WHY Kishore Biyani's Future Looksbleak

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August 9, 2020 `100

kis WHY Hore bi FUTU Yani's Looks re bL eak INDIA’S BEST KNOWN RETAILER IS DROWNING IN DEBT. WHAT OPTIONS DOES THE CHAIRMAN OF THE FUTURE GROUP HAVE?

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Editor-in-Chief: aroon purie A Felled Retailer Group Editorial Director: Raj Chengappa Editor: Rajeev Dubey Group Creative Editor: Nilanjan Das Group Photo Editor: Bandeep Singh Executive Editor: anand adhikari ishore Biyani, India’s best-known retailer, is in trouble. Deep, Deputy Editors: ajita Shashidhar, Naveen Kumar (Money Today) deep trouble. Already drowning in `13,000 crore of debt, Biyani’s Future Group was dealt a deathly blow by the coronavirus lock- special projects and events K Senior Editor: anup Jayaram down, bringing revenues to nil, and crippling its finances. The prolonged correspondents slowdown and lockdown double whammy has by now made the business en- Senior Editors: p.B. Jayakumar, Nevin John, Joe C. Mathew, E. Kumar Sharma, tirely unsustainable. Future Group is struggling to even service debt. On the Dipak Mondal, Manu Kaushik, Sumant Banerji verge of bankruptcy, Biyani got a lease of life when Centre first allowed EMI Associate Editor: Nidhi Singal, Senior Assistant Editor: Sonal Khetarpal moratorium on loans and then deferred the insolvency and bankruptcy code research by a year. But with uncertainty staring in the face, Biyani has been forced Principal Research Analysts: Niti Kiran, Shivani Sharma to get to the negotiating table to attempt a sell-off. A deal is as close as the copy desk end of the month. Potential suitors: Rival Reliance Retail and two Amazon- Senior Editor: Mahesh Jagota Associate Editor: Samali Basu Guha backed consortia of Premji Invest and Samara Capital. Copy Editor: aprajita Sharma

When historians chronicle India’s coronavirus-induced business col- photography lapses, Biyani’s Future Group is unlikely to go unnoticed. An instinctive, Deputy Chief Photographers: Rachit Goswami, Yasir Iqbal intrepid entrepreneur, Biyani has tried his hands at every possible business, Principal Photographer: Rajwant Singh Rawat besides retail. From restaurants to gyms to beauty salons and consumer fi- art nance. He even dabbled in film production. Deputy Art Director: amit Sharma Assistant Art Director: Raj Verma But eventually, it was the dramatic collapse in share prices of group com- production panies between mid-February and April first week that forced Biyani to Chief of Production: Harish aggarwal pledge almost his entire stake in group companies. With stock prices at the Senior Production Coordinator: Narendra Singh Associate Chief Coordinator: Rajesh Verma bottom, he has little option to raise more resources through pledges, even library as the business empire is crumbling. Biyani went through a similar crisis a Assistant Librarian: Satbir Singh decade back but emerged stronger. This time, though, even his staunchest Publishing Director: Manoj Sharma supporters admit that he has given in. In fact, he’ll be lucky if the sale pro- Associate Publisher (Impact): anil Fernandes ceeds are enough to square off all the loans. So, what next for the fearless en- impact team Senior General Manager: Jitendra Lad (West) trepreneur? “He’s never without a plan,” a close associate tells me. “In fact, General Managers: Upendra Singh (Bangalore) he has too many.” Ajita Shashidhar and Nevin John take you through Kishore Kaushiky Gangulie (East) Biyani’s roller-coaster ride. Marketing: Vivek Malhotra, Group Chief Marketing Officer

Biyani’s plight is symptomatic of what ails India Inc.—as reflected in the Newsstand Sales: Deepak Bhatt, Senior General Manager latest Business Today-C Fore Business Confidence Index that surveyed 500 (National Sales); Vipin Bagga, General Manager (Operations); Rajeev Gandhi, Deputy General Manager (North), CEOs and CFOs across the country. Though business confidence has shown Syed asif Saleem, Regional Sales Manager (West), S. paramasivam, Deputy Regional Sales Manager (South), marginal improvement from 46.3 in the January-March quarter to 47 in the piyush Ranjan Das, Senior Sales Manager (East) April-June quarter, the index has stayed below the 50 mark for six quarters in a row now. No wonder, 82 per cent of the respondents surveyed said the gov- Vol. 29, No. 16, for the fortnight July 27 to August 9, 2020. ernment hasn’t done enough to revive the economy; 84 per cent believe in- Released on July 27, 2020. Editorial Office: India Today Mediaplex, FC 8, Sector 16/A, Film City, Noida-201301; Tel: terventions like direct cash transfers, interest rate reduction, higher public 0120-4807100; Fax: 0120-4807150 Advertising Office (Gurgaon): A1-A2, Enkay Centre, Ground Floor, V.N. Commercial Complex, Udyog Vihar, Phase 5, Gurgaon-122001; Tel: 0124- expenditure and capital injection in businesses can boost economic growth 4948400; Fax: 0124-4030919; Mumbai: 1201, 12th Floor, Tower 2 A, One Indiabulls Centre (Jupiter Mills), S.B. Marg, Lower Parel (West), Mumbai-400013; Tel: 022-66063355; Fax: 022- in FY21. 66063226; Chennai: 5th Floor, Main Building No. 443, Guna Complex, Anna Salai, But look at the flip side. Downturns bring opportunities for mergers and Teynampet, Chennai-600018; Tel: 044-28478525; Fax: 044-24361942; Bangalore: 202-204 Richmond Towers, 2nd Floor, 12, Richmond Road, Bangalore-560025; Tel: 080-22212448, acquisitions(M&As). Sectors such as airports, hospitality, tourism, NBFCs, 080-30374106; Fax: 080-22218335; Kolkata: 52, J.L. Road, 4th floor, Kolkata-700071; Tel: 033-22825398, 033-22827726, 033-22821922; Fax: 033-22827254; Hyderabad: 6-3-885/7/B, malls and multiplexes, fashion, affordable housing, auto components are Raj Bhawan Road, Somajiguda, Hyderabad-500082; Tel: 040-23401657, 040-23400479; Ahmedabad: 2nd Floor, 2C, Surya Rath Building, Behind White House, Panchwati, Off: C.G. facing severe cash and liquidity issues. Many firms will require ‘rescue capi- Road, Ahmedabad-380006; Tel: 079-6560393, 079-6560929; Fax: 079-6565293; Kochi: Karakkatt Road, Kochi-682016; Tel: 0484-2377057, 0484-2377058; Fax: 0484-370962 tal’. For entrepreneurs with war chest, new opportunities are opening up Subscriptions: For assistance contact Customer Care, India Today Group, C-9, Sector 10, Noida (U.P.) - 201301; Tel: 0120-2479900 from Delhi & Faridabad; 0120-2479900 (Monday- faster than ever before. Investment bankers are rightfully salivating at the Friday, 10 am-6 pm) from Rest of India; Toll free no: 1800 1800 100 (from BSNL/ MTNL lines); Fax: 0120-4078080; E-mail: [email protected] prospects ahead as M&A outlook looks robust for the next 12 to 36 months. Sales: General Manager Sales, Living Media India Ltd, C-9, Sector 10, Noida (U.P.) - 201301; Anand Adhikari takes you through that journey. Tel: 0120-4019500; Fax: 0120-4019664 © 1998 Living Media India Ltd. All rights reserved throughout the world. Reproduction in any manner is prohibited. Printed & published by Manoj Sharma on behalf of Living Media India Limited. Printed at Thomson Press India Limited, 18-35, Milestone, Delhi-Mathura Road, Faridabad-121007, (Haryana). Published at K-9, Connaught Circus, New Delhi-110 001. Editor: Rajeev Dubey Business Today does not take responsibility for returning unsolicited publication material. All disputes are subject to the exclusive jurisdiction of competent courts and forums in Delhi/New Delhi only.

For reprint rights and syndication enquiries, contact [email protected] [email protected] or call +91-120-4078000 www.syndicationstoday.in @rajeevdubey 37 54

Market Surviving The Pandemic Decoding The Recovery Evolving regulations and poor large, mid and small-cap stocks infrastructure are turning have all taken part in the recent out to be pain points for the rally. is this sustainable? private healthcare sector, August 9, 2020 Cover by already struggling to manage Volume 29, Number 16 NilANjAN dAs the virus outbreak 72 6 40 Interview

The Point Finance “A mechanism that expects NPAs to find their Paying Through own solutions is useless” Their Nose Deals in Distress shardul shroff Crude oil is down nearly 33 per A slowing economy and wide- cent from january. But indian spread stress in india inc. are cre- consumers continue to pay a ating opportunities for promoters bomb for petrol and diesel and strategic investors to ink 60 M&As, buy back shares and delist 76 Desi Vs. Videshi A campaign for boycott of Chinese products is opening Money Today up opportunities for local brands in smartphones and Stay Put in MFs TVs. But do they have the do not get overwhelmed by the scale to upstage the Chinese? smart market recovery and book profits. The uptrend is likely to continue

68 14 46 Management BCI Industry Bucking The Trend Hoping Brand: The X-factor in a season of layoffs and pay Against Hope Branding goes for course cuts, select companies are not Business confidence bounces a correction to reach consumers just hiring, but also compensating bit in the first quarter as corpo- stuck at home better. Here's why rate leaders remain hopeful of 80 bigger government intervention to revive the economy, finds the latest Business Today-C fore Network Business Confidence survey The Occasional Flier 18 businesstoday.in jaideep devare of Mahindra insurance Brokers has made flying his passion. it has taught him how 30 cover story to take calculated risks mi Policy A sTAy CoNNECTEd wiTH Us oN FUTUre 82 Digital Tax: www.facebook.com/BusinessToday@BT_india The Road Ahead UnCerTain

Even as india increases the chit gosw Kishore Biyani Best Advice I Ever Got scope of the Equalisation levy, is sTarinG aT a MaJor DeBT An Feature the Us has initiated a probe ph r A “Choose your battles against 10 countries for impos- Crisis. here is Why The From time to time, you will see pages titled “An Impact oPTions For The FUTUre Feature” or “Advertorial” in Business Today. This is no wisely, fight the most ing taxes on digital services. important ones and let This could effectively mean in- GroUP ChairMan are LiMiTeD different from an advertisement and the magazine’s editorial dia, like many others, could face staff is not involved in its creation in any way. the rest go”

Us reprisal, going forward photogr A Gerd Hoefner

4 Business Today 9 August 2020 9 August 2020 Business Today 5 37 54

Us reprisal, going forward photogr A Gerd Hoefner

4 Business Today 9 August 2020 9 August 2020 Business Today 5 Petrol/Diesel Prices Rise; Diesel Turns as Pricey as Petrol… 85 Prices in new delhi (`/Litre) 70% 80 The Point The proportion 75 of taxes in retail Petrol price of petrol/ 70 diesel 65 diesel 60

55 04-Jan-20 04-Jul-20

PAYING …Despite Crude Oil Being Far From Highs 80 THROUGH CRude OIl PRICeS 70 (Indian Basket); $/Barrel 60 50 THEIR NOSE Taxes Form a Consumption 40 Crude oil is down nearly 33 per cent from Big Chunk of Dips Sharply… January. But Indian consumers continue to 30 Retail Price 20 pay a bomb for petrol and diesel 20 10 By Shivani Sharma | Graphics by Tanmoy Chakraborty 10 80.43 80.53 0 0 04-Jan-20 04-Jul-20 18.56 18.83 -10 Petrol -20 Germany diesel India Petrol Prices Russia -30 France at Global 1.46 0.66 nepal 32.98 31.83 1.51 -40 Median Level 0.79 China -50 2.54 COnSumPTIOn UK 1.36 0.85 3.64 -60 (Y-o-Y Change %) PeTROl -70 ($/Litre) 25.25 27.33 South -80 Korea May 2019 June 2020 PeTRoL dIeSeL Spain 1.12 1.29 Base Price + Freight …But So Does Japan dealer Commission excise duty Production 1.18 VaT (including on Canada dealer commission) 10 0.89 5 Hong Prices In Delhi, from 0 Kong July 1; in `/litre USa 2.86 -5 0.66 -10 Petrol -15 Brazil australia diesel 0.74 0.82 -20 -25 PROduCTIOn -30 (Y-o-Y Change %) Source: South Singapore -35 IndianOil, africa May 2019 June 2020 CMIE, 0.76 Pakistan 1.4 Bloomberg, Thailand 0.44 IndIa Sri Lanka PPAC 0.92 0.86 14 1.01 30 May 2019 Business Today 15 Petrol/Diesel Prices Rise; Diesel Turns as Pricey as Petrol… 85 Prices in new delhi (`/Litre) 70% 80 The Point The proportion 75 of taxes in retail Petrol price of petrol/ 70 diesel 65 diesel 60

55 04-Jan-20 04-Jul-20

2,021 609 1 9 0 44 224 412 (2.2%) AmoUnt Centre StareS 0.8 (68%) 10 StateS Accepted (0.4%) (` thousand 1 2 crore) . aCCoUnt For 5 at Severe 6 1 Haryana FinanCial StreSS Capital 85% Market receipts Revenue Rajasthan î Central government finances came under deficit 1

borrowinGS 5 heavy strain during April and May. Revenue Gujarat

Revenue 6

receipts during these two months, at `44,667 . receipts î Tamil Nadu has borrowed the West Bengal crore, were merely 2.2 per cent of budget 2,630 most from the market this year 8 Maharashtra estimate for FY21 456 796 412 î It is followed by Maharashtra, Telangana î Net tax collections shrank 70 per cent (17%) 466 Rajasthan, Andhra Pradesh, year-on-year to `33,850 crore, 2.1 per cent of 55 (59%) (13%) Telangana, Kerala and West budget estimate, compared to 7 per cent in Bengal Karnataka Andhra Pradesh

April-May 2019

î Most states are expected to . 5

Tamil Nadu 2 2 î Fiscal deficit touched `4,66,343 crore, borrow more this year as their 8

Kerala 58.6 per cent of annual budget estimate revenues will fall due to the Capital coronavirus-induced slowdown

Budget Estimates (FY21) Fiscal expenditure 7

Source: 1 2 . 4 deficit Actuals up to May 20 CARE Ratings Revenue (` thousand crore) expenditure Source: Finance Ministry

î India’s external î Commercial borrowings î US dollar debt was $558.6 at 39.4 per cent was the denominated external billion at the end largest component followed debt continued GSt Collections core sector shows of March 2020, an by non-resident deposits as the largest Debt Up increase of $15.4 (23.4 per cent) and component Jump in June improvement billion over short-term trade credit (18.2 with a 53.7 per end-March 2019 per cent) cent share î There was a smart recovery in Goods and î The output of eight core industries 2.8% in FY20 Services Tax (GST) collections in June shrank 23 per cent in May compared with 37 per cent in April î Gross GST revenue was `90,971 crore, way higher than `32,294 crore in April, the î Industries such as coal, cement, steel, first month of the lockdown natural gas, oil took a substantial hit due 130.6 to the lockdown î However, first-quarter collections 220.3 were 59 per cent of what was raised in the year-ago period Growth in eiGht core indUstries 130.4 (Y-o-Y%) Gst collections 10 106.9 (` thousand crore) 206.6 5 108.4 126.2 June 0 May 102.2 99 -5 201.8 April -10 57.5 57.2 60 -15

100 -20 oUtstAndinG At end of mArch 90 -25 (US$ billion) 25.4 25.6

9.5 1.2 27.2 -30

Commercial Borrowings Bilateral 5.8 7.9 1.2 5.5 113 62 Non-resident Deposits Trade Credit Total 7.2 -35

Total 1.2 Short-term Debt IMF 529.3 5.4 32 543.1 -40 2020 2019 2018 Multilateral Rupee Debt Total FY20 FY21 May 2019 May 2020 558.6 Source: PIB Source: Office of Economic Advisor

8 Business Today 9 August 2020 9 August 2020 Business Today 9 The Point Union Government AccoUnt April- May 2020

borrowinGS 5 heavy strain during April and May. Revenue Gujarat

Revenue 6

April-May 2019

î Most states are expected to . 5

Tamil Nadu 2 2 î Fiscal deficit touched `4,66,343 crore, borrow more this year as their 8

Kerala 58.6 per cent of annual budget estimate revenues will fall due to the Capital coronavirus-induced slowdown

Budget Estimates (FY21) Fiscal expenditure 7

Source: 1 2 . 4 deficit Actuals up to May 20 CARE Ratings Revenue (` thousand crore) expenditure Source: Finance Ministry

100 -20 oUtstAndinG At end of mArch 90 -25 (US$ billion) 25.4 25.6

9.5 1.2 27.2 -30

Commercial Borrowings Bilateral 5.8 7.9 1.2 5.5 113 62 Non-resident Deposits Trade Credit Total 7.2 -35

Total 1.2 Short-term Debt IMF 529.3 5.4 32 543.1 -40 2020 2019 2018 Multilateral Rupee Debt Total FY20 FY21 May 2019 May 2020 558.6 Source: PIB Source: Office of Economic Advisor

8 Business Today 9 August 2020 9 August 2020 Business Today 9 The Point

50 î Retail price inflation for industrial workers fell to employmeNt CPI-IW inflation 5.1 per cent in May from 5.5 per cent in April 2020 40 î It was much higher at 8.7 per cent in the same falls to 5.1% in month a year ago. Food group recorded inflation NUmBers 30 of 5.9 per cent compared to 6.6 per cent in April sHow smArt 20 May 2020 eMPloyMent rate In urban IndIa (%) reCovery 10 î In spite of a minor 0 deterioration in labour 05-Jan-20 28-Jun-20 conditions in the week ended 10.6 Food Fuel & lIght CPI-IW June 28, there was a dramatic 50 improvement in the employment 8.3 7.7 7.5

7.6 rate in April and May 6.8

7.0 40 6.9 6.7 6.6

6.5 ClothIng & MIsCellaneous î The improvement in rural 5.9 5.5 5.5 FootWear 5.1 India was on account of higher 30 spending under MGNREGA and 3.2 2.8 2.7 2.7

2.4 rural development schemes 2.7 2.0

2.2 20 2.2 1.6 to combat the impact of the eMPloyMent rate In lockdown (person days of jobs rural IndIa (%) under MGNREGA touched an all- 10 time high in May) 0 Source: CMIE 05-Jan-20 28-Jun-20 Jan-20 Jan-20 Jan-20 Jan-20 Jan-20 Apr-20 Apr-20 Apr-20 Apr-20 Apr-20 Feb-20 Feb-20 Feb-20 Feb-20 Feb-20 Mar-20 Mar-20 Mar-20 Mar-20 Mar-20 May-20 May-20 May-20 May-20 May-20

Source: MOSPI May’20 New INvestmeNts China Accounts for auto sales Jun’20

4,00,742 Bajaj Hero Auto Dry Up 48% steel exports throw up MotoCorp î The June quarter saw 135 new investment î Despite tensions on the border, China proposals, the lowest in any quarter accounted for 48 per cent of Indian steel June surprise exports in April-May î The value of these investments (`56,100 î Demand for automobiles crore) is the lowest in 16 years î Crash in domestic demand forced steel rose sharply in June producers to turn to export markets Source: CMIE compared to May as states TVS Mahindra Escorts Value oF î With crash in prices globally due to weak eased the coronavirus- Motor & Mahindra InVesMents 5.15 demand, China is finding it better to import induced lockdown (`Lakh cr) finished/semi-finished steel 4.36 î The rise was led by rural 2,33,809

3.37 steel exPorts and semi-urban areas. 3.16 3.04 2.8 (Apr 1 to May 31, 2020, People bought vehicles to

2.3 Metric Tonnes) commute as public transport

1.16 remained dysfunctional; 1,75,533 4 1 Maruti 0.56 4 , Hero MotoCorp sales rose 0 Suzuki 0 nearly four times

0 seMI 0

FInIshed î Tractor demand remained 1,27,128

4 1,287 Tata 7 1,12,682

7 1,714 strong due to partial

(Number of 8 Ashok 2

2 Motors

, economic recovery in rural Investment Proposals) 1 Leyland markets; Escorts reported a 1,447

rise in sales 70,130 1,142 58,906 1,109 î Sales, however, were 903 44,341

784 substantially down year- 33,901 684 664

609 on-year. This shows it will 135 18,539

be months before demand 15,625 8,960 6,594 4,383

China 3,017 returns to pre-Covid levels 1,420 Other 18-Jun 19-Jun 20-Jun 19-Mar 18-Sep 19-Sep 18-Dec 19-Dec 20-Mar Source: JPC Source: Motilal Oswal

10 Business Today 9 August 2020 9 August 2020 Business Today 11 The Point

7.6 rate in April and May 6.8

7.0 40 6.9 6.7 6.6

6.5 ClothIng & MIsCellaneous î The improvement in rural 5.9 5.5 5.5 FootWear 5.1 India was on account of higher 30 spending under MGNREGA and 3.2 2.8 2.7 2.7

2.4 rural development schemes 2.7 2.0

Source: MOSPI May’20 New INvestmeNts China Accounts for auto sales Jun’20

3.37 steel exPorts and semi-urban areas. 3.16 3.04 2.8 (Apr 1 to May 31, 2020, People bought vehicles to

2.3 Metric Tonnes) commute as public transport

1.16 remained dysfunctional; 1,75,533 4 1 Maruti 0.56 4 , Hero MotoCorp sales rose 0 Suzuki 0 nearly four times

0 seMI 0

FInIshed î Tractor demand remained 1,27,128

4 1,287 Tata 7 1,12,682

7 1,714 strong due to partial

(Number of 8 Ashok 2

2 Motors

, economic recovery in rural Investment Proposals) 1 Leyland markets; Escorts reported a 1,447

rise in sales 70,130 1,142 58,906 1,109 î Sales, however, were 903 44,341

784 substantially down year- 33,901 684 664

609 on-year. This shows it will 135 18,539

be months before demand 15,625 8,960 6,594 4,383

China 3,017 returns to pre-Covid levels 1,420 Other 18-Jun 19-Jun 20-Jun 19-Mar 18-Sep 19-Sep 18-Dec 19-Dec 20-Mar Source: JPC Source: Motilal Oswal

10 Business Today 9 August 2020 9 August 2020 Business Today 11

Mild Recovery Some positive movement but BCI has been below 50 for six straight quarters now

50.6 49.3 48.7 50.5 49.7 48.5 49.1 48.6 46.3 47 Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020

BCI by BCI by Hoping Sector 49.1 46.4 47.5 48.5 47.2 46.6 48.2 45.8 46.9 Size* 50.7 46.9 47.4 49.6 47.4 46.8 47.7 46.2 47.2 46.6 45.1 46.5 Confidence Big is Low Across Businesses Segments Are More Against Positive Than Others Services Light Heavy Big Medium Small Micro Hope industry engineering businesses businesses businesses businesses *Big businesses: Turnover > `500 crore; Medium businesses: Turnover `100-500 crore; Small businesses: Turnover `5-100 crore; Micro businesses: Turnover < `5 crore Business Oct-Dec 2019 Jan-Mar 2020 Apr-Jun 2020 confidence Bounces a Bit in the first quarter as Macro Update corporate leaders remain hopeful of Gap between exports and imports shrinks, inflation another bright spot Bigger government Industrial production intervention Exports rise MoM Inflation falls off its peak shrinks 18 per cent to revive the CPI Inflation (%) IIP growth (%) economy, finds 8 10 4.9 5 the latest 7 25,745 38,524 27,097 39,596 25,834 41,146 27,729 37,501 21,376 31,166 10,356 17,120 19,055 22,202 21,907 21,114 Business today-c 6.1 0 6 -5 fore Business -10 5 confidence survey -15 4.6 -18.3 4 -20 By MANU KAUSHIK Nov ’19 Dec ’19 Jan ’20 Feb ’20 Mar ’20 Apr ’20 May ’20 Jun ’20 Oct ’19 Jun ’20 Jul ’19 Mar ’20 ILLUSTRATION By RAJ VERMA Exports Imports Consumer Price Index; (YoY change) (YoY change ); Base Year 2011/12 Figures in $ million Index imputed for April and May 2020 Macro data source: CMIE

he exodus of compa- away from China, they are looking for slight recovery in key economic indi- nies from China is not not just cost savings but also a captive cators, has improved the sentiment of new. It’s been happening market for their products and services. corporate leaders. The Business Con- T since the start of the trade India, with its big market, is asking fidence Index (BCI) – on a scale of 100 war between China and the US in 2018. companies to set up base here, report- – jumped to 47 in the April-June quar- The only difference this time is that In- edly developing a land pool almost dou- ter compared with 46.3 in the previous dia has a fair chance of attracting com- ble the size of Luxembourg. quarter and 48.6 in the quarter before panies leaving China. This is in sharp “Soon after the pandemic broke out, that. Market research agency C fore contrast to the earlier situation where there was flight of capital from India. quizzed 500 CEOs and chief financial almost all companies which moved Later, investors started coming back as officers across 12 cities for the survey. out of China went to CLMV (Cambo- they realised that India is the best bet Siddhartha Sanyal, Chief Econo- dia, Laos, Myanmar, and Vietnam) for them,” says Prahalathan Iyer, Chief mist and Head of Research at Bandhan countries as they were cost efficient General Manager (Research and Anal- Bank, says the reason for this opti- and better connected to the global sup- ysis Group) at state-run Export-Import mism is a lot more clarity in minds of ply chain. The Covid-19 pandemic has Bank of India. corporate leaders. “Towards the end changed everything. The growing prominence of India in of March, when the previous survey As companies look at diversifying eyes of global investors, coupled with was conducted, there was a shock ele-

14 Business Today 9 August 2020 9 August 2020 Business Today 15 Mild Recovery Some positive movement but BCI has been below 50 for six straight quarters now

50.6 49.3 48.7 50.5 49.7 48.5 49.1 48.6 46.3 47 Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020

14 Business Today 9 August 2020 9 August 2020 Business Today 15 Economy – Business Confidence Index

ment about the lockdown. Businesses Some economists that Business have now understood that they have to Gloomy Quarter Hoping For a Turnaround Today spoke with believe that direct strike a balance between what to pri- Businesses Find Hardly any Redeeming Feature Businesses are pinning hope on start of the festive capital injection and giving subsidies to oritise and where to compromise. Even in April-June Quarter season for things to improve businesses are unproductive. “It might though the key economic indicators help corporates in the short term but are still significantly lower compared will not make them sustainable in the to the December quarter, they are bet- Overall Economic Economic Prospects Order Book long run. The production-linked incen- Conditions As many as 63% Just 4% ter than they were in the previous three 77 95% say respondents expect expect tive scheme that they have launched for months,” he says. conditions improvement 59 things to the electronics sector will have a long- worsened for them That is why, after several quarters of 32 worsen term impact,” says an economist. pessimism, the latest survey shows that 3 The survey points out that 77 per things are looking up for corporate In- 5 cent of respondents are planning to dia. A large number of respondents are 4 8 27 sell non-core assets and will go for re- 18 1 1 hopeful that the situation will improve 4 1 55 structuring in the current financial in areas like economic prospects, over- 0 year. “This is time for consolidation. all economic situation, overall business We expect businesses to focus on their situation, financial situation, sales, Financial Situation Sales Pickup core strengths and de-bottlenecking working capital, availability of finance, 37% say they see a 65% see higher cash flow issues,” says Sanyal. Another hiring, production level, order book, Availability of Demand ray of hope sales in current 91 per cent are not looking at raising re- Business Finance Conditions quarter 58 inventory, utilisation of production ca- Just 2% say 94% say things sources for expansion at the moment as pacity and profits. there was an 54 71 turned for the most are operating below optimal level Though a total of 82 per cent respon- improvement worse 3 5 32 of production due to poor demand. dents believe the government hasn’t 16 44 32 The survey shows that respondents done enough to revive the economy, 60 7 are expecting some deterioration in 26 2 per cent expect the overall economic areas like cost of raw material and sell- 18 23 1 situation to improve in the July-Sep- ing price. For example, 11 per cent cor- 5 tember quarter as compared to just 10 2 1 porate leaders said cost of raw mate- per cent predicting so in the previous 0 0 rial will fall in the September quarter survey. Reserve Bank of India (RBI) Hiring Pickup Profit Pickup as against 25 per cent hoping so in the Governor Shaktikanta Das recently More than half see Half expect previous survey. no change 1 profits to rise said the economy is showing signs of 76 As a supplement to the survey, we do normalcy with lockdown being eased from here on an assessment of other economic indi- Hiring Conditions 52 7 across the country. Also, 67 per cent re- Merely 1% cators. These are trade, index of indus- respondents say there 22 42 spondents hope that their production 12 trial production (IIP) and consumer was an improvement 11 3 levels will improve in the September price inflation (CPI). The key industrial quarter compared to just 9 per cent say- 44 output indicator, IIP, continued to slide ing so in the previous survey. 6 in May. It fell 34.7 per cent compared to 14 In June, the government had an- the same month last year. This was bet- nounced a stimulus package worth `20 ter than the 57.6 per cent contraction 9 lakh crore (about 10 per cent of GDP) 1 in April. Retail inflation grew 6.09 per covering social sector and a host of in- cent in June, marginally higher than the 0 Has India Done What Kind of Intervention Could dustries. Out of that, about 60 per cent Enough to Revive Help Revive Economic Growth for RBI’s upper margin of 6 per cent. will come through financial institu- Economy? FY21 and Beyond? About the future roadmap, 84 per tions and the RBI. Many worry about cent said interventions such as direct Direct cash transfer to individuals 9 the low impact of the package as the 81 Profit Margins 7 cash transfers to individuals, increase actual fiscal impact, that is, the direct As many as 93% Yes Increase in public expenditure 1 in public expenditure, interest rate re- say margins fell stimulus, is just 1-2 per cent of GDP. Interest rate reduction 2 duction and capital injection in busi- EXIM Bank of India’s Iyer says the gov- nesses can boost economic growth for 82 Capital injection in businesses 4 ernment might be keeping a cushion. No FY21 and beyond. The positive outlook All of the above 84 “They have all options available which 12 6 of business leaders in the middle of a 1 11 might not be implemented at one go. I None of the above 0 global crisis has a surprise element to it. think what the government has done is 0 Can't say Now, whether they continue to hold on adequate to start with. If there’s a need, to this optimistic view is as unpredict- they may exercise other options like able as the march of the pandemic. extending moratorium on loans and Substantially worse Moderately worse Same/no change Substantially worse Moderately worse Same/no change deferment of taxes,” he says. Moderately better Substantially better All figures in per cent Moderately better Substantially better All figures in per cent @manukaushik

16 Business Today 9 August 2020 9 August 2020 Business Today 17 Economy – Business Confidence Index

16 Business Today 9 August 2020 9 August 2020 Business Today 17 cover story future group FUtUre Uncertain Kishore Biyani is sTarinG aT a MaJor DeBT Crisis. here is Why The oPTions For The FUTUre GroUP ChairMan are LiMiTeD By ajita shashidhar & nEVin jOhn PhOtO MOntagE By BandEEP singh

18 9 August 2020 Business Today 19 cover story future group FUtUre Uncertain Kishore Biyani is sTarinG aT a MaJor DeBT Crisis. here is Why The oPTions For The FUTUre GroUP ChairMan are LiMiTeD By ajita shashidhar & nEVin jOhn PhOtO MOntagE By BandEEP singh

18 9 August 2020 Business Today 19 cover story How future group Biyani Got Into Debt

Acquired Nilgiris for There is a temporary reprieve, thanks to the loan mor- `300 crore (2014); cale has always fascinated Future Group atorium and one-year suspension of the Insolvency and EasyDay for `500 crore Chairman Kishore Biyani. The bigger, the bet- Bankruptcy Code(IBC). Had it not been for the corona- (2015) and Heritage for virus lockdown, Biyani’s companies would have been fac- `295 crore (2016) ter. In 2017, when he unveiled his ambitious Re- ing insolvency. He had a March deadline for repayment of tail 3.0 strategy, he articulated his dream of cre- dues. But the Reserve Bank of India’s loan moratorium has Set up 1,100 small for- provided a breather. In mid-May, the Centre also exempt- mat stores; most were ating a $1 trillion business by 2047. At that time, ed all Covid-related debt from the definition of default un- non-performers. Con- the world’s biggest retailer Walmart generated der the IBC and suspended fresh initiation of insolvency sumers were not willing for up to a year. In this one-year period, the lenders will to pay `999 annual fee $485 billion in revenue, a little less than half of not be able to recommend Future Group companies for for 10 per cent discount Biyani’s ambition. But Biyani was banking on a insolvency, even if they default on loan repayments. In- stead, the loans will have to be restructured, by taking out Aggressive expansion of modest year-on-year growth of 20 per cent per the unsustainable portion. small-format annum for his then `20,000 crore empire. But the business is already unsustainable and Biyani is stores backfired on the negotiating table to exit — in full or in part. While His recipe for greater scale: service every Reliance Retail remains the frontrunner, two Amazon- Private brand strategy backed consortia of Premji Invest or Samara Capital may failed. Aimed to scale up possible consumer. First with 70,000-1,00,000 also emerge as dark horses. Sources say a deal is likely as private brands (Future sq.ft. big-box retail stores, Big Bazaar. Second, early as end of July. One of the plans discussed by negotia- tors of Reliance Retail and Future Group is a complete share Consumer) to `20,000 in local areas through 2,000 sq.ft. small-format swap. It is not clear how the swap will be designed as Reli- crore by 2021. Reached neighbourhood stores, EasyDay (he targeted ance Retail is not listed while Biyani has six listed entities. `4,040 crore in FY20 The deal will lead to Biyani’s exit from the retail business. S Strategy of using stores 10,000 tech-enabled EasyDay stores by 2020). This is not the first time Biyani is struggling with debt. And third, create an online marketplace where Nearly a decade ago, in FY12, he was in an identical `12,000 to distribute private crore debt soup. But he extricated himself by selling his brands and reduce these stores could access Future Group’s entire most valuable asset, Pantaloons Retail, to Aditya Birla presence of established retail inventory. Alongside, he wanted a consum- group for `1,600 crore. He also sold Future Capital to War- brands led to dip in burg Pincus for `4,250 crore and his stake in apparel brands footfalls er play as well. His excitement about the group’s BIBA and AND. But this time, the chances of a comeback fledgling FMCG business, Future Consumer, are dim. “The big difference this time is that we are in a re- Private brands consti- cession globally. He was able to make a comeback in 2012 as tuted 35-40 per cent of was particularly infectious. He dreamt of scaling market dynamics were strong. This time, he will be lucky if inventory, but he gets money to just square off the debt,” says the CEO of a there were quality issues up the `2,000 crore business to `20,000 crore leading FMCG company. by 2021. While rentals shouldn't Three years down the road, those dreams lie In Dire Straits exceed 2 per cent of a Things weren’t so bad till February. Market buzz about store's cost, in case of shattered. With profits dipping 11.24 per cent to his inability to service debt began in mid-February, send- Future Group, they were `619 crore in the first nine months of FY20 (it ing shares of group companies crashing, triggering rating 10-20 per cent of the downgrades, even as lenders sought more shares as col- cost is yet to declare full-year results), the group’s lateral against loans to Biyani. Between mid-February and first week of April, shares of Future Retail fell by 83 per cent, woes came out into the open in the last quar- Future Lifestyle by 75 per cent and Future Enterprise by 65 Liquidity crisis prior to Covid and complete halt ter of FY20. Slowdown and an uncertain future per cent. The market cap of all group companies crashed around 75 per cent from `33,365 crore on February 1 to of business during the amid lockdowns have crippled his ability to ser- `8,354 crore on April 1. This forced Biyani to pledge 80-100 nationwide lockdown added to the crisis vice loans, drowning him in `13,000 crore of per cent of his stakes in group companies. UBS and IDBI Trusteeship tried to invoke the pledge but Biyani got inter- debt. Biyani is staring at sure-shot bankruptcy. im relief from the Bombay High Court. The Supreme Court

20 Business Today 9 August 2020 9 August 2020 Business Today 21 cover story How future group Biyani Got Into Debt

20 Business Today 9 August 2020 9 August 2020 Business Today 21 cover story future group

dismissed the Special Leave Petition filed by UBS AG, Lon- will have to exit. He may also have to sign a non-compete don Branch, challenging the high court ruling. pact disallowing him from starting a new retail venture. With almost all his equity pledged with lenders, Biyani “He is prepared for a complete exit. In fact, he has no choice, is desperate to find buyers for his business. he desperately needs cash. Only a larger group-level deal While repeated emails to the company didn’t elicit a will give him the liquidity he needs,” says the banker. Till DebT Do Us PaRT response, a banker close to the company says when the A senior retail industry expert, who has known Biyani stock market debacle happened in February, the company since the late eighties, says if he has a choice, he will never had just put together a detailed cost-cutting plan to tide sell to Mukesh Ambani. “When Reliance decided to enter over the crisis. “Kishore had predicted that 2020 would retail in 2007, Biyani and Ambani had met, and the former be a tough year globally. He was expecting a recession and had invited Ambani to join his business. He opened up every (` thousand cr) was aware that the debt challenge would soon haunt him. detail of his business but Reliance entered the retail sector 15 Therefore, he decided to shut down any business that was on its own. Biyani shared his business model in good faith.” 12 625 burning cash,” says the banker. The company shut 150 non- As Biyani dreamt of building scale, his competitor, Rad- 500 performing stores, started negotiating for lower rentals hakishan Damani, the founder of DMart, preferred doing 9 and began to slash people costs. what he did best – focusing on growing his core grocery 375 6 The lockdown hit cash flows badly. With liabilities retail business. With revenues of `15,000 crore, DMart was 250 ) mounting, Biyani had no option but to exit the business the most profitable retail company in India in 2017. “We r 3 c ( 125 ` d completely. He is in talks with Samara Capital and Premji shouldn’t be compared with DMart. They are a low-cost e c r 0 r d o Invest (which has a 6 per cent stake in Future Retail) to sell operator, limited SKUs, they do it very well. We are very r n 0 e u ) his most prized possession, the `20,185 crore Future Retail complex. That’s our specialty, as you can’t be the same,” Bi- h -3 FY19 -125 FY14 ` (which houses Big Bazaar, FBB and small-store formats yani had told BT. On the other hand, the big daddy, Reliance ( FY14 (EasyDay, Nilgiris and Heritage). Retail, was racing towards the `1,00,000 crore revenue tar- Future FY19 However, the only way Biyani can get rid of the debt is by get. Reliance Retail had the backing of cash-rich RIL. Enterprises selling the entire business. The banker says Biyani is hope- Biyani’s FMCG (private labels) brands straddled food, Ltd. Future Future ful that Reliance Industries will come to his rescue and give personal care and home care. The idea was to find gaps and Market Consumer FY19 him a good value by end-July. If Reliance does this, it will offer aspirational products that competition didn’t have. Networks 35 28 Ltd. 21 7 FY14 buy Future Group along with its debt, which means Biyani He dreamt of challenging global FMCG biggies such as 14 Ltd. 0

-7 Future 6.25

3.75 Future Lifestyle 2.5 1.25

( 0 ) ` Retail Fashions -1.25 r FY14 Future t c h Ltd. Ltd. o Supply d u n FY19 s a a Chain s How Recent Crisis Unfolded n u d Solutions o c h t r) Ltd. ` 25 ( According to ICRA, Pandemic disrupted UBS and IDBI 15 Future Group's six listed operations. Cash Trusteeship tried 20 (` hundred cr) 12 firms had `12,778 crore flow was not to invoke pledged 15 debt in September 2019 enough to pay off shares but Biyani got 10 9 debts; what came interim relief from the 5 6 The issue surfaced in to the rescue was Bombay High Court. mid-February when government's The Supreme Court 0 3 FY19 shares of listed firms exemption of dismissed the Special -5 0 FY14 started crumbling. This Covid-related debt Leave Petition filed led to rating downgrades. from default and by UBS AG London -3 Lenders sought more pro- FY14 suspension of fresh Branch challenging FY19 Total moter shares as collateral insolvency cases the high court ruling Income for loans against shares PAT Total Debt Rose Far Faster Than PAT for Debt Most Group Companies

GrAphic by TAnmoy chAkrAborTy 22 Business Today 9 August 2020 9 August 2020 Business Today 23 cover story future group

-7 Future 6.25

3.75 Future Lifestyle 2.5 1.25

GrAphic by TAnmoy chAkrAborTy 22 Business Today 9 August 2020 9 August 2020 Business Today 23 cover story Losing Control future group % of Shares Pledged

Unilever, P&G and Nestle on his home turf by offering own What Went Wrong? Future Lifestyle Fashions 99.78 and resources has become the priority. brands at compelling prices and reducing inventory of other Biyani’s ambitious Retail 3.0 strategy never really took We will not sign for any new store if we Future Market Networks 97.98 FMCG brands. He thought he would get the required scale off. While Future Group’s revenue is around `35,000 don’t see profitability there. It was not if he could have a small format store within a radius of every crore, Future Consumer is just a `4,040 crore business Future Supply Chain Solutions 97.62 the case earlier. Now, return on capital two kilometres selling essentially his own brands. That’s (as against the `20,000 crore goal). It suffered a loss of Future Consumer 92.45 employed is important,” he had told BT why he went shopping for small-format stores across the `215 crore in FY20. The group has 990 EasyDay stores; Future Enterprises 87.55 in the earlier interview. country. He bought EasyDay from Bharti in 2015. Later, he it shut down 150 in Q3FY20. Same store sales growth 80.29 So, where did he go wrong? Despite acquired Nilgiris and Heritage in the South and partnered (SSSG) of Future Retail formats was just 2.1 per cent in Future Retail focusing only on retail post the 2011/12 with US-based 7-Eleven, owner of a chain of convenience Q3FY20. With coronavirus, it’s obvious that SSSG will as on June end: Source: BSE debt crisis, industry feels he became stores that was looking to enter (the launch is stalled) India. be negative in Q4FY20. over-ambitious in core retailing too. He also planned to sell his brands to kirana stores through The unanimous verdict of industry stalwarts is that Bi- he has known Biyani from the days he set up his first Panta- While Big Bazaar and FBB remained his strong points, his cash and carry business Aaadhaar Retail. yani ‘overleveraged’ himself. “He is an outstanding entre- loons store in Kolkata. “He always had a broad view of busi- bet on the neighbourhood format, for which he acquired But Biyani and Future Group were stretched for cash preneur, has broken new ground, and many of his experi- ness and dreamt of capturing a large market. He has been a EasyDay, Nilgiris and Heritage, backfired. Biyani hoped to all along (Pantaloons, sold in 2011, was his best perform- ments broadened the horizons for Indian retail. However, hands-on entrepreneur but doing many things at the same attract loyalty towards his smaller format stores by getting ing asset). Nevertheless, he was confident of pulling off some of them were not very successful,” says former Dabur time became a problem for him. He got into higher capital consumers hooked on to a loyalty programme. The idea was his growth story. “We have the cash flow to make growth COO Kannan Sitaram (at present, Venture Partner, Fire- intensive projects which gave him lesser return on capital.” to get at least 2,000 members per store and charge them an happen,” he had said in an interview with BT in 2017. Three side Ventures). Biyani himself admitted that in his earlier avatar, he was annual membership of `999 which entitled them to 10 per years hence, things have turned out differently. A close family friend, Lalit Agarwal, CMD, V-Mart, says chasing every possible avenue of growth and so ended up cent discount on every purchase. The model, says a senior with huge debt. Right from restaurants, beauty salons and analyst, didn’t work as Indian consumers were unwilling to gyms to consumer finance, he dabbled in everything, even pay a fee. “The neighbourhood grocer wasn’t asking for a fee film production. “Earlier, I was focused on growth and do- and was offering similar services,” he says. ing new things all the time. Now, I am doing 10 days of rig- “The dynamics of a small store format is quite differ- orous review of businesses in a month. Allocation of capital ent and when the company started expanding aggres- SHARP FALL IN MARKET CAP in `crore

Future Lifestyle Future Future Supply Future Future Market Future Retail Fashions Consumer Chain Solutions Enterprises Networks

20,000 10,000 5,000 2,500 1,200 200

13-Feb-20 1,030.42 26-Jun-20 19,888.2 4,456.97 178.39 8,235.13 1,983.32 4,000 17,514.9 144.72

26-Jun-20 6,000 6,000 6,000 3,609.77 1,500 800

10,000

100

493.6 119.69

5,706.6 2,241.72 688.53 1,969.14 0 0 1,000 0 200 0 1-Feb-20 16-Jul-20 1-Feb-20 16-Jul-20 1-Feb-20 16-Jul-20 1-Feb-20 16-Jul-20 1-Feb-20 16-Jul-20 1-Feb-20 16-Jul-20

24 Business Today 9 August 2020 9 August 2020 Business Today 25 cover story Losing Control future group % of Shares Pledged

Future Lifestyle Future Future Supply Future Future Market Future Retail Fashions Consumer Chain Solutions Enterprises Networks

20,000 10,000 5,000 2,500 1,200 200

13-Feb-20 1,030.42 26-Jun-20 19,888.2 4,456.97 178.39 8,235.13 1,983.32 4,000 17,514.9 144.72

26-Jun-20 6,000 6,000 6,000 3,609.77 1,500 800

10,000

100

493.6 119.69

5,706.6 2,241.72 688.53 1,969.14 0 0 1,000 0 200 0 1-Feb-20 16-Jul-20 1-Feb-20 16-Jul-20 1-Feb-20 16-Jul-20 1-Feb-20 16-Jul-20 1-Feb-20 16-Jul-20 1-Feb-20 16-Jul-20

24 Business Today 9 August 2020 9 August 2020 Business Today 25 cover story What Future future group Holds…

Will escape insolvency, but sively, it accumulated huge debt. Consumers didn’t find a defaults will affect ratings and A former DMart senior executive says Biyani’s cost of compelling reason not to shop in a kirana store as opposed fund-raising plans doing business is extremely high. He says the rental model to EasyDay,” says Abneesh Roy, Executive Vice-President is capital intensive and doesn’t make sense for value retail. (Research), Edelweiss Securities. Lenders have sounded out “I don’t understand why he didn’t convert his good per- A former Future Group executive, who was closely as- retail majors, including forming stores into the ownership model. Rentals should sociated with Biyani’s Retail 3.0 vision, says had the mar- not be more than 2-3 per cent of your business after the first Reliance Retail and PE investors ket not become sluggish and Covid not happened, Biyani couple of years but Biyani’s rental costs add up to almost 20 would have managed to pull off the small store format. “We like Blackstone, Samara Capital per cent of total costs, which is too high.” anticipated a shorter gestation for small format stores but it and Aion Capital. Premji Invest turned out to be a longer gestation business. Had the mar- and Amazon also in talks Failed FMCG Ambition ket been good, it would have done well.” While experts say Biyani’s aggressive retail expansion led Stock Broker Arun Kejriwal says Biyani’s biggest draw- Premji Invest owns 6 per to his downfall, FMCG was his big ambition. He wanted back is his inability to manage cash. “Biyani realised he can cent in Future Retail, while to use the multiple retail formats to sell his own private sell stories to the market. He bought one company, then he Amazon holds about 3.2 per brands. bought a second one, and kept buying, raising money and cent. Blackstone has a stake Almost 35-40 per cent merchandise at Future Group selling dreams to the market. He often duplicates busi- (6 per cent) in Future Lifestyle formats was its own brands which, according to experts, nesses and keeps raising money from the market.” Kejriwal Fashions and owns $167 million didn’t go well with consumers. While Tasty Treat pasta, euben singh refers to Future Supply Chain (which is listed under Future worth of NCDs priced `30 less than a Del Monte, did have takers, when it Enterprises and has bulk of the debt, close to `6,500 crore) came to soaps, detergents and biscuits, consumers were where, he says, Biyani raised money to offer supply chain ph by r put off when they didn’t find brands such as Britannia, Par- and distribution services to other companies. But that le, Surf or Ariel. “Private labels work in certain categories. was not to be. “The bulk of its business comes from Future Future Group thought private labels will give it higher mar- Group. They hardly offer their services to others,” says Ke- …And What If gins and it will win customer loyalty through lower prices. jriwal. Biyani is desperate to get rid of Future Supply Chain photogr A But one can’t push private labels beyond a point,” says Roy and is known to have asked Ambit Capital to find a buyer. Reliance Buys Future of Edelweiss. A former Future Group executive says Nilgiris and Retail Debacle RIL may come to Biyani's Heritage lost their loyal customer base after Future Group Biyani is often called India’s Sam Walton (Founder of rescue by acquiring Future took over. “They removed popular Nilgiris in-store brands Walmart). But for the fact that both championed value Group with debt and replaced them with their own.” In the past few years, retail, there is nothing common between the two. While He has been a hands-on the company has acquired juice brand Sunkist and also got Walton took 40 years to move from Bentonville to other Biyani will have to exit retail, as entrepreneur, but doing into a partnership with New Zealand dairy major Fonterra cities in the US, Biyani has been a firm believer in aggres- the deal with have a non-compete many things at the same time for stocking its products. sive growth. “Walton was patient, focused on cutting costs clause Biyani’s private brands also suffer from lack of trust. and building logistics and supply chain. For him, retail was became a problem for him. He The company tried to woo customers through deep dis- not a real estate play. It was a business which needed plan- He could continue as back-end got into higher capital-intensive counting, but that hasn’t worked. “A consumer may get ning and execution as any business. What Biyani has done supplier to retailers through his projects, which gave him lesser swayed by the ‘buy one get one free’ offer one time, but if defies common sense. He started in Kolkata and went all the quality isn’t good, she will not go back. Most global re- food parks return on capital over India knowing that the country is too complicated for tail brands have private labels and they are successful be- building a good supply chain,” says the CEO of a leading Lalit Agarwal, CMD, V-Mart cause quality is supreme. Biyani has not focused much on consulting company. He finds Radhakishan Damani more quality,” says the former DMart executive. Private brands like Walton as he has stuck to the basic principles of grocery account for less than 10 per cent of DMart’s inventory. It retailing. DMart (Avenue Supermarts) is today a `24,870 has always believed in offering consumers the best brands crore company despite the Covid lockdown and the liquid- at lowest possible price-points. ity crisis prior to that. In FY20, it reported 44.15 per cent which Walmart has made and that too in recent times have situation. He wanted to offer an improved version of a ki- growth in profits. been a handful of online retail companies which it has rana store with loyalty programmes and discounts. These Governance Issues Unlike Walton, whose single-minded focus was his hy- merged with Walmart.com to take on the likes of Amazon. stores attracted consumers initially but were not sustain- Biyani’s desire to pull many horses at one go has proved permarket model, and to an extent Sam’s Club (cash and “EasyDay was his market concept to take on DMart. able despite discounts. Also, real estate and people costs did to be detrimental to his group. However, anyone who has carry), there is no retail format in the world which Biyani At the same time, he also signed with 7-Eleven. There has not make sense. “Those who owned their kirana stores had interacted with him will agree that he is among the best has not tried – supermarkets and hypermarkets, small for- been no consistency in strategy. It’s his attitude of ‘I need low costs and loyal customer base and were not impacted,” minds in the retailing business in the country. “He is always mat stores and premium food retail (Foodhall), apparel re- to do everything in retail’ that has led to his doom,” says the says Roy of Edelweiss. thinking about what next, what changes can I make, what tail, malls and home products retail. While Walton believed CEO of a leading lifestyle retail company. Biyani set up at the most four-five stores in a city. “You else can I offer to consumers? He says the consumer isn’t in organic growth, Biyani has grown through acquisitions, Biyani’s small format store strategy (EasyDay, Nilg- need at least 30 to make an impact,” says a senior analyst just the king but also the queen. He is always thinking about most of which were loss-making. The only acquisitions iris), say experts, has been the major reason for his current with a leading brokerage. how to engage more deeply with the Indian middle class,”

26 Business Today 9 August 2020 9 August 2020 Business Today 27 cover story What Future future group Holds…

26 Business Today 9 August 2020 9 August 2020 Business Today 27 cover story future group

to pick up inventory, they are made to wait at the cash coun- pay rent, the lease is terminated. Your front-end staff does What the Buyer Will Get ter as stores prioritise their own customers. The aim was not have unique skills, unlike manufacturing, where you to do over a lakh deliveries a day from Big Bazaar stores but may have highly qualified R&D people. So, when you think Big Easyday and they don’t do more than 10,000-15,000,” the former execu- about value and valuation, it will be difficult to get Reliance Bazaar FBB Foodhall Heritage W.H. Smith tive adds. Though there are reports of Amazon increasing interested, unless it comes at a distress price,” he says. “It its stake in Future Retail, the US retailer will be happy to won’t be Biyani who will call the shots but the lenders. If Stores 292 94 12 1,007 99 exit considering that the investment is not reaping fruits, his shares are pledged, lenders will have to see at what price Cities 144 46 3 355 12 he adds. they are being sold. Ambani has no reason to buy Future,” Area 12.49 1 1,43,482 2.39 57,372 says the CEO of a leading FMCG company. Million sq.ft Million sq.ft sq.ft Million sq.ft sq.ft Will Ambani Buy Biyani? Kejriwal says nobody will buy Biyani’s entire business. While the market is abuzz with talks of the two signing on “It will be piecemeal disposal. Whosoever will buy will Figures for FY19; Future has shut down 150 stores in the last one year the dotted line soon, retail experts believe the deal is too have a strong balance sheet. They will say, I will settle your good to be true. The CEO of a leading consulting company debt and renegotiate terms with lenders and make money says stories around Ambani buying out Biyani must be on that.” says Srini Vudaygiri, CEO, Unibic. vourite among vendors is that it clears dues in days, unlike coming from the latter’s company. “Reliance buys things Biyani needs an urgent bailout. One has to wait and A former Future Group employee says Biyani comes Future, which takes months. at a scrap rate. They bought Alok Industries at a distress watch who will buy him out and how soon, but chances of up with at least 10 new ideas every day. Often, the dilemma Biyani is also infamous for delaying payments to land- price after it went to the NCLT.” Alok Industries, by virtue a comeback appear grim. The only business Biyani is likely before his team is what to implement and what to ignore. In lords even during good times. “He had a good relationship of being a fully integrated textile company with a dominant to retain is Future Consumer. But then, FMCG is an ex- fact, his vision, more than often, doesn’t get translated into with Phoenix and there was an understanding that Future presence in cotton and polyester, can be a supplier for Reli- pensive business and will require huge capital. His friends action, which leads to governance issues. Industry veterans would get the option of becoming an anchor tenant in any ance's fashion and lifestyle business, he adds. “It has assets and associates say Biyani is never without a plan.It remains say Biyani is only a man of ideas and does not follow best new mall built by Phoenix. Phoenix ended the relation- in plant and machinery. In retail, there are no assets, and to be seen if the ‘ideas man’ has a plan to work around business practices. ship when it realised that his reputation is going from bad the inventory is perishable. The longer the inventory lies in this time. Transparency is a huge issue, says the CEO of a leading to worse and that having him as an anchor tenant doesn’t your stores or warehouses, the more its value diminishes. personal care company. “If you are launching a new prod- bring any advantage,” says a senior real estate consultant. Real estate is not owned by you, it is leased. If you don’t @ajitashashidhar; nevinjl uct with Reliance or DMart, the process is simple. You go Governance issues have tainted the deal with Amazon, to central teams at their headquarters where they list the too. According to a former senior Amazon executive, it is product. It becomes part of their inventory nationally. In on the brink of collapse. Amazon picked up a 1.3 per cent Future, even after getting the product listed centrally, one stake in Future Retail last year through Future Coupons, in has to go to each and every store and ensure that it is listed. which it bought a 49 per cent stake. “The deal was aimed at Most stores also have a huge amount of missing inventory.” building the retail business together. Amazon was to bring “The inventory they show on their books isn’t right. I in technology and Future supply chain efficiencies and visited a Big Bazaar store in Chennai. The store manager inventory. The stores are to be used as fulfilment centres. came up to me, told me inventory is missing, and requested The arrangement is facing a host of operational challenges. me to give a credit note to make up for that,” says the CEO of When the Amazon delivery staff goes to Big Bazaar stores a leading FMCG company. A common complaint is that the group does not pay vendors on time. One frequently gets to read about leading FMCG companies blacklisting Future stores due to payment delays. A Ranchi-based regional rice and atta manu- facturer says he wants to terminate his contract with Big

Bazaar as payments take ages. One reason DMart is a fa- A l A w ss A When the company started expanding aggressively, it accumulated huge debt. Consumers didn’t find a compelling nesh J A reason not to shop in a kirana store as

opposed to EasyDay ph by D A

Abneesh Roy, Executive Vice-President (Research), Edelweiss Securities photogr A

28 Business Today 9 August 2020 cover story future group

Abneesh Roy, Executive Vice-President (Research), Edelweiss Securities photogr A

28 Business Today 9 August 2020 STORY SO FAR

March 2020: India expands the scope of Equalisation Levy by imposing a 2 per cent tax on online sales The Road Ahead by overseas e-com firms

June 3: The US initiates probe against 10 countries for planning/ taxing digital companies

June 18: The US withdraws from talks on digital tax EvEn AS IndIA IncREASES The united States recently threatened France with a 25 with European ThE ScOpE OF ThE per cent tariff on goods imported from the country if the countries latter went ahead with its 3 per cent tax on digital services EquAlISATIOn lEvY, ThE provided by foreign-based tech companies. It had slapped a July 7: uS hAS InITIATEd A pRObE 25 per cent tariff on import of French wine last year for the The US AgAInST 10 cOunTRIES similar reason, forcing the French government to defer the government implementation of its digital services tax by almost a year threatens to FOR IMpOSIng TAxES On impose a 25 (from January 1 to December 31, 2020). per cent tariff dIgITAl SERvIcES. ThIS The US, home to many tech giants at the receiving end on goods cOuld EFFEcTIvElY MEAn of the digital tax planned by France and other countries, imported IndIA, lIkE MAnY OThERS, is leaving no stone unturned to ensure that its technology from France cOuld FAcE uS REpRISAl, companies don’t end up being the worst hit. Barely a month in response to ago, it had pulled out of talks on finalising a framework to the latter’s 3 gOIng FORwARd per cent digital tax digital companies, besides initiating probes against 10 services tax countries, including India, which have levied or plan to levy By Dipak MonDal taxes on digital services. illUSTRaTion By Raj veRMa India recently expanded the scope of the Equalisation Levy, or digital tax, to the sale of goods and services in the

9 August 2020 Business Today 31 STORY SO FAR

March 2020: India expands the scope of Equalisation Levy by imposing a 2 per cent tax on online sales The Road Ahead by overseas e-com firms

June 3: The US initiates probe against 10 countries for planning/ taxing digital companies

9 August 2020 Business Today 31 Policy – Digital Taxation

HOW THEY STACK UP Digital Tax Rate In Different Countries

2% 2% 3% 3% 3% 3% 5% 5% India UK France Belgium Spain Italy Austria Czech Republic

country by overseas e-commerce firms. Countries across the globe have felt the need to tax rev- issued a statement that meaningful dialogues on a con- Responding to US' allegations, the Centre has said the enues generated by such companies in a particular jurisdic- sensus on digital taxation can only occur after the US elec- tax is neither discriminatory nor extra-territorial, and is tion. Talks began in 2018 under the aegis of the Organisa- tions. Mukesh Butani, Founder, BMR Legal, also thinks any consistent with India's commitments under the World tion for Economic Cooperation and Development (OECD) meaningful multilateral talks will happen only after the US Trade Organisation and global taxation agreements. How- to formalise a framework on what and how to tax revenues elections. He, however, thinks the guidance given by the ever, with no consensus on the contentious issue, there earned by such companies in a country in which they have OECD that there will be a consensus on digital taxes by the could be another round of trade war between countries, es- no physical or significant presence. But an abrupt US deci- end of 2020 is now a distant dream. pecially between the US and European countries. sion to pull out of the negotiations, involving 137 countries, The Equalisation Levy was introduced and threats of retaliatory action against Uncertain Future? for the first time in 2016 as 6 per cent tax those levying digital taxes have hit the 2020 The main reason for the US developing cold feet on digital on revenues earned by non-residents from deadline. For India, it creates enormous un- taxation is its apprehension that the same will hit American l online advertising and related services. 137 certainty, since the country has always been tech giants the most. Even though there is no consensus yet The burden of this tax eventually fell on lo- Total number of countries at the forefront of adopting the concept of on what and how to tax the digital economy, many coun- that are part of the OECD cal firms advertising on these platforms. In taxing foreign digital companies. It is now sir iqb A tries have already implemented or plan to implement such a talks underway to formu- March, the government expanded the scope late a global framework subject to a probe initiated by the US. tax. In the absence of a consensus, the rate and scope of the of this levy to include the sale of goods and on digital taxation While tax experts and government of- tax varies from country to country. services in the country by overseas e-com- ficials have called it a bullying tactic, some Unlike in India, where the 2 per cent Equalisation Levy merce operators. The transactions will be are also confused by the US' dilly-dallying is applicable on a host of e-commerce operators selling taxed at 2 per cent if businesses earned more on the issue. Akhilesh Ranjan, Former CBDT goods and services worth `2 crore or more in a year, most than `2 crore. The new provision is applicable from April 1, Member, and Principal Chief Commissioner of Income European countries have levied or plan to levy taxes mainly 2020. Globally, the rate of digital tax varies from 1.5 per cent Tax, International, says: “The US is a bit confused. They Photogr AP h by yA on big tech giants with global turnovers of $840 million or (in Poland and Kenya) to 15 per cent (Paraguay). In Europe, are not able to decide what they want to do. The proposal, more in a year. Such a high threshold for turnover means the tax rate varies from 3 per cent (France, UK, Spain) to 7.5 the unified approach that is being discussed, are all based most large US corporations will fall in the tax net. per cent (Hungary). mainly on a US proposal. It was the US which talked about Says Sunil Arora, Tax Partner at chartered accountan- these ways.” What baffles Ranjan is the fact that though the India has not imposed the tax cy firm ASA & Associates: “If I was the US, I would have re- The US Question US has withdrawn from the talks twice — the first being in acted in the same way. I am not saying it is justified, but giv- The need to tax digital companies — the likes of Amazon, December 2019 — it continues to attend the meetings. “So, on US companies. It has also not en that I am the worst affected because I own the Amazons Google and Netflix — arises because these companies col- does that mean that because of the presidential election in imposed this tax (only) on large and Googles of the world, there has to be some reaction.” lect digital revenues from countries where they do not have November 2020, they are not able to take a decision at this technology giants. The threshold He, however, admits that it (the retaliation and arm significant business presence, which in tax parlance is re- time?” he asks. for the Equalisation Levy in India twisting) is not good for the future of the talks. “This action ferred to as permanent establishments. These are new-age Experts hope once the presidential election is over, of the US (to pull out of the talks) is unilateral and I don’t companies, which can use virtual infrastructure to operate the US government is likely to make its stand on the issue is very low ” think it will find much support among other countries." in another country. clearer. OECD Tax Director Pascal Saint-Amans has even Mukesh Butani, Founder, BMR Legal So, what happens if the OECD fails to break the impasse

32 Business Today 9 August 2020 9 August 2020 Business Today 33 Policy – Digital Taxation

HOW THEY STACK UP Digital Tax Rate In Different Countries

2% 2% 3% 3% 3% 3% 5% 5% India UK France Belgium Spain Italy Austria Czech Republic

32 Business Today 9 August 2020 9 August 2020 Business Today 33 Policy – Digital Taxation

The US is a bit confused. They are not able to decide what they want to do. The proposal, the unified approach that is being discussed, are all based mainly on a US proposal. It was the US, which talked about these ways.” Akhilesh Ranjan, Former CBDT member, and Principal Chief Commissioner of Income Tax, International

on digital taxation? Mukesh Butani of BMR Legal says the investigation Himanshu Parekh, Partner and Head, Corporate and initiated by the US on India’s digital tax falls under the US International Tax, KPMG in India, says if the US does not Trade Act, which gives its government power to impose agree, each country will come out with its own unilateral retaliatory measures against each country that is discrimi- measure like what India recently did. “It will create a lot of natory for American business enterprises. “But if you look tension as far as global trade is concerned,” he says. at the India levy, it is not discriminatory. India has not im- The nature of the digital tax, at least the way in which posed the tax on US companies. It has also not imposed this some countries have formulated it in the absence of a global tax (only) on large technology giants. The threshold for the framework, is such that it feels more like a consumption tax Equalisation Levy in India is very low (`2 crore),” he says. than an income tax. And if no solution is arrived at, coun- Akhilesh Ranjan agrees. “The Indian tax is very broad- tries may use it as an import tax. Akash Karmakar, Partner based and has a very low threshold.” in law firm Panag & Babu, says digital tax Experts and government sources say has ceased to be a tax in the true sense of the the Centre is not unduly perturbed by the word, it’s more of a tariff. “The illogical part 6 US investigation, though it delayed the no- of the digital tax is that it is deliberately tar- per cent tification of the law, keeping in mind the US geting companies that are outside the coun- Equalisation Levy intro- threat. There is almost unanimity among tax try,” he adds. He, however, hopes that all 137 duced by the govt in 2016 experts that India could have waited for the countries could get into a discussion with on revenues earned by issue to be resolved at the multilateral level non-residents from online the US and try to convince it that it is in the ads, related services before expanding the scope of the tax. best interest of the latter to agree to a global Besides, the suddenness of the move has framework on digital taxation. also not gone down well with businesses. “India has always been criticised for (tax) The India Story uncertainty and this only added fuel to the fire. If you could These developments are significant for India given its have given companies something to think about, they decision to expand the scope of the Equalisation Levy, would have submitted their objections, they could have despite the fact that no such provision was part of the Fi- worked out something or at least would have some indica- nance Bill presented with Budget 2020. tion of what was coming,” says Arora of ASA and Associates. The announcement was followed by the US decision to The new 2 per cent levy on the sale of goods and services probe 10 countries, including India, for introducing such a that have no permanent establishments hereis believed to tax. Finally, the US pulled out of OECD talks. have been an afterthought by the government, and desper- Do these developments then make India’s case for taxation to find ways of generating revenue. The government ing non-resident digital companies weaker? Irrespective of had collected around `900-1,000 crore from the 6 per cent the fact that most experts believe the government’s deci- Equalisation Levy. With a much wider scope of the tax, the sion to expand the scope of Equalisation Levy is a not well figure is expected to be higher. thought-out move, it may still escape the US ire. Meanwhile, the government will keep an eye on the The reason is its wider scope and much lower threshold. talks at the OECD level, hoping the US shuns its antagonis- Unlike in other countries such as France and the UK, where tic approach and agrees to resolve the issue at the earliest. the focus of the tax in digital services only, in India, the tax will be levied on both goods and services. @dipak_journo

34 Business Today 9 August 2020 Column Spy In The Room One of the most fundamental of our rights is the presumption that we are law-abiding citizens living in compliance with the law. State surveillance turns that on its head

By ABrAhAm C. mAthews

ust imagine a new device in your living the drone operator would need to take so as to ensure room — a camera, installed by any of the privacy. big global technology giants. But this one Questions also abound about the data collection prac- doesn’t take instructions from you. It just tices of the Aarogya Setu app. With the government not silently sits there, quietly observing you go releasing the source code of the server, we simply don’t about your mundane daily activities. Occa- know what information the government is collecting, sionally it will remind you that you are going storing and evaluating. to be late for office if you don’t leave now. It Or take the tender floated by the Ministry of Informa- might ask you if the sofa cushions you just tion and Broadcasting for the empanelment of an agency Jbought were comfortable, and even remind you to change for the “fact verification and disinformation detection”. it every now and then. If you fight with your spouse, it will Some of the services sought in the tender are the identi- suggest therapists you could meet; or even the number of fication of suspicious profiles, identifying key influenc- an ambulance service, depending on the seriousness. ers behind disinformation, and geo-location analysis of But it mostly just observes. It keeps track of the pages disinformation. These sound innocuous enough, and in of the newspapers you are reading, the tone of your din- fact, essential too; however, it is quite likely to end up be- ner table conversation, and the kind of friends you share ing just a tool for targeting dissenters who question the a drink with. If it is witness to some criminal activity, it government. is mandated to inform the police. Needless to say, all of This follows earlier attempts by the Unique Identi- these are designed to make your life more comfortable, fication Authority of India (which gave us Aadhaar) for and arguably safer. setting up a social monitoring hub — aborted after the Would you be okay with such a device snooping on you Supreme Court observed that it was a step towards set- all day (maybe a less intimidating version of the TV from ting up a surveillance state. Earlier, in December 2018, the novel “1984”)? Most of us certainly wouldn’t. And the home ministry issued a circular authorising 10 secu- yet, we seem to have invited global big tech companies to rity agencies to intercept, monitor, and decrypt any infor- do the exact same thing, albeit through our phones and mation generated, transmitted, received or stored in any other gadgets. computer or device. While the circular was immediately Even as technology companies strive to hide the evi- challenged before the Supreme Court, arguments in the dence of their snooping in dense legalese and non-deni- case are still pending. als whenever questioned, the government seems to have The government inevitably defends such collection, no such compunction. Take for example, the recently as it did during the Aadhaar hearings, saying that Indians released draft Unmanned Aircraft System Rules, 2020, voluntary give this data, and so much more, to social me- to govern drones. Section 35 of the Rules permit drones dia companies based abroad. So why frown at the govern- to take pictures after ensuring privacy of an individual ment, which is only looking to protect the public interest? or property. But there is not a whiff about what steps That is a legitimate argument, and needs to be addressed.

illustrAtions by rAj vermA 9 August 2020 Business Today 35 Column

ities. According to Justice BN Srikrishna, on whose committee report the Bill (which did not have this clause) was based, this single provision could usher in “an Orwellian state, with big brother snooping on citizens”. But mark the irony. In a country where the majority of people are simply not capable of reading legal verbiage, forget understand the privacy intrusions they are con- senting to, the government could have been an ally to its citizens — protecting her from intrusions from private data companies. Instead it chooses to be an even bigger predator. There are three reasons why we should not be comfortable with unrestricted data collection and access by government agencies, even for the stated aim of national security, without a privacy framework in place. First, mass surveillance is justified on the basis that agencies are analysing anonymised data for undesirable activity — nobody is individually targeted. This is a myth. Researchers have been able to work backwards to identify the person corresponding to the data with alarming accuracy. A study from Carnegie Mellon University in 2000 found that a combination of just data about gender, date India does not have a of birth and zip-codes was sufficient to arrive at the iden- privacy law. The Personal tity of 87 per cent of the people of the population. Ninety nine per cent accuracy can be achieved with just 15 fields Data Protection Bill, 2019, of data. India’s 2011 Census collected information under has been held up due to 29 heads. oppostion to one clause Joined with this is the fact that large-scale analysis of data through algorithms (or in other words, Artificial Intelligence) is still ridden with inaccuracies and biases — the algorithm might throw up patterns that are wildly off-the-mark. Second, often what is done in the name of public interest is often merely the interest of the government in power. Decades of India’s history has shown that security However, the two are not comparable. Simply put, pri- agencies mostly work at the bidding of the party in power. vate companies don’t look at you with suspicion — they To give them access to your private and personal conver- are morally indifferent. On the other hand, the State can sations would leave citizens in a constant state of fear declare you a possible criminal and arrest you. And that’s and would render almost all constitutional protections a world of difference. Or speaking as a lawyer, there’s a nugatory. reason for the constitutional protection from being ran- Finally, and perhaps most importantly, such data col- domly searched by a police officer without a reason. One lection is simply unlawful. The judgment of the Supreme of the most fundamental of our rights is the presumption Court in the phone tapping case (People’s Union for Civil that we are decent law-abiding citizens going about our Liberties vs Union of India, 1997) declared that the right lives in compliance with the law. State surveillance turns to hold a telephone conversation in the privacy of one’s that on its head. Every thought, every interaction, every home can certainly be termed as a fundamental right, emotion is connected and analysed —because that is which can be breached only according to the procedure what big data analysis does. established by law. The Court had also laid down proce- Compounding the problem is that India does not have dural safeguards for when the State needed to tap tele- a privacy law. The Personal Data Protection Bill, 2019 has phones. Sans a law, such mass surveillance perhaps is an been held up due to opposition to a clause that grants outright breach of privacy. omnibus exemption to security agencies for accessing in- The writer is a Delhi-based advocate and formation without the statutory compliance responsibil- chartered accountant

36 Business Today 9 August 2020 DEcoDing thE REcoVERY Large, mid and small-cap stocks have all taken part in the recent rally. Is this sustainable?

By Niti KiraN illustratioN By raj verma

9 August 2020 Business Today 37 -4,262.0 Markets – Stocks 31-Jan-19 2,146.9

17,219.6 28-Feb-19 -565.9 Year Pre- Towards Since March Year-to- smart 2019 Covid* March lows# lows date 33,980.6 gains S&P BSE Sensex 13.8 -0.9 -34.8 38.8 -10.4 29-Mar-19 -13,930.3 Figures are % change S&P BSE LargeCap 10.5 -0.9 -35.4 39.9 -10.5 *Between Jan'01-Jan 30' 2020 # Between Jan'30-Mar'24, 2020 S&P BSE Midcap -3.0 3.7 -36.6 37.2 -9.8 21,193.5 Source: Ace Equity 30-Apr-19 S&P BSE SmallCap -7.2 6.4 -39.5 44.0 -7.3 he Sensex posted its best quarterly return of 19 per cent -4,219.5 in the first threeT months of the current fiscal. Keeping in 7,919.7 step, other broader indices, such as large-cap, mid-cap and 31-May-19 small-cap, posted similar returns. But are all constituents 5,316.3 Moreover, one can buy them for a song as nearly 53 per of March had made them cheap and amenable to a bounce, of these indices delivering identical returns or are some of cent scrips in the large-cap space are trading below their he says. them bucking the trend? 2,595.5 five-year median price-to-earnings (PE) ratio. For in- The performance of small-cap and mid-cap stocks The trigger for the rally came from retail investors and 28-Jun-19 stance, ACC Ltd is available at a 40 per cent discount to its has been better in 2020 compared to 2019 as these were 3,643.3 domestic institutional investors (DIIs) even as foreign five-year median PE ratio. Dr. Reddy’s is 39 per cent below beaten down badly. Then, as momentum picked up, par- portfolio investors (FPIs) pressed the panic button. DIIs its five-year average PE ratio. ticipation by non-institutional investors rose. Around six -12,418.7 pumped in `88,132 crore in Indian stock markets in the first 31-Jul-19 lakh new demat accounts each were opened with the cen- half of 2020, almost double of what they had invested in the 20,394.5 Mid cap: Better Performer tral depository services in March and April. “The cumu- entire 2019. Mutual funds invested `39,359 crore. On the The mid-cap index, which represents the next 15 per cent lative fall in these stocks (including the March 2020 fall) contrary, FPIs turned net sellers, pulling out over `18,000 -17,592.3 market cap after the large-caps, opened the year on a posi- seemed more than required and attracted value buying. 30-Aug-19 crore during the period. They had pumped in a little over `1 20,933.6 tive note after last year’s 3 per cent decline. However, it de- Moreover, young new-to-market investors and traders lakh crore last year. Net DII inflows have been positive for clined nearly 37 per cent towards March-end, leaving 48 per signed up with brokerages and started dabbling in small- the past five years. Rajat Jain, CIO, Principal Asset Man- 7,547.9 cent of the scrips in the red (down 40-80 per cent). The re- cap and mid-cap stocks to make a quick buck,” says Jasani agement Private Ltd, says this long-term trend indicates 30-Sep-19 covery was equally sharp with overall gains of 37.2 per cent. of HDFC Securities. 12,490.8 the growing importance of DIIs. “We The year-to-date performance of mid-caps is no dif- believe flows into mutual funds and ferent from that of large-caps. The top performers include The Penny Party 12,368.0 insurance companies may continue to 31-Oct-19 mostly pharma stocks such as Bayer CropScience (54 per Penny stocks, or scrips that trade at less than `10, too grow gradually over the medium term.” 4,675.4 cent) and Ajanta Pharma (49.3 per cent). Almost two-third jumped on the bull-market bandwagon. While over a four- stocks in this space are trading below their five-year histor- fifth of them were in the red in the past year or so, just 5 per Large-caps: Repeat Performers Fiis Come 25,230.6 ic PE ratio. Shriram Transport Finance Company and Oil cent stocks in this lot have not recovered since the steep fall 29-Nov-19 Large-caps, mid-caps and small-caps Back in -7,970.3 India are trading 50 per cent below their five-year median of March. The advance to decline ratio of the market shot have all taken part in the recent rally. PE ratios. up sharply in early April and first week of June. Moving for- But they followed different paths to may/June 7,338.4 ward, Jasani is cautious as in any bull run, the momentum reach here. In 2019 calendar year, the FPIs Net Investments 31-Dec-19 Small cap: Show-stopper passes from large-caps to small-caps and mid-caps in the -740.8 large-cap index had risen around 11 per DII Net Investments The bottom 15 per cent, or the small-cap, segment was the next stage, before there is reversal in trend. “The fact that a cent, while mid-cap and small-cap in- worst performer of 2019. It has fallen the least, 7.3 per cent lot of penny stocks have started participating in the run-up In ` crore 12,122.6 dices were in the red, falling 3 per cent Source: Ace Equity 31-Jan-20 year to-date. However, it put on a power-packed show in is sign of an impending reversal in trend,” he says. and 7.2 per cent, respectively. “This was 2,249.6 the June quarter with double-digit outperformance over There are many things that may upend this recovery due to polarisation in favour of large- the 30-stock Sensex. The Sensex rose 19 per cent while the and keep markets volatile in the near term. Economic re- caps,” says Deepak Jasani, Head, Retail 1,819.8 small-cap index rose 29 per cent during the period. vival is expected to be gradual and uncertain due to caution 28-Feb-20 Research, HDFC Securities. 16,896.4 Close to 27 per cent, or 191 stocks, in the index are up on part of consumers, weak corporate balance sheets and The large-cap index, which covers 34 per cent of Sensex since the start of 2020. Moreover, prices of around 10 small- threat of second wave of coronavirus infection. stocks and top 70 per cent of the market, is still down 10.5 -61,972.8 cap stocks have risen over 100 per cent during the period. Jain of Principal Asset Management says markets may per cent since the start of the year (the big slump had come This includes Opto Circuits (India) and Sintex Industries. favour companies expected to emerge stronger from the 31-Mar-20 55,595.2 in March when the nation had gone into the lockdown On the valuation front, almost all small-cap stocks are crisis due to dominant position in their industry, balance mode). However, some 17 stocks, including leading phar- available at a discount to their five-year average multiples. sheet strength and early resumption of operations. “As the -6,883.6 maceutical names such as Dr Reddy’s and Cipla, and FMCG 30-Apr-20 Jain of Principal Asset Management says excess liquid- Covid issue settles, the economy gradually moves towards majors HUL and Nestle, bucked the trend due to high de- -824.7 ity is behind the performance of mid-cap and small-cap normalcy and earnings recover in FY22, the markets may mand for their products. Aurobindo Pharma led the pack indices. “This is likely the result of liquidity which flooded move up steadily in the next couple of years,” he says. here with almost 83 per cent year-to-date rise followed by 14,568.8 markets globally as central banks increased the size of their No matter how the market moves, experts say that 29-May-20 other pharma stocks such as Dr. Reddy's and Cipla. 11,356.1 balance sheets to support economies and face stresses rather than tracking the benchmark indices, one should go Altogether, 43 per cent stocks in this space have out- caused by the lockdown and collapse of demand. This li- for value buying and take advantage of volatility instead of performed the index year-to-date while a little over half 21,832.0 quidity has driven up prices of risk assets globally. The shying away from it. beat the benchmark after March (all of these have returned 30-Jun-20 outperformance of mid-cap and small-cap stocks is likely 4,910.9 more than 32 per cent since March lows). a part of that picture.” The sharp fall in markets at the end @niti_kiran

38 Business Today 9 August 2020 9 August 2020 Business Today 39 -4,262.0 Markets – Stocks 31-Jan-19 2,146.9

38 Business Today 9 August 2020 9 August 2020 Business Today 39 Deals in Distress A slowing economy and widespread stress in India Inc. are creating opportunities ROADMAP 2020 AND BEYOND

Domestic for promoters and consolidation to be in focus

Smaller players to merge with larger strategic investors to few months ago, no one thought remote-controlled ones drones, used in military warfare, logistics and search and Restructuring of rescue operations, will be used in M&As. But travel restric- businesses, selling tions are making investment bankers use drone footage of non-core assets ink M&As, buy back of factories to give prospective buyers a 360-degree view Over-leveraging from inside and outside. to force mergers & “The buyer can visit the plant when the deal reaches acquisitions the final stages,” says an investment banker involved in Stake sale to shares and delist one such deal. Negotiations are taking place over Zoom or financial, strategic Skype. This is probably one reason why deal street is buzz- players By AnAnd AdhikAri A ing despite lockdown since end-March. The investment illustrAtion By rAj vermA Buyback and banking community has found many ways to complete a delisting attempts by transaction, including structuring the deal in a way that promoters

40 Business Today 9 August 2020 9 August 2020 Business Today 41 Deals in Distress A slowing economy and widespread stress in India Inc. are creating opportunities ROADMAP 2020 AND BEYOND

Domestic for promoters and consolidation to be in focus

40 Business Today 9 August 2020 9 August 2020 Business Today 41 Finance – M&A

it is linked to future deliverables. So far, the M&A deals in 2020 have crossed $32 billion. A big backlog of pre-Covid deals had smooth sailing M&As SO FAR in Q1 of FY2021. Jio Platforms, the subsidiary of Reliance MORE INBOUND DEALS Industries, raised over $20 billion from a dozen marquee High global liquidity, low 2015 2016 2017 2018 2019 investors such as Facebook, Google, KKR, General Atlan- interest rates to encourage tic, TPG, Silver Lake and Intel, among others. Jio Platforms acquisitions alone pushed private equity (PE) and venture capital in- Investors from China PE Deals 22.6 18.3 30.4 40.4 36.1 vestments in May 2020 to $5.4 billion, compared to $2.8 to stay away billion a year ago. GMR Infrastructure, which operates Delhi and Hyderabad airports, sealed a deal to sell 49 per US and European investors to look for more opportunities cent in its airport business to France-based ADP. In July this year, Carlyle signed a deal to acquire a 25 per cent stake Covid-hit sectors such as Other in Bharti Airtel’s data centre business. hospitality, tourism, real estate, 23.5 44.5 35 81..5 36.9 roads to attract interest Deals “Among the deals under way, a few are in pharma, tech and digital services. Buyers see these as fundamentally good assets, neutral-to-positive in terms of Covid impact, OUTBOUND M&As SET with a favourable market trajectory,” says Amitabh Mal- TO LOSE STEAM hotra, Head, Investment Banking, HSBC India. Expect a few strategic deals, Similarly, low market valuations in some commodity Total not for attaining scale 46.1 62.8 65.4 121.9 73 businesses are providing promoters a once-in-a-lifetime Deals opportunity to buy back shares. Anil Agarwal of Vedanta Small-ticket transactions to and Gautam Adani of Adani Power have decided to delist dominate their companies. Promoters are also raising confidence Technology, digital capabilities capital for M&A opportunities in an economy which is to be main interest areas Figures in $ billion; Source: PwC report/ VCC Edge / Venture Intelligence likely to head into a recession. Uday Kotak of Kotak Ma- Focus on acquiring R&D hindra Bank has said that they are open to inorganic op- facilities, innovative products portunities in financial services. V. Ramakrishnan, Chief Financial Officer of IT giant TCS, recently said economic downturns are the best time to strike deals. TCS had struck OTHER DETAILS one after the 2008 financial crisis when it had acquired the quidity position, reduce leverage and strengthen balance omy. “Smaller enterprises where next generation is not Citigroup Global Service business for $505 million. So, Private equity to control deals sheets,” says Ajay Arora, Partner, and M&A head, EY India. interested will also explore M&A opportunities because how will deal street pan out in the post-Covid world? Limited exits by PEs via IPOs An EY India 2020 survey says the current economic situ- of changing business dynamics such as digital acceleration Puneet Renjhen, Executive Director, Investment Bank- ation will require companies to raise capital through dis- or higher technology adoption, supply chain issues with ing, Avendus Capital, shares his past experience of such Focus on restructuring, cost investments. “Sixty-seven per cent of companies surveyed China and slowing economic growth,” says Rajesh Narain rationalisation and new markets events. “M&A and fund raising generally get heightened said they will look to reduce debt through divestments,” Gupta, Managing Partner at SNG & Partners, a full service after a year or so. Hence, the M&A outlook looks very ro- Stress on management buyouts according to the survey. It says divestments will also be Law firm. India Ratings and Research has predicted ad- bust in the next 12 to 36 months, especially in sectors hit by aimed at raising funds for a technologically enabled future. ditional stressed loans of `1.67 lakh crore, which is over Committed investments worth Covid,” says Renjhen. $80 billion waiting to happen Last month, billionaire Ajay Piramal, Chairman, Pira- and above the `2.54 lakh crore anticipated during the post- Clearly, opportunities are opening up for promoters mal Enterprises, agreed to sell a 20 per cent stake in the Covid period. High promoter pledge is another factor that with a war chest, financial investors and PE players. pharmaceutical business for $490 million. “This fund in- will encourage M&As. Dish TV and Kishore Biyani's Fu- fusion will strengthen our balance sheet and provide us ture Lifestyle Fashion come in this category. There are al- Domestic Consolidation a war chest for the next phase,” said Piramal. Investment ready murmurs of a deal between Reliance Industries and Investment bankers say domestic consolidation will be the bankers say many corporates are raising confidence capi- Future Group. theme. “Domestic consolidation will have three broad ele- component players, will face liquidity issues. These com- tal to face any worst-case scenario in the near future and Low market valuations in some sectors have thrown ments; large corporate and private equity deals, PE-to-PE panies are restructuring to cut costs. Airport, hospitality, buy stressed assets. Reliance Industries recently com- open new opportunities such as promoter buyback and transactions and management buyouts by PE,” says Gopal tourism, NBFC and micro-finance players are also severely pleted a successful `53,124-crore rights issue. Many other delisting for those with access to funds. Global markets Agrawal, Co-Head, Investment banking, Edelweiss Finan- hit. A big transaction of a sovereign fund acquiring a stake rights issues are in the pipeline. ICICI Bank, HDFC Bank are flush with funds at near zero interest rates, while cial Services. At present, large/strong corporates are fo- in a micro-finance company got stuck because of business and Axis Bank have lined up capital-raising plans of over `1 Indian banks too are willing to lend to well-established cusing on managing their ownership, as they need capital disruption and uncertainty in the micro-finance industry. lakh crore this year. promoters. Vedanta, whose parent Vedanta Resources to survive in the post-lockdown world. “It is not a question of revised business plan but what is the “We have too many players in every sector because plans to buy the remaining 49 per cent stake in it, has a Many corporates will require rescue capital or funding business plan and how you can draw conviction,” says an of the large market. But in the post-Covid world, smaller market cap of `41,000 crore with a low price to book of support to survive in the challenging operating environ- investment player. players may find the going difficult. We may see consoli- 0.59 times. Adani Power, whose board has approved the ment. Consumer discretionary companies (malls, multi- Given the risk aversion among banks, many companies dation in the near future,” says Suraj Malik, Partner, M&A delisting, has a market cap of `13,788 crore with price to plexes, travel, fashion), micro-finance institutions, apart will look to sell non-core assets or raise money by parting and Transaction Tax, at BDO India. There are other non- book of 0.87 times. from affordable housing, hospitality, tourism and auto with equity. "Companies would try to improve their li- business issues which will accentuate in a slowing econ- But this will happen in rare cases. “Delisting will hap-

42 Business Today 9 August 2020 9 August 2020 Business Today 43 Finance – M&A

pen in select cases as it entails giving money to minority and JB Chemicals. If market sources are to be believed, at shareholders,” says Salil Pitale, Joint MD at Axis Capital least a dozen deals ranging from $200 million to $1 billion Ltd. In the pre-Covid world, the focus was on companies are under negotiations. “There is a lot of inbound interest buying back shares, while post-Covid, the focus has shifted in pharma,” says Agrawal. Renewables is another sector to promoter buybacks. “Promoters are risk takers. There is with a lot of investor interest. “The yields in renewable op- nothing wrong if they want to buy back shares and increase erating assets are in the range of 12-13 per cent which works their holding or even delist,” says Mahesh Singhi, Founder out to 6-7 per cent in dollar terms. There is a lot of interest and MD, Singhi Advisors, which calls itself a global invest- in low-risk completed assets,” says Renjhen. Agrawal of ment banking firm. Edelweiss says, “Some of the latest bids in solar assets saw entry of new players. The interest is from strategic players Outbound, Inbound & Private Equity and sovereign funds.” Outbound M&A never recovered post the 2008 global The financial sector is also ripe for consolidation with financial crisis. Over-leveraging and costly overseas ac- opportunities in NBFCs, fintechs, MFIs and affordable quisitions by large Indian corporate houses around the housing. Fintech solution provider Infibeam Avenues re- 2008 period kept them away. In the post-Covid world, cently acquired Bangalore-based Cardpay Technologies, outbound M&A will be strategic, say investment bank- which has a spend management platform for corporate ers. There are firms looking to buy new technology to India. Many are expecting deals in the fintech space as bridge product gaps, R&D facilities and molecules for founders are short of capital and VC players are not willing agri-chemicals. Some are trying to get into newer tech- to commit more at this stage. nologies in packaging due to stringent environment “Consumer tech, edtech and health tech will see norms. “We would probably see select outbound activ- heightened deal activity both on account of fund-raising ity in sectors like technology and life sciences, driven by “Global private equity “there will be a lot more as well as consolidation,” says Arora of EY India. Last but the need to acquire new technologies and products,” says not the least is real estate. “There is going to be unabated EY’s Arora. Funds would be keen structured instruments, interest in yields. We can see this in multiple asset heavy Supply chain disruptions in global markets, especially to do control trans- which will protect sector transactions that we are working on,” says Renjhen, China, will encourage M&As for securing raw materials. actions in businesses, investors From downside. hinting at sectors like real estate. Similarly, there is lot of “We don’t see much action in the short term, but there will which are likely to be these can be optionality interest in data centres and cloud space. surely be a move to own supply chain assets in the future,” says a banker. There are several opportunities in European carved out oF larGe or deFerred conversion The Big Valuation Challenge markets where many mid-sized companies are experienc- corporate and type oF instruments Drones can help in deals but the critical factor is valuation. ing succession issues. Wealthy clients are also enquiring businesses houses” or both” How do you value a business based on pre-Covid numbers, about buying property in popular tourism destinations Ajay Arora, Partner, and Amitabh Malhotra, Head, Investment especially the 2019/20 EBITDA? such as Spain and France. “There are aspiration-driven M&A Head,EY India Banking, HSBC India Businesses have been disrupted from Q1 FY2021. EBIT- buyout possibilities. Some excellent properties are avail- DA, which shows operating profitability of a business, will able at a dirt-cheap prices,” says an investment banker. not be the right benchmark for 2020/21. “Investment bank- Rupee depreciation has partly reduced outbound deal ers are creating ‘ valuation bridges’ by using innovative activity. While low global interest rates are a positive, these deal structures. The alternative structures in the form of rates are not available to every company looking for acqui- earn-outs , stock deals would be an important lever to help sition abroad. to buy due to gap between intrinsic value and potential that PEs and VCs will focus on managing existing portfo- bridge valuation gaps,’ says EY’s Arora. The GMR deal for The inbound M&A space is changing. Many European value. All investors need to do is figure out right business- lios and will be less aggressive about new investments over selling 49 per cent stake to Groupe ADP for `10,780 crore is and US companies are starting to see opportunities in es, intrinsic value and the right time to buy,” says Renjhen the next one year. It is possible that many PEs will focus on the perfect example of deal structuring during Covid un- their own countries because of US-China trade tensions. of Avendus Capital. Big PE players are scouting for con- saving the better lot in their portfolio of companies. “They certainty. GMR received the first tranche of `5,248 crore, The third big driver of M&A is PE deals. Many PEs are trol transactions. “Global PE funds would be keen to do will be a little reluctant to go out versus working around while the balance `4,475 crore is linked to milestones over stuck because of market uncertainty. Everstone Capital in control transactions in businesses which are likely to be existing deals to sustain and grow the business,” says the next five years. “There will be a lot more structured Burger King, CX Partners in Barbeque Nation Hospitality carved out of large corporate and businesses houses,” says Malik of BDO, adding, “Once they stabilise operations of instruments, which will protect investors from downside. and TPG Capital in Shriram Properties were ready to exit Arora of EY India. US-based KKR is acquiring a majority existing companies, they will look outside for new acquisi- These can be optionality or deferred conversion type of in- but Covid disrupted their plans. At present, PEs are busy 54 per cent stake in drug maker JB Chemicals for `3,100 tions. The worst hit would be early stage companies with- struments or both,” says Malhotra of HSBC India. managing their portfolio companies. But the PE indus- crore. The deal was sealed during the lockdown. Another out any funding tie-ups.” Many deals that were announced in Q1 FY2021 were al- try is flush with funds. The figure quoted for committed PE player Carlyle Group acquired 74 per cent in an animal “Many early stage companies will close down,” says a ready in advanced stages before Covid. The stage is now capital for India from limited partners such as endowment healthcare product company SeQuent Scientific in May. player. With the Chinese door almost shut, there will be set for post-Covid deals. “The time period to complete a funds, family offices, pension funds, is to the tune of $80 PE players are focusing on pharma, technology, tele- implications for Chinese origin PE/ VCs as they will also deal and filters have increased tremendously. The risks are billion. “It is going to be a buyer’s market. You can pick and com, energy and real estate sectors. “They have a clear 6-7 look at monetising or getting out of some investments. also much higher,” says Singhi. choose, decide where you want to play and at what valua- years to restructure and make money in an acquisition,” Ultimately, everybody wants a value deal. tion,” says Malhotra of HSBC India. says Singhi of Singhi Advisors. The Sector Cut “The next two to three quarters will be the right time A CRISIL study has given a different take suggesting The pharma sector is buzzing with two big deals, Piramal @anandadhikari

44 Business Today 9 August 2020 9 August 2020 Business Today 45 Finance – M&A

44 Business Today 9 August 2020 9 August 2020 Business Today 45 Brand: The X-facTor

Branding goes for course correction to reach consumers stuck at home

emerging reaLiTieS

The current cri- Research sug- The role of Pay cuts and job Brands should sis is more like gests if firms cut advertising is losses have led change their a war than a re- back less on ad limited because to shortage of mix of products cession, normal budgets now, the crisis is funds. Brands and services, or By AjitA ShAShidhAr rules of business they will perform restricting both need to adapt find newer ways illuStrAtion By rAj vermA may not apply better in the demand and to a less-affluent of distributing for a while long run supply world them

Source: adam&eveDDB

46 Business Today 9 August 2020 9 August 2020 Business Today 47 Brand: The X-facTor

Branding goes for course correction to reach consumers stuck at home

emerging reaLiTieS

Source: adam&eveDDB

46 Business Today 9 August 2020 9 August 2020 Business Today 47 Industry – Advertising

xecutives at Godrej Consumer Prod- the activation and live entertainment have come to a standstill ever since the lockdown began in March. While marketers can’t afford ucts were struggling to find ways to make break-up not to have a digital-first strategy anymore, they are still learning the company’s premium hair colour brand to adapt to new consumption mindsets. Godrej Expert Rich Creme relevant to Size of Behaviour Changes `68,475 the Indian Traditionally, marketers increase expenses in a recessionary envi- buyers, when a sudden tweet by filmmak- crore advertising ronment to improve connect with consumers. Not only is media Industry inventory more affordable during a recession, it also gives brands er Karan Johar came to their rescue. Johar an opportunity to raise their voices and push their not-so-strong competitors (who don’t have the wherewithal to advertise) to the had posted a picture of his grey look, with fringe or even acquire them. But, Covid-19 is different. Unlike a a caption on how the lockdown had made television typical recession when consumption dips due to fall in demand, this time, there has been a massive supply crunch as well. In a re- him ready for ‘father’ roles. Godrej’s hair cent white paper on the virus outbreak, Les Binet, noted market- `26, 869 ing expert and Head of Effectiveness, adam&eveDDB, a commu- colour team reached out to Johar and re- crore nications agency, has called the pandemic a war-like situation, quested him to shoot a video of himself colouring his where the normal rules of marketing and business doesn’t apply. “If demand is the problem, advertising is an obvious solution. But hair and post it with the #ColorLikeKaran hashtag. Go- print if people can’t buy or use your product right now, then the role of advertising is much more limited,” says Binet. drej Consumer Products, which contributes a large part ` of the group’s total revenues, was grappling with Cov- 20,110 A Whole New Game crore The pandemic is set to alter the basic principles of marketing and id-19 and its impact on the balance sheet. Johar’s video brand building. To begin with, it has completely transformed the consumer’s mental model, says Kataria. “The consumer’s life, got seven million views on Twitter. the way he/she consumes, the concept of leisure, work, in fact, Digital the model of happiness itself has changed. This is not an ordinary situation where one can say that everything will be back to normal `13,683 post the lockdown. Some habits may go back to what they were crore earlier, but a lot of them will not be the same, and marketers will need to morph their strategies accordingly.” Godrej Consumer Products Chief Executive Officer, India or Ceregrow, all our brands are enjoying One of the most obvious changes is people staying indoors, and Saarc, Sunil Kataria, did not disclose if Johar’s video increased the benefit of our digital-first strategy. This working from home and also entertaining themselves at homes. sales of hair colour, but it managed to make DIY (do it yourself) is the play we will be using for a long time ooh Socialising at cafes or parks is now a thing of the past, and so are hair colouring fashionable, and a host of similar videos popped up because consumers will be digitally far weekend shopping at malls and movie watching at multiplexes. on social media platforms. more active than before,” says Nestle India `3,887 From birthdays to wedding anniversaries, people are finding ways It was the ‘moment of truth marketing’ straight out of books Chairman and Managing Director Suresh to celebrate special occasions at home and get friends and extend- that Kataria had studied decades ago. It also showed the power Narayanan. From a mere 6-7 per cent pre- crore ed family be part of the celebrations virtually. In fact, virtual video of digital media. “We engaged with consumers with a product lockdown, the company’s digital ad spend is communications platform Zoom grew traffic from 10 million like hair colour, which is of least importance to them during the now at a high single-digit of its overall media participants a day in December 2019 to 300 million in April 2020. lockdown. Our effort was to make hair colouring part of the con- expenses. raDio The big fat Indian wedding has now become thinner as well, with sumer’s new habit by encouraging him/her to DIY (do it yourself) In fact, digital media spends, at 20 per new social distancing norms restricting gatherings to 20 people. at home. We did all of this on social media. If a brand can become a cent of the overall `68,475-crore advertis- Even air travel and holidays will never be the same again. All these habit, it will be the ultimate prize for marketers,” says Kataria. ing pie before Covid, have increased by 10-15 `2,479 changes are here to stay and so companies have to rejig their brand per cent during the lockdown period, and crore architectures to stay relevant. For example, over 15-20 per cent The Digital Native are likely to be as high as 35 per cent by the revenues of brands such as Nestle or Amul come from institutional From binge watching originals on Netflix and Hotstar to short end of 2020. While sectors such as auto- sales, and they are coming up with more cooking options at home. videos on Instagram and Facebook, and from consuming news mobiles were already spending a consider- Anxiety around health and job losses are also affecting con- on Twitter to taking lessons in cooking and Zumba dancing from able amount on digital marketing, the virus Film sumer behaviour. According to a Deloitte report, 36 per cent of YouTube, the lockdown has made the average Indian consumer a outbreak proved a catalyst for traditional Indians are still very anxious about the future. Around 76 per cent digital native. If there is one major takeaway for marketers from FMCG companies and other sectors as well. `1,447 are worried about their health, 80 per cent about their family’s this period, it is that digital can no longer be an after-thought in The Indian advertising industry has crore health, almost 45 per cent are concerned about their ability to pay brand-building strategies. seen a 60-70 per cent dip in revenues, espe- EMIs and 57 per cent are anxious about job losses. “Earlier, digital engagement used to be for a certain period of cially on traditional platforms such as TV “Some of these are going to immediately impact consumption time and for a few brands. Be it Maggi, Nescafe, KitKat, Nangrow and print, while activities such as outdoor Source: DAN Digital Report if you look at it from the lens of a marketer. The engagement of

48 Business Today 9 August 2020 9 August 2020 Business Today 49 Industry – Advertising xecutives at Godrej Consumer Prod- the activation and live entertainment have come to a standstill ever since the lockdown began in March. While marketers can’t afford ucts were struggling to find ways to make break-up not to have a digital-first strategy anymore, they are still learning the company’s premium hair colour brand to adapt to new consumption mindsets. Godrej Expert Rich Creme relevant to Size of Behaviour Changes `68,475 the Indian Traditionally, marketers increase expenses in a recessionary envi- buyers, when a sudden tweet by filmmak- crore advertising ronment to improve connect with consumers. Not only is media Industry inventory more affordable during a recession, it also gives brands er Karan Johar came to their rescue. Johar an opportunity to raise their voices and push their not-so-strong competitors (who don’t have the wherewithal to advertise) to the had posted a picture of his grey look, with fringe or even acquire them. But, Covid-19 is different. Unlike a a caption on how the lockdown had made television typical recession when consumption dips due to fall in demand, this time, there has been a massive supply crunch as well. In a re- him ready for ‘father’ roles. Godrej’s hair cent white paper on the virus outbreak, Les Binet, noted market- `26, 869 ing expert and Head of Effectiveness, adam&eveDDB, a commu- colour team reached out to Johar and re- crore nications agency, has called the pandemic a war-like situation, quested him to shoot a video of himself colouring his where the normal rules of marketing and business doesn’t apply. “If demand is the problem, advertising is an obvious solution. But hair and post it with the #ColorLikeKaran hashtag. Go- print if people can’t buy or use your product right now, then the role of advertising is much more limited,” says Binet. drej Consumer Products, which contributes a large part ` of the group’s total revenues, was grappling with Cov- 20,110 A Whole New Game crore The pandemic is set to alter the basic principles of marketing and id-19 and its impact on the balance sheet. Johar’s video brand building. To begin with, it has completely transformed the consumer’s mental model, says Kataria. “The consumer’s life, got seven million views on Twitter. the way he/she consumes, the concept of leisure, work, in fact, Digital the model of happiness itself has changed. This is not an ordinary situation where one can say that everything will be back to normal `13,683 post the lockdown. Some habits may go back to what they were crore earlier, but a lot of them will not be the same, and marketers will need to morph their strategies accordingly.” Godrej Consumer Products Chief Executive Officer, India or Ceregrow, all our brands are enjoying One of the most obvious changes is people staying indoors, and Saarc, Sunil Kataria, did not disclose if Johar’s video increased the benefit of our digital-first strategy. This working from home and also entertaining themselves at homes. sales of hair colour, but it managed to make DIY (do it yourself) is the play we will be using for a long time ooh Socialising at cafes or parks is now a thing of the past, and so are hair colouring fashionable, and a host of similar videos popped up because consumers will be digitally far weekend shopping at malls and movie watching at multiplexes. on social media platforms. more active than before,” says Nestle India `3,887 From birthdays to wedding anniversaries, people are finding ways It was the ‘moment of truth marketing’ straight out of books Chairman and Managing Director Suresh to celebrate special occasions at home and get friends and extend- that Kataria had studied decades ago. It also showed the power Narayanan. From a mere 6-7 per cent pre- crore ed family be part of the celebrations virtually. In fact, virtual video of digital media. “We engaged with consumers with a product lockdown, the company’s digital ad spend is communications platform Zoom grew traffic from 10 million like hair colour, which is of least importance to them during the now at a high single-digit of its overall media participants a day in December 2019 to 300 million in April 2020. lockdown. Our effort was to make hair colouring part of the con- expenses. raDio The big fat Indian wedding has now become thinner as well, with sumer’s new habit by encouraging him/her to DIY (do it yourself) In fact, digital media spends, at 20 per new social distancing norms restricting gatherings to 20 people. at home. We did all of this on social media. If a brand can become a cent of the overall `68,475-crore advertis- Even air travel and holidays will never be the same again. All these habit, it will be the ultimate prize for marketers,” says Kataria. ing pie before Covid, have increased by 10-15 `2,479 changes are here to stay and so companies have to rejig their brand per cent during the lockdown period, and crore architectures to stay relevant. For example, over 15-20 per cent The Digital Native are likely to be as high as 35 per cent by the revenues of brands such as Nestle or Amul come from institutional From binge watching originals on Netflix and Hotstar to short end of 2020. While sectors such as auto- sales, and they are coming up with more cooking options at home. videos on Instagram and Facebook, and from consuming news mobiles were already spending a consider- Anxiety around health and job losses are also affecting con- on Twitter to taking lessons in cooking and Zumba dancing from able amount on digital marketing, the virus Film sumer behaviour. According to a Deloitte report, 36 per cent of YouTube, the lockdown has made the average Indian consumer a outbreak proved a catalyst for traditional Indians are still very anxious about the future. Around 76 per cent digital native. If there is one major takeaway for marketers from FMCG companies and other sectors as well. `1,447 are worried about their health, 80 per cent about their family’s this period, it is that digital can no longer be an after-thought in The Indian advertising industry has crore health, almost 45 per cent are concerned about their ability to pay brand-building strategies. seen a 60-70 per cent dip in revenues, espe- EMIs and 57 per cent are anxious about job losses. “Earlier, digital engagement used to be for a certain period of cially on traditional platforms such as TV “Some of these are going to immediately impact consumption time and for a few brands. Be it Maggi, Nescafe, KitKat, Nangrow and print, while activities such as outdoor Source: DAN Digital Report if you look at it from the lens of a marketer. The engagement of

48 Business Today 9 August 2020 9 August 2020 Business Today 49 Industry – Advertising

consumers as a consequence of this is The trust factor extends to influ- going to predominantly drive engage- LOCKDOWN encers as well. Brands are relying on ments with brands,” says Ajit Kumar, BLUES micro-influencers, who are more rel- Leader, Customer and Marketing, evant now than ever before. Consum- Consulting, Deloitte India. ers are looking for realistic assurances, Ad volumes fell over 35 per Malls and high-street retail stores cent of their pre-Covid num- as opposed to tall claims by celebrities. have opened in most places, but have bers during the early days So, if a neighbour has ordered grocery been able to attract only 20-30 per of the lockdown. They later on Amazon and received timely deliv- cent of their pre-Covid footfalls. Eat- recovereds to 23 per cent ery, one will also order on Amazon. ing out and watching movies are still "The principles of brand building a while away. Fear of pay cuts and job The number of brands adver- will continue to be the same. How- losses have led consumers to down- tising on television declined ever, the context has evolved today trade. The average consumer is seeking from 2,045 to 1,370 and therefore the task for each brand value products like never before. “The immediately will be unique and differ- focus is on consuming essentials… People are seeking value and Average time spent on ent," says Anusha Shetty, Chairman are looking at smaller packs. Popularly positioned products and smartphones went up by 11 and CEO, GREY Group. affordability are becoming important. They want to conserve the per cent; data usage per day last `10 as hedge against the future,” says Nestle’s Narayanan. at 1.1 GB The Transformation There will also be limited uptake in categories such as apparels Digital was always the future of busi- and beauty products since work from home is here to stay. Covid This has led to brands in- ness, but a number of companies were has taken offices, meetings and socialising to virtual platforms. creasing their digital connect reluctant to make the transformation. Consumers no longer feel the urge to buy clothes or shoes. So, with audiences The lockdown and the change in con- while food and personal hygiene brands have a natural advantage sumption patterns have forced brands by virtue of being essential products, a lot of other brands, which Digital ad spends set to be to include digital as a ‘must-have’ in are in the not-so-essential category, will have to strive to make 30-35 per cent of the overall the new normal. “E-commerce was themselves a part of the consumer’s new preferences. ad industry in 2020, against already a significant development be- 20 per cent in 2019 Royal Enfield, for instance, is using its digital platforms to fore Covid-19. The crisis has just given get bike enthusiasts share anecdotes. The auto sector was going Suresh Narayanan, CMD, Nestle India it a fresh impetus. Similarly, the role through a slowdown at least a year prior to Covid-19, and the pan- Companies such as Nestle, of digital in a brand’s communication demic added to its problems. Massive job cuts and pay reductions Godrej Consumer or Marico plan was increasing already and with have increased their digital ad “Be it Maggi, Nescafe, KitKat, Nangrow or have reduced buying power of consumers significantly. “We are spends by up to 30 per cent, certain traditional media being ham- getting bike enthusiasts to share their Royal Enfield story on our from low single-digits Ceregrow, all our brands are enjoying the pered by the lockdown, the share was social media platforms. Our social media fan following has gone benefit of our digital-first strategy... This bound to increase. Our narrative with up by over 30 per cent during the lockdown,” says Shubhranshu advertisers was already changing. Singh, Chief Marketing Officer, Royal Enfield. “We will surely is the play we will be using for a long time” From making the 30-second ad for TV come back with more gusto, but for the time being, we will need to providing a holistic and integrated to cater to our consumers by understanding the changed circum- approach and intervention through stances. We will also offer them easy finance options,” he adds. the entire consumer journey — from the consideration stage to last-mile The Trust Factor delivery through e-commerce — deliv- Just like in case of individuals, trust is a major factor in brand ered seamlessly. These conversations building as well. During a crisis, consumers depend on brands society during this time of crisis. “Messag- and household chores. “Our vision is to cre- will gain momentum,” explains Tarun Rai, Chairman and Group they can trust. How a brand behaves may have a bigger effect on ing around selling may not gel well with ate aspirational products which will help CEO, Wunderman Thompson. perceptions than advertising, especially if ad budgets have been consumers in current circumstances. If the our consumers multi-task, and at the same For example, a person buying a car will have to go through 28 cut, points out Binet of adam&eveDDB, in his white paper. tonality of communication reflects authen- time be cost-efficient and energy-efficient,” touchpoints before he completes the transaction. “You go to a Most brands are doing their bit to win consumers by assuring ticity and care for society, sales will auto- says Panasonic India Managing Director showroom to see the product, you compare it with other brands, them about quality and hygiene standards — from manufacturing matically pick up when times are good.” Manish Sharma. you go to a blog to find out how the product is, you go for a test to last-mile delivery. “What are you, as a brand, doing to help the Consumer durables brand Panasonic is "Survive, Revive and Thrive is the man- drive, arrange for finance, etc. While one part of digitalisation is situation? Are you doing something for the people who are not able trying to strike a chord with its target audi- tra. You need to first survive as it is not a communication, the major part is the need to digitalise all other to afford food and essentials? In this state of anxiety, it is natural ence by promising a better life and a better scripted crisis. Everybody is finding new aspects to give a seamless experience to the consumer. This means for consumers to engage with a brand that is helping find a solution world. The pandemic has forced people to ways of going ahead... Perhaps a newer way the OEM should have a platform which makes it easy for consum- to the current situation,” says Kumar of Deloitte. live indoors and made them realise the im- of working will enable us to revive, and if you ers to engage with the brand, even at the process when a consumer Shashank Srivastava, Executive Director, Sales and Market- portance of having gadgets such as a micro- do this you will thrive," says Madhukar Ka- is comparing products,” explains Maruti Suzuki’s Srivastava. The ing, Maruti Suzuki, says the automaker’s focus has moved from wave or a dishwasher that could help them math, Chairman Emeritus, and Mentor and car maker was spending almost 34 per cent of its marketing budget brand-building and selling to showing greater care towards the strike a balance between their profession Chairman, DDB Mudra Group. on digital platforms pre-Covid, which is likely to increase to 45-50

50 Business Today 9 August 2020 9 August 2020 Business Today 51 Industry – Advertising

Nestle India’s websites Raymond has started send- Changing Relationships WHAT FIRMS Maggi.in and Asknestle.in ing e-catalogues to loyalty So, how will the role of a traditional creative or media agency have lots of recipes that are programme members. Cus- change? After all, it is consultancies such as Deloitte, Accenture or ARE DOING easy to cook and nutritious. tomers can also place their Asknestle’s focus has been orders online EY, which are known for cutting-edge digital marketing solutions. immunity-building recipes, "We earlier called ourselves communications consultants or mar- which has attracted 1.2 mil- keting investment consultants, but now we have to think about Brands are collaborating lion engagements in the last the business at large," says Parthsarathy of Mindshare. few weeks with social media influencers to come up with For instance, at the beginning of the lockdown, when the dis- innovative ways to reach tribution network of most brands had come to a halt, Mindshare, Godrej Consumer Products audiences — like Reebok claims Parthasarathy, had helped clients partner distribution is engaging with consum- India’s home workout videos platforms such as Swiggy and Dunzo to ensure their products ers digitally almost every with KatrinaKaif, Dettol’s20s day across social media #Handwash Challenge reached consumers. “Enabling of distribution is something we platforms either by giving with Riteish Deshmukh and wouldn’t have done pre-Covid,” he says. them DIY hair-colouring tips, Philips India’s #TrimAtHome In fact, Ashish Bhasin, Chairman, Dentsu, says it is high time or getting celebrities and initiative with ViratKohli agencies bring in consulting efficiencies, and ensure they get paid influencers to talk about its fairly for their time and services. “Large consulting companies or various brands even lawyers don’t do anything for free. In advertising, we never thought that way, and as long as the market was growing at 10-15 per cent year-on-year, it didn’t really impact us. But with pressures on costs increasing by the day and growth slowing down, we as an per cent going forward. industry need to be more prudent.” Digital transformation for apparel major Raymond, on the Aditya Kanthi, CEO, DDB Mudra, admits remuneration is a other hand, has been aimed at offering an omni-channel experi- FROM CORPORATE challenge and contracts with clients are getting revised. “All good ence to consumers. With buyers shying away from stores due to agencies need adaptability and agil- fear of contracting the virus, an omni-channel presence has be- TO HUMANE ity in order to thrive. Clients do value come mandatory, says Shantiswarup Panda, Chief Marketing Sunil Kataria, CEO, India & Saarc, scale, yet they expect agility.” Officer, Raymond. “The idea is to make the brand available at our Coronavirus is cial distancing, Godrej Consumer Products Kumar of Deloitte believes build- stores, on e-commerce platforms, as well as on our own website, primarily a hu- handwashing and ing a tech capability for an ad agency manitarian crisis. generosity. In ad- so that consumers can buy both online and offline.” The brand has Firms that fail to dition, the brand “The pandemic is set to alter the basic is going to be a big shift, for which they started sharing e-catalogues on WhatsApp. They can select the behave responsibly is committed to need to make bold moves in terms of product, which will be delivered home. are likely to find make essentials principles of marketing and brand acquisitions. Over the years, Deloitte With online shopping suddenly getting a leg-up, consumer their reputations like Lifebuoy soaps, building... It has completely trans- has developed products such as Rapid durables major Godrej Appliances is helping its network of 25,000 tarnished for years hand sanitisers and Commerce, which can get any business to come Domex cleaners traditional dealers get their own e-stores. “Dealers are now able to available across the formed the consumer's mental model” online in a few weeks. In the past few direct customers from WhatsApp to Facebook pages, where they country years, agencies have gone shopping to can see the products and shop. Since many consumers are looking Companies should add to their digital capabilities, essen- for a contactless experience, we have also created videos of prod- put short-term prof- tially in the space of marketing com- its aside, and focus Reckitt Benckisers’s uct demonstrations that dealers can send to their customers,” says on doing what is in campaign, #Dis- munications. Kamal Nandi, Business Head, Godrej Appliances. public interest infectToProtect, ternal team gives me the flexibility to make Marketing and Branding Expert Alpana Parida expects Consumer insights play a major role in crafting a perfect mar- aims at educat- alterations. I can change my creative three consulting firms and communication agencies to merge going keting plan, but in the Covid era, face-to-face communication is an ing people about times a day,” he adds. forward. “There has been a lag between business consultants Hindustan Unile- issue. “Consumers are not coming out of their houses, or meeting the need to keep M.A. Parthasarathy, CEO, Mindshare, who are mostly product-centric, while advertising and brand- ver, in collabora- surfaces clean; the unknown people at their homes. We are asking agency partners to tion with UNICEF, brand has pledged agrees that the pandemic has brought about ing agencies only understand consumer behaviour. If the two come with virtual models to test ads with similar accuracy as in a has launched the to donate 1 million rapid behaviour and habit changes, forcing merge, they can offer far more holistic services.” physical interface model,” says Kataria of Godrej Consumer. #BreakTheChain litres of Lizol and brands to be on the edge all the time. The There is no doubt that coronovirus will bring about a huge campaign with Harpic to support media agency has created a dashboard that shift in the way brands are being built. Digital will surely take the three powerful frontline workers Being Agile themes — so- constantly throws up data on consumer driver’s seat. Shashi Sinha, CEO, IPG Mediabrands India, how- Covid has also made businesses far more agile. George Koshy, behaviour. “The dashboard gives diverse ever, has a word of caution. “This is the time for digital to look at Chief Marketing Officer, Marico India, claims that most of the and disparate data on advertising trends, measurements, else it will be a short-term gain,” he says. company’s recent digital campaigns have been made within 10-12 air pollution, mobility, search patterns and The disadvantage that digital media currently has is the lack days. “In a normal cycle, it would have taken one month, but right social buzz. It enables us to study trends in of a uniform measurement tool. If the industry doesn’t put its act now, speed is of essence,” says Koshy. Marico has set up its own one market versus the other. We kickstarted together, brands will be sceptical to invest in digital. After all, in digital studio. “Having an agency within our own team reduces this because of Covid-19, because the pace the end, it is all about returns. the response time. Each time we launch a new product or cam- of change each week is so different.” paign, we need to come up with 500-odd creatives. Having an in- @ajitashashidhar

52 Business Today 9 August 2020 9 August 2020 Business Today 53 Industry – Advertising

52 Business Today 9 August 2020 9 August 2020 Business Today 53 Industry – Hospitals Surviving The Pandemic Evolving regulations and poor infrastructure are turning out to be pain points for the private healthcare sector, already struggling to Why Private manage the virus outbreak Healthcare Is Key By JOE C. MATHEW Private hospitals are IllusTrATIOn By rAJ vErMA among the country’s top five employers

Constitute over 60 per cent of total beds (around 8.5-9 lakh) of the sector, 60 per cent of in-patient visits, 80 per cent of doctors

`2.4 lakh crore n July 13 Annual revenue , in a rare expression of solidarity, repre- estimated sentatives of half-a-dozen Indian private healthcare industry associations, at least a dozen heads of leading private hospitals and the Health Servic- `31,000 crore es Committee of industry body Ficci announced Annual EBITDA a virtual press conference. It got postponed at the Olast minute to July 15, only to get cancelled again, as the central topic `7,000 of discussion was “sub judice.” The topic, which representatives of top crore ranking private hospitals such as Apollo, Fortis, Hinduja, DM Health- Annual profit care and Columbia Asia wanted to discuss, was challenges due to the after tax Covid-19 pandemic. The issue most central to this — price caps on Co- vid tests and treatments by central agencies, state governments and the General Insurance Council — is also being considered by courts. Though the event got postponed, there is no relief in sight for private healthcare providers, even as the number of Covid-19 patients in India races past the 10 lakh mark. And ‘unsustainable price caps’ is just one of their problems. “Across India, different states and cities are in various stages of lockdown. If we talk of price caps, prices are different in different states and that is a challenge,” says Ashutosh Raghuvanshi, Managing

54 Business Today 9 August 2020 9 August 2020 Business Today 55 Industry – Hospitals Surviving The Pandemic Evolving regulations and poor infrastructure are turning out to be pain points for the private healthcare sector, already struggling to Why Private manage the virus outbreak Healthcare Is Key By JOE C. MATHEW Private hospitals are IllusTrATIOn By rAJ vErMA among the country’s top five employers

Constitute over 60 per cent of total beds (around 8.5-9 lakh) of the sector, 60 per cent of in-patient visits, 80 per cent of doctors

54 Business Today 9 August 2020 9 August 2020 Business Today 55 Industry – Hospitals

Director and CEO, Fortis Healthcare. Stumbling cent in April and 35 per cent in May. Healthcare Infra - India Vs Others He says 60-70 per cent cost of running Blocks To top this, ever changing regu- a hospital is fixed and cannot be cut lations, guidelines and orders from even when occupancies are low. Big or Private hospitals have central and state governments, court US Brazil UK India China small, no hospital will find these prices seen around 40 per orders and price caps and treatment Beds cent drop in revenue 29 22 28 12 42 per 10,000 sustainable, he says. “The caps don’t from pre-Covid days specifications are keeping them on people match the quality of care being given at their toes. There are also allegations The government Source: cRiSiL our hospitals. Our supply chains, medi- of overcharging and violation of treat- Research/ has come up with AHeL investor cal equipment and hospital systems hundreds of health- ment norms. Then, some of the facili- Presentation have also been affected. Manpower is related regulatory ties are being taken over temporarily directives a challenge as for Covid, you need clini- by governments for treating Covid pa- cians from critical care, pulmonology, Increasing complaints tients. The net result is loss of revenue, respiratory care. Any hospital will have of overcharging, apart from fear and uncertainty, not non-compliance of limited number of these specialists,” he guidelines just among patients but also among pri- says. vate healthcare providers. The pricing problem arises due No stimulus “Our interactions with healthcare to the huge difference in government given to augment providers show that the occupancy infrastructure, tide rates and that charged by private hos- over liquidity crisis level of private hospitals is 25-35 per pitals. Delhi, on June 20, capped Covid cent. Outpatient consultations are not treatment charges (for 60 per cent of happening and tele-consultations have total Covid bed capacity) at `18,000 The given only a benign push (to business). per day for severely ill patients in inten- Telemedicine Elective surgeries have been post- sive care units. The Covid management Push poned, and medical tourism, a major package announced by Max Health- source of revenue for several hospital care for the same critical patient was chains, has been substantially hit,” `72,500 per day at that time. Similarly, 500 says Isha Chaudhary, Director, CRISIL per cent Covid-19 RT-PCR test rates are capped growth in online Research. “We expect private hospital at `2,400 in Delhi, as against the `4,500 consultations during industry revenues to contract 10-15 per charged by diagnostic labs. March 1 to May 31 cent in FY21, which has never happened With nine lakh beds, Indian private before,” she says. India's Share in Global Disease Burden is 20%; in Health Infra, its Share is Far Less healthcare is a `2.4 lakh crore business, 5 Why are Indian private healthcare accounting for almost 70 per cent of crore entities so vulnerable? Are they crum- people accessed secondary and tertiary care hospital healthcare online bling under pressure? Will they emerge admissions. It has been growing at 16- during the period out of Covid wiser, better prepared to 17 per cent a year for the last five years. face future challenges? The lockdown, and the resultant drop 67 in occupancy in April-June, have bro- per cent THE SHOCK Disease Beds Doctors Nurses Community Lab ken this growth trajectory. Industry drop in in-person visits As in other parts of the world, Covid-19 burden 6% 8% 8% & health Technicians estimates peg operating losses during took the `4.4 lakh crore Indian health- 20% workers 1% the three lockdown months at `13,400- 44 care system (public and private togeth- Source: ficci-ey 9% 22,000 crore. Price caps have not been per cent er) by surprise. It laid bare undersupply drop in visits from the villain here, though. The main rea- non-metro cities of doctors/nurses, inadequacy of infra- son was absence of private players from structure and import dependence for Source: Practo Report fight against Covid-19 during initial medical technology. Initially, the pri- months. The period also saw hardly any vate sector was just an enabler on the non-Covid patients in private hospitals side. Everything, right from diagnostic government’s health assurance packages like Ayushman While the world experienced a series of infectious diseases due to fear of infection and logistical problems caused by kit supplies to approvals to testing to identification of the Bharat fixed their own reimbursement rates for empan- and pandemics like SARS, H5N1, H1N1, Ebola and MERS, the lockdown. disease to providing beds to patients, was controlled by the elled private hospitals. Private healthcare players, already the impact of these was marginally felt in India. The private Just two examples will illustrate the problem. Bengalu- government. The private sector has come into the picture hit by decline in number of non-Covid patients, found healthcare ecosystem, therefore, did not have to make any ru-based Narayana Health, which owns, manages and op- only in the last three to four weeks after the government re- themselves underprepared to take on the massive chal- significant transformation and investment over the years erates over 20 hospitals, reported an 11 per cent growth in alised it cannot handle everything on its own. lenge. “Over the last few decades, given the epidemiological in infrastructure, technology or clinical acumen to combat operational revenue in first 11 months of FY20, but ended While district administrations started by taking over shift in India to non-communicable diseases, the private the tsunami of an infectious disease like Covid-19,” says the year with 8.6 per cent growth as business shrank in private healthcare facilities, the weeks that followed saw sector has been scaling up healthcare infrastructure large- Vishal Bali, Executive Chairman, Asia Healthcare Hold- March due to spread of Covid and countrywide lockdown. some states such as Delhi asking private healthcare players ly towards providing care in key specialities like Cardiac, ings. “Our private hospitals are designed to have a few Fortis Healthcare Ltd, with 28 operational facilities, says its to earmark a certain percentage of beds for Covid patients. Neuro, Orthopaedics, Oncology, GI, Urology/Nephrol- segregated isolation and ICU beds for infectious disease average bed occupancy level of 65-75 per cent fell to 29 per Some also imposed cap on treatment costs. The central ogy and Critical Care which was needed to save many lives. patients but are not designed to handle infectious pandem-

56 Business Today 9 August 2020 9 August 2020 Business Today 57 Industry – Hospitals

Lockdown is likely to result in operating losses of “Different states/ done. The US has announced a $150 billion federal fund- cities are in ing to help hospitals and healthcare workers fight the pan- `13,400-22,000 crore in April-June quarter demic. The UK has announced immediate assistance of £5 various stages of billion to strengthen its National Health Service. India does At 50% 70% lockdown. If we not have the money to spend anything close to these num- Pre-Covid Fall In Fall In talk of price caps, bers but the industry expects the government to at least Revenues Revenue Revenue prices are different clear its estimated dues of `1,700 crore for treatment under in different health assurance schemes like CGHS and ECHS. It is also EBITDA (`'000s crore) 7.7 -13.4 -21.9 seeking sops like loans at concessional rates, tax conces- states. That is a sions and deferment of statutory liabilities. Interest Coverage Ratio 2 -6 -9 challenge” Arindam Haldar, CEO, SRL Diagnostics, says a central body should decide the new pricing (for Covid tests) across Receivable Days 45 135 194 Ashutosh Raghuvanshi, the country, and it should not be left to each state. “Sec- MD and CEO, Fortis Healthcare ondly, while the government has reduced prices of tests, Cash In Position Days 19 -32 -42 Source: Ficci-Ey it has not capped prices of inputs. As one of the largest lab chains in the country with sufficient capacity, we are more than willing to reduce prices provided input costs are also capped. Some inputs attract very high tax (as high as 80 per High Fixed Costs Behind Worsening Financials “The pandemic cent), and the government should look at making these inputs tax free,” he says. Average has exposed While it is nearly impossible to predict what the next revenue per Quarterly that we have a pathogen threat will be, from where it will emerge and No of No of beds occupied Fixed cost Variable cost EBITDA (% of EBITDA loss fragile healthcare when it will strike, there is no doubt that the government Category hospitals (in lakhs) bed (`) (as % of total) (in %) revenue) (in `crore) system which was and the private sector should be better prepared against 21,000 to 8,600 to Tertiary 1500 2.8 65-70 30-35 13 underprepared to infectious diseases. “The Covid-19 pandemic has exposed 22,000 14,000 that we have a fragile healthcare system which was under- 42,000 to 5,000 to 4,800 to detect, respond and Secondary 5.8 75 - 80 25-20 14 prepared to detect, respond and contain the spread of the 43,000 6,000 8,000 contain the spread disease. It brings to the fore that India needs to priortise 44,000 to 10,000 to 13,400 to and escalate its investment in healthcare infrastructure, Overall 8.6 65-75 25 - 35 13 of the disease” 45,000 11,000 22,000 implement a multifold increase in medical education to build up the medical and paramedical talent base and pro- Vishal Bali, Executive Chairman, vide a supportive regulatory environment and policy eco- Source: Ficci-Ey Asia Healthcare Holdings system to scale up indigenous manufacturing of medical technology. Most importantly, we must strengthen our infectious diseases surveillance system to detect early and respond effectively,” says Asia Healthcare's Bali. The sector also requires massive capitalisation. A big ics. Hence, several of our institutions even had to undergo the government is utilising the existing manpower, while in the supply, though none of that is helping Nayati as people push by the government, probably pumping in 3-3.5 per infrastructure changes to accept Covid patients. This is the the other two, they have got their own manpower to run the avoid other treatments due to fear of contracting the Co- cent of GDP into the healthcare sector, can kick-start this critical reason why unlocking of capacity in the private side facility. However, there is lack of clarity on payment,” says vid-19 infection. “The occupancy level of non-Covid beds infrastructure development. is low. The amount of infrastructure the private sector has Sabahat Azim, Founder, Glocal Healthcare Systems. While in our flagship hospital in Mathura is less than 25 per cent. CRISIL’s Chaudhary, who says the private healthcare in its current form is extremely limited,” he says. the company has received some money for part payment of Among the 100 beds earmarked for Covid there, hardly 20 sector will see a 10-15 per cent drop in revenues in FY21 As long as the Covid fight was limited to government salaries, consumables, etc., there is no clarity when normal are occupied,” says Radia. The company has reworked the due to low occupancy, poor price realisation because of hospitals, costs were not considered a problem. However, revenue flows will resume. “People are scared, patients are salary structure of employees and kept in abeyance its deci- cap on costs and loss of revenues from medical tourism, the moment the load started shifting to the private sector, scared. They don't want to step out unless it is very, very, sion to open new hospitals in Northern India, especially in says it is expected to recover from the third quarter of which started charging the way it does under normal cir- critical.” the National Capital Region. FY21 (from October 2020). “The average occupancy level cumstances, complaints started. There were instances of Niira Radia, the Chairperson and Promoter of Mathu- for the hospital industry is 65-70 per cent. By Q4 (January- private hospitals asking for advance payments and charg- ra-centric hospital chain Nayati Healthcare, considers pa- WAY FORWARD March 2021), we expect this to go back to 60 per cent lev- ing several times more than the rates fixed by state govern- tients’ ‘fear’ as the biggest challenge before healthcare pro- The government has said that it will earmark some funds to els. Further, we expect a rebound next year and whatever ments. Most said the government rates were too low. viders. Radia’s less than a decade old hospital chain caters fill the viability gap to encourage establishment of health- is lost (this year), most of it will be gained,” she says, add- The promoters of hospitals taken over by governments to Western Uttar Pradesh, and is among the few tertiary care infrastructure in Tier-II and Tier-III cities as part of ing: “All depends on a Covid cure coming, and that is our for Covid treatment have their own share of worries.“Out care facilities serving the 60 million-odd population of its economic stimulus package to fight the Covid-induced baseline assumption.” of our 10 hospitals, six, four in Bengal and one each in Bihar Mathura, Agra and Aligarh districts. The demand for tertia- slowdown. But it is minuscule compared to what other and Odisha, have been taken over. In four Bengal hospitals, ry services in these Tier-II and Tier-III cities far surpasses countries, with much better health infrastructure, have @joecmathew

58 Business Today 9 August 2020 9 August 2020 Business Today 59 Industry – Hospitals

58 Business Today 9 August 2020 9 August 2020 Business Today 59 Industry – Electronics

A campaign for boycott of Chinese products is opening up opportunities for local brands in smartphones and TVs. Vs. But do they have the scale to upstage Desi Videshi the Chinese?

By sumant Banerji illustration By raj verma

60 Business Today 9 August 2020 9 August 2020 Business Today 61 Industry – Electronics

A campaign for boycott of Chinese products is opening up opportunities for local brands in smartphones and TVs. Vs. But do they have the scale to upstage Desi Videshi the Chinese?

By sumant Banerji illustration By raj verma

60 Business Today 9 August 2020 9 August 2020 Business Today 61 Industry – Electronics From One in 2015, Four of the Top Five Smartphone Makers are Now Chinese

Lenovo Intex Samsung Others Realme Vivo 5.2% 9.4% 27.8% 11% 14% 17% Lava Micromax Others Oppo Samsung Xiaomi 5.4% 15.3% 36.9% 12% 16% 30%

Q1 2015 Q1 2020

Q1 2015 Q1 2020 the afternoon of June 18, a video featuring a group of men in Coimbatore shout- ing anti-China slogans and smashing smartphones went viral on social media. The same day, another group of men, this time in Surat, were seen doing the same to a TV set. This beat the earlier one in internet popularity due to its higher drama quotient. The videos emerged less than 72 hours after the clash between Indian and Chi- Intex Micromax Others Nokia Lava Others 8.7% 12.2% 43% 13% 15% 28% nese forces at Galwan Valley in East Ladakh that led to the death of 20 Indian sol- Lava Microsoft Samsung Micromax Samsung Itel 8.1% Lumia 18.2% 7% 15% 22% diers. Since then, relations between the two countries have been strained. This has 9.8% Numbers show marketshare; manifested itself in a public campaign to boycott Chinese goods, especially smart- So is the Largest Feature Phone Brand Source : Counterpoint Research phones and TVs, the two segments dominated by companies with Chinese origin. in the Country This swirl of nationalism has given fresh wind to local brands steamrolled into dust by the Chinese a few years ago. Companies such as Micromax, Karbonn and Lava in In Smartphones, China-based In Low-cost Feature smartphones, and Onida, Weston, Salora, once household TV names, along with new Companies Have Grown Exponentially Phones, Local Brands entrants like VU Technologies, are sensing an opening to increase market penetra- at the Cost of Local Brands are Far More Resilient 80 tion. Any real dent in demand, howsoever small, for Chinese products in the two cat- 73 52 52 egories, will throw up a sizeable opportunity for these local players. 70

China-Based 60 Local

Take smartphones. Around 158 million smartphones na again accounts for the lion’s share. Xiaomi is the market 50 were sold in India in 2019. This made it the world’s sec- leader. It enjoys the company of compatriot TCL in the top Global ond-largest market behind China with revenues of $8 five. Others are gearing up for action but more on that later. 39 28 40 billion. Four of the top five bestselling brands in the In a highly competitive and technology-driven sector Global 26 country are Chinese, led by Xiaomi and Vivo and fol- like consumer electronics, consumers rarely opt for newer 37 lowed by Realme and Oppo. Together, they account for or smaller brands. The anti-China sentiment, however, 30 25 Others over 80 per cent of the market (Q1 2020). The domestic could provide a springboard for local brands to beat the 15 feature phone market is worth another 130 million units. heavyweights. But do they have the ability to exploit this 20 Local 12 The market leader is iTel, owned by Shenzhen-based opportunity or will it be business as usual once winter sets 19 Others 5 Transsion Holdings. The hold of the dragon is relatively in and dust settles in the cold desert of Ladakh? Or will 10 5 10 2 weaker in this segment. non-Indian, non-Chinese companies benefit? China-Based In the nascent smart TV segment, which is in many Away from the border, a battlefield of another kind is 0 ways seen as an extension of the smartphone market, Chi- being readied. 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Numbers show marketshare in %; Source: IDC

62 Business Today 9 August 2020 GrAphics by Amit shArmA 9 August 2020 Business Today 63 Industry – Electronics From One in 2015, Four of the Top Five Smartphone Makers are Now Chinese

Lenovo Intex Samsung Others Realme Vivo 5.2% 9.4% 27.8% 11% 14% 17% Lava Micromax Others Oppo Samsung Xiaomi 5.4% 15.3% 36.9% 12% 16% 30%

Q1 2015 Q1 2020

China-Based 60 Local

62 Business Today 9 August 2020 GrAphics by Amit shArmA 9 August 2020 Business Today 63 Industry – Electronics

government schemes. It will enable us to build capacity Source : Counterpoint Research to cater to export markets. This will facilitate building of SmaRt tV: a cost-efficient mobile manufacturing ecosystem with Chinese Firms Have an Edge Here too a huge potential to create employment opportunities,” Xiaomi Others Samsung TCL Xiaomi LG Sony TCL says Tejinder Singh, Head-Product, Lava International. 24% 21% 12% 4% 27% 13% 13% 4% “We plan R&D investment of `800 crore over the next LG Sony VU Others Samsung VU five years. We are already among the top five feature 21% 13% 5% 22% 12% 5% phone brands in the world. Our vision is to raise the In- dian flag high in global skies.” While the anti-China sentiment is palpable, right from the man on the street to the bureaucrat in government offices, the most vocal voices against Chinese dependence have come from the trading community. En- couraged by policies such as Atma Nirbhar Bharat that aim for bringing down import dependence and catchy slogans like vocal for local, the Confederation of All In- 2018 2019 dia Traders (CAIT), the umbrella body of 40,000 trader organisations, is at the forefront of this campaign. CAIT has made a list of 500 products that it wants its seven crore member retailers to stop importing with an aim of reducing Chinese imports by $13.3 billion by December ndeep singh next year. There is confusion, though, on classification of Xiaomi, Vivo, Oppo, Realme, Poco and One Plus — com- ph by b A panies with Chinese origin but manufacturing facilities in India. Like others, their phones are made locally, in factories run by Indians. Besides, their wide retail network provides livelihood to thousands of people photogr A across the country. “Anybody who is Sunil Raina, President & Business Head, manufacturing in India should not be Lava International considered a foreign company,” says Lava plans to take advantage of government Pankaj Mohindroo, Chairman, India The Rise of the Chinese Today, less than 2 per cent buyers opt for local smart- Cellular and Electronics Association The Chinese domination of India’s mobile handset seg- phone brands. “I can't think of any country where the incentives for local manufacturing. It is (ICEA). ICEA has joined hands with ment may seem overwhelming statistically but is very Chinese have dominated like this,” says Tarun Pathak, planning R&D investment of `800 crore over CAIT and is assisting the government recent. In 2015, Chinese brands accounted for less than Associate Director, Counterpoint Research. “Every- the next five years in framing policies to bring down the 20 per cent of the market. The majority pie was with lo- thing fell in place perfectly for them from 2016 when import content in mobile phones. cal brands, as Micromax, Intex and Lava, among others, they started accelerating. They were ahead of the curve CAIT has written to celebrities like cornered nearly 40 per cent of the market. and invested in 4G when local companies were still Aamir Khan, Virat Kohli, Ranbir Ka- Since then, the rise of Chinese brands has been as ex- into 3G. Decline in data prices also helped companies poor and Ranveer Singh, who endorse ponential as it has been relentless. By 2017, they had more like Xiaomi that had an online-first strategy. They also phones from these brands, to stop than half the market. So much so that towards the fag end went for innovation in devices for India. Indian brands, cies. For example, the product linked incentive scheme, promoting these Chinese companies. of the year, when Xiaomi upstaged on their part, were facing headwinds launched by the Ministry of Electronics and Informa- From toys and T-shirts to handicrafts, coffee mugs, Samsung to emerge as India’s biggest such as demonetisation and GST and tion and Technology in April this year, provides a 4-6 watches and spectacles, Chinese goods are omnipresent smartphone maker, it did not feel like a were vulnerable as the Chinese built per cent incentive on incremental sales over FY20 levels. in Indian markets, though a lot of them are classified as flash in the pan. It has since then con- momentum.” It favours local brands as, for international companies, unorganised merchandise. But the ubiquitous mobile solidated its position at the top. 40 a threshold value of `15,000 has been stipulated, while phone has earned the ire of the populace and become a The rise of the Chinese came at Opening for Local there is no such condition for local firms. The invest- symbol of Chinese domination. “Considering the im- Per Cent the cost of local brands. The local More than 75 per cent smartphone ment criteria for local companies are also less stringent. pact of this movement, it will give impetus to Indian players were hamstrung by technolo- The share held by Indian volumes come from phones that cost Domestic firms need to invest just `50 crore initially and brands which have the capability to build products of- gy (most were sourcing it from China) companies such as Micromax, less than `15,000. This is also the `200 crore incrementally over four years to avail the in- fering great experience and quality,” says Singh of Lava Intex and Lava in the handset ` and did not have pockets deep enough market in 2015; by 2018, it had segment where Lava, Micromax, Kar- centives, while for others, it is 250 crore initially and International. “We are in the process of building a robust to withstand the onslaught. By 2018, shrunk to 10 per cent bonn and Intex operate. These brands `1,000 crore over four years. portfolio, which will have offerings for every segment.” their share had shrunk to 10 per cent. are supported by government poli- “Local players like us will get the benefit of various Lava is the second-largest feature phone brand in In-

64 Business Today 9 August 2020 9 August 2020 Business Today 65 Industry – Electronics

dia, and while its presence in the smartphone segment roots, these companies have nothing to hide and are smartphone brands such as Motorola, Nokia, OnePlus is negligible (around 1 per cent share), it is planning to stressing transparency and data security to entice con- with their Smart TVs looking to build a connected device launch a slew of smartphones in the next few months sumers. “Consumers will not simply look at the name story,” says Debashish Jana, Research Analyst for TVs at starting with Z61 Pro. It wants to replicate its success in of the brand they are purchasing but also the trust they Counterpoint Research. “These new-age brands from feature phones in the smartphone market. have for it. With our European roots and proven track re- Xiaomi to OnePlus offer high specifications and some Similarly, Micromax, which has been testing its cord, our phones are well-positioned in this aspect,” says unique features at highly affordable price points tar- “Made in India-Made for India” smartphones, is plan- Sanmeet Kochhar, Vice President, HMD Global, which geting urban users via e-commerce channels. This has ning to launch at least three products in the budget to makes phones for Nokia. led to some serious price cuts by competition to match mid-range segment that accounts for a bulk of the vol- However, the odds are stacked heavily in favour the value proposition of these Chinese brands leverag- umes. “We have seen a definite uptick in enquiries for of Samsung, the only non-Chinese ing the cost-effective e-commerce our phones even though overall footfalls at stores are brand in India with big enough opera- channels.” relatively low because of the pandemic. It has bolstered tions to cash in on any mistake by the The floodgates are just opening our confidence and we are planning to expand our port- r major players. In terms of timing too, up. Realme threw its hat in the ring folio and expedite our launches,” says a Micromax exit is a god-send for the Korean firm, $13.3 in the middle of the lockdown in May ecutive. “Indian consumers now want to buy only Indian which just got over taken by Vivo as billion with its first smart TV while OnePlus phones and nobody understands their needs better than the second-largest smartphone mak- expanded its range earlier this month r deodh A The reduction in Chinese us. We need to fulfil their aspirations.” er in the country (Q1 2020). In feature imports that CAIT is with the more affordable U and Y send A phones, too, Lava has caught up with targeting by December next ries. Oppo is expected to join the fray A Matter of Scale Samsung as the second-largest play- year; it has made a list in the next few months. The success of local brands is not a given even with so er. Samsung used to be clear market of 500 items whose imports it Devita Saraf of VU says the Chi- plans to discourage much going in their favour. Experts say lack of scale is a ph by m A leader in both these segments in the nese have similar strategies and will big problem. Further, minimal presence at the present not-too-distant past. “Samsung is end up unleashing a price war and juncture means consumers do not have many choices the only mass-market non-Chinese eating into each other’s share, leav- apart from Chinese in some smartphone segments. brand with decent scale. So, it can ing the rest of the market for others. photogr A “Chinese brands are facing a back- benefit significantly,” says Pathak of The current negative sentiment also lash from the consumer but it is very Devita Saraf, Chairman and CEO, VU Televisions Counterpoint. “Anecdotal evidence works against them. “People buy easy to misread the situation. These suggests they have benefited a bit in 25 Chinese products because of their brands command more than 80 per the second quarter of this year. We per cent pricing and the fun part is they copy cent (Q1 2020) of the market. So, “People buy Chinese products because of their foresee a close fight between Xiao- The rate of growth of a lot of what we do. And now, they are where does he go even if he doesn’t pricing and the fun part is they copy a lot of mi, Samsung and Vivo in the third the smart TV market; also copying each other. It is going here also, Xiaomi leads want to buy a Chinese phone?,” asks what we do. And now, they are also copying quarter. Samsung has a real chance with a 27 per cent to be like one big pot where they will Navkender Singh, Research Director, each other. It is going to be like one big pot of nudging ahead if it can play its market share step on each other’s toes. It’s not my IDC. “In our mystery shopping ex- where they will step on each other’s toes” cards right.” job to jump into that battle,” she says. ercise, we found that 7 out of 10 buy- “Of course, the anti-China sentiment ers ask for a non-Chinese phone but Virgin Territory in Smart TVs is helping us, as at this point people only three buy one, because of lack of Compared to mobile handsets, the smart TV segment don’t want to buy Chinese brands and are seeing value options.” in India is still evolving. In 2019, TV sales in India grew in a brand like us, even though we are more expensive. Another issue is fickle consumer 15 per cent and topped 15 million units, with smart TVs (But) We are competing with the likes of Sony, Samsung sentiment. A business case built on estimated to have cornered a third of the market. It is a and LG from day one and successfully taking market that can be vulnerable. Pathak of Counterpoint says any tunity. “Scale doesn’t come overnight. Just because the segment that is growing much faster than regular TVs at share. In any case, nobody is going to buy a very high-end real impact will be visible only if this sentiment against situation is suddenly in your favour doesn’t mean you 25 per cent, mirroring the trend of smartphones outpac- product from them.” Chinese products sustains for another month and be- can make two million phones overnight. That needs in- ing feature phones. The lower end of the market is where the likes of yond. “In case of any event, the first four weeks are always vestments and commitment,” says Singh of IDC. “If lo- Not surprisingly, the Chinese have made an early Onida and Weston come in. But lack of scale could be a about sentiment, when enquiries do not get converted cal brands start this journey and plant the seeds today headstart in this category as well with Xiaomi having a hindrance for them as well. “A smartphone has become into purchases. So, consumers are enquiring for non-Chi- and remain disciplined, then they can see the fruit of 27 per cent market share. TCL is the only other Chinese a use and throw product but not a TV. Also, it is a bulky nese phones at stores and realising there are not many op- their efforts after two years. Otherwise, it will not mean player with a significant share (8 per cent). The only lo- product, so manufacturing it on a large scale is capi- tions. So, they are not buying. If this sentiment prolongs much, as this sentiment will not last forever.” cal brand of any significance is VU Technologies with a 7 tal intensive. I doubt if the fringe players will be able to for, say another month or so, we will start seeing some se- In the interim, the likes of Samsung, LG, Sony and per cent share. Others such as Onida, Salora and Weston suddenly light a bulb and beat the Chinese at their own rious impact on the Chinese,” says Pathak. Nokia may benefit more. These players, like the Indian are insignificant players. Just like in smartphones, the game,” says an industry insider. Past campaigns in favour of locally produced goods companies, have lined up multiple launches in the run- Chinese caught incumbents Samsung, LG and Sony A chunk of India’s consumer electronics market is up have fizzled out after the first few weeks without any up to the festive season starting September. For ex- napping in this segment too. “Brands like Xiaomi, TCL for grabs but the consumer isn’t really spoilt for choices fundamental change. Now, the impact is likely to be ample, beginning next month, LG plans to launch six and VU have been expanding over the last few years right now. more permanent, but even then, lack of scale means In- phones across price points. taking on incumbents such as Samsung. LG, Sony and dian brands may not be able to fully exploit the oppor- Unlike the Chinese, who are getting flak for their Panasonic. Furthermore, 2019 was marked by entry of @sumantbanerji

66 Business Today 9 August 2020 9 August 2020 Business Today 67 Industry – Electronics

66 Business Today 9 August 2020 9 August 2020 Business Today 67 Bucking the

In A seAson of trend lAyoffs And pAy cuts, select compAnIes Are not just

hIrIng, But Also By E. kumar sharma compensAtIng illustrations By raj vErma Better. here's why

WHO ARE HIRING

his year has been particularly good for 25-year-old Vi- Bigger players in FMCG, the FMCG sector has helped him too. Irrespective of any gnesh Sridharan. The management graduate from XLRI E-commerce, Edtech, crisis, essential items will be in demand. has joined as a trainee in the sales and marketing division of Small Finance Banks and Some 2,000 km away, in her hometown in Surat, Kiran healthcare. Reckitt Benckiser, a company he interned with last summer Sharda, 22, a student of IIM Udaipur, remotely concluded and got a job in October. The company held on to the offer Among start-ups, her first summer internship with a leading consumer and even during the pandemic, and Sridharan was onboarded players that offer tech- specialities chemicals company. “They call us the pioneer in June. He is currently operating out of Kolkata. based solutions; are batch of this virtual world and it felt good,” she says. Sharda In a season of layoffs and pay cuts, Sridharan is mind- totally digital and include is now waiting for her second-year online classes to begin. ful of the happy confluence of three factors — luck, choice gaming companies, Her senior and a gold medallist from the Class of 2015, of sector and the value of sticking to commitments that re- Edtech players, tech- Angad Singh Abrol, after being part of two startup found- cruiters make. All three played out in his case. Among his based logistics solution ing teams since 2015, chose this year “to take a pause from batch of 180, the majority had no issue of any sort, either in providers and insurance an entrepreneurial career and get deeper insights into getting a job offer or in onboarding. Sridharan's choice of aggregators product management.” He recently joined as senior prod-

68 Business Today 9 August 2020 9 August 2020 Business Today 69 Bucking the

In A seAson of trend lAyoffs And pAy cuts, select compAnIes Are not just hIrIng, But Also By E. kumar sharma compensAtIng illustrations By raj vErma Better. here's why

WHO ARE HIRING his year has been particularly good for 25-year-old Vi- Bigger players in FMCG, the FMCG sector has helped him too. Irrespective of any gnesh Sridharan. The management graduate from XLRI E-commerce, Edtech, crisis, essential items will be in demand. has joined as a trainee in the sales and marketing division of Small Finance Banks and Some 2,000 km away, in her hometown in Surat, Kiran healthcare. Reckitt Benckiser, a company he interned with last summer Sharda, 22, a student of IIM Udaipur, remotely concluded and got a job in October. The company held on to the offer Among start-ups, her first summer internship with a leading consumer and even during the pandemic, and Sridharan was onboarded players that offer tech- specialities chemicals company. “They call us the pioneer in June. He is currently operating out of Kolkata. based solutions; are batch of this virtual world and it felt good,” she says. Sharda In a season of layoffs and pay cuts, Sridharan is mind- totally digital and include is now waiting for her second-year online classes to begin. ful of the happy confluence of three factors — luck, choice gaming companies, Her senior and a gold medallist from the Class of 2015, of sector and the value of sticking to commitments that re- Edtech players, tech- Angad Singh Abrol, after being part of two startup found- cruiters make. All three played out in his case. Among his based logistics solution ing teams since 2015, chose this year “to take a pause from batch of 180, the majority had no issue of any sort, either in providers and insurance an entrepreneurial career and get deeper insights into getting a job offer or in onboarding. Sridharan's choice of aggregators product management.” He recently joined as senior prod-

68 Business Today 9 August 2020 9 August 2020 Business Today 69 Management – Hirings

past six months and as and when new FACtOrS thAt MAttEr positions or replacements are needed, engineering,” Varma adds. “We have they are done. Like, in the past few honoured all hiring commitments, in- months, we have added people in front cluding internship offers. In March, we office and senior level roles,” he says. started onboarding hires virtually and extended that to launch a virtual stu- Joining The League dent internship programme for corpo- Even biggies in challenging business rate teams this summer.” segments are hiring. Consider con- struction and engineering major Lars- Buzz And Business Prospects en & Toubro (L&T). “Our construc- One aspect across most hirings today tion division as a whole is hiring young is the perception of healthy business Access to Business Ability to pivot engineers to commensurate with busi- prospects, says Amazon’s Varma. “E- capital prospects business to new ness needs. We are not reneging on ApArt from three commerce is one of the fastest-growing demands any offers made in campuses in spite offers by one sectors in India, and this presents a of the difficult economic environment compAny, All the unique opportunity for firms to deliver and challenges that the pandemic has others Among the 394 a superior customer experience.” uct manager in FarEye, a SaaS-based solutions provider for year will be comparable with any other year,” he says, add- posed. We have decided not to renege Agrees Nestle’s Narayanan. “As a compAnies stuck to logistics players. “If you are skilled enough then every time ing, “the good part this year is that everybody has received on offers made and go by the principle consumer goods company, the bless- is a good time to look for a job,” says Abrol. The same applies their salaries, increments and bonuses. Whatever ben- in hiring that ‘a promise-is-a-promise’,” their commitments ing that we have is that business is still for companies as well. If a company is good and is in a prom- efits they were to get have been given. So there has been no says Yogi Sriram, adviser to CEO and And All students Are coming. As a company, we have a fairly ising space, access to funds is not a challenge even in the change between last year and this year in terms of commit- MD, Group HR at L&T. getting onboArded clear idea about what costs we can cut middle of a pandemic, he adds. FarEye, he says, “raised $25 ment to people or what they were supposed to be getting.” “We are recruiting healthy num- such as establishment costs or confer- million in April 2020 and has expanded its manpower with So, is this year no different from any other? “All the of- bers relative to others in spite of a chal- Professor Amit Karna, Associate ence costs or travelling costs, which in Professor of Strategy and the remote hiring by over 12 per cent amidst the COVID-19 out- fers we made to summer interns were fully honoured. They lenging year ahead. We have a healthy Chairperson of Placements, IIM, any case have got rationalised.” Instead, break.” He sees a clear trend in more hiring by tech-based spent eight weeks. We usually take in 20-25 students every order book that exceeds `3 lakh crore Ahmedabad the company is looking to invest more solution providing startups. year, and it continued this year as well. We onboarded them and we will need these young bright, on people. It has just launched a 1,000 So, why do some companies see sense in ramping up on virtually and some of them will be selected by the com- energetic engineerss for the present ‘Nesternship’ programme to reach out quality talent instead of resorting to layoffs? How are man- pany,” says Narayanan. “In all, 24 management trainees and the future. GETs (Graduate Engi- to young professionals. “In the last four agements, in times of cost-cutting, approaching hiring? joined in early June. Usually, in a year we take in anywhere neering Trainees), PGETs (Post Grad- years, we offered around 1,000 intern- What are they conveying to graduates, business partners between 18 and 25 students. This is something that we had uate Engineering Trainees) and Build ships and now under this initiative, we and most importantly their own people? In some cases, it also committed in all the offers at IIMs and other institu- India scholars are the main source for intend to do this in just the next four is driven by an expectation of a business rebound and in tions. Those were all completely honoured and we did not our talent bank,” he adds. In just GETs months. Of course, we will not be re- others, a confidence in respective brands and a simple de- renege on a single one. All those who have been given job of- and PGETs, there have been 1,000 and cruiting the 1,000, though some might mand-supply equation where good talent is available. There fers are in the process of joining, virtually at the moment.” 240 additions, respectively. become employees. The idea is to build are companies from FMCG, finance, tech-based startups, the capability in them to see employ- healthcare and e-commerce sectors who are rejigging their Newer Roles More Access To Talent ment,” says Narayanan. businesses models to adapt to the new reality. One addition to the hiring scenario is new roles getting cre- While companies seem conscious of And what about added costs. More ated to cater to the changing business needs. Nitin Chugh, the current challenges, they also have importantly, why now? “There will be Much More Broad-based Managing Director and Chief Executive Officer of Benga- reasons for onboarding young profes- the cost element to it but that we are Clearly, all is not lost. Those with access to deep pockets and luru-headquartered Ujjivan Small Finance Bank, who has sionals in times of layoffs. “We under- willing to absorb and we are confident in businesses with growth prospects are ready to hire. Amit been hiring at senior levels, too, in the past few months, says stand that in the current uncertain and of being able to digest it,” he adds. What Karna, Associate Professor of Strategy and the chairper- roles like head of digital banking are proving out to be good volatile employment environment, is likely to change is the composition son of placements at the Indian Institute of Management decisions in today’s environment. “Another senior role that there is an availability of great talent We hAve been hiring of compensation in packages, which (IIM), Ahmedabad, told Business Today: “Generally, most we have now created is head of TASC (Trusts, Associations, across functions... Currently, we have for the pAst couple of would be tuned according to the chang- companies barring one or two have adhered to the commit- Societies and Clubs). Smaller entities in this are an under- higher access to talent than we did pre- yeArs And reAched A ing business requirements and will fac- ments made this year. Apart from three offers by one com- served segment and we could reach out to them now. Other viously due to the disruption caused in tor in elements like work from home. heAdcount of Around pany, all the others among the 394 companies stuck to their than that, there were at least half a dozen senior-level po- recent months,” says Deepti Varma, Narayanan sums it up. “In a people- commitments and all students are getting onboarded. We sitions that were replacements, which we also filled in the director HR, Amazon India. “We have 17,500 Across the centric organisation, I will be betraying are expecting delays by a couple of months. Perhaps by Oc- past couple of months like the head of liabilities, taxation, recently opened 20,000 seasonal em- country... in the pAst the spirit, if I say I am not going to spend tober, all of them will get placed.” Normally, around 80 per operational risk and CTO, among others,” he adds. ployment opportunities in customer feW months, We Added on people and cut their salaries.” cent of placements are completed by around July-end, but “There were management trainees, too, who normally service apart from over 2,000 open po- people in front office That, perhaps, is a message compa- this time it would be around 60 per cent for most institu- join in June, but this time are joining us in July in multiple sitions that we are hiring for, across lo- nies bucking the trend, are happy send- And senior level roles tions. By October, the remaining would be placed. locations. We have not laid off. We have been hiring for the cations and levels. Some of the key roles ing out. Nestle India Chairman and Managing Director Suresh past couple of years and reached a headcount of around we are hiring for include software de- Nitin Chugh, MD & CEO, Ujjivan Narayanan agrees. “Broadly, the spend levels on people this 17,500 across the country. We have been at that level for the velopment, operations, IT and support Small Finance Bank @EKumarSharma

70 Business Today 9 August 2020 9 August 2020 Business Today 71 Management – Hirings

70 Business Today 9 August 2020 9 August 2020 Business Today 71 Interview

A mechAnism thAt expects npAs to find their oWn solutions is useless” India Inc. and its lenders are in a legal crisis. Pre-empting a financial meltdown due to the Covid-19 lockdown, the Centre has suspended the Insolvency and Bankruptcy Code for a year. In parallel, the Reserve Bank of India has offered moratorium on loan repayments. In the absence of debt resolution mechanisms, the burden has shifted back on banks. Business Today’s Nevin John speaks to Shardul Shroff, Executive Chairman, Shardul Amarchand Mangaldas and Co, on the legal tangle and what this means for businesses and banks. Edited excerpts:

PhotograPh by shekhar ghosh

hat are the legal implications which are stressed assets / NPAs for banks, to seek resolution of bankruptcy of such Defaulters also do not have it easy. In the absence of market of suspending IBC? resolving matters without the imperative firms that are in insolvent circumstances. revival or creation of demand, the lack of production and sale The implications of suspending the to find a solution in a time-bound solution, It would open the need for lenders stand- is affecting manufacturing enterprises. Unless there is true re- corporate insolvency resolution are difficult to handle. A mechanism which ing outside, winding up and proceeding to structuring of balance sheets of borrowers, it is difficult for bor- (CIR) process indicates lack of ca- expects NPA companies/stressed assets enforce security, not as a mere asset sale rowers to resolve their defaults. pacity of tribunals, inability to deal will find their own solution with lenders is or a piecemeal sale, but as a sale on a go- For the government also, this is a problematic issue. In the with lack of market demand for totally useless. ing concern basis with management rights, interim period of the moratorium, the government is not able to stressed assets in the CIR process, and which promote creation of adequate build capacities or originate novel solutions, which are adaptive andW ban on existing promoters remedying the default. It also in- You represent various stakehold- cash flows to repay lenders. The suspen- to the prevailing circumstances. dicates excessive litigation slowing down the resolution process. ers. So what does it mean for lend- sion of default interest and penal interest It is not able to envisage the massive insolvencies, which In the absence of a white knight or a third-party promoter step- ers, defaulters and government? together with non-payment of regular in- would follow the suspension period of between six months to ping in to take over, the ban on existing promoters continuing Lenders would be stressed since they can- terest and the right to recovery will lead to one year (from March 25). Unless innovative thinking with ide- with the company is deeply problematic. There is a moral dilem- not rely upon defaults in the interim (from bank balance sheets shrinking and create ators is encouraged, the suspension is not going to take matters ma. The expectation that lenders and promoters of companies, March 25, 2020) by borrower companies the need to capitalise banks. further. It will only kick the can down the road.

72 Business Today 9 August 2020 9 August 2020 Business Today 73 Interview

PhotograPh by shekhar ghosh

72 Business Today 9 August 2020 9 August 2020 Business Today 73 Interview – Shardul Shroff

Does suspension mean that the earlier era of debt re- Will enhancing the threshold limit structuring mechanism is back? to `1 crore affect NPA reduction Technically, the old methods of recovery will come into play as plans of banks? the remedy of resolution is suspended. In the absence of legal The threshold to commence a CIR pro- process of compelling stakeholders to adopt a method of reso- ceeding has been raised from `1 lakh to `1 lution, lenders will be driven to harsher recovery mechanisms crore so that the IBC focusses on larger without results. claims, which have caused banks to suffer. It is a question of prioritising larger value Some corporates on the brink of bankruptcy may matters, enhancing recovery from such use the opportunity to default and force lenders to matters and prosecuting defaulting pro- restructure loans. What is the mechanism to prevent moters and their investor companies who misuse of IBC suspension? have caused the insolvency or are guaran- In case of wilful defaults by borrowers, there are sufficient mech- tors. This is a matter of fiscal prudence anisms to take action against them, including punishment for and optimal utilisation of resources in the fraudulent trading. Deliberate acts of mismanagement, siphon- NCLT/NCLAT to lower NPA defaults. ing funds, removing assets, promoters treating the company as personal fiefdom and personal property are bad behaviours of Economic projections state India majority shareholders and managers of defaulter companies. could post negative GDP growth None of these can be condoned. Bankers will have to trace assets this fiscal... and use modern methods to recover misappropriated properties of borrower companies.

While restructuring loans, lenders have to forgo the unsustainable loan portion and stretch the repayment deadline of defaulters. They also have to grant another set of There is no free lunch. loans for working capital. So, does the default burden fur- Reducing bank loan ther shifts back to lenders? outstandings and giving It is true that while restructuring loans, lenders do sacrifice. But, the new loans have limitations previous regime’s policy of requiring at least 30 per cent of the value of sacrifices as new funding from promoters for the benefit of lenders is a saner policy. There is no free lunch and reducing bank loan outstandings and giving new loans has their limitations. Promoters, old or new, have to bring fresh funds to Yes, based on the Covid-19 pandemic de- be entitled to remain in charge of their companies. Restructuring tails available, migration of workers, in- has to be equitable and sharing the burden between promoters ability of factories to produce more than and lenders of defaulter companies is a fine art requiring great 60 per cent of their capacity due to lack of talent. The interest of unsecured creditors and small traders is demand, inability to have a healthy cash also to be catered to. flow to retire debts are all factors respon- sible for rendering the GDP to a negative What does it mean for the NPA position of banks? value this financial year. This may spill That may not increase technically as no default is declared dur- over to the next few fiscals as there will be ing the moratorium period allowed by the RBI. However, once a time lag. This is a structural problem, the the RBI notifications have lapsed or are withdrawn, there would pandemic has worsened the situation. be a sudden spike in NPA portfolios of banks and financial institutions. @nevinjl

74 Business Today 9 August 2020 Stay Put in MFs Do not get overwhelmeD by the smart market recovery anD book profits. the uptrenD is likely to continue

illustration by raj verma

75 Money Today – Mutual Funds

he stock marketT is on a roll again after falling steeply in March due to spread of coronavirus and the resulting lock- Stay down. The benchmark Nifty has risen 43 per cent since March 24, when it had hit 7,511 (it closed at 10,768 on July 10). Eq- uity mutual fund investors, whose portfolio had crashed 30-40 per cent, have a reason to rejoice. Not just largecaps, even midcap and Put in smallcap funds have risen up to 35 per cent since March 24, a signal that the recovery is broad-based. Most sectoral indices are also up significantly. Even the worst-performing theme – PSU – is up 27 per cent. Is the worst behind us? Not nec- essarily. Coronavirus cases are still MFs rising. While slowdown in the June quarter is a given, there may be nega- Do NoT gET ovErwhElMED by tive surprises in the September quarter ThE SMarT MarkET rECovEry too. Most importantly, the recent rally has attracted a new breed of stock aND book ProFiTS. ThE traders cooped up at home and trying UPTrEND iS likEly To CoNTiNUE to make a quick buck. A single negative trigger is all it will take for another By AprAjitA ShArmA downward spiral. illuStrAtion By rAj vermA Whatever the situation months down the line, this is a good time to take stock of your MF portfolio and answer a key question — should you book profits, if any, or wait for a more opportune

Taking Stock

Most This is after Unlike recent Pharma, PSU, banking Experts mutual fund a 30-40 per past, when only energy and and MNC expect schemes cent fall in largecaps were international funds are rally to have risen Covid-led doing well, funds are the worst continue 20-30 from market now mid and the market performers, in short to March lows crash smallcap funds leaders but with 27 to medium too giving good 33 per cent term returns gains

76 Business Today 9 August 2020 9 August 2020 Business Today 77 Money Today – Mutual Funds

Taking Stock

76 Business Today 9 August 2020 9 August 2020 Business Today 77 Money Today – Mutual Funds

time? It is a tough call, but experts say that broadly, your MF Resurgence After Big Fall strategy should be long term and not depend on your ability Returns (%) to predict and time the market. It is a different matter if you What You Should Do need funds for an important life goal, though.

Post-Covid Recovery Don’t sell just Smallcap and midcap funds have widely underperformed because markets 35.49% 35.30% 35.20% 34.07% 33.16% largecap funds for a couple of years now. However, the re- have risen Largecap Midcap Large-midcap Smallcap Multicap cent recovery has been broad-based with largecap, large- Funds Funds Funds Funds Funds midcap, multicap and even midcap and smallcap funds rallying 33-35 per cent. However, this doesn’t mean that all midcap and smallcap stocks are up. “Although small It is wrong to base & midcap indices have seen a significant move, disper- your exit strategy on sion in returns across stocks is significant. For instance, a timing the market Sectoral/Thematic funds few stocks have fallen 25-30 per cent during this period, Returns (%) while several small-caps have risen 2x or more,” says Kaus- Pharma 43.37 tubh Belapurkar, Director – Fund Research, Morningstar Energy 41.47 India. International 39.97 Book some profits if Technology 39.24 Data from Among sectoral funds, predictably, pharmaceutical your life goal is near Infrastructure 33.53 Morningstar India, funds have led the rally with 43.37 per cent gains, followed by or you need money from March 24 (the Consumption 32.92 lowest level of index energy and international funds, which are up 41.47 per cent MNC 32.89 in 2020) to July 10 and 39.97 per cent, respectively. Other sectoral funds are Banking 31.77 only slightly worse off. PSU, banking, MNC and consump- PSU 27.30 tion, at the lower end of the pecking order, have returned 27- If allocation to equities has risen, sell some 33 per cent in this rally. units to rebalance your Thus, unlike last year’s polarised rally, where top 8-10 portfolio stocks were steering the market, a very big chunk of the market universe is taking part in the current rally. “Apart from horizon, market participants hope that the government will returns. For sectoral/thematic funds, Kumar of FundsIndia those such as Reliance Industries and Bharti Airtel, and to an continue its fiscal stimulus and the Federal Reserve will con- says choosing such funds involves getting four things right extent HDFC Bank, stocks with top index weights have not Prefer diversified tinue to provide easy liquidity. “The odds of the market fall- - picking a winning theme/sector, selecting a fund that is rallied very sharply. Others have clocked good gains in past multicap funds over ing back to previous bottom levels remain low in our view well-placed to harness that theme/sector, valuations which few months. Some stocks with top index weights, especially sectoral funds but a structural and sustained recovery needs a medical so- haven’t already priced in the theme’s/sector's potential and in financials, have seen a fall in weightage. The trends point lution or a continued decline in spread of the virus.” ability to enter and exit the theme/sector at the right time. to a broader rally than before,” says Bhavana Acharya, Co- Since the odds of getting all the four right are slim, experts founder, PrimeInvestor.in. What You Should Do advise diversified funds over sectoral funds. “Long-term Whatever the market direction, your exit strategy should performance of a majority of thematic/sector funds has Why the Rally always depend on primarily two factors. One, if the life been mediocre. Given their non-diversified exposure, high- Injection of fresh liquidity in markets, especially by the US goal for which you have been investing is near or not. Two, er risk profile and need to time entry and exit, we recom- Federal Reserve, to fight the coronavirus-induced recession, so far this month till July 10. “There is no clear picture of if you have to rebalance your portfolio. “We believe inves- mend avoiding sector funds and sticking to well-diversified has given confidence to investors. Then there is the eco- the impact of the lockdown on economy and corporate tors should plan their exit based on need for funds for life multi-cap equity funds. However, if investors still want to nomic stimulus by various countries, flattening Covid curve fundamentals so far. Markets can reassess growth based goals rather than market conditions. In our experience, explore sector funds with the hope of boosting returns, they in Europe and parts of Asia and hope about launch of a vac- on factors such as slower improvement in high-frequen- most market timing backtests fail to provide the same level can use them to complement rather than replace core hold- cine. “Market rallies are propelled by global sentiments and cy indicators, impact on GDP when numbers come out, of profits in real life. So, if you have a financial obligation for ings,” he says. liquidity. Currently, our markets are following the global corporate earnings for the June quarter, credit growth which you need money in the next three years or less, you However, as we are into a volatile market, this may be a trend, especially the US. Besides, India weightage on MSCI and NPA trends of banks & NBFCs. Drying up of FII should start moving that money to liquid funds or cash. Else, good time to book some profits for efficient tax planning. index has been increased by 1 per cent. Additionally, FII net flows based on global developments and risk sentiment stick to your long-term asset allocation and keep rebalanc- “Investors should optimise portfolios to take advantage of investment, along with investment by DIIs, has absorbed can also cause a correction,” says Acharya of PrimeInvestor. ing the portfolio periodically,” says Gaurav Rastogi, Founder tax rules. In India, the first `1 lakh of long term capital gains supplies and driven demand,” says S. Ravi, Managing Part- Arun Kumar, Head of Research at FundsIndia.com, says and Chief Executive Officer at Kuvera, an online platform (LTCG) every year is exempt from the 10 per cent LTCG tax. ner of Ravi Rajan & Co and former Chairman of BSE India. while bad news may continue for some time, the perception for MF investments. Do not wait for February-March of FY21 to harvest gains and However, in the domestic market, there are hardly change from ‘exceptionally bad’ to ‘bad’ is the point where If you are looking at fresh investments, start with any reduce LTCG taxes. Do it as early in the financial year as pos- any positive triggers, apart from partial lifting of the lock- the recovery starts. “In our view, this perception change category, but in a staggered manner, that is, through the SIP sible; as happened in FY20, you may not have any gains to down. This has made even foreign institutional investors (which is already happening), along with continued global route. If choosing an MF scheme is an issue as almost all of harvest later,” says Rastogi of Kuvera. (FIIs) iffy. FIIs, which pumped in a net `18,564 crore in central bank stimulus measures, remains the key for mar- them are up 30-40 per cent, go for index funds in respective Indian equities last month, have sold a net `2,210 crore ket recovery in the near term.”As US elections are on the categories, which have low cost and give average category @apri_sharma

78 Business Today 9 August 2020 9 August 2020 Business Today 79 Money Today – Mutual Funds

78 Business Today 9 August 2020 9 August 2020 Business Today 79 Network Cooking to De-stress In between his busy from my friends at the schedule of managing university. I can cook 750 employees and five-six dishes in each strategising, Ankit of those cuisines,” Mehrotra, Founder and he says. Mehrotra’s CEO of Dineout, finds personal favourites time to de-stress. He are pasta and grilled cooks two-three times chicken, his go-to a week, and considers dishes because they it the best way to take are the quickest to breaks in these times prepare. “I go to buy of work from home. groceries, and do elab- While studying in orate cooking, espe- London and then work- cially on weekends, for ing as an investment my family of seven,” banker overseas, Meh- he says. He also fre- rotra, 35, learned six quently puts cooking cuisines, including Ital- videos and recipes on ian, Spanish, French, the Dineout’s Insta- Indian and Mexican. gram account due to “I was learning almost its wide reach. one cuisine every year manu kaushik

Pushing Oneself with The Occasional Flier Extreme In his childhood, Jaideep His dreams got wings when to take on calculated risks risk and discipline. With close Devare always dreamt of fly- a friend from the Indian Air because flying is about taking to three decades of experience Sports google + sergey brin ing an aircraft. In fact, when Force persuaded him to learn risks.” Manoeuvring a flight in the corporate world, he has he was young, he would often flying. Pilot training and requires presence of mind as flown the Cessna 172R, which He is the epitome believes in living life to of this – in-line skating, pany Alphabet in De- visit the cockpit whenever licence followed. Devare, who well as skills, he adds. Devare, does not have an autopilot of living the ultimate the fullest in his spare skiing, gymnastics – cember 2019, Brin will he flew on holidays. “It was has been pursuing his hobby who helps his clients manage mode, and dreams of flying American dream. Ser- time. He loves intense started while he was ensure that Googlers easy talking to pilots then,” for the last three years, says risks by taking insurance cover fighter jets one day. “I also gey Brin, the Co-found- sports that push his studying at Stanford, have a passion for er of Google, is the son body to the limits. His which is where he met intense sports. In the says the Founding Member the passion for flying helps for businesses, sees many simi- want to fly over the snow-clad of a Russian immigrant suite of intense sports Google Co-founder early days of Google, and Managing Director of him professionally as well. “It larities between insurance and mountains,” he says. who moved to the US includes skydiving, Larry Page. he used to have team Mahindra Insurance Brokers. helped me develop the ability flying; both, he says, involve – anand adhikari when Sergey was just roller hockey, ultimate Though he stepped bonding events at a six. Brin, who is now Frisbee, and being on down as President of training facility in San valued at $64.6 billion, the high trapeze. Much Google’s parent com- Francisco.

80 Business Today 9 August 2020 9 August 2020 Business Today 81 Network Cooking to De-stress In between his busy from my friends at the schedule of managing university. I can cook 750 employees and five-six dishes in each strategising, Ankit of those cuisines,” Mehrotra, Founder and he says. Mehrotra’s CEO of Dineout, finds personal favourites time to de-stress. He are pasta and grilled cooks two-three times chicken, his go-to a week, and considers dishes because they it the best way to take are the quickest to breaks in these times prepare. “I go to buy of work from home. groceries, and do elab- While studying in orate cooking, espe- London and then work- cially on weekends, for ing as an investment my family of seven,” banker overseas, Meh- he says. He also fre- rotra, 35, learned six quently puts cooking cuisines, including Ital- videos and recipes on ian, Spanish, French, the Dineout’s Insta- Indian and Mexican. gram account due to “I was learning almost its wide reach. one cuisine every year manu kaushik

80 Business Today 9 August 2020 9 August 2020 Business Today 81 “Choose your battles wisely, fight the most important ones and let the rest go” Gerd Hoefner, MD anD PresiDent, sieMens HealtHineers inDia

Q: What was the problem you were your battles wisely, fight the most important ones, grappling with? and let the rest go. He advised me to hold myself back A: In 1999, I was establishing the Manufacturing and let them make their own decisions. While it seems Execution Systems (MES) business for Siemens auto- natural to tell others what they should do, sometimes mation technology division. Since this was the first time it takes a lot of effort to step back and let others make the division was venturing into a software business, we choices. It helped me recognise that good leaders are acquired a company in England to accelerate growth. I not just good decision-makers, they also listen better was appointed to its board. In those days, if I believed in and encourage others to lead. something, I would try to convince and persuade others. But this did not go down well with the leadership team. Q: How effective was it in resolving your problem? Q: Who did you approach and why? A: This advice made me a better professional and A: I approached Heinz-Jürgen Müller, the then CFO of a more understanding person. Since then, I have the Business Unit at Siemens. encouraged my team to make its own decisions and allow mistakes to happen. However, when required, I Q: What was the best advice you ever coach them in thinking through their decision-making received? process. A: He told me to try and not fight every battle. Choose –p.b. jayakumar

82 Vol. 29, No. 16 for the fortnight July 27 to August 9, 2020. Released on July 27, 2020. Total number of pages 84 (including cover)