Innholdsfortegnelse for 1-Jul-2018 i Business Today

WAREHOUSES lack the sex appeal of the slick, consumer-facing showrooms, though, they are probably as important, if not even more, for any consumer products company that wants to win in the marketplace. Strategically placed warehouses allow the company to deliver the product quickly and service the customer better. They are the not-so-visible parts of a company’s supply chain, but they form the crucial link between the factory and the customer. There is a veritable revolution taking place in Indian warehouses now for multiple reasons. First, GST has completely changed the rules of the game for all companies when it comes to choosing the spots where they will set up their warehouses. Earlier, different taxes in different states played a huge role in deciding the placement of warehouses. Today, after GST…

THE DOMESTIC AVIATION sector seems to be rushing to begin long-haul international flights. After SpiceJet’s announcement last year, IndiGo and Vistara reportedly intend to start them. Vistara, for instance, is likely to order six Boeing 787s, an aircraft best suited for long-haul flights. IndiGo, too, is doing a lot of work on how to launch international services over the next few months. Indian carriers, except Air India and Jet Airways, primarily fly to international destinations which are four to five hours away. International flying is a high-margin business and important to tap into, especially as margins in the domestic segment have dipped for some time now. But international flying comes with its challenges, and IndiGo has understood it well. The airline has hired a bunch of expats for senior roles…

U.S. UNEMPLOYMENT DIPS TO 3.8% The U.S. unemployment rate dropped to 3.8 per cent in May, the lowest in 18 years, as per Labor Department data. The economy added 2,23,000 jobs, recording strong growth across sectors, although wages grew at a modest 2.7 per cent. Black unemployment also fell to a record low. However, the employed percentage of America’s population stands at 60.4 per cent, well below pre-recession levels. MICROSOFT TO BUY GITHUB FOR $7.5 Bn Microsoft is buying the open-source coding platform GitHub in an all-stock deal worth $7.5 billion. San Francisco-based GitHub provides coding tools to more than 28 million developers and claims to be the largest code host. The deal will bolster the Windows maker’s pivot to cloud services, undertaken by CEO Satya Nadella, and help the…

THE NEWLY MINTED INSOLVENCY and Bankruptcy Code, 2016 (IBC) has put banks in a spot. The bankruptcy process is forcing them to book massive losses. Take a look. Promoters of Mumbai-based Shirdi Industries, a manufacturer of decorative laminates for the furniture industry, left just 26 cents for a dollar on the table for bankers as part of the IBC resolution. In the bankruptcy proceedings against Noida-based oil producing company JEKPL, bankers managed to negotiate just a cent higher than what Shirdi Industries offered them. Worse, in the case involving Hyderabad-based Synergies Dooray Automotive, bankers didn’t even get the liquidation value. They accepted a paltry 6 cents for a dollar. This is the state of affairs of most mid-sized companies under the bankruptcy code and bankers are taking huge haircuts on…

Prepare a contingency IBC strategy for stressed assets Appoint turnaround experts to study the defaulting companies Also check with investment bankers globally for interest in the assets Watch big operational creditor(s) carefully who could trigger bankruptcy Insist on one time settlement with promoter rather than drag him to bankruptcy Sell loans to Asset Reconstruction Companies Create a distressed assets division for building expertise. Treat it as a profit centre Put together an exit strategy for equity holdings in distressed companies…

SANJEEV GUPTA, Executive Chairman, Liberty House Group THE MAN AND HIS COMPANY have repeatedly been in the news in recent months, as the process of selling off stressed assets under the new Insolvency and Bankruptcy Code (IBC) – passed in May 2016 – gathers steam. When bids were invited for shipbuilding company ABG Shipyard, Sanjeev Gupta’s Liberty House was the only company to respond, even raising its offer to ₹5,600 crore when the initial bid was rejected as too low. Liberty House was the higher of the two bidders for auto parts maker Amtek Auto, quoting ₹4,334 crore, as it was for steel manufacturer Adhunik Metaliks. Liberty House entered the fray for Bhushan Steel after the bid deadline but with an offer of ₹18,500 crore. Though it was substantially larger…

YEAR 2018 LOCATION: Tuticorin, India ENTITY: Sterlite Copper Protest against plans to double smelter capacity. Protestors say environmental pollution from the copper plant has led to health issues among the locals IMPACT Plant shut; Government orders permanent closure; Company to contest YEAR 2014 LOCATION: Goa ENTITY: Sesa Goa SC quashed mining licences in Goa based on the Justice Shah Committee recommendation, which alleged violation of environmental laws by mining firms, including Sesa Goa IMPACT Mining licences cancelled YEAR: 2013 LOCATION: Niyamgiri, India ENTITY: Sterlite It has been alleged that Vedanta expanded capacity without environment clearance and was to mine bauxite from a sacred hill in Niyamgiri IMPACT Mining could not take place; Lanjigarh refinery running but intermittently closed for shortage of bauxite YEAR: 2016 LOCATION: Chingola, Zambia ENTITY: Konkola Copper…

Q: Why are you making this shift now? A: IBM’s cultural transformation is aligned with the reinvention of our business, with almost half our revenue coming from businesses we weren’t in six years ago. We’ve fully embraced design thinking and agile methodologies, which changes the way we work and assemble teams to drive value for our clients. It requires more Connector behaviours from all IBMers. We’re systematically creating opportunities for learning through peer-to-peer coaching. What are the advantages of this approach? It’s more market-driven. Too often learning and development teams focus on creating and pushing out new kinds of programmes for employees – the incentive is really around creation. This approach recognises that there’s a lot of value in “pull” – when people seek what they need. It also offers…

IF THE RIGHT COMBINATION OF DATA PIECES, INCLUDING A DIGITAL SIGNATURE, IS MISAPPROPRIATED SOMEHOW, THE RESULTS COULD BE DRASTIC. IT IS NOT JUST SMART home products, social media accounts or browsing activities on the web that open up user data to those waiting to harvest it; smart hotel rooms, too, are in the reckoning. All over the world, hotels are trying to keep up with tech innovations that could transform a person’s hotel stay. This would also mean creating a ton of rich data on each hotel guest. In a single overnight stay, the sheer amount of data yielded and necessarily retained would be voluminous. As a guest walks into a hotel room with a special digital key, practically every object will involve sensors and voice controls. A recent report…

Helping the younger generation understand the effects of climate change and the importance of water bodies can be challenging, not to mention tedious. But what if a life-like 3D model could show how the smallest of human actions can impact the environment? WWF Free River, an augmented reality (AR) app does just that. When you point the iPad’s camera on a flat surface, the app overlays a realistic 3D model on the screen offering a spectacular landscape view – showing rivers, rain and dams and how they affect habitation, and helps explore more sustainable ways for energy development. As is sufficiently evident, AR technology, by overlaying digital information on top of the real environment, can render a truly immersive experience across industries. Just pointing the camera on the subject can…

Talent Wins: The New Playbook for Putting People First By Ram Charan, Dominic Barton and Dennis Carey Harvard Business Review Press Pages: 256 Price: ₹999 ONE KEY THEME that created ripples in the world of HR last year has been ‘future of work’. While people contemplated on the timing of its “arrival”, one thing was clear – the work of the future will have no boundaries (of organisational structures, geographies)’ it will be fluid. Agility will be the only constant in this ever-evolving world, and with the changing social and talent structure, organisations will find it increasingly difficult to have talent strategies that will not only help them survive but also remain competitive. As the business world grapples with the realities of this future, Talent Wins, by Ram Charan, Dominic…

ENSURING ACCESS TO education is the responsibility of the government. But no matter how much it tries, the government alone cannot provide good quality education to everyone. It has to rely on the private sector to shoulder the mammoth task of ‘Education for All’. Some of the best schools are private schools. Even parents from lower income groups prefer low-cost private schools over government schools. As the role of the private sector is so crucial, why isn’t the government making it easier for them to function? Education is a capital-intensive sector, and money is required to buy/lease/hire land, building, infrastructure, facilities, staff, technology, et al. The government is certainly not in a position to meet these capital requirements. It is barely able to provide (if at all) right-to-education reimbursements to…

Date NPA ACCOUNTS Loan Outstanding (₹cr) HAIRCUTS % Total losses (₹cr) June-July 2017 12 BIG-TICKET LOAN DEFAULTERS 2,25,000-2,50,000 50% 1,12,500 From Jan 2017 till today 645 OTHER DEFAULTERS ADMITTED UNDER BANKRUPTCY 1,50,00-1,75,000 70% 1,05,000 Jan-Feb 2018 28 LARGE TO MEDIUM LOAN DEFAULTERS 1,50,000-1,75,000 60% 90,000 Under consideration DEFAULTERS WITH LOAN EXPOSURE OF OVER ₹2,000 CRORE 2,00,000 70% 1,40,000 Loan outstanding and haircut percentages are estimates; Haircuts over the principal amount; Existing 645 cases include loan sale to ARCs and exclude 12 plus 28 cases; Note: Some numbers may change; Source: Market…

2018 Diamond Bank, UK Rio Tinto’s aluminium smelting unit, France ($500 million) Tahmoor Coal Mine, Australia 2017 Caparo Merchant Bar, UK Georgetown Steelworks, US Arrium, Australia (Mining and materials’ company) $750 million Whyalla Steelworks, Australia ZEN Energy, Australia (storage battery manufacturer) 2016 Tata Steel’s specialty division, UK (£100 million), Rio Tinto’s Scottish aluminium smelter ($412 million) Wyelands Bank, UK 2015 Caparo Tubular Solutions, UK 2013 Mir Steel, UK…

Has the economy settled down? SANJAY LALBHAI: We can see some green shoots. Some businesses have started doing well. Automobiles for one; FMCG also – the HUL numbers are good. Some businesses connected with agriculture are doing well. So are private banks. Some financial sector companies are doing well, not all. I think travel, leisure are doing well. But many manufacturing and export-oriented sectors are still struggling in the aftermath of demonetisation. Has GST settled down as far as your business is concerned? Yes, if you look at textiles, GST has been good for the compliant players. Why couldn’t anyone consistently create huge shareholder value or build humongous scale textile companies earlier? After all, roti, kapda and makaan are very basic needs. You have a DLF in real estate but…

WORLD ENVIRONMENT DAY – June 5 – that started off as a concept in 1974 was way ahead of the times. It is only over the past few years that environmental issues – be it water, land or air pollution – have emerged as areas of serious concern. This is also true of India, where many major projects, such as Posco’s $12 billion steel plant in Odisha, did not take off due to environmental concerns. The recent agitation over Sterlite’s copper plant in Tamil Nadu is another example where environmental concerns have made national headlines. This year, as India hosts the 43rd World Environment Day for the first time, the theme is Beat Plastic Pollution. That is a huge area of concern globally (See Losing the War, Page xx). The…

FACING HEAT for its failure to cope with increasing crude oil prices, the government finally has some respite in the form of its GST collections for April. The GST collection in the first month of the current financial year at ₹94,000 crore is a healthy jump from the average monthly collection of ₹89,000 crore in the previous fiscal. A windfall collection from GST in the coming months – especially if it can touch the ₹1 lakh crore mark – will give the government some leeway to play around with populist measures like reducing excise duties. Experts suggest that collections could be more consistent now that the government has introduced a slew of anti-evasion measures such as the e-way billing system. On the flip side, collections from GST are still far…

HIRING LESSONS WHAT: FICCI Workshop on Hiring for Success WHEN: July 5-6, Hyderabad WHAT TO LOOK FOR: The dynamics of employment have altered drastically over the past few years. Finding the right fit is becoming more challenging for recruiters with the traditional ways of hiring are yielding diminishing returns. To align thinking and action to the changing dynamics of the workplace, FICCI is conducting a two day workshop. TOWARDS INCLUSIVE GROWTH WHAT: Conference on Human Capital Development for Inclusive Growth WHEN: July 18-19, Chengdu, China WHAT TO LOOK FOR: Despite the strong economic growth enjoyed by most Asian countries, some groups are falling behind, often because of the widening gap in income and wealth. This Asian Development Bank event aims to stimulate discussion on human capital development and inclusive growth…

FACEBOOK is taking its relationship with users to another level – from helping people forge friendships to now helping them find love. The social networking site will soon introduce a dating service. An ‘obvious move’ given its gargantuan user base. While singles are waiting for the service with bated breath, dating apps aren’t upbeat. In fact, the shares of Match Group, a company that owns dating services such as Tinder, OkCupid and Match.com, took a plunge in the stock market after Facebook’s announcement. Experts predict that the move will impact the Indian dating market that has global players Tinder, OkCupid and Coffee Meets Bagel, as well as start-ups such as TrulyMadly and Woo. According to online market research firm Statista, the Indian dating services market is worth $182 million in…

Warehouse space (mn sq ft) Source: JLL Tectonic shift in industry, from fragmented, unorganised players to large organised ones More power to the warehouse, from just storage to providing value added services Institutional investors making a beeline for the sector Warehouse consolidation, from multiple facilities to a few large centres Pruned inventory carrying costs for major companies Automation and smart warehousing solutions in operations Source: Knight Frank PROJECTED INVESTMENTS: WAREHOUSING WAREHOUSE 35,000 COLD STORAGE 4,000 AGRI STORAGE 3,500 CONTAINER STORAGE 500 OVERALL 43,000 Figures in ₹ crore Source: JLL…

Lower bids, averaging half a cent to a dollar Absence of defaulting promoters results in lower realisation Lack of interest from strategic players except in a handful of cases Global and domestic funds are extremely selective RBI pushing banks to take defaulters to IBC. It should ideally be the last resort High liquidation probability in SME and sectors not doing well Higher provisioning requirement: 40% for secured assets and 100% for unsecured assets…

THE MNC VIEW The judgement affects not only Monsanto’s patent but potentially all gene patents granted to other technology developers. A total of 100-plus patents in agri-biotech and 1,291 patent applications could be impacted. Research in multiple crops like cotton, maize, rice and vegetables such as brinjal, cauliflower and cabbage may come to a halt. Herbicide tolerant and drought-tolerant varieties (all of which are biotech innovations) benefit farmers. THE INDIAN VIEW The court order only reinforces what is stated in the Indian Patents Act, which excludes from patentability plants and animals in whole or any part thereof (other than microorganisms), seeds and essentially biological processes for production or propagation of plants and animals. The specific clause of the Patents Act has been used extensively in the past, including for invalidating…

₹1 lakh crore: Investment that has gone down the tube 80,000-90,000: Jobs that could be lost this year compared with 40,000 in 2017 18.87%: Fall in adjusted gross revenue of the sector in 2017/18 ₹3.55 lakh crore: Amount raised by government from the sector in the past six spectrum auctions ₹50,000-60,000 crore: Value erosion for smaller telcos, including Reliance Communications, Tata Teleservices, MTS, Telenor and Videocon (excluding Aircel, which has filed for bankruptcy)…

THE SHUTTING down of Sterlite Copper’s operations at Tuticorin in Tamil Nadu shrinks the revenue of global metals and mining major’s UK parent Vedanta Resources by nearly 25 per cent. It also deals a big blow to its attempt to reposition itself as an environmentally and socially responsible mining company, and infuses a wild uncertainty into its operations and balance sheet both in India and abroad. India’s consumption economy is fuelling unprecedented demand for metals and plastics. Their production has a colossal fallout on the environment. That has the nation grappling with the difficult balancing act between economic compulsions and ecological preservation. For now, the hawks seem to have an upper hand. Especially, when politics hijacks one for the other at various points – as it did in Tuticorin. “Closure…

I IN A UTOPIAN corporate world, managers lavish a constant stream of feedback on their direct reports. This is necessary, the thinking goes, because organisations and responsibilities are changing rapidly, requiring employees to constantly upgrade their skills. Indeed, the desire for frequent discussions about development is one reason many companies are moving away from annual performance reviews: A yearly conversation isn’t enough. In the real world, though, constant coaching is rare. Managers face too many demands and too much time pressure, and working with subordinates to develop skills tends to slip to the bottom of the to-do list. One survey of HR leaders found that they expect managers to spend 36 per cent of their time developing subordinates, but a survey of managers showed that the actual amount averages just…

INDIA ACCOUNTED FOR 14 CITIES in the list of 15 most polluted cities released by the World Health Organization last month. Kanpur, Patna, Gwalior, Varanasi, Lucknow or New Delhi and its satellite towns Gurgaon and Faridabad figure on these lists so frequently that it does not come as a surprise anymore. The government, aware of the risks this poses to citizens’ health, has set ambitious targets for electrification of cars, two-wheelers, trucks, buses and pretty much anything that runs on wheels. Apart from improving air quality, this will also help it reduce the high dependence on crude oil imports. Every year, India imports more than 80 per cent of its crude oil requirement (220 million tonnes in 2017/18). The crude oil import bill of $88 billion in 2017/18 accounted for…

India’s automotive industry is the poster boy of ‘Make in India’. But growth has to be balanced with national priorities such as energy security and emission control. So, the country will need a bouquet of technologies and fuel diversity to make growth sustainable. Diesel, Then And Now Delhi Gasps, screamed a newspaper headline in November 2015. That year, air quality deteriorated to a level no one had ever seen before. Matters landed in court, similar to what had happened in 1998-99, and diesel fell prey. Actions taken included stopping registration of diesel passenger vehicles above 2,000cc and limiting the life of diesel cars in the National Capital Region to 10 years. What might have been relevant in 1999 was also considered relevant in 2015. However, a number of new-technology diesel…

1839 German apothecary Eduard Simon isolates polystyrene from natural resin. However, he does not know what to do with it. 1862 Alexander Parkes demonstrates Parkesine at the Great International Exhibition in London. Made from cellulose, it can be moulded into different shapes. But it is not a commercial success. 1865 John Wesley Hyatt develops a way of making a billiard ball from cellulose nitrate in response to a challenge. Till then, billiard balls were made from ivory. 1891 Rayon is developed in France. 1909 A chemist in New York named Leo Baekeland creates the first, all-synthetic plastic called Bakelite for electrical use. It becomes very popular and designer Coco Channel even uses Bakelite to design jewellery. 1920 Polyvinyl chloride (PVC) is invented. 1925 The term ‘plastics’ is coined for all…

SOCIAL NETWORKS are hotbeds for explosive conversations. Verbal clashes, abuse, bullying and harassment are commonplace on platforms such as Twitter and Facebook. Researchers at Cornell University may be able to help tackle this. In a study, spotted by The Verge, a group of scientists have figured out how to feed volumes of data on the indicators that a conversation is likely to turn sour. Looking back over a conversation, it isn’t difficult for humans to spot early warning signs. The researchers believe that when predictions become good enough, one can salvage a conversation in its initial stages. For example, an obvious lack of polite words or overly confrontational questions and a tendency to personalise are signs that a conversation is headed down the wrong path. Give enough instances of this…

The Subtle Art of Not Giving a F*ck By Mark Manson Harper Collins Price: ₹499 Catalyst By Chandramouli Venkatesan India Portfolio Price: ₹299 Thinking, Fast and Slow (Penguin Press Non-Fiction) By Daniel Kahneman Penguin Price: ₹499 Attitude Is Everything: Change Your Attitude … Change Your Life! By Jeff Keller Collins Price: ₹199 A Century is not Enough: My Roller Coaster Ride to Success By Sourav Ganguly Juggernaut Price: ₹699 *Top books by sales for May 25-June 7, 2018; Includes only books released after Jan 1, 2015; Information provided by…