Maheshwari, a former Meta executive, will lead Allen’s digital operations. Nitin
Kukreja, a former Star Sports executive, is the new CEO of Allen Career Institute and in-
charge of its “transformational journey as it focuses to deliver a digital-first consumer
experience at scale”. Allen has hired executives from Indian startups too, notably
Flipkart, to lead product development for its tech platform. The hires point to a desire to
combine its coaching institute roots to an online business model that isn’t just
supportive but additive. The firepower in the team, Allen hopes, can turn a digital trick
for the company.
The suits here don’t have a direct spotlight on them, unlike the Mohans. Allen is a huge
brand name with solid revenue generation, but like other offline institutes of its time, it
has laboured away in relative silence. Byju’s and PW are products of the online era, and
have worked actively to keep the spotlight on themselves. It’s part of their business
model, just as much as offering quality courses. For Allen, digital will always be a new,
and somewhat alien, bet. The suits will have to worry about marrying technology to the
traditional Allen coaching platform, and not as an afterthought.
I hope you enjoyed the very first edition of Ed Set Go in the new year. If you did, do
write to me at edsetgo@the-ken.com. I’ll see you next Monday.
Regards,
Olina
.
For Sula
Vineyards,
government >
wine drinkers
Even in a business where the state looms large, the winemaker
stands out
Tuesday, 09 January 2024

It’d be no exaggeration to say that without Sula Vineyards, few would be drinking wine
in India. The 25-year-old company has had to do a lot to make wine count in a country
used to whisky and rum.
Oenophiles might take offence at us calling what Sula sells wines, but it’s the same story
with most Indian whiskies, which are basically rums. But that’s on us—we love really
sweet alcoholic drinks.
Not surprisingly, Sula controls half of India’s wine market. And it’s had a great run since
it went public in December 2022. As of last Friday, Sula’s shares were up 80% from
their listing price.
Before you think the rally in Sula’s shares is because of the company’s dominance in the
wine market, let me tell you, that market is piddly.
India is predominantly a spirits market, which accounted for 59% of its

consumption in volume, followed by beer, which made up 40% in 2021.
Meanwhile, of the 836 million cases of alcohol sold in India during 2021, wines
made up only 2.1 million (<1%) of the overall sales.
Sula Vineyards’ $116M IPO is fine wine for its shareholders, not public-market
investors, The Ken
And the S&P BSE Smallcap Index rose 60% in the same period. Next to that, Sula’s
share-price growth doesn’t seem unusual.
But something unusual did happen on Monday.
Global brokerage CLSA said Sula could rise 50% in the next year. This is not because
Sula entered a new market, or because there were some hitherto invisible signs that
Indians were drinking more wine than before. Instead, it’s all thanks to Maharashtra
reinstating a key subsidy for wines made and sold in the western state.
Under Maharashtra’s Wine Industrial Promotional Scheme, winemakers should be

getting back 80% of the value added tax they pay as a rebate. The scheme, launched in
2021, had been put on hold during the pandemic. But now, not only will winemakers be
eligible for this subsidy for the next five years, but they’ll also be able to get the same for
the past four years.
Investors sent Sula shares soaring after CLSA upgraded its rating on Sula.
Why is a seemingly simple policy change in one state so consequential?
Well, because Maharashtra is Sula’s largest market and accounts for half of Sula’s
volumes. And Maharashtra, thanks to the tax refund, is also the company’s most
profitable state.
As of August, Sula’s tax-refund dues in Maharashtra were Rs 120 crore (US$14.4
million). That’s 1.5X the net profit the winemaker made in the whole of the year ended
March 2023.
Small wonder, then, that analysts and investors are going nuts over the government’s
move.
There’s nothing wrong with that, except that Sula’s future seems to be predicated more
on whether a government policy will survive a change in regimes than on the dynamics
of India’s wine market. And that’s not a great place to be in.
For what it’s worth, India’s alcohol industry, unlike FMCG companies, is tightly
regulated and heavily taxed. Every seventh rupee of states’ revenue comes from local
excise duties, mainly on alcohol.
Even so, brewers and distillers have a growing market that can offset needy states. And
wineries will continue to be on the fringes.
Sula, in its IPO filing, estimated that wine consumption will reach ~3.9 million
cases by 2025. This means it will still remain less than 1% of the overall alco-
bev consumption in India.
Sula Vineyards’ $116M IPO is fine wine for its shareholders, not public-market
investors, The Ken
So right now, a bet on Sula is more to do with old fashioned state largesse than it’s about
Indians growing fonder of wines.
Let me know what you thought of the edition. You can write to me at tradetricks@the-
ken.com.
Regards,
Seetharaman
.
.
Dmart is not
used to being
in a funk for so
long
It’s no longer the company other retail stocks are benchmarked
against
Tuesday, 02 January 2024

I hope you’re having a great start to the new year.
I began this newsletter in October 2021 with a piece on how Dmart was making its
supermarkets bigger and bigger, because that’s how it could sell more high-margin, non-
grocery products such as clothes, shoes, crockery, and home appliances.
Dmart shares were on a tear back then and closed at an all-time high of Rs 5,900
(US$71) that month. It didn’t matter that supermarkets, despite selling essentials, were
nowhere close to how they were pre-Covid. Investors believed that no retailer could
bounce back sooner than Dmart, thanks to its no-frills stores, discounted products, and
handsome profits.
Twenty-seven months and 111 Trade Tricks editions later, they were way off the mark.
Dmart shares are currently trading at Rs 4,065 (US$49). That’s an over 30% drop from
its 2021 peak. In the same period, the benchmark Nifty 50 index has risen almost 20%.
After Dmart went public in March 2017, the stock shot up every single year—until 2021.
This headlong rise seemed a given, which only throws into sharp relief Dmart’s tepid
run in the past two years.
Don’t get me wrong, Dmart is still worth a heck of a lot. With a market capitalisation of
almost US$32 billion, it’s among the 25 largest listed companies in India.
But it’s no longer the company that other retailers are benchmarked against. That
privilege is now Trent’s. The Tata Group company behind apparel chains Westside and
Zara is the hottest retail stock right now, surging 125% in 2023.
There’s one reason for that: Zudio, the value retailer known for its sub-Rs 1,000 (US$12)
apparel and shoes. Set up in 2016, almost two decades after Westside, Zudio already has
over 400 stores. In a matter of months, there will be two Zudio outlets for every
Westside store.
Few expected Zudio’s spectacular rise to harm Dmart. But as I’ve written before, the
kind of shoppers Zudio targets are exactly those that are drawn to Dmart’s cheap t-shirts
and sandals.
Zudio is just as inexpensive, and shopping there is not the endurance test that visiting
Dmart has become. I’ve never seen a Dmart store that doesn’t look like the outside of
Shah Rukh Khan’s house on his birthday.
Even if Dmart’s footfall hasn’t been affected, the people walking in are not adding as
many non-grocery items to their cart as earlier. Dmart’s average bill value peaked in the
year ended March 2022—at Rs 1,680 (US$20)—and has since been on the decline.
According to one brokerage, it will take at least a couple of years for Dmart to reverse
the fall.
Zudio showed that it was possible for a seasoned retailer to pull off something new. This
begs the question: why can’t Dmart do the same?
Because there are limits to what a grocer can do.
It’s not that companies haven’t experimented with supermarkets of all sizes. Just ask
Kishore Biyani. From sprawling hypermarkets (Big Bazaar, Hypercity) to
neighbourhood convenience stores (Easyday Club, Heritage Fresh) to premium-grocery
outlets (Foodhall), Biyani had it all. Then, he duly lost it all.
Small-format stores (2,500-5,000 sq ft) have to compete with kiranas and cannot sway
shoppers with big discounts or a large number of stock-keeping units (SKUs). And
supermarkets selling imported cheeses and cold-pressed oils cater to a very small group
of consumers that can afford them.
That’s precisely why Dmart has stayed away from both and instead focussed on outlets
that average over 41,000 sq ft in size.
It’s not that Dmart hasn’t tried new things. When Dmart was forced to take e-commerce
seriously during the pandemic, not only did it not offer free delivery like its VC-funded
peers, regardless of the size of the order, but it also allowed penny-pinching customers
to pick up their groceries from its 250 sq ft kiosks.
But the online-grocery space has changed dramatically in the past couple of years, and
quick commerce has proved to be more than a flash in the pan.
Dmart still seems to be stuck in 2021, though, prioritising next-day delivery when there
are enough options for consumers to get stuff delivered in minutes. This is Dmart chief
executive Ignatius Navil Noronha during an earnings call in July 2023, in response to a
question on whether it will consider venturing into quick commerce:
We all know what real quick commerce is, right? It is a lot of impulse. It has a
lot of low ticket value items. It is all about delivering in the next 30 minutes. I
don't think we are focusing on that space. We are focusing on bulk. But we see
an opportunity in delivering early. Earlier we used to deliver on an average,
maybe 50% of the orders in 24 hours. Now we are saying 100% should be in 24
hours. Then within that, if you are saying, how much of this can be delivered in
12 hours? I think delivering in 12 hours is a good vision to have considering the
size of the order we have and considering the assortment of the orders. When a
customer on DMART Ready is shopping, she is not expecting the order in the
next 30 minutes or 60 minutes.
There’s logic to what he’s saying, but only if Dmart offers a much better deal than its
rivals. That’s not true, though. A comparison of different online grocers for a basket of
over 30 products in June 2023 found that Jiomart was cheaper than Dmart Ready. And
Blinkit was only 9% more expensive than the latter.
On the aforementioned earnings call, Noronha said he was confident that the company
wouldn’t lose too much money in e-commerce. That may turn out to be true. But for
once, Dmart shouldn’t worry so much about the bottom line, at least not until it has
scale.
And investors certainly wouldn’t mind. They can see that for all the millions Blinkit has
burnt until now, profits aren’t far off.
Correction: An earlier version of the newsletter incorrectly stated that Dmart was part
of the Nifty 50 index. It is not. The Ken regrets the error.
I’d love to know what you thought of this edition. And if you have any suggestions for
what I should write about, please mail me at tradetricks@the-ken.com.
Regards,
Seetharaman
.
.
What if all
electric
vehicles end up
looking the
same?
Over time, SUV, sedan, and crossover designs have moved
towards a sameness that is striking, boring, and perhaps
inevitable. EVs are at a crossroads and likely driving straight
into that sameness
Wednesday, 10 January 2024

Even as news of some large investment commitments at Tamil Nadu’s investors’ meet
was breaking last week—many of them in green energy, electric vehicles (EVs), and
batteries—Tata Motors unveiled its “first pure EV architecture” in Mumbai.
I’m not an automotive nerd; I don’t even have the eye of an auto reviewer. But pictures
of the big launch revived from dormancy a nagging question that I’ve been wrestling
with for a while now.
Are EVs as a category destined to race down the same boring road that SUVs,
crossovers, and sedans have all taken in the past?
Here’s what I mean:
Much has been written about this, and for years. (You can find a tiny sample here and
here). In fact, I came across the picture above on a decade-old Reddit thread.
The broad consensus is that this happened due to a bunch of reasons, including
government regulations and the need to sell the same product in multiple markets,
which forced automakers into converging on neutral-looking designs.
I’m afraid we’re beginning to see those copy-paste design touches in electric vehicles
too.
They don’t look as boxy in the rear as most ICE cars, especially SUVs, but most EVs are
going for minimalism, distinct straight lines of LED lights both back and front, and a
certain angularity for increased aerodynamics.
Are designers all cut from the same cloth, or is an electric vehicle by default a platform-
ised product?
I asked this question to Gagan Agrawal, founder and CEO of Planet Electric, a new
electric light commercial vehicle manufacturer that’s charging up to take on Tata Ace. As
a new company that’s readying to launch an EV built using a brand-new material—
which also gives it a little flexibility in design—Planet Electric, and Agrawal, make some
interesting arguments.
Diversity in sameness
With Punch.ev, Tata Motors has unveiled its second generation EV platform—Activ.ev.
The new car’s front does have some typical EV design touches, especially the LED lights,
but the back is very much like Tata’s first-gen Nexon EV, which was itself built on the
Nexon ICE framework.
It appears the Tatas have taken the existing powertrain and battery packs, and put them
on a platform that’s only a few slight tweaks removed from their first-generation design
(the new platform has a flatter chassis, something that most EV platforms have). In fact,
it won’t be wrong to say the Tatas are a little behind in this race.
It’s not surprising then that Cardekho has called it a “baby Nexon EV”.
At first glance, you will find a lot in common between the exterior design of the
Nexon EV and Punch EV. The latter also gets a split-lighting setup sporting
triangular projector LED headlights and fog lamps, while there’s the new
elongated LED DRL strip on the upper portion. There’s a big air dam in the
lower bumper and a silver skid plate…At the back, there’s no major change
except for updated LED taillights and a silver skid plate.
Why is it so hard to break from the past?
The first reason is designers, says Agrawal. Before he and his team settled on an LCV,
they wanted to build a passenger car, so they engaged with many automobile designers
and found frequent similarities in how they “used lines, cutouts, LED lights, etc”.
Second, there’s the constraint (or convenience?) of using similar suppliers who provide
certain economies of scale.
“Everybody is talking to the same kind of suppliers, which means that at the end of the
day, you have some of these moulds made, you know what the intricacies of a shape are,
and you don’t want to divert too much because a lot of focus is still on the EV battery
and powertrain. They remain key technological challenges for many EVs.”
The future of car design is all about skateboards and top hats. The former
refers to the flat, often self-supporting chassis of an electric vehicle, housing a
large battery pack in the middle and motors at either end, along with the
suspension, brakes and wheels. Upon this sits the top hat, which is car designer-
speak for the body and interior of a vehicle.
With far fewer moving parts than an internal combustion engine, the battery
pack and motors sat in this skateboard chassis perform in a near-universal
way, no matter which manufacturer the vehicle comes from.
This is why all electric cars look exactly the same, Wired
There’s also a bit of oversimplification on the design side because the assumption is that
customers will focus on battery life and motor power, which were sort of taken for
granted in ICE vehicles. As Agrawal puts it: “when you say it’s a two-litre engine, people
know what you’re talking about.”
The long and short of it is, for the foreseeable future, EVs will increasingly look the
same.
Until they won’t.
Design will start to matter again

While many auto designers talk of aerodynamics today in the context of EVs, few are
paying much attention to it.
“Mostly, people mess up aerodynamics with heat exchangers in the front. They
also mess it up by not having a uniform canopy on the elevation. We wanted to
solve it. A square front will not get you those extra 10 kilometres that you want
for the economics to work.”
Gagan Agrawal, founder and CEO of Planet Electric
If a typical SUV today has an aerodynamic drag coefficient of somewhere around 0.35-
0.40, Tesla’s Model Y SUV and Model X are at about 0.22-0.23, which makes Tesla’s
models that much more efficient. Aerodynamics R&D typically costs a few million
dollars (in the high single-digits) if you want to bring down drag from 0.3 to 0.2,
Agrawal says. No one in India is going to do that kind of work.
Planet Electric is using high-strength composites, a new material that allows it to be 10-
15% cheaper than its competitor—which is Tata Ace EV as far as I can see—while still
delivering a higher payload. (One tonne vs 600kg.)
Planet Electric’s LCV (on the left) is priced Rs 9 lakh (US$10,800) while Tata Ace
EV (on the right) is priced close to Rs 11 lakh (US$13,200)
With his founding team mostly from the aerospace industry, Agrawal can’t help but
liken EVs to aircraft or rockets which can’t refuel mid-air and hence need to deliver their
payloads with higher efficiency and “less range anxiety”.
Frankly, range anxiety is being addressed with fast charging, better infra, and better
battery packs. So fundamentally, higher efficiency will come down to reducing the
weight of the vehicle.
“If you have a 2,000kg car to carry 200kg of passengers, you have to ask
whether it can be done in 1,000kg or 1,500kg. I say it can be done, but at a cost.”
Gagan Agrawal, founder and CEO of Planet Electric
Let’s just say that’s some years away; most car makers are yet to even move away from
normal steel or aluminium the way Tesla has done.
That’s a wrap for the week. Keep writing to greenmargins@the-ken.com with your
thoughts and suggestions.
Regards,
Seema Singh
.
What's (not)
surprising
about Ola
Electric’s IPO
papers
The prospectus is enlightening, in a very limited way
Wednesday, 03 January 2024

We are barely three days into 2024 and I’ve already read a few reports on how more
than a dozen startups will float their initial public offerings (IPO) this year. It’s only
fitting, then, that we talk about Ola Electric, which filed its draft red herring prospectus
(DRHP) some days ago.
From founding to imminent public listing in less than five years is a benchmark for any
company, anywhere. So needless to say, I read the DRHP—a 444-page tome—with great
interest.
For a company that has a very controlled way of letting anyone peek into its corporate
developments, I expected the DRHP to enlighten me. And it did, in a very limited way. A
lot of specifics are missing, but I found myself chuckling a few times.
I am sure as we get closer to the listing, we’ll write a detailed long-form piece about it at
The Ken, but for now, I’ll keep it brief and light. Here are a few things that surprised me,
and a few that did not.
New-age business, old-age disclaimer

DRHP risk assessment lingo in most cases is a long list of every conceivable risk in the
business, but it can be fun if you start applying them more seriously to the companies in
question.
For a clean-tech company that is riding the climate-tech wave and bagging subsidies left,
right, and centre, this disclaimer sounds over the top:
“We also cannot guarantee the suppliers’ compliance with ethical business
practices, such as environmental responsibilities, industry standards on
sustainability, fair wage practices and compliance with child labour laws,
among others.”
This is a cop-out for a purportedly low-carbon business. Measuring emissions in the

supply chain—and outside of one’s operations— falls under Scope-3 emissions reporting
and helps prioritise emissions reduction strategies (Scope-3 emissions are categorised
as those resulting from assets not owned or controlled by a company, but are
nevertheless indirectly affected by its activities—both up and down the value chain).
Ola can easily help identify which suppliers are laggards and which are leaders when it
comes to sustainable practices.
As for the clauses on “fair wage practices” and “child labour laws”, why I find them
disappointing should require no explanation.
[Ola Electric’s Futurefactory in Krishnagiri, Tamil Nadu, has an installed capacity
of one million units per year, Source: Ola Electric DRHP]
Short on past, long on future

Ola Electric was founded in 2019, shipped its first electric scooter in December 2021,
and started recognising revenue from sales in the financial year ended March 2022.
While it has garnered the largest market share in India’s electric two-wheeler market to
date, the fact remains that the company has a “limited operating history”.
So, when Ola Electric lists “its ability to design and manufacture EVs without defects” as
a risk factor, we should believe them. After all, in this short operating history, it has 189
matters before consumer dispute redressal commissions which have been filed by its
customers. And the litany of customer complaints on social media is all too loud to miss.
[Ola’s Gigafactory in Krishnagiri, Tamil Nadu, is expected to have a production

capacity of 1.4 GWh by March this year, Source: Ola Electric DRHP]
Routine change cannot be a risk

For two years, until December 2023, Ola Electric customers were able to charge their
Ola EV scooters with their standard and hypercharger guns for free. Now, Ola plans to
charge for this service. “Such policy change could result in customer dissatisfaction and
deter some customers from purchasing our scooters,” says the document.
Come on. That’s just a routine part of growing up for EV companies. It’s another matter
entirely that Ola has taken growth pills, maybe steroids.
Tesla gave free charging to its customers for four full years, from 2012 to 2016, then it
started charging a small fee. Ola is shutting the tap in two years. But that’s a good thing.
Because anytime you give away something for free, people overuse it. Asking people to
pay will ensure people charge as much as they need, and Ola will be able to manage the
line better.
The maturing of your business cannot be a risk factor.

***********
Related parties are all too related

I was surprised and disappointed to learn that for such a young company, Ola Electric
already has 10 subsidiaries, and the promoter group has 15 entities to its name. Related
party transactions are common commercial practices and can be beneficial to the
company—among other things, they reduce transaction costs for the related parties.
But it’s also a given that the uncontrolled nature of related party transactions allows
wealth transfer between the company and the related parties, usually to the detriment of
minority shareholders.
For a business that calls itself “software or computer on wheels”, why would one keep a
key component—the navigation system powered by Ola Maps—housed in a separate
promoter-group company? In case you didn’t know, Ola Maps is owned by Geospatial
Services Pvt Ltd, a promoter group company.
(Indian family-owned businesses are notorious for this. I wrote about one—Apollo
Pharmacy—a while ago.)
***********
Independence of the independent audit committee

Just before filing the DRHP, on 6 December, Ola appointed Manoj Kumar Kohli as an
independent director. He also chairs the audit committee which has two other newly
appointed independent directors—Mensa founder Ananth Sankaranarayanan and
Yourstory founder Shradha Sharma.
What is striking here is the equity that was given to Kohli recently—nearly 300,000
shares. Not that inconsequential when you consider the valuation Ola is hoping to
achieve with the IPO.
***********
High attrition remains high

Ola Electric has been a check-in, check-out counter for professionals for a while now.
Attrition has always been high, and per the DRHP, it remains elevated—47% in the
financial year ended March 2023.
It’s true that a few years ago, there was a dearth of skilled people for the EV ecosystem.
But Ola here says one of the reasons it has high attrition is that its people get poached.
Industry people tell me it has gotten easier for domains like mechanical, electrical
design, and testing roles as “there are a ton of startups where people get their hands
dirty and learn quickly”. But there is a dearth of talent in more specific areas such as
control systems, cell design, cell manufacturing.
We haven’t done those things as a country and the tech has been imported.
“As OEMs vertically integrate different parts of the value chain, those bits are hard to
hire for. Not a lot of folks who have been there, done that. Hence, you will see expats or
folks from the US returning to fill those roles,” says a professional from a rival company.
“Ola's attrition rate is a well-known phenomenon. The reasons are well

documented. In their own words, it's not for everyone. The DRHP is making it
sound nice, as it should.”
I wish Ola Electric success.
I also wish retail investors—not more than 10% of the issue will be available to them;
Sebi doesn’t allow loss-making companies to offer more—luck.
That’s a wrap for our first edition of 2024. Write to greenmargins@the-ken.com if you’d
like to share any thoughts or feedback with us.
Regards,
Seema Singh
.
.
The mystery of
why anyone
would misuse a
Fastag
Why are scammers going to all the trouble of cracking Fasttag
wallets when the payoff is barely a few thousand rupees?
Thursday, 11 January 2024

If you’ve been a reader of Ka-Ching! for a while, you’ll know that we love going down
rabbit holes chasing how various payment products are used or misused.
This edition, it’s the turn of the National Payments Corporation of India’s (NPCI)
Fastag, which was rolled out as part of the retail payment body’s National Electronic
Toll Collection program. These electronic tags were made mandatory in 2021. For the
uninitiated, Fastags are fitted onto the windscreens of vehicles, and work in such a way
that when you zip past toll plazas, money gets deducted from the prepaid wallet linked
to your tag.
Fastags are now accepted across 1,000 different toll plazas across the country. About 81
million were issued in December 2023, and 347 million transactions worth Rs 5,860
crore (US$706 million) were processed during the month.
Where there’s money, though, there are always crooks. And the Fastag ecosystem seems
to have attracted a few of these by now.
Just this Monday, Lithika, a Bengaluru-based user on X ( formerly Twitter) wrote about
how her Fastag was being misused at tolls in several places in North India and the
money in her linked Paytm* wallet deducted.
Indeed, how can this happen?
Afterall, every tag is linked to the vehicle number, phone number, and is validated with
an OTP at the time of registration.
I was curious too, so I asked cybersecurity expert Anand V the same question.
One way Fastags could have been misused in Lithika’s case, he says, is through cloning.
Fastags come with information like Issuer ID, vehicle ID, and the digital signature of the
issuing bank coded onto the tag. But cheap cloning tools can easily help crooks burn
these details onto another card, he says.
“Unlike a credit card it doesn’t have a chip or pin. It’s just data written on a
chip.”
If it’s any consolation, Amit Lakhotia, who runs Park+, a car services platform and is the
largest distributor of Fastags, says that the number of scams they’ve come across on
Fastag “is not much”. Many times, he adds, users think they’ve been scammed because
they get a notification of a debit from their wallet late, sometimes even 24 hours after
having passed through a toll.
Why so late? Because Fastag is not a real-time payment system. And if there is one thing
Indians have been spoiled with recently, it’s real-time payments.
“Sometimes, because of patchy internet issues, toll plaza sends the files for debit
slightly after the car has crossed the toll. So the debits can happen 12+ hours
later in odd cases.”
Amit Lakhotia, Park+
Fastag is also probably the only payment system that has escaped RBI’s two-factor
authentication (2FA) mandates—you don’t have to go through one if you want to use a
Fastag.
And I understand why it’s been spared the treatment: tolls are usually low-value
transactions, after all, and 2FA may end up causing traffic jams at toll booths, defeating
Fastag’s purpose.
The one question I couldn’t get a good answer to while speaking to my sources for this
piece was: just why would scammers go through all this effort to misuse a tag when most
users may not have more than Rs 500 (US$6) or Rs 1,000 (US$12) in their linked
wallets? Of course, very long-distance travellers or commercial vehicle owners may have
a few thousands more, but my point remains.
And honestly, I don’t have a good answer for that, except to remember that this is a
country where crimes have been committed for smaller amounts. If you have a better
answer for why Fastags are being misused, and how, please write to me at kaching@the-
ken.com.
Regards,
Arundhati Ramanathan
Credit cards
are getting a
glow up
Some banks and fintechs are toying with the idea of issuing LED
credit cards
Thursday, 04 January 2024

It’s Gaurav for Ka-Ching! this week.
Credit cards are going to be lit this year. And I mean that very literally.
A few months ago, in September 2023, 16 credit cards were launched at the three-day
Global Fintech Festival in Mumbai. Onecard, Jupiter, Freo, Fi Money were just some of
the fintechs that launched co-branded credit cards at the event. Paytm, Scapia, Kiwi,
and Fibe had done the same earlier in the year.
The haste to add credit cards to product repertoires is palpable among fintechs these
days, who think it’s an appealing product with lucrative revenue-generating potential.
“Go to any bank, even the smallest public or private bank, and check their meeting
registry. You’ll find nearly every fintech in there,” a fintech founder told me recently.
But if every fintech in operation is going to flood the market with more plastic, what’s to
differentiate one card from the other? Sure, one could devise a great rewards
programme, but as we’ve already written in this newsletter, even banks are pulling back
on credit card reward programmes, and fintechs may not be too keen on the cash burn
involved.
Instead, it seems many fintechs are turning to cosmetic solutions. Metal cards are not
new; Onecard, for instance, already has the distinction of issuing such cards to its users.
But metal cards are also very expensive for issuers—costing up to Rs 4,000 per card
(US$48)—so not many fintechs may want to follow suit.
Jupiter, for its part, has launched a transparent credit card.
[Source: Credolite/Twitter]
But there are other fintechs that are considering a far flashier option: light-up LED
credit cards.
Lit payments
Way back in 2020, gaming tech company Razer launched an LED credit card in
Singapore. The company’s logo on the card would light up each time a payment was
made in the tap-to-pay mode.
[Source: Razer]
We could see similar LED credit cards in India this year because some issuers are
already toying with the idea, a payments industry executive tells me.
However, any firm willing to offer such a credit card would likely want to position it as a
premium offering. Usually, fintechs pay around Rs 100 (US$1.20) per card, according to
the executive, and customisations such as Jupiter’s transparent credit card can drive up
the cost of plastic by as much as 1.5X. LED credit cards can cost substantially more than
this, but not as much as a metal card.
So is the expense worth it?
There are a few points worth pondering. Like: how much value would fintechs find in a
user cohort attracted to light-up credit cards? According to a banker I spoke to, an LED
card might be appealing to first-time credit card users, but without any accompanying
value addition to the card’s features, it would likely end up as just another gimmick.
Then, there’s the fact that about 65% of credit card transactions take place online. Only
a fraction of the remaining 35% are tap-to-pay point of sale (PoS) transactions, which,
according to the banker, are where LED credit cards would come in (they work using
RFID signals from PoS machines). And with the RBI-mandated limit of Rs 5,000 for
tap-to-pay card payments, the gap between the cost and business use case could end up
too wide for large banks to consider LED cards.
Onecard has had some success in proving that cool cosmetics minus a reward
programme isn’t just a gimmick. But the novelty of an LED card could quickly wear off,
the banker noted. “Cosmetic changes can make a card stand out, but plastic just doesn’t
convey the heft and premium-ness as a metal card does.”
Would you brighten your year with a light-up credit card? (Asking for a fintech.)
That’s a wrap for today. Write to kaching@the-ken.com if you’d like to share your
thoughts and ideas with us.
Regards,
Gaurav Noronha
The next move

isn’t Boeing’s
In fact, Boeing’s next move is inconsequential
Friday, 12 January 2024

This is Mathew, and I’ll be your host for Inciting Incident this week.
Boeing and its most profitable offering—the 737 Max aircraft—are in the headlines
worldwide for all the wrong reasons. All over again.
On 5 January, a plug on one of the emergency exit doors on Alaska Airlines’ eight-week-
old Boeing 737 Max 9 plane blew out just a few minutes after takeoff, causing rapid
depressurisation. Thankfully, no one was injured.
Ever since the two fatal Boeing 737 Max crashes in 2018 and 2019, which together
claimed 346 lives (there were no survivors in either crash), there has been a growing
consensus in global media that “corporate greed” and corroding organisational culture—
especially after Boeing’s US$14-billion merger with McDonnell Douglas in 1997—is to
blame.
Filmmaker Rory Kennedy’s documentary Downfall: The Case Against Boeing is a

brilliant watch on Netflix if you’d like to get deeper into this. Or perhaps listen to
episodes #6 and #7 of the seven-part Business Wars podcast, which gets into the
Boeing-Airbus duopoly and the events that led to the two tragic crashes.
But this week’s edition of Inciting Incident is not an explainer on what happened last
week. Nor is it an evaluation of what got Boeing here. There’s a ton of reportage around
that already.
It’s about what happens next—and I don’t think the next move is Boeing’s.
Sequential games 101

One of the most popular types of games in game theory is the sequential game. Chess,
for example, is a sequential game—player A moves a piece, then player B moves a piece.
And for every action, there are trade-offs; advantages and disadvantages to each move.
I’d like to break down this situation using the same concept.
First, this isn’t chess; we have a lot more than two players in this game. There is Boeing,
of course. Then the airline companies (both current operators and potential customers
of the 737 Max). Then there are passengers like you and me. And finally, aviation
regulators across the world.
[Source: Wikimedia Commons]
So, after two crashes that killed nearly 350 people, a worldwide grounding, and then an
emergency door flying off in mid-air just a few years after the 737 Max got back in the
air, what moves are available to each of our players?
Imagine you are an airline company that already has an order for 737 Max planes—like,
for example, Akasa Air, which has an existing order for 76 aircraft. You have two options
if you want to drop the Boeing order: a) you could switch to Airbus planes, or b) lease
non-737 MAX planes from leasing companies.
Now, both of these have significant trade-offs involved. As per its September 2023
figures, Airbus has a backlog of nearly 4,000 A320 Neo orders (A320 Neo is Airbus’
offering in the same segment as 737 Max). Which means, you’ll have to wait in the queue
for who knows how long, and you’ll also incur additional costs, like having to train your
Boeing pilots to fly Airbus aircraft.
As Tim Jeans, the former managing director of Monarch Airlines, says to the BBC:
“The thing is, these days, aircraft manufacturing is now really a duopoly
between Airbus in Europe and Boeing in the States. You don’t really have a great
deal of choice. It is not easy, for example, to switch allegiance from one
manufacturer to another because you have to train your pilots differently; there
is all your engineering and maintenance to be changed. So the notion that this is
going to damage Boeing in a sales sense, a commercial sense, is probably wide
off the mark.”
And given that other airlines may also be approaching leasing companies for non-737
Max planes, leasing costs will also rise. Bloomberg columnist Brooke Sutherland argues
that airlines have little choice, whether they like it or not:
From a customer standpoint, it’s just not possible for the aerospace industry to
be entirely dependent on Airbus SE for narrow-body jets. The planemaker is
sold out of its marquee A320 narrow-body planes into the 2030s, and its supply
chain is straining to ramp up production. The Boeing-Airbus duopoly isn’t
exactly good for competition; there’s a good argument to be made that the
pattern of hyper-consolidation in the aerospace industry has diminished
accountability for quality-control lapses and contributed to the deterioration of
safety culture. But a duopoly is better than a monopoly. After a long delay,
Commercial Aircraft Corp. of China Ltd.’s C919 jet — an attempted rival for the
Boeing 737 and Airbus A320 series — has finally started commercial flights
locally and is seeking international certifications, but those are unlikely to be
forthcoming from the FAA or the European Union Aviation Safety Agency any
time soon.
“If incremental customers want a 160+ seat narrowbody aircraft before the end
of this decade, a 737 MAX is the only option unless Airbus can raise production
rates further, which may not be possible,” Melius analyst Spingarn wrote in a
note.
Airlines and Flyers Are Stuck With 737 Max, Like It or Not, Bloomberg
Or there’s the third option: you could go back to Boeing and say, “Hey, I hope you fix
this ASAP, but I want to renegotiate the price for our order”, and maybe pocket a
discount. I wouldn’t be surprised if many companies take this route because in 2020,
after its grounding, Boeing offered huge discounts to companies who were willing to buy
the 737 Max.
Passengers of the world unite?

So what about passengers?
Users on social media have been raging for a couple of days now, some claiming that
they will now think twice before flying on an airline that operates the Boeing 737 Max.
Others say that all airlines should switch from Boeing to Airbus immediately. We’ve
even had calls for a halt in 737 Max production entirely and a return to the drawing
board.
So are we on the brink of a passenger boycott?
Well, actually, nope.
That’s because passengers are heterogeneous, with each making independent decisions,
which naturally reduces their collective bargaining power. And then, there’s the fact that
safety can often take a backseat to convenience or price for many. If you want an
example, just check some of the crash test scores of India’s top-selling cars.
Some passengers may consciously avoid flying on the 737 Max, but I think they’ll likely
be a minority.
Boeing’s best option

Which brings us to Boeing.
At first glance, there seem to be three possible moves the manufacturer can make, all
with significant drawbacks.
i. Admit there were shortcomings, compensate all existing customers, and

offer price cuts for new customers
If Boeing does this, it’s likely its stock will take an even bigger hit and revenues will
decline in the short to medium term. Since the Alaska Airlines mishap, Boeing’s share
prices have already fallen by 8.5%.
ii. Boeing could actively lobby officials and splurge on marketing to try to
convince everyone that the planes are safe
The aircraft manufacturer is already a large spender when it comes to lobbying and US
federal campaign contributions. A Bloomberg story published in January 2020, for
instance, says that Boeing hiked its lobbying expenditure in the wake of the 2019
Ethiopian Airlines crash.
Choosing to take this route, however, may end up cementing the already unfavourable
public perception of the company.
iii. Halt production completely, return to the drawing board, and build a
brand-new jet
Building a new plane takes years and a couple of billion dollars at the least, and Boeing
will have to sacrifice short-term profits for supposed long-term gains in goodwill. Not to
forget, Boeing already has a US$9 billion debt on its balance sheet. Also, if there are
airline companies that are still willing to buy the aircraft (Boeing 737 Max’s current
order book has a backlog of 4,783 aircraft) and large numbers of passengers who don’t
care what aircraft they’re flying on, why should Boeing surrender a market it already
has?
Which is why I think Boeing’s best move now is to do none of the above, and instead,
just assure everyone that it is looking into the issue (like CEO Dave Calhoun’s latest
response does) and will make the required changes, and then sit quietly praying that
another mishap doesn’t happen before everyone moves on.
So whose move is it, then?

Well, the aviation regulators’. Or at least, it should be.
Because this series of incidents with Boeing isn’t something that only the aircraft
manufacturer is to blame for. The United States’ Federal Aviation Administration (FAA)
and other regulators around the world have much to do with it; the FAA more than
others because Boeing is a US company.
In recent times, the FAA has been pulled up for falling standards and a tendency to be
lax with manufacturers.
The FAA had been considered the global aviation industry’s gold standard since
it was established in 1958. But by 2006, the Government Accountability Office,
the nonpartisan congressional watchdog agency, was warning the FAA that
their programs were becoming ineffective because of their tight relationships
with and lax supervision of industry leaders like Boeing.
How Boeing Bought Washington, The Lever

Thus, it is the world’s aviation regulators who have to take control of the narrative,
which currently leaves them looking weak and entirely susceptible to corporate
interests, and turn it around by showing that they can actually do their jobs of ensuring
passenger safety.
“The bottom line is, this is a safety issue, and it’s incumbent on the FAA to ensure
that we don’t have any kind of a repeat of what happened with those two fatal
crashes.”
William McGee, senior fellow for aviation and travel at the American
Economic Liberties Project, to The American Prospect
That’s it for this week. Please let me know what you think about this edition. What did
you like? What could I have done better? What did I miss? Write to me at inciting-
incident@the-ken.com, and we’ll be back in your inbox at 7 a.m. India time next Friday.
Till we meet again,
Mathew Jacob
mathew@the-ken.com
.
The times they
are a-changin’
for Indian
smartwatch
makers
Playing only the low-margin high-volume game for too long can
be a risky business
Friday, 05 January 2024

Time has been on my mind this past fortnight. It’s an appropriate season for it; for
millennia, people have celebrated these moments, when the days start getting longer
again. More daylight—>more time to do things. Of course, that’s a rather
straightforward way of looking at it. People like painter Salvatore Dalí have been more
esoteric in their explorations—the Persistence of Memory, which Dalí painted in 1931, is
something I’ve always been intrigued by.
Time is an inescapable part of stories, too. Characters are always anchored in time,
either a victim of it or changing it. And so are storytellers, because when the times
change, the stories you tell have to change with them. To quote singer-songwriter Bob
Dylan:
The order is rapidly fadin'
And the first one now
Will later be last
For the times they are a-changin'
India’s smartwatch segment is having one of these “times they are a-changin’” moments
right now.
It’s time for a new story

Over a year ago, Counterpoint Research announced that some time between July and
September 2022, India had become the world’s biggest smartwatch market. The news
was reported extensively, as was the primary reason for it: “the global smartwatch
market grew 30% YoY and India grew 167% YoY, taking the top spot for the first time
thanks to the growth of local brands.”
The stars in this story were two Indian smartwatch brands—Noise and Fire-Boltt—
which each crossed 5% in global market share by the end of 2022. In fact, in the first
quarter of last year, Fire-Boltt even surpassed Samsung, taking up the second spot
globally, after Apple. (Noise and Fire-Boltt have about 10% each in global market share
currently, according to Counterpoint’s latest release.)
The way Indian smartwatch makers managed to do this was by launching products
packed with features, but with pricing that was ultra-affordable. How affordable? Well,
by early 2023, smartwatches priced under Rs 2,000 (US$24) made up around 40% of
all smartwatches sold in India.
"This milestone is a testament to our strong focus on innovation, quality, and

affordability. Our agile product strategy, a strong focus on R&D, and our
unwavering commitment to providing the most affordable yet quality products
to our consumers have been some of the biggest drivers of our extraordinary
growth," Fire-Boltt Co-Founders Arnav Kishore and Aayushi Kishore said in a
statement.
India's Fire-Boltt surpasses Samsung for first time in global smartwatch

shipments, The Economic Times
By the third quarter of 2023, most domestic manufacturers had also increased their
localisation levels significantly, with the share of domestic manufacturing in their
products rising to 82% compared to just 4% a year earlier.
But there was a trade-off. While low-cost high-feature products accelerated sales, there
was also a sharp fall in average selling price (ASP), and hence margins. Competition also
intensified, with players such as Titan’s Fasttrack entering the market, leading to more
discounts and aggressive pricing.
To keep up with the competition, these smartwatch brands are compelled to cut
down the prices to almost half. As per an IDC report, the average selling price
of the smartwatches has declined by 44.9 per cent YoY, dropping to $25.6
(approx Rs 2,000) from $46.6 (approx Rs 3,800) in the second quarter of 2023.
[…]
“The first half of 2023 saw hundreds of smartwatch model launches with
premium finishing, sporty appearances, rugged builds, and a variety of strap
finishes like metal, silicon, leather, etc. The second half of 2023 will see
aggressive festive offers and discounts, while brands remain cautious for
supplies,” says Upasana Joshi, Research Manager, Client Devices, IDC India.
Cut to 2024, which The Economic Times has termed a “make or break” year for
smartwatch brands in India. By now, experts quoted in the piece say, the smartwatch
market is behaving like it’s part of the fast-moving fashion and lifestyle industry, which
means high-speed launches at low prices with minimal changes, while spending more
on marketing and leaving little for R&D.
This can be risky business, though.
“Fashion brands keep a high margin of 60-65% to accommodate for the

variations they need to make in their products, all of which might not sell. But
to do that for smartwatches, where margins are at best 20-25%, it starts eating
into your unit economics,” said Sameer Mehta, chief executive at Imagine
Marketing that owns the Boat electronics brand.
Some wearables makers seem to have realised this, because they’re starting to tweak
their product narratives, shifting focus to more premium products.
For instance, Boat, a major player in the Indian wearables market, launched “smart
rings” priced at Rs 8,999 (US$110) in November last year, while Fire-Boltt, for its part,
has begun teasing an Android-Based LTE “Wristphone” that’s set to launch on 10
January.
On that note, Happy New Year! I’ll see you again next week. And as always, please let me
know what you think about this newsletter by writing to inciting-incident@the-ken.com.
Yours,
Ruhi
.
The Great Wall of Fashion
The Nutgraf is a 10-min newsletter

sent at 10 AM IST every Saturday. It
connects the dots and synthesizes
one big event in business, technology
and finance that happened over the
week in India. In a way you’ll never
forget.
This is a paid newsletter that’s

available exclusively to The Ken’s
premium subscribers.
Just 10 mins long Synthesis not analysis

Sometimes memes
06 JAN, 2024
“Who buys clothes online?”
It’s 2011.
I’ve just joined Myntra as a Product Manager.
Neither of us have any idea what I’m doing here. As I’d tell people later, I
suspected that Myntra had hired me 20 minutes after getting funded. The money
had just hit the bank account and once the senior leaders had high-fived and
congratulated each other, someone asked, “Now what?”. Someone else said, “Not
sure. Maybe we should hire some Product Managers? All the cool companies are
doing it.”
And that’s exactly what they did. Their leadership team drove down from the
compact Myntra office at HSR Layout to the IIM Bangalore campus at
Bannerghatta Road, crossing Silk Board junction (traffic was less of a problem in
Bengaluru in 2011, else they’d have probably considered flying to Ahmedabad
instead to save time). When they interviewed me, they figured out instantly that
I had no clue what I was talking about, but I must’ve sounded confident doing
it—essentially the most important skill for a Product Manager. So they hired me
on the spot.
Back then, whenever I’d tell people where I worked, everyone had the same
response.
“Who buys clothes online?”
This may sound strange today, but in 2011, it was a perfectly legitimate question.
E-commerce was just starting off in India. Flipkart mostly sold books, and it
pointed to Amazon as an example of a company it wanted to emulate. Myntra
was different. It was in uncharted territory. The idea that people would go
online, browse through clothes and shoes, and actually buy them without ever
trying them out physically sounded absurd. Since Myntra was the pioneer, it had
to figure out practically everything from scratch.
The biggest problem, it realised pretty quickly, was to solve sizing. Once users
felt confident about which size they needed, they’d start to get comfortable
buying online.
And that’s why I was there. One of my first projects was to launch a new feature
called ‘Relative Size Chart’. As you probably know, sizes aren’t standardised in
apparel. Small, Medium, Large mean different things for different brands. This
was the biggest objection from users who were asked why they didn’t buy clothes
online. And so, this was the first hurdle that Myntra had to overcome. Myntra’s
marketing team did some user research that revealed that most consumers
understood sizing but didn’t understand size charts. They simply couldn’t figure
out measurements in cm or inches for chest, length, etc., for a product. Most of
them didn’t even own a measuring tape. But what they did know was a preferred
size, i.e., that one specific size in one specific brand that fit them perfectly. So the
idea that we had was—maybe size charts could be relative, instead of absolute? If
you knew that a medium size from, say, Reebok fit you perfectly and told us that
on the website, Myntra’s website would suggest that you pick a large if you
wanted to buy a Nike or a small size for Puma.
I was tremendously excited. This was ground-breaking. As far as we could tell,

no e-commerce website else had done anything like this, anywhere in the world.
Imagine me, a newly minted young Product Manager, solving the greatest
unsolved problem facing online fashion. It would be the start of a new era. Out of
turn promotions would follow. Interviews in newspapers. Maybe a Padma Shri
award.
Turns out, we were wrong.

Luckily, I found this out quickly. I went to the Myntra warehouse and measured
t-shirts and jerseys across brands to come up with a relative size chart. After a
few hours, to my disbelief, I discovered that even sizes within the same brand
weren’t consistent. A small size in, say, Adidas isn’t the same across Adidas
products, forget other brands. This wasn’t just one brand. In some cases, there
were variations within the same SKU itself. I found minute, but noticeable
differences in measurements for two identical T-shirts, from the same brand,
both of the same size. I lost all faith in fashion and measurement that day.
Relative size charts were never going to work, because there was no such thing as
absolute sizes. Reality does not care about your PM frameworks and deep
consumer insights. The project got shelved and I moved on to launch other
interesting things—some of which worked spectacularly. Others were disasters,
equally spectacularly. But I didn’t get that promotion. Nobody interviewed me.
They gave the Padma Shri award to Irrfan Khan that year.
I tell this story because online fashion e-commerce was never inevitable. It was
precarious. There were countless reasons why everyone—users, investors,
employees—all simply refused to believe that people would buy expensive clothes
and shoes on the internet. Most of those reasons were also correct.
And yet, somehow, over the next decade, companies figured out ways to do it.
Myntra. Jabong. Flipkart Fashion. Amazon. Ajio. Meesho. Nykaa. All of them
built pioneering products, incredible customer experiences, collaborated with
the right brands, created new ones, and transformed the way millions and
millions of Indians buy clothes online. In 2016, Myntra was skyrocketing,
growing at 60-70% month-on-month. The others weren’t far behind. For a long
time, all of these companies routinely grew at double-digit rates, sometimes even
doubling sales year on year.
And then, quite suddenly, it all came to a halt last year.
If you talk to anybody who works in e-commerce, they’ll tell you that growth
across the board has slowed down, but no category has been hit harder than
fashion e-commerce. As we reported last month, Myntra’s executives believe that
revenue growth “could currently even be in single digits”. Flipkart Fashion’s
numbers are in the same range. Amazon is in the same boat. Meesho has claimed
significant growth (more on this later), but investors seem to agree that the
company is overvalued. Nykaa has seen some growth, but it also started from
zero last year. Ajio is probably doing better than the rest of the pack, but it’s
unclear by how much, and how much of it can be attributed to Reliance’s offline
presence.
It’s almost like they were running faster and faster year after year, until they ran
smack into a wall.
At this point, you’re probably thinking one of two things. If you’re a long-time
reader of The Nutgraf, you’re probably viewing the fashion e-commerce
slowdown as another illustration of the shallowness of India’s internet consumer
market. Or else, you’re probably attributing this as another example of a broader
slowdown in the consumer market as a whole, driven by inflation and low
savings.
Both of these are true, but there’s one more thing.
You know which companies are seeing growth? And not just growth, but
explosive growth?
Offline fashion retail.
Tata Group's retail arm Trent Ltd on Tuesday reported a 189% year-on-year
jump in consolidated net profit at ₹228 crore for the July to September
quarter, driven by robust revenue. It was ₹78.94 crore in the corresponding
quarter of last fiscal.
On a consolidated level, revenues rose 52.7% on-year to ₹2,982 crore,

compared to ₹1,953 crore in the same quarter a year ago. The company earned
a net income of ₹3,062 crore in the second quarter of the current fiscal.
Trent's EBITDA or earnings before interest, taxes, depreciation and

amortisation climbed 78.5% on-year to ₹456.57 crore as against ₹255.81 crore
in the year-ago quarter. The EBITDA margin expanded to 15.3% as against
13.1% YoY.
Trent's Q2 net profit nearly triples to ₹228 crore on robust
revenue, CNBC
Trent, which owns Westside and Zudio, isn’t just doing well, it’s absolutely
killing it. Zudio, which positions itself as a value-fashion retail outlet, is the
magic weapon. In a short period of time, it’s scaled to nearly 400+ stores, and
expects to open another 200 stores next financial year. Tata Trent’s stock price is
at an all-time high, and almost all of the excitement is driven by Zudio.
Tata Trent isn’t the only offline fashion company growing maniacally.
Guess who else is at the party?
Retail giant Reliance Retail Ventures has reported strong growth in Q2FY24
with gross revenues increasing to Rs 77,148 crore as compared to Rs 69,948
crore in the previous quarter.
In terms of categories, the company saw the fashion and lifestyle business
leading the growth followed by grocery and consumer electronics.
Reliance Retail’s fashion and lifestyle segment reported a 32 per cent YoY
growth despite the festive season falling entirely in the next quarter, said the
company.
Reliance Retail Q2 results: Fashion, grocery biz lead growth; focus
on expanding private labels, ET Retail
If Tata Trent is a beast, well, Reliance Retail is a godzilla. It’s a force of nature.
Already Reliance Retail is worth a lot more than its oil or digital vertical. There’s
a minor caveat here—since it’s not listed as a separate company, some of the
details are a bit fuzzy, such as the split of business verticals and the digital and
physical commerce breakdown. However, one thing is clear, i.e., a big driver of
Reliance Retail’s growth is offline fashion and lifestyle.
So we are seeing two things simultaneously:
3. India’s largest fashion e-commerce companies are struggling to grow.

4. India’s largest offline fashion companies are seeing explosive growth.
I can’t stress how bizarre this is. This is completely backwards. E-commerce was
supposed to be the disruptor. The disruptors always grow faster, usually at the
expense of the disrupted. Perhaps what’s happening right now isn’t a
coincidence, but is a direct causality. Maybe Tata Trent and Reliance Retail
aren’t just taking share away from unorganised retail and chains like Arrow and
Allen Solly, but also creating a massive bulwark that’s putting the brakes on
online fashion e-commerce.
For over a decade, fashion e-commerce grew by convincing people who’ve always
bought clothes offline to change their behaviour and move online instead. For
over a decade, they did this easily, and faced little resistance from offline fashion.
Now that has changed. Earlier, I wrote that it almost feels like Myntra, Flipkart
Fashion, and the others have run into a wall.
I believe that wall is offline fashion.
But this does not answer the most important question—why now? For years and
years, fashion e-commerce was red hot. How did they suddenly run into the
Great Wall? What changed?
I’m not so sure, but here’s my theory.
I’m going to let you in on something that one of Myntra’s early leaders told me
back when I was working in fashion e-commerce. At first, I thought it was
extremely reductive, but over time, I’ve changed my mind. Once in response to a
question on how to solve for growth, he said that all fashion e-commerce is
essentially about making decisions everyday on two dimensions:
5. Increasing categories, i.e., going broader

6. Adding premium brands, i.e., going higher
That’s it. There’s nothing else.

I know it sounds ridiculously basic. But this is also exactly what Myntra has done
for a long time. When it started, Myntra positioned itself as a sports and athletic
apparel destination, primarily selling stuff like IPL jerseys. Then it went higher
and added brands like Nike, Puma, and Asics to the mix. Finally, one day, after a
bunch of senior leaders returned from a trip to China, the new mandate became
that Myntra was now going to expand into fashion apparel. T-shirts. Jeans.
Dresses. Boots. Innerwear. Everything. Myntra went broader. Then, it decided to
get more premium brands, like partnering with Hrithik Roshan to get HRX, and
even attempted to get more premium international brands into India. It went
higher.
For several years, this was the playbook that most fashion e-commerce
companies followed to chase growth. Go broad or go high. Or both. Right now,
this is what’s driving growth for fashion e-commerce. Meesho still has some
growth left in it because it’s right at the bottom of the value segment, and it’s
choosing to go higher. It’s also expanding into other categories, which is helping
it go broader. Nykaa was originally just a beauty and cosmetic products
company, but now it’s decided to jump into fashion e-commerce. It added a
category, and that’s driving some growth.
Myntra and Flipkart Fashion, on the other hand, have already gone as broad as
they possibly can. Online fashion e-commerce is quite innovative and has great
margins, but the one thing that it has been unable to do is create new categories.
All it did was replicate categories that were already available offline. That’s not
true for, say, categories like electronics and mobile phones, which fundamentally
created product differentiation between offline and online products. For a long
time, most of the popular and latest gadget models were only available online.
That makes a big difference. Fashion doesn’t do that. It simply cannot. This
means that once a consumer moves from offline to online, it’s just as easy for
them to switch back. This is the great wall in action.
Well, then, if going broader isn’t an option, they can go higher instead. A viable
path for growth for fashion e-commerce is to add more and more premium
brands and products to their collection, and hope to get a larger share of revenue
from their customers. A few weeks ago, I wrote about how, increasingly, fortune
is found at the top of India’s pyramid. No category can do this better than
fashion, since it essentially thrives on the very existence of tons of premium and
luxury brands. How many luxury electronics or mobile phone brands can you
think of? If you are a fashion e-commerce company, going higher is much easier,
and more lucrative, than going broader.
In fact, they tried. Back in 2018, when Myntra acquired Jabong, one of its stated
goals was to convert it into a luxury fashion destination.
Jabong is making a lot of waves when it comes to the luxury

segment and in April we expect to launch both a luxury store
and a designer store in line with the expectations of our
consumers. The launch of the stores is in line with our belief
that the Indian customer is ready to experience both these
segments online. The luxury store will see several innovations
because if we are bringing luxury online, we actually want to
create an experience that is different
Gunjan Soni, Jabong’s Head and the Chief Marketing Officer at
Myntra
A few months later, Flipkart was acquired by Walmart. I imagine Walmart had
other priorities, because Jabong never ended up becoming the luxury destination
it was envisioned to become. It got shuttered, and all of its traffic got redirected
to Flipkart or Myntra. In hindsight, this was probably not a bad decision. Jabong
would have likely run into the great wall too, but from a different direction.
This is the most mind-blowing part of this story, and it illustrates why the wall is
simply impenetrable for online fashion e-commerce companies.
One company owns exclusive rights for nearly all major international and luxury
brands in India.
One company can decide where to market, distribute, and sell these brands.
One company sits right on top of the wall, effectively blocking off upward
movement from fashion e-commerce companies.
And yes, it’s probably the first company that came to your mind.
Fashion e-commerce can’t go broader, because they have no more categories left
to create. They cannot go higher, because they do not have access to the luxury
and premium brands that’ll pump up their sales. The Great Wall stands in their
way, big and imposing.
For years, fashion e-commerce found a way to convince offline shoppers to buy
online through a combination of discounts, friendly return policies, fast
deliveries, vast collection of styles, and some fantastic product innovations.
Myntra even cracked the size chart problem a few years later, but I wasn’t
around to see it happen. But other things also happened, especially in 2023.
Return policies have become less friendly. Convenience fees are higher. We’re
witnessing service degradation.
Maybe fashion e-commerce hasn’t just reached its limits on expansion of breadth
and depth due to offline stores like Reliance and Trent, but also reached a limit
on how well it can convince users to change their behaviour to buy clothes
online.
For over a decade, fashion e-commerce did a ton of things to move users online,
and now, in 2024, those reasons seem less persuasive.
Today, the question that was asked to me all those years ago is back.
It’s in a different tone, but just as urgent.
“Who buys clothes online?"

Share this edition
Here's the link to this edition for you to share. Or you can use the easy share
buttons below
https://the-ken.com/the-nutgraf/the-great-wall-of-fashion/
Take care.
Regards,
Praveen Gopal Krishnan

Should We Blame Immigration For Canada's Economic Woes

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Should We Blame Immigration For Canada's Economic Woes

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Should we blame

Canada might be headed towards a recession and people are

So in today’s Finshots, we explain why Canada might be finally

If you’re already a subscriber or you’re reading this on the app,

Its economic growth was anaemic. And some people blamed it

Another problem was that Canada’s demographic dividend was

How’s that, you ask?

And here’s how the Deputy Governor of the Bank of Canada

Every year during the holidays, my brother makes tourtière [A

He can boost his tourtière output — or increase

• through capital — he could buy a second, bigger stock pot

And like we said, Canada’s demographics weren’t looking good.

So Canada needed outsiders to give a jolt of fresh energy. And it

But what about the impact of all these immigrants on the

Well, it all depends on the type of immigrants coming into the

Also, it looks like immigrants are more sensitive to price

So yeah, the idea seemed to work. And immigration turned out

For starters, the International Monetary Fund (IMF) pointed

So the benefits of these new policies or immigration didn’t really

Secondly, while immigration didn’t affect broader inflation, it

The end result?

The vacancy rates — or the units available — collapsed.

As a consequence of this mismatch, rents are shooting up too.

Now let’s say someone had enough of these exorbitant rents.

So yeah, you can see why Canadians might be inclined to blame

So what can the country do now?

But more than anything, Canadians might need to realize that

In today’s Finshots, we tell you about why everyone believes

If you’re already a subscriber or you’re reading this on the app,

Okay. We say disrupt because that’s what everyone believes is

So will it happen this time?

Well, we don’t know. But it’s not going to be easy.

Secondly, playing a price game is hard. If Jio could offer ultra-

So yeah, disruption seems to be a far dream at the moment.

But wait... maybe, just maybe, Reliance could have something

So he decided to set up his own venture along with a few other

And initially, they dabbled in the bond market. They vacuumed

And to put this in perspective, some people call Aladdin

Rick Rieder, CIO of BlackRock’s $1.7 trillion fixed-income

Of course, it’s up to the fund manager to decide whether they

I mean, the US Federal Reserve, the European Central Bank,

BlackRock actually rents out this software to other financial

Also, this isn’t BlackRock’s first rodeo in India. It partnered

These are interesting times for sure.

In today’s Finshots, we oversimplify Bitcoin ETFs and tell you

Before we begin, if you're someone who loves to keep tabs on

But why did Bitcoin prices shoot up, you ask?

Now, we know what you’re thinking. Why would someone who’s

It’s simple really. If you own a Bitcoin you have to store it in a

It believes that the prices of these ETFs could be manipulated.

So the SEC had to agree to review Grayscale’s application. And

In today’s Finshots, we tell you how Japan’s businesses have

Before we begin, if you're someone who loves to keep tabs on

But that’s just on the broader side of things. Japan’s disasters

Besides, a lot of money also goes into revival and support

See, when a region is affected by a natural disaster, businesses

Small and medium enterprises enjoy these benefits too. So

You see, more than 52,000 companies in Japan are over a

And these businesses probably didn’t have the kind of disaster

And here’s something a study by the Bank of South Korea found

When the 2011 disaster hit Japan, one of its popular

Time for global businesses to take notes from Japan? Perhaps.

Until next time…