Innholdsfortegnelse for 24-Mar-19 i Business Today

THE INDIAN BANKING SECTOR is poised at an interesting juncture. The Reserve Bank of India last year showed its displeasure with the professional and personal actions of several marquee CEOs, leading to changes in leadership in three private banks. Two other private banks, which are doing exceedingly well, will see changes in their leadership because their iconic leaders will be retiring. The central bank has made its discomfort clear about the compensation packages of high-flying bank CEOs and made suggestions that could result in big changes in bonuses and other variable incentives given to them. The regulator has suggested that bonuses should be more tightly linked to performance, and should not be just a reward given out by a friendly board. If several private sector banks have been reprimanded, most…

INDIAN STEEL MAKERS are on the cusp of a bull run as experts foresee strengthening of steel prices, and better capacity utilisations. Steelmakers had been de-leveraging their balance sheets in the last 3-4 years to stay fit to cash in on the next uptick of the steel cycle. The government’s plan to extend antidumping duty until 2022 is also welcome news. The key brokerages are hiking target share prices of steelmakers and rating upgradation of stocks. The most likely to benefit are Tata Steel and JSW Steel. Both bought distressed assets, added capacity, and turned their manufacturing cost competitive. If they get a multiyear spike, both will be able to regain their lost glory.…

A STEP IN THE right direction are the final guidelines on risk weightage of non-banking finance companies (NBFCs) – benefitting both banks and NBFCs. Post-modification, banks can assign risk weights to their rated NBFC exposures, depending on ratings assigned by credit rating agencies (CRAs). At present, banks’ NBFC exposure - rated and unrated - attracts 100 per cent risk weight. Reduced risk weightage will free up capital for banks to use for incremental lending or improving their own capital ratios. This could also lead to a marginal reduction in the cost of borrowing for the better-rated NBFCs. Meanwhile, the Reserve Bank of India has hiked risk-weightage for non-rated NBFC loan exposure above ₹200 crore to 150 per cent. The move will push banks to nudge all NBFCs to get rated,…

GREEN MOBILITY WHAT: India E-Vehicle Show and BV Tech Expo WHEN: March 22-24, Delhi WHAT TO LOOK FOR: Indian companies in the electric vehicle space will display their latest products, services and innovations at the event. For the first time, start-ups will also present their ideas on traffic, mobility and logistics and network with players in the battery vehicle industry. SHEROES WHAT: Women Economic Forum WHEN: April 11-16, Delhi WHAT TO LOOK FOR: Over 2,000 women from 120-plus countries are expected to attend the WEF, making it one of the biggest and most diversified global events. The All Ladies League organises the event to enable empowering conversations, connections and collaborations among women entrepreneurs and leaders. RESEARCH AND GROW WHAT: International Conference on Electrical, Electronics and Data Communication WHEN: March 31,…

THE FOURTH-largest private bank Yes Bank has been passing through a difficult phase as the RBI refused to extend the tenure of founder and CEO Rana Kapoor. But the bank has been growing at a scorching pace. In 2017/18, deposits and advances grew at a massive rate of 40-50 per cent. Given its growing size, with assets of over ₹3 lakh crore, the three year CAGR growth is 30-40 per cent. Fee income and operating profits are also growing robustly. The high growth numbers have pushed the bank to the top as the fastest growing bank in the BT–KPMG Best Banks Study. It has got a new MD & CEO, Ravneet Singh Gill, from Deutsche Bank. Gill will have to strengthen the credit standards as there was a huge deviation…

₹ 246.5 CRORE THE NET PROFIT OF PNB IN Q3–FY19, AFTER THREE QUARTERS OF LOSSES The state-owned Punjab National Bank (PNB) has taken the digital highway to reach out to the financially excluded – all thanks to the use of cost-effective e-KYC, Aadhaar-enabled payment system (AePS), online loan-tracking system and data analytics to predict defaults or frauds. The use of e-KYC saw the number of accounts jump 13 per cent from 7.18 million in December 2017 to 8.11 million in December 2018. Online registration for social security schemes through banking correspondents (BCs) is also a hit, while its unified application – PNB One – is helping users transact on mobile. It is banking big time on AePS, through locations peopled by BCs. The bank has upgraded to a more userfriendly…

Everyone in the business circles of Mumbai – and other metros as well – seems to have an opinion on Anil Ambani’s current predicament and his fall from being one of the richest men in the world 10 years ago to one who is hanging on to his billionaire status by a mere thread. Most rivals say he was over ambitious. Only a few seem to speak up in his favour saying that at least some of his companies went down because the entire sectors were in trouble. Reliance Communications (RCom), his telecom company, wants to go for voluntary bank- ruptcy to settle with debtors. The power business has a slew of unfinished projects and has had to sell some lucrative assets to reduce debt. The Supreme Court has pulled…

Jet Airways’ woes began early last year with rise in jet fuel prices and rupee depreciation The airline posted a net loss of ₹1,036 crore in quarter ended March 2018, its first quarterly loss in 11 quarters Last May, the aviation ministry rejected Jet’s proposal to merge its low-cost arm, JetLite, with itself Passengers on a Mumbai-to-Jaipur Jet Airways flight bled from their noses and ears after pilots forgot to switch on a crucial button Two directors – Ranjan Mathai and Vikram Mehta – quit the board in November Jet delays salaries of senior management employees Tata Sons raises red flag on the possible acquisition of Jet citing issues with funding and liabilities Jet Airways forced to ground several aircraft after failing to pay its lessors…

THE CAPABILITIES demonstrated by artificial intelligence (AI) are just beginning to unfold one shock after another. That the technological evolution has the potential to affect human life and society before we are ready for it is already giving researchers and technologists sleepless nights. Among them is OpenAI, a San Francisco-based non-profit research organisation whose mission is to discover and enact the path to safe artificial general intelligence (AGI). The company focusses on long-term research so that it can redirect the impact that this technology will have very soon. OpenAI is funded and sponsored by several global tech leaders, including Elon Musk and Peter Thiel, among others. Recently, the OpenAI group decided to hold back the research output and code related to an AI set-up that writes ‘news’ based on a…

STAY CONNECTED WITH US ON www.facebook.com/BusinessToday@BT_India PERSPECTIVES Can Anil Ambani Save Himself from Going to Jail? Though RCom has many options, executing them is going to be a big challenge for Ambani businesstoday.in/rcom-challenge Are Discount Broking Firms a Threat to Traditional Brokerages? The challenge with online brokers is that investors may exit the platforms in droves when market crashes because thin margin and heavy discounts lead to traders losing big amount in a short span businesstoday.in/onlineinvestor Developers in North and West India Staring at Defaults Top 54 developers in north, west region run the risk of defaulting on their loans because of the growing mismatch between their operating profits and interest obligations businesstoday.in/realestate-defaults It’s High Time Marketers Look Beyond Millennials One can’t afford to ignore the 45-plus audiences, as they are brand-loyal, mostly…

WHILE IT IS easy to understand the sentiment behind the National Company Law Appellate Tribunal’s (NCLAT) order not to treat any entity of IL&FS as a non-performing asset (NPA) until its consent is taken, this is clearly wrong. First, it is the Reserve Bank of India that makes guidelines for classifying NPAs, and banks are supposed to follow those orders. Two, while NCLAT’s intention may be to sort out the IL&FS mess without that company’s creditors dragging it to bankruptcy court, this is not the right way to go about it. If the government wants to save IL&FS entities from the bankruptcy court, it needs to find a solution. Perhaps ask the newly constituted board to talk to creditors for a standstill agreement. Or, work out a scheme for orderly…

REELING UNDER THE PRESSURE of bad loans, it’s high time banks consider business losses caused by climate change. Close to 40 per cent of gross credit exposure of Indian banks is in sectors where water risks are significant, said the WWF-India report Hidden Risks and Untapped Opportunities. In fact, the highest at 20 per cent is in water intensive sectors (power and agriculture) that account for the highest gross credit exposure of Indian banks. India has already seen several instances of thermal power plants closing down or functioning below capacity due to water scarcity. The water crisis is real. It is time for banks to consider climate and environmental factors as they assess projects’ creditworthiness, and perhaps invest in water-related infrastructure, water treatment plants, and projects related to efficient irrigation…

BREXIT GETS MORE CHAOTIC The UK Opposition leader and Labour Party head Jeremy Corbyn has bowed to his party’s pressure and promised to support a second referendum on the country’s EU exit if MPs vote down Prime Minister Theresa May’s latest attempt to extend the Article 50 negotiation process, which could delay the Brexit departure. The time frame for the same is unclear although EU sources have suggested a possible period of 21 months. Earlier, seven Labour MPs quit the party and currently sit in the Parliament as the Independent Group. All of them support a fresh EU referendum and more MPs are likely to join them. Media reports also say that Japanese automaker Honda Motor may shutter its manufacturing facility in Swindon. Earlier, Honda had said that a no-deal…

The ₹152-lakh crore banking industry is yet to come out of the woods but is experiencing a breath of fresh air. There are new CEOs at some of the fast-growing private sector banks such as ICICI Bank, Axis Bank, IDFC First Bank and YES Bank. Two other well-run private banks – HDFC Bank and IndusInd Bank – will soon start the process to select their next heads. Consolidation has also been kicked off in right earnest. The State Bank of India’s mega merger with five associate banks has been a smooth affair. In fact, it has given confidence to the government as well as the regulator that bank marriages can work. The recent three-way merger of Bank of Baroda, Vijaya Bank and Dena Bank sets the stage for creation of…

₹ 34.54 LAKH CRORE BALANCE SHEET SIZE OF SBI, INDIA’S LARGEST BANK The past cannot be changed. The future is in your power. This was the message from Rajnish Kumar, Chairman of the State Bank of India (SBI), when he took over in October 2017. The 61-year-old wants the country’s largest bank to focus on being transformative. Kumar has termed FY2018/19 as the ‘Year of Hope’ and 2019/20 as the ‘Year of Happiness’. And he is determined to accomplish what many of his predecessors had done before – steer the organisation ahead through thick and thin. Think of O.P. Bhatt and Arundhati Bhattacharya, who had successfully anticipated changing market dynamics. Bhatt was credited with making the elephant dance. He scaled up retail lending, which is now paying dividends. Bhattacharya, the…

₹ 51.7 CRORE REVENUE IN FY2017/18, A 7.7 PER CENT JUMP FROM 2016/17 A product made in India and deployed in India that could be offered to the rest of the world – this is the vision around which Bengaluru-based mPoS (mobile point of sale) solutions provider Ezetap was set up in 2011. For Co-founders Abhijit ‘Bobby’ Bose and Bhaktha Keshavachar, entering the nascent mobile payments territory at the time was a leap of faith. But the founders believed in its market potential across the fintech sector. Moreover, unlike the US where companies like PayPal and others ruled the digital payments space, India did not have legacy issues. So, Bose returned home after quitting a lucrative job in the San Francisco Bay Area and teamed up with Keshavachar to start…

15.7% INCREASE IN DEMAND FOR CREDIT EVERY YEAR The Indian banking landscape has been transforming over a decade, from changing customer expectations and evolving technology to innovation in products and services, fueled by a democratised digital infrastructure. Over the same period, India changed from a savings to a consumption-driven economy, with rising incomes and declining household savings. As per RBI data, the disposable income and consumption levels in India have also grown at a healthy rate of 9-12 per cent since 2012/13. Demand for credit, specifically retail credit, has been rising at 15.7 per cent every year over the past three years. This interplay of factors sets the tone for future evolution of banks to meet the need for better products, especially at the point of consumption. Three factors are…

Group debt went up four times to ₹1.72 lakh crore in 10 years The group has lost 93 percent market value – from ₹4.02 lakh crore in Jan-Feb 2008, it is now at ₹26,967 crore. Ambani’s wealth is down to over $1 billion from $42 billion at its peak High debt meant Reliance Communications posted a loss of ₹23,912 crore and filed for bankruptcy last year Reliance Infrastructure had to sell cement and power assets worth ₹18,600 crore to payoff debt Reliance Power planned to build 28,200 MW generation capacity, but could build just 6,000 MW…

Your predecessor said CEA is a dream job. What has been your initial experience? It is enjoyable. Possibly because I joined when Budget deliberations had just started. Q: A series of US-trained professionals have had a tough time in India as they were seen as not knowing the Indian economic realities. Are you an exception? A: The important difference is that I have been in India for the last 10 years. It is important to have the best education, be at the cutting edge of both wisdom and techniques involved in research. Good awareness of the realities here is a plus. What do you see as the biggest challenges before the economy right now? Let’s start with what has been achieved where we can also talk about what needs to…

SMART SPEAKERS have all but cracked speech recognition and natural language processing. But tech giants are not going to leave them at that. The next frontier to be breached by Amazon’s Alexa, Google Assistant and Apple’s Home Pod is gesture recognition. In fact, their capabilities could extend to gauging users’ facial expressions, moods and stress levels. In 2018, Abhishek Singh created an app that enables Alexa to recognise gestures and respond to them. Alexa had to be given a computer screen to interface with users, but there are other smart speakers with displays of their own such as the Echo Spot and Echo Show from Amazon and several devices with Google Assistant-and-screen combinations. The idea: People with hearing impairments should be able to use smart speakers, which are, for now,…

FINE WINE Making Waves SLOWLY BUT SURELY India is carving out a niche for itself on the global wine map. And the latest to join the growing list is a label called Early Dark, brought to you by veteran winemaker Abhay Kewadkar in collaboration with Rishad Minocher. The wines are produced in the award-winning sud-ouest (south-west) vineyards of France and combine state-of-the-art equipment with modern winemaking. The portfolio features a range of reserves and blends and is highly recommended. For instance, the Early Dark Cabernet-Merlot 2017 is a pure delight, offering black fruit and spicy flavours. Better still, the entire portfolio is available across Karnataka and Maharashtra. ACCESSORIES Haute Earbuds SAY LOUIS VUITTON and one will be immediately transported to a world of super stylish clothes and fabulous accessories which…

CUTTING THE GORDIAN KNOT: India’s Quest for Prosperity BY T.N. HARI AND HARI MENON Publisher: Bloomsbury India Pages: 266 Price: ₹499 EVERY YEAR, 12 MILLION young people enter the workforce in India. And in the next three years, over 60 per cent of the country’s population will be in the working age group. Is India creating enough jobs to make the best use of this demographic dividend? Do we, at least, have a robust plan in place? Put together by Hari Menon (Co-founder and CEO of India’s largest online supermarket BigBasket) and his colleague T.N. Hari (Head of Human Resources), with contributions from several experts, Cutting The Gordian Knot explores and analyses various aspects of India’s jobs problem, its complexity and possible solutions. Pramath Raj Sinha, Founder Dean of Indian…

THREE MONTHS AGO, the Reserve Bank of India (RBI) and the government were almost baying for each other’s blood. But things have improved drastically after former bureaucrat Shaktikanta Das replaced Urjit Patel, who left Mint Street abruptly in December last year. Take half a dozen weak banks that were under the RBI’s Prompt Corrective Action framework and are now back in the system to lend money. The central bank has also been generous in paying out ₹28,000 crore interim dividend, pushing the total dividend in the financial year to ₹68,000 crore. The new governor is also more at sync with the government and the finance ministry. Another surprise was the RBI easing the repo rate by 25 basis points to 6.25 per cent early this month. There are expectations of…

AIMING TO ALLEVIATE the growing stress in the domestic sugar industry, the government has increased the minimum selling price of the commodity by ₹2 per kg to ₹31 per kg. This will boost margins of sugar companies and is expected to free up ₹3000 crore towards payment of cane arrears that has already topped ₹2,000 crore as on February 13. However, given the fundamental issue of glut in the domestic market, it may be a case of too little too late. Even though sugar production is slated to fall to 30 mt in 2018-19 against 32.3 mt in 2017-18, it is still higher than what is required at 26 mt. Add to that the 10.7 mt of excess stock from last year, the glut situation worsens. The hike in MSP…

THE DRAFT E-COMMERCE policy focusses more on data privacy and access than on e-commerce. Not only does it call for the housing of data centres and server farms locally, but it also seeks government access to source code and algorithms of artificial intelligence (AI) systems. It bars sharing Indian users’ sensitive data with third parties even with users’ consent and talks of creating a legal and technological framework to restrict cross-border data flow. The new rules once again highlight India’s hard stance on data localisation after the draft Personal Data Protection Bill and the Reserve Bank of India’s directive last year to payments companies to store all data locally. Data misuse is a major concern but forced localisation and seeking access to data on the pretext of security and privacy…

AS THE IT INDUSTRY’S digital revenues reached $33 billion in 2018, clocking a 30 per cent year-on-year growth, 36 per cent of the CEOs of IT/ITeS companies voted for digital deals to drive growth in 2019, as per a NASSCOM survey. Although the industry lobby outlined all evolving trends in the digital space, it fell short of defining what constituted ‘digital’ for the sector. IT services companies have been calling out their digital revenues without service line break-ups, but an apple-to-apple comparison eludes us without industry standardisation. NASSCOM President Debjani Ghosh says companies are willing to share data, but arriving at a consensus on what constitutes ‘digital’ revenues will be a Herculean task. But why are we bothered? The answer is, unless companies voluntarily disclose the break-up of digital revenues…

JOURNALIST BARKHA DUTT has been a frequent target of trolls on social media platforms. But who could have thought that reporting these incidents might lead to blocking of her account? Recently, when she tweeted some of the threat pictures sent to her, Twitter blocked her account for 12 hours. It was, however, restored after she reported the blackout to the authorities of the microblogging site. Twitter defended its move by saying its users are not allowed to publish or post other people’s private information without their express authorisation and permission (it is unclear whether those posts carried personal details of the people who had abused her on social media). Whatever be the reason, this is just one example of how technology fails when it comes to taking complex and nuanced…

0.98 PER CENT THE BANK’S NPAs, AMONG THE LOWEST IN THE INDUSTRY For a bank that says getting the fastest-growing tag has never been its number one priority, Kotak Mahindra Bank has done exceptionally well for itself. The focus on reducing risk, rather than growing at all costs, is perhaps why this new millennium bank has emerged from the bad loan crisis – which has singed almost all the country’s banks – unscathed. “Aspiration-wise, we do not want to be the fastest-growing bank. We want to grow at a healthy trot. In that growth, you have to balance growth with risk,” says Dipak Gupta, Joint Managing Director, Kotak Mahindra Bank. This shows in the bank’s non-performing asset (NPA) ratio of 0.98 per cent, among the lowest in the sector. The…

Be it online merchants on platforms like Flipkart and Amazon, Oyo-affiliated hotel owners or cab owners of taxi aggregators, the state-owned Bank of Baroda has taken a huge lead over others in reaching out to them, thanks to its partnerships with fintech firms. The bank’s ‘Fintech Alliance’ comprises 35-plus partnerships in various segments, including SMEs, large companies, retail lending, wealth management, payments, and more. ₹ 7.2 LAKH CRORE THE BALANCE SHEET SIZE OF BANK OF BARODA “All our partnerships can be put into three main categories – lending, wealth and technology and payments. About 60 per cent of our business is lending, out of which 70-80 per cent is SME lending,” says Akhil Handa, Head, Fintech and New Businesses Initiatives, Bank of Baroda. One of the bank’s biggest successes has…

As a young professional working at his uncle’s travel agency in Delhi, Naresh Goyal, the Chairman of Jet Airways, had exact schedule of almost every flight in the country on his fingertips. This perseverance and handson approach, added to his dealmaking skills, came in handy as he went on to build full-service carrier Jet Airways from the scratch, an endeavour that destroyed Air India’s monopoly in Indian and international skies. However, Goyal’s once-formidable empire, shaky for the last five years, has started crumbling, thanks to his strategic mistakes, heavy management churn and changes in the external environment such as rise in aviation turbine fuel, or ATF, prices and rupee depreciation. Jet’s market share tanked from 16.6 per cent in January 2018 to 13.6 per cent in January this year. Market…

In her book Who me, Poor?, journalist Gayatri Jayaraman wrote about a young marketing executive who bought a car with her first salary, and between rent and loan payments, she was starving. If you have secured your first job and work for a reputed company, banks and credit card companies will be willing to offer you credit cards, thus giving you access to easy money. You could be earning well, but let us face it – the money is never enough! You can use credit cards for financial emergencies and also for regular spending. But is that a good idea? You might have heard of a friend who has fallen into a debt trap and how he/she blames the credit card for the situation. This begs the question if you…

A Game Changer’s Memoir: Ex-SEBI Chief Recounts the Defining Moments of His Tenure By G.N. Bajpai Publisher: Penguin Portfolio Pages: 304 Price: ₹599 ON THE MORNING of May 17, 2004 (infamously known as the Black Monday), the Sensex dropped 17 per cent, the biggest slump in its history. The circuit breaker was triggered twice that morning, halting all trading for three hours. It was the market’s massive reaction to the surprising defeat of the National Democratic Alliance party in Lok Sabha elections. But where was the stock market regulator during the mayhem? In distant Jordan, attending a conference. Gyanendra Nath Bajpai was the man in the hot seat, and almost everyone – from the media to investors to government officials – was gunning for him to save the day. He…