Business Today August 13 2017

SPECIAL REPORT UP BUDGET BUSINESS CONFIDENCE
,1)5$6758&785( *$,1(56$1'/26(56 '(35(66('6(17,0(17
www.businesstoday.in August 13, 2017 `70
A DOZEN BIG
CORPORATE
DEFAULTERS HAVE
POISONED THE
INDIAN BANKING
SYSTEM. WHATS
THE ANTIDOTE?
From the Editor
Tackling NPAs http://www.businesstoday.in
Editor-in-Chief: Aroon Purie

Group Chief Executive Officer: Ashish Bagga
T
he reader of Business Today would be aware that we have been writ- Group Editorial Director: Raj Chengappa
ing about the mounting non-performing assets (NPAs) of banks in I
Editor: Prosenjit Datta
India, and especially the government-owned banks regularly. We Group Creative Editor: Nilanjan Das, Group Photo Editor: Bandeep Singh
Managing Editor: Rajeev Dubey
have examined how the rising NPAs would force the banks to raise enor- Deputy Editors: Venkatesha Babu, Anand Adhikari
mous capital in order to meet the capital adequacy norms set by Basel III. I
SPECIAL PROJECTS AND EVENTS
We have looked at how banks tried to fix their bad debt problems with the Senior Editor: Anup Jayaram
I
help of asset reconstruction companies (ARCs) as well as why this has not CORRESPONDENTS
been a successful approach. And also, why strategic debt restructuring Senior Editors: P.B. Jayakumar, Nevin John, Goutam Das,
Mahesh Nayak, Ajita Shashidhar, Joe C. Mathew
(SDR), which allowed companies to restructure their debt, did not work Senior Associate Editors: E. Kumar Sharma, Anilesh Mahajan,
Dipak Mondal
out as anticipated. We have examined the efforts of the government and Associate Editors: Manu Kaushik, Chanchal Pal Chauhan,
Sumant Banerji
the Reserve Bank of India (RBI) to clean up the mess and both the advan- Senior Assistant Editor: Nidhi Singal
Special Correspondent: Sonal Khetarpal
tages as well as the flaws of each initiative they have taken. I
RESEARCH
Despite the RBI and the Central government taking multiple steps to Principal Research Analysts: Niti Kiran, Avneet Kaur
solve the NPAs, the problem has only been getting worse. At last count, I
COPY DESK
the loans classified as NPAs by banks had touched `7.28 lakh crore. An Senior Editors: Rishi Joshi, Mahesh Jagota
Associate Editor: Sanghamitra Mandal
equal amount could be classified as stressed loans, which are headed to- Assistant Editor: Sapna Nair Purohit
Chief Copy Editor: Gadadhar Padhy
wards becoming NPAs. The total amount of bad loans with the banks to- Senior Sub Editor: Devika Singh
day is in excess of `14 lakh crore. Another `1.7 lakh crore would possibly I
PHOTOGRAPHY
be in the form of downgraded debts, which Photo Editor: Vivan Mehra
Deputy Chief Photographer: Shekhar Ghosh
include bonds that have been sold to mutual Principal Photographers: Rachit Goswami, Nilotpal Baruah
Senior Photo Researcher: Sudhansh Sharma
funds, foreign and domestic investors. I
ART
Out of these `7.28 lakh crore of NPAs, a Assistant Creative Editor: Safia Zahid
Associate Art Directors: Amit Sharma, Ajay Thakuri
dozen companies account for 25 per cent of Assistant Art Director: Rajkumar Wahi
the NPAs. The lenders are trying to sort out Chief Designers: Vikas Gupta, Raj Verma
Senior Designers: Devender Singh Rawat, Mohammed Shahid
these specific NPAs by initiating insolvency I
PRODUCTION
proceedings against almost all of them. How Chief of Production: Harish Aggarwal
will the new approach pan out? Several Senior Production Coordinators: Narendra Singh,
Rajesh Verma
companies from this list have chosen to raise I
LIBRARY
objections at the NCLT, the adjudicating Assistant Librarian: Satbir Singh
authority for bankruptcy. A large corporate I
Publishing Director: Manoj Sharma
Associate Publisher (Impact): Anil Fernandes
house has approached the High Court, chal- I
lenging the bankruptcy proceedings initi- IMPACT TEAM
Senior General Manager: Jitendra Lad (West)
ated against the company, though it was not successful. In future, there General Managers: Upendra Singh (Bangalore),
Kaushiky Chakraborty (East)
will be some who would go to the appellate authority or Supreme Court I
against the NCLT judgments. A few others are cooperating with the banks Marketing: Vivek Malhotra, Group Chief Marketing Officer;
Vipul Hoon, General Manager; Reynold Robert, Brand Manager
and trying their best to pay back the loans by selling assets. I
Newsstand Sales: D.V.S. Rama Rao, Chief General Manager;
Each case is different and there are still plenty of hurdles in the way. Deepak Bhatt, General Manager (National Sales); Vipin Bagga, Deputy
Even after insolvency proceedings have been initiated, there is no guar- General Manager (Operations); Manish Kumar Srivastava, Regional
Sales Manager (North); Rajeev Gandhi, Regional Sales Manager (West);
antee that the banks will ever get back even the principal they lent. In Arokia Raj L, Regional Sales Manager (South)
some cases, the assets would be deteriorated and are no longer worth Vol. 26, No. 16, for the fortnight July 31 to August 13, 2017.
Released on July 31, 2017.
much. In other cases, there might be no buyer interest because there was Editorial Office: India Today Mediaplex, FC 8, Sector 16/A, Film City, Noida-201301; Tel: 0120-4807100; Fax:
0120-4807150 Advertising Office (Gurgaon): A1-A2, Enkay Centre, Ground Floor, V.N. Commercial Complex,
overcapacity. In still others, there is the problem of managing the assets Udyog Vihar, Phase 5, Gurgaon-122001; Tel: 0124-4948400; Fax: 0124-4030919; Mumbai: 1201, 12th Floor, Tower 2
once they have been taken over. A, One Indiabulls Centre (Jupiter Mills), S.B. Marg, Lower Parel (West), Mumbai-400013; Tel: 022-66063355; Fax:
022-66063226; Chennai: 5th Floor, Main Building No. 443, Guna Complex, Anna Salai, Teynampet, Chennai-600018;
Our cover story this issue looks at 12 companies, how they got into Tel: 044-28478525; Fax: 044-24361942; Bangalore: 202-204 Richmond Towers, 2nd Floor, 12, Richmond Road,
Bangalore-560025; Tel: 080-22212448, 080-30374106; Fax: 080-22218335; Kolkata: 52, J.L. Road, 4th floor,
trouble, what their lenders are doing to recover money, and how the Kolkata-700071; Tel: 033-22825398, 033-22827726, 033-22821922; Fax: 033-22827254; Hyderabad: 6-3-885/7/B, Raj
Bhawan Road, Somajiguda, Hyderabad-500082; Tel: 040-23401657, 040-23400479; Ahmedabad: 2nd Floor, 2C,
company promoters themselves are reacting to the lenders initiatives. Surya Rath Building, Behind White House, Panchwati, Off: C.G. Road, Ahmedabad-380006; Tel: 079-6560393,
079-6560929; Fax: 079-6565293; Kochi: Karakkatt Road, Kochi-682016; Tel: 0484-2377057, 0484-2377058; Fax:
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Sales: General Manager Sales, Living Media India Ltd, B-45, 3rd Floor, Sector-57, Noida (UP) - 201301; Tel:
resolving. The sector report is on page 80. 0120-4019500; Fax: 0120-4019664 1998 Living Media India Ltd. All rights reserved througout the world.
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Re: Letters to the Editor
pm, they did not issue the certifi- nesses as they are not tech-savvy
cate. They issued the letter of accep- and do not even use computers for
tance for LUT on 14th July, but accounting purposes. It is also a fact
refused to issue letter for claiming that some items will be cheaper and
composite rate drawback. some dearer. The prime objective of
We sought a meeting with the launching this one nation, one
GST Commissioner, who told us to tax reform is to not only ensure
meet the Addl. Commissioner for hassle-free business across the
Composite Rate Drawback. He told country, but also widen the tax net.
us their office had stopped issuing It is an open secret that most busi-
such letters since custom commis- ness communities try to evade tax
sioner at ICD, Tughlakabad, was not as much as possible and a majority
accepting it. We confronted him of them shows bare minimum prof-
with Circular no 22/2017 its, while the service class religiously
Customs dated June 30, 2017, and pays taxes regularly. But our gov-
newspaper advertisements stating ernment needs sufficient money to
all jurisdictional GST officers to issue fund public infrastructure and wel-
such letter for claiming composite fare schemes. So, it is high time for
Red Tape Grinds rate drawback and to ensure each and everyone of us to under-
GST to a Halt smooth flow of exports till 30th stand that this move is largely in the
This refers to your cover story (The September. interest of the nation.
Good, Bad and Ugly, July 30). Our He informed that there was no Bal Govind, Noida
company Blue Star International way to ensure that some rogue ex-
is a government-recognised Star porter will not avail of the double India Must Play Its Cards
Export house, with turnover of `40 benefit of composite rate drawback Well and Firmly
crore and 100 per cent realisation of & GST input tax credit refund fraud- This refers to a column on the
export proceeds till date. Our GST ju- ulently. We showed him copies of Chinese geopolitical ambitions
risdictional office is in Bhikaji Cama NOC for claiming composite rate (Handling the Dragon, July 30). China
Place, New Delhi. We welcomed the drawback issued by range commis- is expanding its business set-up in
7th July CBEC notification distin- sioners of other jurisdiction, where Pakistan as it has an eye on
guishing or clarifying who could exporters were able to take advan- Pakistan-occupied Kashmir. The
give bond and who could give letter tage of this. He stated that whoever Middle Kingdom directly or indi-
of undertaking (LUT) for exporting was issuing such a NOC was doing rectly supports Pakistan on
without payment of IGST. so at the risk of their job. We are Kashmir issue, too. Chinas attitude
Our team went to the GST juris- sure many exporters face similar towards India has not changed
dictional office on 10th July to seek issues and request concerned since the Sino-Indian war in 1962.
what documents are required for bodies to take up this matter Even Prime Minister Narendra
LUT acceptance and claiming com- urgently and resolve it. Modis visit did not lead to any posi-
posite rate drawback. We moved A. Saluja, Director, tive attitude towards India. Beijing
our file for LUT acceptance the same Blue Star International may take the liberty to create prob-
day to claim composite rate draw- lems for India and may also have a
back with all required documents. Ensuring Hassle-free win-win situation. India must play
The superintendent confirmed our Business Across the Nation its cards well and firmly to show
file was complete and the certifi- This refers to your cover story The China that it is no pushover.
cates would be issued by 5 pm, the Die Is Cast. No doubt, there would be Mahesh Kapasi, New Delhi
same day. Despite waiting till 7.30 teething troubles for small busi- Send all your comments to: editor.bt@intoday.com
WRITE TO:
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10 BUSINESS TODAY August 13 2017

CONTENTS
COVER BY NILANJAN DAS AUGUST/13/2017
VOLUME 26/NUMBER 16
UPFRONT
16 I Quick takes on
44
major events
FOCUS
20 I Losing Sheen COVER STORY
Despite outpacing the growth in
net profits over the past five years,
dividend payouts are seemingly
becoming inconsequential
THE
22 I Gone for a Toss
DANGEROUS
The government has set yet
another deadline, but lack of PoS DOZEN
devices is putting the fertiliser DBT The noose around
programme on the back foot
12 big corporate
24 I Graphiti: defaulters tightens
Bulls on the Prowl as bankers invoke
bankruptcy
FEATURES proceedings for
26
26 I Taking a Tumble quick redressal
Business confidence plummets 48 I Zeroing in on the Dozen
with corporate leaders expecting a
negative impact of GST on con-
sumption and investments: Survey
60 I Piramals Big Bet 76 I A Short Slide
Ajay Piramal is betting on real The automobile sector, hit
32 I Teething Troubles estate, financial services to create hard by demonetisation and
Despite the governments efforts, a $20-billion business by 2020 BS-IV ruling in 2016/17,
transitional issues in GST continue may see short-term
to haunt businesses volatility due to GST
66 I Back in Driving Seat
COLUMN/Ashok V. Desai NCLTs judgment gives Vikram
36 I Making Patents Useful Bakshi the edge in his battle
The minister needs to think more with McDonalds
about the IP Exchange proposal
72 I An Uneasy Truce
38 I An UPhill Task While the public spat at Infosys
Yogi Adityanath aims to overhaul has abated for now, can
UP finances. After the farm loan the company regain its
waiver, will he succeed? winning ways?
80
INFRASTRUCTURE SPECIAL 90 I Getting Smarter 98 I Power Off
Indias urban infrastructure Power projects are staring at a
80 I Building the Backbone could change for the better as bleak future as renewables sur-
How India is creating infrastruc- work begins on Smart Cities pass them in capacity addition
ture for the future
94 I Heading for Trouble 102 I The Power Game
82 I Standing Tall Governments plan to revive India is keen to become a power
Emerging infrastructure firms have airports and subsidise fares is major, but its existing power grid
seen rapid growth in recent years riddled with problems requires a massive overhaul
CONTENTS businesstoday.in
106 I The Defenders
CRON Systems is working with defence forces
to secure the borders STAY CONNECTED WITH US ON
www.facebook.com/BusinessToday
PERSONAL TECH @BT_India
110
110 I Smarter Than You Think PERSPECTIVES
g apps,
With the right pp y you can turn y your Why Indian Markets Are Not Looking
smartp
tpho
hone
ne ccamera
smartphone amer
am era
a in
into
to a utili
tility
y machine
utility Overvalued
With the Sensex soaring to its all-time high
levels, it is becoming increasingly expensive
as measured by the PE ratio
businesstoday.in/sensex-value
What Forced GSTN to Defer Invoice

Uploading Service
Among the 80 lakh existing indirect taxpayers,
70 lakh have migrated to the GST Network
businesstoday.in/gst-invoice
Battle with Vikram Bakshi Could Hit

EX-LIBRIS
McDonalds Brand Equity in India
114 I Step Up: How Women Can Perform Over the years, CPRL performance has borne
Better for Success: The Sky Is the Limit the brunt of the cold war between its partners
businesstoday.in/vikrambakshi-mcdonald's
122 I PEOPLEBUSINESS Inflation, Product Demand Dip: Is It
124
LEADERSPEAK
Slowdown or Macro Stability?
124 I Jose Roman Is the easing of inflationary pressure or the
Corporate VP & Global Head of Datsun for Nissan Motor declining demand for products a direct outcome
of the series of policy disruptions caused by
the Modi government?
businesstoday.in/inflation-slowdown
NEWS
What You Should Know About SBI Life
Before Investing in Its IPO
Of the total shares issued, 12 million are
reserved for SBI shareholders and two million
for State Bank employees, which will be offered
to them at discounted price
businesstoday.in/sbilife-investment
An Feature Find the Right Job on Page: 118-121

From time to
time, you will see pages Jobs Today
titled An Impact
Feature or Get Lucky. Get Active on Monster.
Advertorial in
Business Today. This is Better Access Better Connections
no different from an Better Jobs
Cinema Advertising Gains Momentum as
advertisement and the
Urban Indians Flock to Theatre
magazines editorial staff Powered by:
With the movie theatre audiences skewed
towards men, the gender gap is decreasing, with
is not involved in its 53 per cent of the cinema goers being women
creation in any way. Find Better.
businesstoday.in/cinema-advertising
UPFRONT
` 2.5 lakh crore

QUOTE
"Thats a major This is the amount banks may have

milestone where to forgo as dues from 50 large
stressed companies, says a report
an Indian by CRISIL
automotive
210 GOVERNMENT SITES
company is DISPLAY AADHAAR DATA
opening up About 210 websites of
central and state
manufacturing in government departments
SHEKHAR GHOSH
were found to be displaying
a resurgent personal details and
Aadhaar numbers of
Detroit. I think beneficiaries, Minister of
State for Electronics and IT,
thats a wonderful P.P. Chaudhary, said in the
Lok Sabha. The Unique
twist of history." Identification Authority of India has taken note and is
regularly monitoring the status to get the Aadhaar data
M&M Chairman Anand Mahindra on removed from the said websites, he said.
the company's decision to open a
facility in Detroit
DEMONETISATION
YIELDS PITTANCE AS
FAKE CURRENCY
The value of fake
currency detected
after demonetisation
is `11.23 crore,
Finance Minister
Arun Jaitley has told
the Rajya Sabha. This
is a very small number
compared with the
RACHIT GOSWAMI
`15 lakh crore-plus

currency that the
PAYTM MALL DELISTS
government had 85,000 SELLERS
banned on Paytm Mall has delisted
November 8 last year. about 85,000 sellers for
failing to meet quality
standards. It said the
move was part of a
ITC LOSES `49,731 CRORE revamp of the seller
VALUE IN A DAY onboarding process for
Shares of ITC fell 13 per cent on better customer service.
July 18 after the government Now, those wanting to
increased the cess on cigarettes under sell their products
the goods and services tax. The loss in through Paytm Mall will
market capitalisation came to have to furnish brand
`49,731 crore. The move is expected authorisation letters and
to yield the government an annual run strict quality and
revenue of `5,000 crore. service audits.

CALENDAR
SORTING OUT GST
25 26 02 WHAT: ASSOCHAM
National Summit on
DEBATING GST Post Implementation
Issues
GLOBALISATION WHEN: August 2, New Delhi
WHAT: IMF Conference on
WHAT TO LOOK FOR: The
"Globalisation in the
ASSOCHAM meet will discuss
Aftermath of the Crisis"
the post implementation
WHEN: July 25-26, Kuala Lumpur
issues related to GST. The
WHAT TO LOOK FOR: The event being organised jointly by the Bank Negara
idea is to provide feedback to
Malaysia (BNM), the International Monetary Fund (IMF) and the
IMF Economic Review will aim to deepen the understanding of the
recent setback to globalisation. It will provide a forum to discuss the
slowdown in global trade and finance, the role of protectionist
policies, and welfare implications of immigration.
the government for resolving

THE NEED FOR PROMOTING FINTECH implementation issues and
26 PPPs 28 WHAT: CII Fintech 2017 also provide a platform to the
industry to brainstorm GST.
WHAT: India PPP WHEN: July 28, Delhi
Summit WHAT TO LOOK FOR: The conference aims
The event would debate legal
to discuss and understand the Fintech interpretational issues,
WHEN: July 26, New Delhi
opportunities for India. The thrust procedural compliance
WHAT TO LOOK FOR: The FICCI
issues, issues relating to
summit will discuss
transitional provisions
critical issues related to
and tax administration
Public Private
related issues.
Partnerships (PPPs). It
will focus on policy
framework and
regulations, fostering
partnerships and
RESOLVING LABOUR
evolving innovative
financing solutions for
04 CONFLICTS
PPPs. It would also WHAT: Roundtable
provide an opportunity would be on key challenges including Discussion on Managing
to get stakeholders Reimagining Financial Services with Contract Labour
views on facilitating an Emerging Technologies; Leveraging WHEN: August 4, New Delhi
enabling environment Fintech for Inclusive and Equitable WHAT TO LOOK FOR: It is important
for scaling up PPPs in Growth and Risk and Regulation in to have a floating workforce
the country. Fintech World. but uncertainty of job and
lack of a comprehensive social
security cover are cited as the
reasons against its
ADOPTING CLEAN TECHNOLOGIES desirability. The All India
04 WHAT: 3rd CleanTech Summit 2017 Uttar Pradesh Organisation of
WHEN: August 4, Noida Employers
WHAT TO LOOK FOR: The CII summit (AIOE) along
would stress on the need to with FICCI
promote clean technologies for is organ-
sustainable business practices in ising a
infrastructure, water & waste Roundtable
management. The meet would Discussion
also showcase some of the best on how to
startups and success stories in manage contract
the Cleantech segment. labour effectively.

Losing Sheen
Despite outpacing the growth in net prots over the past ve years, dividend
payouts are seemingly becoming inconsequential. By NITI KIRAN
46.3
Divident amount
Prot after tax
31.0
24.4 26.2
22.7
17.4
17.5 8.3
7.4
4.2 13.1
9.7
5.9
2.6
0.2 -9.7
Change in Trend
-15.8
Figures indicate year-on-year change in %
Based on aggregate of 382 companies
-27.1
2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Source: Ace Equity
A
new trend is emerging. Hefty dividend payments growth in the top line.
by companies seem to be becoming unpopular. Back in 2016, it was a different story. India Inc. (a
As per the data collated by Ace Equity for 382 bunch of BSE 500 companies) saw 7.4 per cent growth
companies whose details were available, 2016/17 saw in dividend payments despite witnessing a 10.2 per cent
the steepest decline of 16 per cent compared to reduction in profits. Dividend growth has outpaced
2015/16 in dividend payouts over the past decade. growth in net profits over the past five years. Dividends,
Around 45 per cent of these companies saw a decline in in absolute amounts, have grown at a compounded an-
dividend payouts over the period this despite over 20 nual growth rate (CAGR) of 12.7 per cent, while profits
per cent growth in their net profit and 6.4 per cent have grown at a more modest 2.8 per cent CAGR be-

tween FY11 and FY16, states a research note from On close examination, the cash flow statements re-
Institutional Investor Advisory Services India Limited veal more interesting details. For example, Everest
(IiAS), a proxy advisory firm. So whats preventing firms Industries board recommended a dividend of 10 per cent
this time? in 2016/17 the total outgo of dividend (including tax
Companies are undoubtedly cautious about new on dividend) would be `185.6 lakh against `931.5 lakh
investments; the continuous fall in new investment for the previous financial year. Further, the companys
proposals is proof. As per data from the Centre for long-term borrowings fell to `91.7 crore from `118.2 in
Monitoring Indian Economy, in the past two years, 2015/16. Its cash outflow for repayment of long-term
year-on-year growth in the cost of new investment borrowings increased to `47.41 crore in 2016/17 from
projects declined by 19.9 per cent in 2015/16. In `20.60 crore in 2015/16.
2016/17, it grew just 0.4 per cent. On an aggregate level, the total cash outflows (of the
Interestingly, the companies in the sample, exclud- sample) towards repayment of long-term borrowings
ing banking and financial institutions were significantly higher at `56,245
(BFSI), registered the sharpest decline crore, compared to `41,154 crore in
of around 30 per cent in their cash 2015/16. This amount, however,
and bank balances, since 2008. stood at `43,033 crore in 2014/15.
Clearly, corporates are deploying Simultaneously, total cash outflows
their money elsewhere.
WHAT THE for interest paid saw a jump of 19.8
When it comes to rewarding DATA SAYS per cent in 2016/17 compared to a
shareholders, buyback of shares is an Around 45 per cent companies 5.4 per cent growth in 2015/16.
effective practice. According to Prime saw a decline in their dividend Roughly half the companies have
Database, buybacks gathered steam payouts in 2016/17, despite over seen an improvement in their interest
in 2013/14 with 32 companies com- 20 per cent growth in their coverage ratio in 2017 compared to
ing out with buybacks amounting to net profits the previous year. There has also
`11,380. These declined in the fol- been an increase in instances of com-
lowing two years and rose signifi- Over 10 companies within the panies servicing or retiring their
cantly to `34,468 crore (by 49 com- sample came out with buyback debts.
panies) in FY17. In the current fiscal, offers amounting to `6,753 crore If we talk about the ideal sce-
eight companies have already pro- nario where stock appreciation is al-
posed buybacks to the tune of The top ten dividend-paying ready happening on the back of a
`22,721 crore (till June). companies saw an increase in surge in the overall market, repaying
Incidentally, 12 companies of in the their payouts in 2017 loans is a better option. Its a better
sample (ex-BFSI) have come out with sign of improvement where the cash
buyback offers amounting to `6,753 generated is being used smartly for
crore. This is primarily on account of tax advantage of loan prepayment, says Sudhanshu.
buybacks against dividends, says Amit Tandon, The regular and top dividend-paying corporates,
Founder & MD, IiAS. meanwhile, bucked the trend and continued to pay
Share buybacks are a more tax efficient way of dis- dividends. The top ten companies that contributed over
tributing earnings of the company as companies are 60 per cent of the total dividends paid in 2016/17 saw
required to pay a dividend distribution tax of 15 per an increase in payouts in 2017. Their absolute growth
cent. was, however, outweighed by the significant fall in
Of the 12 companies, four belonged to the IT sector payouts by the rest of companies in the sample, translat-
contributing close to 40 per cent of the total buybacks ing into an overall decline in dividend payments.
of the sample. For instance, Wipros payment towards According to a recent report by India Ratings, com-
dividends (including dividend distribution tax) and panies whose free cash flow is positive and greater than
buyback of shares for 2016/17 amounted to around the dividend paid are adopting a higher dividend payout
`3,373.4 crore. The companys dividends declined to strategy. Their absolute dividends grew at a CAGR of 21
`729 crore from `2,963 crore in 2015/16. per cent during FY10-16 compard to the 6 per cent CAGR
IT companies, until recently, chose to reward inves- in free cash flow. It expects the pace of dividend payout
tors through the buyback route rather than dividends. to pick up in FY18 for such companies. This study was
Sluggishness, Visa issues and lack of demand led big IT restricted to the top 65 corporates which accounted for
companies to take this decision to cheer investors. This around 85-88 per cent of the total dividends paid each
is about one sector, but it varies from sector to sector, year since FY10. ~
says Abnish Kumar Sudhanshu, Director & Research
Head, Amrapali Aadya Trading & Investment. @niti_kiran
August 13 2017 BUSINESS TODAY 21

FOCUS Fertiliser DBT
Gone for a Toss

The government has set yet another deadline but lack of PoS devices and related
issues are putting the fertiliser DBT programme on the back foot. BY JOE C. MATHEW
T
he governments ambitious direct benefit transfer shop if the government insists that fertiliser companies will
(DBT) programme for fertiliser subsidy may hit the get subsidies only for the quantity that gets sold through
skids as point-of-sale (POS) machines, required to POS devices. It can also impact accessibility as not all retail
carry out all such transactions for the sake of transpar- shops are close enough to provide an effective replacement.
ency, are in short supply. Close to 200,000 retail outlets The second, and perhaps more critical factor is the
across 11 states are supposed to receive these devices as a frequency of POS usage. On a given day, not more than
POS-only buy-and-sell regime is one-fourth of the POS-enabled
afoot and pilots for the same are retail shops registered a sale. For
under way in 14 districts for al- instance, out of the 645 POS-
most a year now. Under the new enabled retailers in Karnal,
practice, retail outlets equipped Haryana, the maximum number
with POS machines can read and of retailers who made POS trans-
record a buyers Aadhar/ID de- actions on a daily basis over the
tails. Once the validation is past six months was 339 as on
done, the subsidy amount is June 30. It is an indication of the
AJAY THAKURI
credited to the bank account of transaction volume and also of
the manufacturer concerned. retailer readiness.
Before making any authenti- At first, the kick-off date set
cated transaction, retailers must by the government was January
enter the opening stock after 1, 2017. It got extended by a
tallying it with the stock re- month and then by another
corded in the governments four months to May 31. In
digital fertiliser management system. The key March, the government made it clear that
While DBT schemes in other areas such as objective of post this deadline, the subsidy would be paid
cooking gas, kerosene and foodgrains see based on POS transactions alone. Despite the
consumers paying the full amount to retailers
the scheme is threat, POS machine deployment could not be
and getting the subsidy component reim- to streamline speeded up and the new deadline set up this
bursed by the government, those buying fertiliser time is July 31. The companies are trying to
fertiliser will continue to pay the subsidised pass on the blame to vendors saying that in
rate. The subsidy part will be given to the
distribution spite of placing their orders, POS devices are
fertiliser companies on the basis of actual and improve not delivered on time.
sales made by the retailers on designated
dates (four times a month).
availability The original plan was to ensure that the
states, where the pilots are being held, would
The key objective of the scheme is to move to the new system by October 2017.
streamline fertiliser distribution, stop diver- The pan-India rollout is expected in 2018.
sion of fertilisers to improve availability and The rollout is likely to be a watered-down
ensure that the retailers are not overcharging. Is that version as subsidy payment to fertiliser companies on the
happening at the pilot level? basis of stockist-level distribution is expected to continue.
Real time data available with the fertiliser depart- The POS-based calculation of subsidy component, being
ments mobile fertiliser movement tracking system sug- tried in the pilot districts, is unlikely to be expanded in the
gests that the pilots lack in terms of farmer and retailer near future. Missing the deadline in this case would be a
readiness. Despite months of rigorous focus, the govern- better option, though, as shifting to a POS-based subsidy
ment has not been able to bring in every retailer under the regime before the POS-related teething problems are settled,
DBT umbrella. As on July 17, 2017, only 6,617 retailers may disrupt fertiliser movement and its availability. ~
or 70 per cent of the 9,328 retailers in the 14 pilot districts
have started using POS for transactions. Others may shut @joecmathew

FOCUS GRAPHITI
FOCUS GRAPHITI
BULLS
ON THE
PROWL
The benchmark BSE Sensex surged
past 30,000 in April and has scaled
record highs over the past few weeks.
Here's how the current bull run
compares with those in the past.
Graphic by: Tanmoy Chakraborty
Research by: Niti Kiran
BULL RUNS OVER

THE YEARS
The rally between May 2003 and January
2008 remains the mother of all bull runs
Apr '84-Feb '86 166

Feb '91-Apr '92 280
Jul '93-Sep '94 106
Nov '98-Feb '00 108
May '03- Jan '08 620
Feb '09-Nov '10 136 Absolute returns (%)
Dec '11- Jan '15 80 by the Sensex
Feb '16-still continuing 39 Source: Ace Equity
DEMONETISATION IMPACT
The BSE 500 market cap has crossed aggregate bank deposits.
The gap would been much more without demonetisation
1,20,000
Aggregate deposits
1,00,000
BSE 500 M cap
80,000
60,000
40,000
20,000
0
27/02/1999 07/07/2017
NOT THERE YET
1,12,759 (74%)
Figures In ` billion; Source: Ace Equity & RBI
The market cap-to-GDP ratio has risen over

the past two years but is still way below the
94,985 (76%)
record high of 2008

89,157 (65%)
Market cap in `billion, based on GDP at market prices
BSE 500 Mcap

70,696 (63%)
(BSE 500 Mcap to GDP ratio)

64,487 (89%)
FIIs ON SLOW TRACK

60,486 (61%)
58,724 (67%)
57,630 (94%)
46,394 (101%)
This rally, unlike the past ones, has not seen big
investments by foreign portfolio investors, which have
invested `86,456 crore since February 2016
31,704 (80%)
28,366 (53%)
26,822 (79%)
Foreign Portfolio Investors' net investment in `crore

15,051 (51%)
2,09,489 2,18,887 3,51,583

10,708 (41%)
May '03- Jan '08 Feb '09-Nov '10 Dec '11- Jan '15
4,879 (21%)
86,456
31/03/2003 31/03/2017 Feb '16-July 18, 2017
Source: Ace Equity
AJAY THAKURI
BUSINESS CONFIDENCE INDEX
Taking a Tumble
After a brief uptick, business condence plummets again with corporate
leaders expecting a negative impact of GST on consumption and slowdown in
investments, nds the latest Business Today-C fore Business Condence Survey.
By MANU KAUSHIK
J
ust as corporate India is re- 2017/18. In comparison, confidence nesses have shrugged off demonetisa-
cuperating from the effects level stood at 49.6 during January- tion fears. The current slump indi-
of demonetisation, the roll- March 2017 and 46.4 in October- cates that corporate leaders have
out of the goods and ser- December 2016, the lowest ever. The turned pessimistic due to the uncer-
vices tax (GST) has caused business confidence index (BCI) in the tainty around GST execution and
jitters. Corporate sentiment same quarter last year stood at 51.5. slowdown in investments.
has dipped to its second-lowest level After a sharp fall at the end of last The BCI was initiated by Business
in the April-June period. The confi- year, business confidence jumped in Today in the January-March quarter
dence level, on a scale of 100, slipped the first quarter of the calendar year of 2011. Just like in every quarter,
to 47.3 in the first quarter of 2017, giving an impression that busi- market research agency C fore

A BODY BLOW: Business Sentiment Slides
57.4 55.4
Apr-Jun 2015 53.2 51.5 53.1
Jul-Sep 2015
Oct-Dec 2015 49.6 49.6
Jan-Mar 2016 Apr-Jun 2016 Jul-Sep 2016 46.4 Jan-Mar 2017 47.3
Oct-Dec 2016 Apr-Jun 2017
BCI by BCI by
50.8
46.3
48.5
48.5
45.8
45.8
46.4
48.2
50.7
49.8
43.9
49.4
48.7
47.5
47.8
47.2
51.6
46.1
45.1
47.1
47
Sector Size*
Dip in sentiment Condence has
across sectors dropped across
businesses
Services Light Heavy Big Medium Small Micro

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
OctDec 2016 JanMar 2017 AprJun 2017
THE MACRO VIEW

What macroeconomic indicators reveal
Exports and imports have slid... ...while ination has eased... ...and IIP growth is weak
Exports Imports CPI Ination (%) IIP growth (%)
7 10
39,643
38,092
36,524
38,112
34,216
33,122
32,723
31,927
8
29,125
24,499
24,003
23,564
24,634
24,007
5
22,147
20,003
6
3 4
2
1 0
Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 Jun 16 Jun 17 Jun 16 May 17
Figures in $ million Consumer Price Index: Base Year 2012 (Y-o-Y change )
quizzed 500 CEOS and chief financial issues such as production level, utili- ticipate that capacity utilisation will be
officers across 12 cities for the survey. sation of capacity, investments, sales, subdued in the July-September 2017
The 6.1 per cent GDP growth in exports and hiring activities. For in- quarter as against 23 per cent antici-
the January-March period was a con- stance, 40 per cent expect sales to pating the same in the last survey.
firmation of the slowdown. The dip in drop in the July-September period. In RBI data shows that capacity uti-
sentiment is largely attributed to that. the previous survey, 21 per cent re- lisation stood at 72.7 per cent in the
The sentiment should go up with spondents were expecting the same. October-December 2016 quarter,
GST, says D.K. Joshi, chief economist The survey highlights that re- slightly higher than the correspond-
at ratings agency CRISIL. spondents believe utilisation of capac- ing figure in the same quarter of the
The survey indicates that business ity will remain low going forward. previous year.
leaders are worried about a host of Around 39 per cent respondents an- Analysts say that improvement in

A SENSE OF GLOOM the investment cycle is some distance

away. Theres still excess capacity in
A majority saw a deterioration in the business the system, and hence no urgency to
environment in the April-June quarter make fresh investments. Private in-
vestments will likely remain weak for
a while. I see an uptick in the same
when manufacturing capacity utilisa-
Overall tion crosses 85 per cent, says
Economic Siddhartha Sanyal, Director and Chief
Conditions 17 40 29 12 India Economist, Barclays Bank Plc.
Most saw a
2 With investment growth in the
downswing corporate sector slowing down to re-
cord lows in 2016/17, 86 per cent
respondents do not plan to make fresh
investments over the next six months.
Availability of Demand Conditions The survey shows that 36 per cent
Business Finance Most perceived a slump of respondents expect the production
Two-third saw no change level to worsen in the July-September
period. In the previous survey, only 20
2 15 per cent respondents felt so. The Index
of Industrial Production (IIP), a leading
6 42
economic indicator, has dipped to 1.7
66 30 per cent in May from 8 per cent a year
24 11 ago, owing to poor performance of the
2 2 manufacturing and mining sectors.
The cycle of weak production
level, lower capacity utilisation and
lack of investment appetite has not
Hiring broken, says Joshi.
Conditions 42
The survey captures the mood of
businesses of all sizes big, medium,
Most saw a
small and micro. The sentiment has
deterioration 14 32 deteriorated across businesses, espe-
10 2 cially for medium and small-size enter-
prises. Confidence levels have plum-
meted for heavy engineering, light
industries and services sectors in the
latest survey.
As per the survey, hiring has
Profit Margins 2 shown the maximum deterioration
Half saw a decline among all parameters. For instance,
11
74 per cent respondents as against
12 26 per cent in the previous survey
39 foresee hiring activities to weaken in
the current quarter.
36 From those surveyed, 67 per cent
think that GST will negatively impact
consumption. The common fear
among businesses is that most items
are falling under the 18 per cent tax
bracket which could jack up the prices
of goods and services. However, some
hold a different view. I dont expect
Substantially worse Moderately worse Same/no change any notable negative impact of GST on
Moderately better Substantially better All gures in per cent overall consumption on a sustained

LOSING FAITH basis. There could be some pressure

on prices of certain high-end seg-
Companies don't expect a stable business ments of consumer durables and au-
environment in the July-September quarter tomobiles, says Barclays Sanyal.
Respondents are expecting im-
provement in the cost of external
22 borrowing and cost of raw material.
Overall Some 72 per cent respondents hope
Economic 34 that cost of external finance will re-
Situation 32
main low in the next three months,
More than two-fth much like in the previous survey.
see a deterioration In the last credit policy in June, the
apex bank kept the repo rates un-
9 3 changed at 6.25 per cent for the fourth
consecutive time, taking a cautionary
5 Demand Sales Pick-up stance on inflation. But with inflation,

both WPI and CPI, softeFning, theres a
More than a About a third see no
1 strong case for interest rate cut in the
third expect change
next policy. The bank deposit rates
a slide
have come down sharply that can lead
33 35 to lower lending rates. Interest rates
will remain low with bias towards
24 downward revision, says Joshi.
Fifty per cent respondents believe
that cost of raw materials will go
down in the July-September period
29 7 in the last survey only 34 per cent
34 1 thought so. This is not completely
31 inconsistent. The crude oil prices
have come down again. The com-
modities havent picked up as they
Hiring Pick-up were expected to, says an analyst.
As a supplement to the BCI sur-
A clear majority is vey, we carry out an assessment of
negative other indicators of economic growth.
These include macro-economic con-
ditions such as exports-imports data,
22 52 19 6 1 IIP, and consumer price inflation
(CPI). All these indicators have regis-
tered a decline in recent months. The
Profit Pick-up Stock Prices CPI index, which is closely watched
Most expect a About a third see no change by the RBI, pummelled to 1.54 per
deterioration cent in June from 2.18 per cent in
39 May due to lower food prices. The
34 drop in imports 4.11 per cent in
June was more pronounced than the
30 31 drop in exports 1.84 per cent in
16 22 the same month.
8 12 The fourth quarter earnings re-
3 5 mained subdued for corporate India;
the sentiment over the next few quar-
ters will largely be determined by the
implementation of GST. ~
Substantially worse Moderately worse Same/no change
Moderately better Substantially better All gures in per cent @manukaushik

ECONOMY GST
Teething Troubles
Despite the government's efforts, transitional issues
in GST continue to haunt businesses. By Dipak Mondal
he Goods and Services Tax Network GSPs, however, say that GSTN has
(GSTN), the IT infrastructure provider neither provided them updated APIs
for GST, was supposed to take invoice (Application Programme Interfaces)
T
uploading services live from July 16. nor MPLS (Multiprotocol Label
It has deferred the plan to July 24. Switching), a technique to carry data
GSTN Chairman Navin Kumar says from one network to another. While
they were not very confident about they admit that initial hiccups were
the preparedness of GST Suvidha expected due to the complexity and
Providers, or GSPs, facilitators for enormity of the job, they also say that
uploading invoices/returns on the GSTN does not have sufficient staff for
GSTN website. such a big task. An executive of a GSP

GST Facts
60,000
tax officials
across the
country needed
RAJ VERMA
to be retrained
1.3
crore is the
maximum
registrants
GST Network
can handle
300
said on condition of anonymity sion. And all this when some of the
he even says that GSPs have been biggest milestones for shifting to the
asked to not talk about their problems new system start of invoice/return
that GSTN is not only short-staffed, uploading, tax payments, refunds, etc
people are
it also lacks quality personnel. He are yet to come.
says the GSTN leadership has been
working on the
unable to get bureaucracy to do The Troubles GSTN helpdesk
things. The managing director of GSTN has set up a 300-people help-
another GSP also said, requesting desk that is getting as many as
anonymity, that they have not been 20,000 calls a day. Kumar says they
20,000
provided the latest APIs. will add another 100 people within a
The prevailing view is that the week. So, what are the most common
GST rollout has been more or less issues faced by complainants? Many
smooth so far. But a close interaction people are having a problem in log- is the number of
with users and intermediaries in- ging in. Some say they have forgotten queries that the
volved in the implementation reveals their password, some say they have GSTN helpdesk
that this is not completely true. Even forgotten their security password, is receiving
as the new system is about to com- some say their advocate has taken everyday
plete one month, the problems, say their security password. While for-
users, have just started pouring in getting the password is a small issue,
be it technical glitches, under- the security password is serious busi-
standing of the new laws/procedures, ness. The person has to approach
or taxpayers reluctance/apprehen- the tax department, which verifies

ECONOMY GST
around 70,000 are yet to do so. He

says many businesses had registered
themselves under VAT despite being
below the `20 lakh threshold. Many
of them are reluctant to come into the
Some people GST fold due to stricter laws.
say they have But the biggest problem that trad-
forgotten their ers and small businesses are facing is
password, determining the HSN code and,
some say they hence, the tax rates of commodities.
have forgotten HSN , or Harmonised System of
their security Nomenclature, are globally accepted
password, codes for different goods. These are
some say their crucial for levying the correct tax on
advocate has a product and have to be mentioned
taken their in invoices. While manufacturers
security (paying central taxes such as excise
VIVAN MEHRA
password. and customs duties) were using HSN

Navin Kumar, codes earlier also, for traders (paying
Chairperson, GSTN taxes to states), it is a new concept.
People are confused about the
rates. The rate schedule is very de-
tailed. Traders were out of excise duty
and so are not conversant with it. For
that he or she is the right person. is PAN-based, and PAN is based on the a common person, it can be a little
Resolving the issue could take four- nature of the business. Many times, difficult in the early days, says
five days, he says. one gets registered as a proprietor but Dhanjay Akhade, Joint Comm-
Getting digital signature ap- later opts for the LLP structure with- issioner, Sales Tax Department,
proved is also a cumbersome task. out changing the PAN. We sent what- Maharashtra.
Kumar, too, admits that it is a bit ever data we had to GSTN based on To make things easier, the gov-
tricky. You have to download a which we got user ID and password ernment has made the HSN code
software. Then you have to register for applicants. However, in many simple for most traders. Rajeev
your digital signature certificate on cases, the quoted PAN did not match Yadav, Commissioner, Central Board
the portal. We have given these pro- the companys name, delaying the of Excise and Customs, explains:
cedures in detail. We have also put up migration, says H. Rajesh Prasad, These are eight-digit codes but those
a video on our website showing how Commissioner, VAT, Delhi. He says in with annual turnover of up to `1.5
to do it. You will not be able to do it if Delhi, 3.32 lakh traders and busi- crore need not quote them. Those
you dont follow the detailed instruc- nesses have migrated to GSTN but with annual turnover of `1.5-5 crore
tions, he says.
An executive of a GSP says GSTN
has not done the testing of the proce-
dure and that is why these problems We expect
pect our officers
are cropping up. Digital signature is to be not
ot only well
mandatory for companies and limited conversant
sant in GST law
liability partnerships or LLPs. Others and rules
es but also be
can use the electronic verification ready to o handhold
code generated with the help of a one- industryry
y in registration
time password sent on the verified and filing
ng procedures
mobile number. Vanaja N. Sarna,
Chairperson,
on, Central Board of
Other Blues Excise & Customs
ustoms
Some taxpayers are facing a problem
in migrating to GSTN because of non-
validation of PAN (Permanent
Account Number). The registration

have to quote only two-digit HSN well received by taxpayers. The CBEC
codes while those above `5 crore has issued FAQs and formed sector
have to quote only four-digit codes. groups, some of whom have come
He says despite this, the traders are out with their reports. We expect our
facing a problem in determining officers to be not only well conversant
codes for their products. in GST law and rules but also be ready
There is also confusion and fear to handhold industry in registration
among traders due to change in juris- and filing procedures, Vanaja N.
diction. Under GST, central tax offi- Sarna, Chairperson, Central Board of
cials have jurisdiction over traders
who were paying VAT and state tax
Sore Points Excise & Customs, said at a recent GST
session organised by the CII.
officials can now administer excise Logging in: Issues such as All state sales tax departments
and service tax payers, he says. He forgetting ones security have conducted training and out-
says traders, mostly used to dealing password may take four-ve reach programmes, sometimes on
with state officials, are reluctant to days to get resolved their own and sometimes with the
meet central officers to clarify doubts. CBEC. Akhade says they have con-
Digital signature: Applicants are
The format (or lack of it) of inducted 500 training sessions for
nding it tough to get digital
voices is another area of concern. signatures approved by GSTN trade associations in Maharashtra.
Shyam Kedia, CEO, GST Suvidha, says We have set up facilitation centres
traders are confused as the govern- Non-validation of PAN: and helpdesks. We are receiving
ment has not given a format for in- GST requires PAN-based calls from across the state. We have
voices. It has only mentioned nine registration. In many cases, developed a mail on Google Drive
mandatory fields invoice number, GSTN is rejecting registration/ where stakeholders can put ques-
migration due to change in
date, HSN Code, tax rate, etc. Traders the nature of the businesses
tions. We have formed eight com-
are retailers are protesting that this without change in the PAN. mittees that pick up their subject and
will make the process of raising in- respond accordingly, he says.
voices cumbersome. The Retailers Unavailability of APIs The Delhi VAT Commissioner
Association of India has written to (application programming says they get 40-50 people in the
the finance minister on this. The interfaces) and MPLS with facilitation centre every day. He says
GST Suvidha Providers:
format is not only increasing the size he himself attends two-three events/
GST Suvidha Providers are
of the invoice but also confusing peo- complaining that GSTN has not meetings daily in his office and out-
ple. There is a lot of information that given all APIs and MPLS. API side to keep abreast of taxpayers is-
is not relevant to end customers as is a set of routines, protocols sues. He says the sales tax depart-
they will not be claiming input credit and tools for building software. ment has conducted more than 50
on the GST paid, it said in the letter. MPLS, or Multiprotocol outreach programme with traders
Label Switching, is a data- associations.
carrying technique for high-
Well Begun performance telecom networks.
However, these efforts are run-
Some initial hiccups were always ning into unexpected challenges.
expected during such a huge change- Incomprehensible HSN/SAC After reports of unscrupulous ele-
over. The government, on its part, Code: Determining HSN and ments trying to fleece shopkeepers
has been proactive in ensuring that SAC codes for goods and and customers, the finance ministry
the rollout of GST is smooth and does services, respectively, and, has barred tax officials from paying
not lead to speculation, panic or hence, the tax rates is a major unauthorised visit to any business
hurdle. HSN is Harmonised
profiteering. It has put all its energy System of Nomenclature
premises. Yadav of CBEC says they do
and might in checking rumour mon- and SAC stands for Service not want such issues and, therefore,
gering, clarifying ambiguities/confu- Accounting Codes which are dont want officials to visit traders or
sions, and resolving taxpayers issues. adopted by the CBEC for businesses even to help. So, we
It has set up facilitation centres in all identication of the services conduct these events with traders'
sales tax and excise offices, organised provided. bodies, he says.
interactive sessions with industry and Lets hope all these niggling prob-
Confusion over invoice format:
traders and come out with timely The government has not lems are sorted out soon so that the
FAQs to clear confusion. specied a clear format for country can celebrate the success of
We have undertaken a large invoices. It has just mentioned the GST rollout.~
number of awareness campaigns certain mandatory elds.
which have been widely attended and @dipak_journo

COLUMN Ashok V. Desai
The writer is a senior economist and was chief consultant in the finance ministry from 1991 to 1993
Making Patents Useful

The minister needs to think more about the IP Exchange proposal
H
arsh Vardhan, Minister of Second, patents taken out by Indians in
Science and Technology, has ap- India are a tiny proportion of patents registered
proved a proposal that the all over the world. Most of the patents are taken
National Research and out in the hubs of innovation, particularly the
Development Corporation (NRDC) US, the European Union and Japan. Does the
should develop an Intellectual Property minister envisage that those foreign patents
Exchange. The idea is appealing. The patent of- should also be traded in his exchange? For that
fice receives thousands of applications every he would have to get cooperation of both the
year. It usually takes a few years to get to an ap- patenters and the major foreign patent offices;
plication, but eventually grants a patent or, that would take some doing.
seldom, rejects an application because it does Third, a large proportion of patenters are
not contain a novel idea. Most of the patents it not inventors, but big firms with research and
grants never go beyond its vaults; a good many development departments which take out pat-
expire eventually without having found com- ents in bulk. They do so, not necessarily to use
mercial use. The system looks very wasteful: so them, but to prevent others from patenting the
many bright scientists and technicians sweat in idea: they occupy the field of ideas to prevent
laboratories and workshops and work out in- others from capturing it. They will not be inter-
ventions for wider use, and most of their ideas ested at all in giving publicity to their patents
are never sold. The minister believes he has a so- and selling or leasing them out.
lution that NRDC would create a market where Finally, these big R&D departments are en-
bright inventors can go and sell their inventions gaged not only in pursuing new ideas, but in
to business firms. The core idea is great; but it is working around others patents to use their
not an easy one to implement efficiently. ideas without having to pay for them. The pat-
All major countries have a patent office, ent system was initially created precisely with
and everyone with a patentable invention can the ministers idea in mind, namely to dissemi-
register it in any and all those offices. Patent of- nate inventions and create a market for them.
fices, when they receive an application, look at But multinationals that dominate technology-
whether it has got a patent in another country, intensive industries, especially chemicals and
especially in countries with high invention pharmaceuticals, have a strong interest in pre-
rates and efficient patent offices; if it has, its venting others from using inventions, and use
chances of being registered go up. Still, patent patent carpet bombing to achieve this.
offices have a lot of work to do: for each applica- There is a quick way around these problems:
tion they have to establish novelty and utility. the minister could abolish patents. Then anyone
Most patents So they take months to approve an application; in India could use any patent in the world with-
have limited some patent offices like Indias take years. Most out having to pay anyone; anyone could sell
uses and are patents have limited uses and are of interest to any technology without worrying about its
of interest a small number of firms. Firms that register and ownership. The minister has a precedent: Indira
use patents on a large-scale keep an eye on pat- Gandhi abolished process patents in 1971. It an-
to a small ent applications, and try to snatch those useful noyed the big industrial countries no end, and
number to them before someone else does so. So patents they twisted Indias arm until it gave in and the
of rms get bought and sold, licensed and rented all the government reintroduced process patents a dec-
time; it is doubtful how much a patent ex- ade ago. Harsh Vardhan should think seriously
change will add to this activity. before following in Mrs Gandhis footsteps. ~

CHANDRADEEP KUMAR
90,219
`
CRORE Tax earnings
during 2016/17
ECONOMY UP
An UPhill
VIKRAM SHARMA
`
1,11,502
CRORE Estimated tax
earnings for 2017/18
Task
Yogi Adityanath
aims to overhaul
UP nances.
After the farm
loan waiver, will
he succeed?
By Anilesh S. Mahajan
ECONOMY UP
Where the Money

Comes From...
90,219
Tax earnings
1,11,502
Non-tax 27,575
revenues 18,437
Share of 1,02,650
Central taxes 1,21,407
48,964
ttar Pradesh Budget is pulling in two opposite directions Grant in-aid
from Centre 68,052
populism and austerity. On the one hand, there is the
farm loan waiver, announced within days of the BJP gov- 64,024
Borrowings
ernment taking charge in March this year but whose 57,509
precise cost to the exchequer `36,359 crore has been
Other 315
made clear only with the announcement of the govern- receipts 284
ments first Budget on July 11. But on the other hand, 2016/17 (Akhilesh
spending on a number of infrastructure and irrigation Yadavs Last Budget)
projects, some education schemes as well as schemes like * All gures in `crore 2017/18 (Yogi
Source: Budget papers 2017/18 Adityanath's rst
the beautification of the Gomti riverside in Lucknow a pet Budget
project of the previous government has been slashed.
There is no allocation even for continuing the much-
publicised free laptop distribution scheme of the previous
government, though the BJP had promised, in its mani-
...And Where
festo, to continue with it. It Goes
Stopping the laptop scheme, along with other freebie
schemes such as the stainless steel thalis and tumblers
46,442
the previous government gave schoolchildren on the last Education
62,351
dhanteras day will save the state `15,000 crore. The first
thing governments do in a fund crunch is to cut down on 4,014
Agriculture
social sector spending, says Pinaki Chakraborty, 36,653
Economic Advisor to the 14th Finance Commission. This
21,595
will obviously impact the human development index, Public Works
33,247
which in any case is not high in UP. Yet religious tourism
has been given a ` 1,240 crore boost, with further develop- 20,238
Social Welfare
ment of Ramayana, Krishna and Buddhist circuits, provid- 22,665
ing, in particular, better infrastructure in the pilgrimage 34,602
towns of Ayodhya, Mathura and Sarnath, respectively. Energy
17,728
Already, 26 per cent of expenditure goes into paying
salaries and another 9 per cent into pensions. This outlay Medical & 15,834
Public Health 17,181 2016/17 (Akhilesh
will be even higher once the Seventh Pay Commissions Yadavs Last
recommendations are implemented; these will cost the 13,865 Budget)
exchequer an additional `24,000 crore. The Budget makes Police
16,117 2017/18 (Yogi
no mention of this, nor does it reveal any provision for in- Adityanath's First
Rural 11,536 Budget
terest payments and debt repayments inherent in the state
Development 15,821
having joined the Ujjwal Discom Assurance Yojana * All gures in ` cr
(UDAY), which requires it to underwrite its power utilities 8,006 Source: UP Budget
Urban 2017/18
debts. With these cuts and omissions, however, UP Finance Development 13,189
Minister Rajesh Agarwal has been able to keep the fiscal
12,117
deficit down to 2.97 per cent below the limit set by the Irrigation
10,958
Fiscal Responsibility and Budget Management (FRBM) Act.
Whether he will be able to stick to it is another matter. 1,52,006
Others
Similarly, the Budget is highly optimistic about tax 1,38,750
* All gures in `crore
Source: Budget papers 2017/18

collection, estimating an inflow of `111,502 tention. Bundelkhand has been battling
crore, 24 per cent higher than in the previ- intermittent drought for the last 15 years.
ous year. In its last year in office, the previ- A key project in this region hanging fire
ous government, too, had budgeted for since 2005, due to various environmental
`101,257 crore in taxes, but could realise concerns, was the interlinking of the Ken
only `90,219 crore. The new Goods and and Betwa rivers, whose irrigation benefits
Services Tax (GST) regime will help since UP, are expected to be substantial. But with the
with hardly any industry, has been classified state and the Centre working in conso-
They need more
as a consumption state GST is expected money. There are nance and the prime minister taking per-
to add `8,000-9,000 crore to its commercial two ways, taking sonal interest, the project is under way,
tax receipts kitty. Overall, the Budget pro- more grants from with the last three months having seen the
jects revenues of `3.84 lakh crore in the the Centre and National Board of Wildlife, the Expert
current year, a rise of 10.4 per cent over the raising debt. Appraisal Committee and the Forest
previous financial year. They will have Advisory Committee both under the
to do both Ministry of Environment, Forests and
Centre as Big Brother D.K. Srivastava,
Climate Change give their consent to it,
UP is the largest state by population, sending albeit with some conditions. Work is ex-
Chief Policy Advisor, EY
80 MPs to the Lok Sabha, but also one of the pected to be completed in six years.
most backward. Its per capita income is a NITI Aayog has also set deadlines for
measly `48,520 per annum, as against the two other largely Centrally-funded river
national average of `94,178. It carries a projects in Bundelkhand: the Bansagar
crushing debt burden `3,75,049.45 crore Dam over the Sone River in adjoining
in March 2017 from `2,25,123.59 crore Madhya Pradesh, which has to be com-
in 2012/13, which in all likelihood will rise pleted by March 2018, and the Arjun
if development programmes are to continue. Sahayak project a network of canals by
There are only two ways a state can raise December 2019. Two more Centre-backed
money get more grants from the Centre or river projects that will benefit both central
take on debt, says D.K. Srivastava, Chief UP and Poorvanchal the Madhya Ganga
Policy Adviser, EY. UP will have to do There is a Canal Phase II and the Sarayu Nahar pro-
both. UPs economic health will be crucial consensus among ject on both of which work had virtually
to the BJPs performance in the 2019 elec- economists that stalled, have been given fresh funds and
tions. Prime Minister Narendra Modi has due to funds have to be completed by December 2019.
promised electricity for all by 2019, and crunch the rst Meanwhile, the state government has been
making good on the promise in UP will be thing governments directed to attend to the smaller irrigation
vital, along with improving roads and trans- tend to cut is social works in these areas, focusing on complet-
portation, bolstering agriculture and over- sector spending ing existing projects, rather than starting
hauling industrial policy. Pinaki Chakraborty new ones. Canal irrigation contributes less
No doubt, Central support given that Economic Advisor, than 20 per cent to total irrigation in UP,
the same party is in power at the State and 14th Finance Commission because so many projects have failed, says
Centre for first time in 15 years is guaran- Subhash Sharma, Director, Centre for
teed. Central grants for UP, for instance, Economic Policy Research.
have been increased by 39 per cent to Central handholding is also clearly be-
`68,052 crore for 2017/18, while the increase for most ing seen in UPs road sector. The two expressways linking
other states is around 5 per cent. NITI Aayog has prepared Bundelkhand and Poorvanchal to Delhi are both being
an Action Plan for Uttar Pradesh, while leading public built by NHAI not the state government under its new
sector units such as Powergrid Corporation, NTPC, NHAI, hybrid annuity model, where NHAI puts in 40 per cent
REC, PFC, and FCI are all chipping in and supporting pro- investment and a private road developer the rest. The
jects in the state. Some of the biggest projects in the state previous Samajwadi Party and Bahujan Samaj Party
are Centre-funded: the Clean Ganga initiative; the planned governments had made the Lucknow-Agra Expressway
airport at Jewar in Greater Noida, along with four smaller and the Yamuna Expressway, respectively, the showpiece
ones at Agra, Allahabad, Bareilly and Kanpur; upgrade of achievement of their governments. NHAI officials further
the 13 urban centres included in the list of smart cities. revealed that they are in the process of taking over the
Two of the most backward areas of this backward state maintenance of 72 state highways, along with three more
are its southern and eastern regions Bundelkhand and expressways. NHAI is also building ring roads in 10 major
Poorvanchal and both are receiving special Central at- UP cities, including Lucknow, Kanpur, Gorakhpur, Bareilly,

ECONOMY UP
Where Other States Stand
BIHAR MADHYA RAJASTHAN UTTAR ALL INDIA

PRADESH PRADESH
Poverty
Rate (%) 33.74 31.65 14.71 29.43 21.92
Data for 2011/12, Based on MRP Consumption-Tendulkar Methodology
Literacy 61.80 69.32 66.11 67.68 72.99

Rate (%)
Data for 2011
Per capita 34,168 62,334 76,881* 48,520 94,130

income (`)
Data for 2015/16 ; Net State Domestic Price (current prices); *Data for 2014/15; Source: RBI
Meerut, and Moradabad. This has enabled UP to reduce is 10,000 MW more than its current generation capacity.
allocation for roads; it has earmarked only `3,972 crore The modest allocation for power in the Budget, as well as
for upkeep of state highways and another `71 crore for cancellations of bids won last year to set up an additional
widening roads connecting district headquarters. 3,800 MW in the state, suggests that Adityanath would
Central spending in UP is understandable and critical prefer to draw power from the Central pool and ensure
to the countrys economy in the long run as long as the smoother coal supplies to existing thermal plants, ensuring
funds are utilised well, says Srivastava of EY. But B.K. they run at full capacity, rather than set up new ones. UPs
Chaturvedi, former Union cabinet secretary, fears it could generation capacity is nothing to worry about since there
lead to financial indiscipline. Other states will start queu- are many thermal plants in the country running below
ing up with similar requests, he says. capacity from which it can buy power, says Ratul Puri,
Chairman, Hindustan Power Projects. What it needs to
Pressures of Power do is to make electricity affordable and more easily avail-
In the power sector, UP is close to floating a joint venture able by reducing transmission losses and power thefts.
with Powergrid Corporation, with equal participation by The power legacy Adityanath has inherited is dismal.
both, to maintain and augment transmis- The UP Power Corporation Ltd (UPPCL),
7,932 CR
sion lines. Talks are in their final stages, the holding company of the states five
says I.S. Jha, CMD, Powergrid. We have
formed similar joint ventures with Bihar
` discoms, has estimated that there are
8.5 million illegal connections in the
and Odishas state transmission compa- state and another 6.5 unmetered ones
nies. Such tie-ups enable the state to tap in rural areas. UPPCL itself is burdened
into cheaper debt from agencies such as
operational losses by a debt of `53,200 crore which the
the World Bank or the Asian of UP discoms state has now underwritten thanks to
Development Bank. Again, this is in in 2016/17 the UDAY scheme and four of its five
contrast to the previous government, utilities barring Kanpurs have
which brought private players into transmission through been ranked the worst performers in the country. Were
a bidding process, but ran into problems later over financial setting up 75 police stations dedicated to checking power
closures and slow implementation. The SP government had thefts, says Shrikant Sharma, UPs Power Minister.
earmarked `23,000 crore for changing old transmission Even after restructuring following the introduction of
lines, while the latest UP Budget does not allocate even one the UDAY scheme, the UP discoms operational losses have
paisa. UPs power sector is also likely to obtain substantial continued to increase, rising from `7,791 crore in
support from two schemes the Centre has launched the 2015/16 to `7,932 crore in 2016/17. Thanks to losses in
Integrated Power Development Scheme for better trans- transit, the gap between the cost of generating and trans-
mission in urban areas and its counterpart for rural areas, mitting power and the tariff at which it is sold in UP was
the Deen Dayal Upadhyay Gram Jyoti Yojana. once as high as `2.80 per unit. It has since been brought
UPs power demand has been estimated at 27,832 MW down to around `1, which is still unacceptable. The task
in 2018/19 by the 19th Electricity Survey of India, which of achieving electricity for all by 2019 seems a tall order.

Agriculture Conundrum a months window to settle farmers dues, or else face penal
The farm loan waiver which the state government prefers action. Though the crushing season ended in April, dues
to call redemption of loans will help 21.5 million small of around `2,500 crore from 32 mills still remain outstand-
and marginal farmers but will do nothing to solve the ing. The mills have their own problems of viability which
problems of agriculture in the state. It will at best provide restricts their options. Were working on a sustainable
the farmer temporary relief, giving the government time policy to make the payment schedule more regular, says
to work out a proper plan, says Tajamul Haque, former a senior UP government official. The Budget allocates `273
Chairman, Commission for Agricultural Costs and Prices. crore for the promotion of the sugar industry.
Among long-term reforms, the government wants to Prime Minister Modi has stated that he wants to see
orient more farmers towards cash crops rather than the farmers incomes double. To achieve this, the UP govern-
subsistence ones for which the state provides a minimum ment will have to take steps to modernise the states agri-
support price. We want to make cash crops more viable, culture. It has announced its intention to set up 20 Krishi
says Surya Pratap Shahi, UP Agriculture Minister. Vigyan Kendras, but given that their budget allocation is
Prominent among them is oilseeds. UP intends to soon join just `10 crore each, they are unlikely to achieve much.
the National Mission on Oil Seeds and Oil Palm (NMOOP). Experts maintain that public investment in agriculture is
In April this year, NMOOP guidelines were liberalised to needed to increase crop yield and expand diversification.
allow 100 per cent corporate investment, including FDI, in The various constraints on UPs Budget such as the large
oilseed farms. This will help since we have industrial units outlay on interest payments amounting to 18 per cent of
in Kanpur with the capacity to process large quantities of total expenditure in the latest budget, or the outgo on
oilseeds, says a senior UP official. employees salaries have ensured that the share of ex-
A major problem for farmers in Western UP, where penditure on agriculture and rural development is signifi-
sugarcane is the main crop, is late payment by mills. In its cantly lower than the national average. Nor is the situation
manifesto, BJP had promised to ensure payments within likely to change in coming years. ~
14 days of delivery of the sugarcane at the factory gates,
and soon after taking charge, Adityanath gave mill owners @anileshmahajan
COVER STORY BANKRUPTCY
R AT E D EF A U LT ER S AS
E N S A R O U N D 1 2 B IG CORPO
THE NOOSE TIGHT S FO R Q U IC K R E D R ESSAL
B A N K RU P T C Y P R O C EEDING
BANKERS INVOKE
B T O F 1 2 C O MPANIES
DE
OUTSTANDING
`2 , 4 8 , 4 3 6 C R O R E
T O TA L D E B T
A L OK
B H U SH A N IN D U ST R IE S
E SS A R
B H U SH A N ST E E L P OW E R & ST E E L
L A N CO ST E E L
IN F R A T E CH
03 * 22,075
4 3 , 4 3 9 4 0 , 0 0 0 3 7 , 4
4 3 , 5 0 2 ABG
E R A IN F R A SH IP Y A R D
AMTEK M ON N E T IS P A T E N G IN E E R IN G
AUTO & ENERGY *
10,333 10,065 8,7 31
14,074
J Y OT I
JAYPEE E L E CT R OS T E E L ST R U CT U R E S
ST E E L S
IN F R A T E CH
05 * 3,387
7,922 7,5
AJAY THAKURI
All figures in ` Crore *Standalone figures, rest all are consolidated; Figures of ABG Shipyard, Alok Industries,
Amtek Auto, Bhushan Steel, Bhushan Power & Steel, Era Infra Engineering, are as on March 2016,
rest are as on March 2017; In some cases total debt is calculated as long-term plus
short-term borrowings. Source: Ace Equity, companies' financial statements
I By Anand Adhikari and Nevin John
INDIA'S BIGGEST loan defaulters are under the ham-

mer of the seven month old Insolvency and
Bankruptcy Code (IBC) for quick resolution or eventual
liquidation. The next 180 days promise to be high
drama as promoters and bankers slug it out in the
open. State Bank of India and ICICI Bank have already
suspended immediately. The insolvency professional
also constitutes a committee of creditors, which discuss
and decides the revival proposal to be submitted for ap-
proval by NCLT.
A Bumpy Road Ahead

kick started bankruptcy proceedings against Monnet Bankruptcy proceedings are going to be challenged at
Ispat, Alok Industries and Jyoti Structures at the every stage.There will be challenges as the new code
National Company Law Tribunal (NCLT), the adjudicat- has to mature. Many precedents have to be estab-
ing authority for bankruptcy. lished, observes Abizer Diwanji, Financial Services
Welcome to the first of its kind bankruptcy legisla- Head at EY India. The Gujarat High Court recently
tion designed to fast track resolution of bad loans in a turned down Essar Steels plea against the RBI directed
time bound manner--something unheard of in India. In bankruptcy. By doing so, the High Court has practically
the past, banks used to happily evergreen loans and liti- shut the doors on those who might be considering chal-
gious promoters had their way whenever banks turned lenging RBIS powers.
hostile. But, not any more, as resolving bad loans is the The scope for challenges within the bankruptcy
top priority of the present government and the Reserve code or NCLT framework remains. The Ruias are ready-
Bank of India or RBI. ing to raise issues at the NCLT. The final orders of NCLT
Out of the `70 lakh crore out- can be challenged at the National Company Law
`7.28
standing bank lending in the sys- Appellate Tribunal (NCLAT). Also, companies can ap-
tem, the backlog of NPAs hit `7.28 proach the Supreme Court to question the appellate au-
lakh crore by end-March this year. LAKH CRORE thoritys order.
The 12 cases account for 25 per Promoters fear operations may deteriorate as insol-
cent of the bad loans in the system. THE vency professionals will not have the bandwidth to
There are five steelmakers and an BACKLOG manage operations. There are fears on the independ-
equal number of construction and OF NPAs ence of bank recommended insolvency professionals
infrastructure companies, two sec- too. "They would be acting as a tool in the hands of
tors hardest hit by coal block can-
IN THE bankers," charged a promoter. NCLT appoints insol-
cellations, land delays and environ- SYSTEM vency professionals though the recommendation
ment clearances. The other two comes from the lending banks.
Amtek Auto and textile major Alok There are other grey areas. Under the bankruptcy
Industries are odd men out. Wherever promoters committee, the committee of creditors has to approve
cooperate, the resolution should be smooth, says revival plans with a 75 per cent majority. That could
Rajkiran Rai G, Managing Director & CEO of Union lead to a fight among creditors for a seat at the credi-
Bank of India, while giving a subtle warning, if pro- tors committee. There are over 100 lending banks in
moters are not cooperating, there is a well laid out the 12 accounts, with some cases having 20-22 lend-
mechanism under the bankruptcy code. Bankers are ing banks. The bankruptcy code also allows non bank
all set to take rogue promoters to the cleaners. Apart financial creditors and even lenders where promoters
from leading lawyers, they have lined up the best have given their personal guarantees to be part of the
brains in the consultancy world to manage stressed creditors committee. It is no longer a bankers club,
companies as insolvency professionals. The Ruias, grins a consultant.
Bhushans or the Gaurs have to sit outside bankruptcy There is every possibility that outside bidders could
proceedings as insolvency professional take over the emerge with better restructuring plans than the bank.
management of the company with the board getting Sajjan Jindal is interested in the steel assets like

"IF PROMOTERS ARE NOT "THE HAIRCUTS TAKEN
COOPERATING, THERE IS A WELL BY BANKS WILL DIRECTLY
LAID OUT MECHANISM UNDER TRANSLATE INTO LOSSES"
THE BANKRUPTCY CODE" Amit Kumar
Rajkiran Rai G Partner & Director, BCG
MD& CEO, Union Bank of India "THE CODE PROVIDES PROMOTERS
AN OPPORTUNITY TO PRESENT
A RESOLUTION PLAN FOR
CONSIDERATION BY CREDITORS"
Cyril Shroff
Managing partner, Cyril Amarchand Mangaldas
PHOTOGRAPHS BY RACHIT GOSWAMI
Bhushan, Essar and Monnet Ispat. The biggest confi- Maximum Burden on Banks
dence booster for new buyers or private equity is the lia- Public sector banks are going to shoulder the
bilities getting crystallized in a court driven process. In a maximum burden. Currently, banks have made 40-50
situation outside NCLT, the acquirer is never sure of lia- per cent provisioning in these 12 accounts. Bankers
bilities arising in future. Another twist in the bank- admit that haircuts on loans are imminent. The haircuts
ruptcy tale could be the unpredictable nature of Indian could be more than `20,000-25,000 crore depending
promoters. The code also provides promoters an oppor- upon the equity intake and additional funds from pro-
tunity to present a resolution plan for consideration by moters. The haircut taken by banks will directly trans-
creditors, says Cyril Shroff, Managing Partner at Cyril late into losses due to increase in credit cost, says Amit
Amarchand Mangaldas. Kumar, Partner & Director, BCG.
There could also be challenges on the role and con- These 12 accounts are just the tip of the iceberg.
duct of insolvency professionals. The breaches and bad There is close to `14 lakh crore locked in stressed
faith actions of insolvency professionals can lead to con- accounts (not all NPAS). Bankers are preparing for the
sequences which will act as a deterrent, says Shroff. worst case scenario liquidation which not only
Under the code, insolvency professionals enjoy extraor- means loss of capital, assets and shareholders value,
dinary powers. They have to be truly independent like but also employment. Is the Indian economy
independent directors on the board. prepared? That is a bigger issue. Over to NCLT. ~

ZEROING IN ON
THE DOZEN
A CLOSER LOOK AT WHAT'S IN STORE FOR THE 12 LARGEST

CORPORATE DEFAULTERS
By Anand Adhikari and Nevin John

L.Madhusudhan Rao,
Executive Chairman
LANCO INFRATECH
H
DEBT: yderabad-based Lanco Infratech (LIL) seems to have bitten off more than it could
`43,502 crore chew. Run by L. Madhusudhan Rao whose elder brother Lagadapati Rajagopal
was once a Congress Lok Sabha MP, LIL is the holding company of the power and
PROMOTER STAKE: infrastructure businesses of the group. It grew tremendously in the early 1990s
58.52%
driven by large construction contracts. It aggressively diversified into power, infrastruc-
ACCUMULATED LOSSES: ture and property development. By 2013, Lanco was among the largest private power
` 6,924 crore producers with an installed capacity of over 4,500 MW.
Post-2011, macroeconomic sectoral issues which led to lower than expected
TOTAL INCOME:
cash generation in operating projects had a detrimental effect on the groups perfor-
` 7,510 crore
mance. Currently, bankers say the power assets are not generating enough reve-
LEAD BANK: nues because power purchase agreements (PPAS) are not in place. State Electricity
IDBI Bank Boards (SEBs) too are not signing PPAs due to availability of cheap power at the ex-
changes. The poor financial health of discoms leading to delayed payments against
INSOLVENCY PROFESSIONAL:
NCLT yet to admit power supplied put substantial pressure on cash flows and working capital require-
the company for ments of the projects, says Rao.
bankruptcy Lanco is now facing bankruptcy proceedings at the NCLTs Hyderabad bench.
Chairman Madhusudhan Rao says Lanco is supporting the bankruptcy initiative of
BANKERS SUGGESTION:
lenders in the hope that they will be able to approve a resolution plan. Lanco is looking
Sale of operating assets,
bring in strategic for some last mile funding. That should come, says a banker. The company requires
investors funds for completing the second phase (2X 660MW) in Chhattisgarh.
Bankers are also exploring the possibility of selling some assets but the RBI directed
CURRENT UPDATE: bankruptcy is only for the holding company, which has shares in operating companies
IDBI Bank files power (thermal and hydro), infrastructure (roads), natural resources (coal), solar (EPC
bankruptcy application
and generation) and property development. Ideally, the bankruptcy proceedings
Consolidated figures for 2016/17; should start from operating companies and end with holding companies, says a
Accumulated losses between
2013/14 and 2016/17
banker. There are plans to bring in a strategic investor in the companys power subsidi-
ary and JSW and Tata Power have shown interests, says another banker.
Lenders led by IDBI Bank can invoke bankruptcy proceedings in the operating com-
panies where there is proof of default. This is something bankers are expected to explore
as the proceedings for Lanco Infratech starts. This (invoking bankruptcy) is something
even operational creditors can do, says a lawyer. IDFC holds 17.04 per cent in the hold-
Source: Company financial
ing company and ICICI Bank 1.58 per cent. The promoters stake has come down from
statements, Ace Equity, BSE 70 per cent to 58 per cent.

Neeraj Singal, Vice

Chairman and MD
BHUSHAN STEEL
I
n May this year, Delhi based Bhushan Steel,
which has plants in Maharashtra, Odisha and
Uttar Pradesh, had bagged an iron-ore mine in
Odisha in an aggressive auction. It beat sectoral
giants Tata Steel and JSW. The bullish posturing re-
vived hopes of investors but was not enough to win
bankers, who dragged them to the Delhi bench of
NCLT this month.
The Bhushan group founded by first generation
entrepreneur Brij Bhushan Singal started as a manu-
facturer of door hinges in the 1970s. Over four dec-
ades under Singal, who is now non-executive chair-
man, Bhushan Steel created a steel capacity of 5.6
million tonnes per annum. Younger son Neeraj man-
ages the company as its vice-chairman and manag-
ing director. Bhushan Steels bad DEBT:
OVER THE times started in 2012 when coal `43,439 crore Steels lawyer had said at the
LAST TWO mines were cancelled by the NCLT that the companys re-
Supreme Court. Slump in steel PROMOTER STAKE: structuring plan under S4A
YEARS, 57.82%
BANKERS prices followed. Dumping of steel was at an advanced stage of
AND THE from China and cancellation of ACCUMULATED LOSSES: approval. He argued for a re-
COMPANY mines were other reasons, says ` 7,653 crore prieve from bankruptcy pro-
STUDIED Nitin Johari, Director (Finance) at ceedings. Some bankers are
VARIOUS RES- Bhushan Steel. Over the years, debt TOTAL INCOME:
not very keen on S4A, instead
TRUCTURING rose steadily to `40,000 crore while `15,099 crore*
they are insisting on deep re-
PROPOSALS it added capacity. The company LEAD BANK: structuring.
struggled to repay loans. The brib- SBI The S4A kind of a re-
ery allegation against the promoters structuring would dilute pro-
came up in August 2014 and the NCLT yet to admit the moters holding, which is
Central Bureau of Investigation arrested vice-chair- company for bankruptcy around 58 per cent. Given
man Neeraj Singhal for allegedly bribing Syndicate market capitalization of just
Bank chairman S K Jain, among others. BANKERS SUGGESTION: `1,400 crore against a debt of
Over the last two years bankers and the company S4A or deep restructuring `40,000 crore, the equity ex-
studied various restructuring proposals from the CURRENT UPDATE: pansion under S4A does not
5/25 Scheme for refinancing the loan to the Scheme NCLT has reserved its make sense, says a banker.
of Sustainabale Structuring of Stressed Assets (S4A). order on bankruptcy There is a need for deep re-
The S4A scheme allows converting unsustainable proceedings structuring. But the joker in
debt into equity or equity related instruments while Consolidated figures; Debt as the pack could be Sajjan
treating sustainable debt as standard asset in the on Mar 2016; Promoter Stake as Jindal owned JSW which is
on June 2017; *Total income for
books of lending banks. There is no relaxation in 2016/17; Accumulated losses
keen to bid, provided the
either interest rates or repayment of loan. Bhushan between 2013/14 and 2016/17 price is right.

ESSAR STEEL
T
he Ruias failed to read the writing on
the wall while aggressively pursuing
steel expansion and acquisitions dur-
ing the boom time about 10 years
back. The $18-billion Essar Groups steel
unit is now bracing for bankruptcy pro-
ceedings.
Essar Steel was the first Indian com-
VIVAN MEHRA
pany to enter corporate debt restructuring

way back in 1999. The company not only
Prashant Ruia,
wriggled out of it, but also thrived with the Group CEO
boom in steel prices. It also made big acqui-
sitions Canadian steel maker Algoma
Steel and the iron ore mines in Minnesota,
to name a few. Striding on, the company DEBT: the company board to be suspended, Essar
also made plans to ramp up its production
at the Hazira plant from 4.6 mtpa to 10
`40,000 crore stated that ...the impact of the decision
would be severe and may result in the com-
mtpa. But the heydays ended as steel prices PROMOTER STAKE: pany going into serious problem because of
crashed and the government cut Essar 97.54% the change of management.
Steels supply of natural gas soon after the ACCUMULATED LOSSES: The Ruias will now be filing their objec-
production from Reliance Industries `6,125 crore tions against bankruptcy at the National
Krishna-Godavari basin started shrinking. Company Law Tribunal. The bankers are,
These events delayed the companys expan- TOTAL INCOME: in fact, ready with a restructuring plan.
sion and escalated costs. Between `15,558 crore Based on a techno-feasibility study, they
2007/08, and 2013/14, the steelmakers LEAD BANK: have arrived at an unsustainable debt por-
debt soared five-fold while sales grew only State Bank of India tion of around 30 per cent. The broad
20 per cent; capacity utilisation fell to 20- agreement among lenders is to convert the
30 per cent after the capacity expanded to unsustainable debt into equity. On the sus-
NCLT yet to admit the
10 mtpa in January 2012. company for bankruptcy tainable portion, the tenor and interest of
There is no doubt that Essar Steel is re- the loan would get adjusted to provide relief
covering with improved capacity utilisation BANKERS SUGGESTION: to the company. There will be a fresh issu-
and operating performance. Bankers were Deep restructuring ance of equity to lenders, bringing down
considering a deep restructuring when the CURRENT UPDATE:
the stake of Ruias who currently hold most
RBIS bankruptcy diktat came in. The Ruias Company to file its of the equity. Technically, there will not be
approached the Gujarat High Court chal- objections, if any, to a haircut in a deep restructuring, but time-
lenging the very order of the RBI. It said, NCLT, may go to appellate value wise there is (a haircut), admits a
referring the company to the bankruptcy Consolidated figures; Debt as on
banker. The bankers, led by SBI, would
code at this stage may result in deterioration March 2017; Promoter stake as gain from any upside in the equity value
of the companys operations and, in fact, on Sept 2015; Total income for over a longer period of time. But this is also
2015/16; Accumulated losses
may delay the resolution discussion with the between 2013/14 and 2015/16 subject to other non-bank creditors agree-
banks. Since the bankruptcy code requires ing with the proposal by the banks.

Sanjay Singal, CMD
BHUSHAN POWER & STEEL
DEBT:
`37,403 crore
T
here was a bitter and prolonged bench of the National Company Law
family dispute over the assets of PROMOTER STAKE: Tribunal (NCLT). An email sent to Sanjay
Bhushan Steel's patriarch Brij 94.46% Singal went unanswered.
Bhushan Singal. After a decade ACCUMULATED LOSSES: The bankers are keen to bring the
long tussle the group eventually divided `3,160 crore company under the Scheme for
in 2011. The assets were split between Sustainable Structuring of Stressed
Singals two sons Sanjay and Neeraj. TOTAL INCOME: Assets (S4A). The promoters hold more
`7,755 crore
The elder son, Sanjay, runs Bhushan than 90 per cent stake in the company
Power and Steel. The company has a LEAD BANK: and an equity dilution can easily hap-
steel capacity of 2.3 mprta and a 503 PNB pen while keeping Singal at the helm of
MW captive power plant. affairs. The other option could be deep
In two years until March 2016, the restructuring wherein the bankers ex-
BDO LLP Partner
company accumulated a loss of `3,160 tend the repayment period and also
crore following the high cost of raw ma- BANKERS SUGGESTION: provide interest rate concessions.
terials for making steel and power pro- S4A or deep A section of the bankers are a bit
duction. Revenues fell to `7,738 crore restructuring sceptical about the possibility of turn-
from `10,425 crore owing to the lower CURRENT UPDATE: ing around the company because of
price of steel. The company is now fac- No objections by company certain investigations by government
ing bankruptcy proceedings at the Delhi to bankruptcy proceedings agencies.
Standalone figures; Debt as on Mar 2016; total income for 2015/16; Promoter
stake as on Sep 2016; Accumulated losses between 2013/14 and 2015/16
ALOK INDUSTRIES DEBT:

`22,075 crore
PROMOTER STAKE:
29.03%
T
extile major Alok Industries, which exports to 90 countries, diligently followed
the strategy of creating globally competitive capabilities across the value chain ACCUMULATED LOSSES:
` 6,301 crore
from yarn to specialised products. While the strategy was right, financed diversi-
fication outside its core textiles manufacturing operations in India such as the TOTAL INCOME:
acquisition of Mileta in Czech Republic, Store Twenty One in the UK, and real estate in- ` 8,988 crore
vestments under Alok Infrastructure marred the fortunes of the company.
LEAD BANK:
The Ahmedabad bench of NCLT has already admitted SBIs insolvency application
State Bank of India
against the company. Two years ago, the bankers failed to convert a part of the loan
into equity under the SDR route. The idea was to change management control from the INSOLVENCY PROFESSIONAL:
Jiwrajka family. Currently, the companys debt is in excess of total equity in the system Grant Thornton
debt of `22,075 crore against equity of `1,357 crore. Promoters equity is too low at
BANKERS SUGGESTION:
28 per cent. Out of the total debt, only `6,000-8,000 forms sustainable debt. The com- Demerger of real estate
pany, say bankers, does not fit into S4A as that requires 50 per cent debt to be sustaina- business, possibilty of
ble. They see no point in converting debt into equity as the company has lost significant liquidation
market share. The companys revenues have crashed from over `20,000 crore two
CURRENT UPDATE:
years ago to `8,000 crore.
NCLT admitted it for
The debt overhang will never create value for equity shareholders, says a bankruptcy proceedings
banker. The only solution is to write off the debt. Demerging its businesses, especially
real estate, and bringing in a strategic investor is another viable option under the Consolidated figures; Debt as
on Mar 2016; Total income for
Bankruptcy Act. An email sent to the company went unanswered. 2016/17; Promoter stake as on
Mar 2017; Accumulated losses
between 2013/14 and 2016/17
VIVAN MEHRA
Arvind Dham,
Chairman
AMTEK AUTO
DEBT:
I
n 2015, Amtek Auto faced a cash flow mismatch for the first time in its history due
`14,074 crore to the global slowdown in the automotive industry. Problems worsened in the last
fiscal when losses ballooned to `2,533 crore on revenues of just `1,999 crore.
PROMOTER STAKE:
52.4%
Founder Arvind Dham, had a mercurial rise starting in the late 1980s as a sup-
plier to Maruti Suzuki. Dham emerged as a supplier to global giants like Daimler-Chrysler
ACCUMULATED LOSSES: and Renault Nissan. Over the last three decades, Dham expanded domestic capacity and
` 2,966 crore made global acquisitions. Amtek has 19 plants across the US, UK, Mexico, Brazil,
TOTAL INCOME:
Germany, Italy and Hungary. It had almost doubled capacity in the crankshaft, flywheel
`1,999 crore and gear assembly anticipating strong demand from local car manufacturers. But utilisa-
tion languished below half. A slew of overseas acquisitions and domestic capacity addi-
LEAD BANK: tion leveraged the balance sheet and increased interest outgo.
Corporation Bank The Chandigarh bench of NCLT is hearing the application of lead bank Corporation
INSOLVENCY PROFESSIONAL: Bank. In Amtek Auto, banks are in agreement to bring new investors and sell interna-
EY India Partner tional assets and non- core assets. The company has made efforts to sell German Amtek
Tekfor, which it bought five years ago for some `6,000 crore. Overseas subsidiaries like
BANKERS SUGGESTION: Amtek Integration are making profits. They also own some bad assets where no value
Strategic investor
is expected, says a banker. Banks say lenders have to bring operating companies into
or complete sale of
business in subsidiaries the bankruptcy code. Currently, Amtek has a dozen subsidiaries which in turn have
another 42 subsidiaries. In addition, there are half a dozen joint ventures and associ-
CURRENT UPDATE: ates. Bankers believe that strategic investors could be the way out to resolve the assets.
NCLT yet to decide If not handled properly, the company may go into liquidation, says a consultant.
on bankruptcy Amtek has also borrowed at the subsidiary level, which could complicate matters.
Consolidated figures; Debt as on Private equity player KKR has launched bankruptcy proceedings against overseas arm
Mar 2016; Promoter stake and Amtek Global Technologies, which owes the PE firm close to $450 million in debt. The
Total income as on Mar 2017;
Accumulated losses between promoter is willing (and even mulling selling some personal assets), but multiple sub-
2013/14 and 2016/17 sidiaries and financial creditors could complicate matters. Amtek did not respond to
questions raised by BT on the way forward.

DEBT:
`10,333 crore
MONNET ISPAT & ENERGY PROMOTER STAKE:
25.27%
ACCUMULATED LOSSES:
` 4,831 crore
I
n 2010, Sandeep Jajodia, Founder and Chairman of Monnet Ispat and Energy, was TOTAL INCOME:
keen to expand the companys primary steel capacity by 1.5 million tonne to triple its ` 1,412 crore
revenue to `5,500 crore and quadruple profits to `1,000 crore in two years. Seven
LEAD BANK:
years later, the revenue dipped to `1,412 crore, registering a loss of `2,132 crore
State Bank of India
with a debt load of `10,000 crore, which could be pushing it to bankruptcy.
Monnet had evolved from a sponge iron manufacturer to a diversified steel, power INSOLVENCY PROFESSIONAL:
and mining company since its inception in 1994. But its fortunes turned when the Grant Thornton
Supreme Court deallocated its coal blocks in 2014. Recently, the NCLTs Mumbai bench
BANKERS SUGGESTION:
has admitted Monnets case for initiating insolvency proceedings. The lending banks, led JSW interested in
by the State Bank of India, had converted a part of its loan into equity. Its debtors are now bidding, bankers to
sitting pretty with 51 per cent equity stake while the promoters hold only 25 per cent. consider
The companys equity capital has expanded from `65 crore to `200 crore, and it is still
CURRENT UPDATE:
attractive for a buyout. The bankers, however, admit they will have to take a haircut as the
current revenues cannot service the debt. Steel tycoon Sajjan Jindal (also Jajodias brother- company for bankruptcy
in-law) and private equity major Blackstone (which holds 2.27 per cent stake in Monnet)
have already shown their interest, but have not started any discussion with the banks, ac- Consolidated figures for 2016/17;
Promoter stake as on Mar 2017;
cording to sources. Jajodia did not respond to Business Today for this story. Accumulated losses between
2013/14 and 2016/17
ERA INFRA ENGINEERING H.S. Bharana,

CMD
D
elhi-based Era Infra Engineering, DEBT: lender in this
run by civil engineer-turned-entre-
preneur Hem Singh Bharana, has
`10,065 crore case, is now try-
ing to shift the
an interest in real estate, power, fi- PROMOTER STAKE: winding-up cases to
nancial services, and construction equip- 66.35% NCLT for hearing. The
ment leasing, and even opened a manage- operational creditors can fight these cases
ACCUMULATED LOSSES:
ment school once. The EPC company, with `3,950 crore at NCLT as it has the power to rule on these
a presence in power and industrial seg- matters. We are hopeful of getting a fa-
ments, started sliding from 2011/12 when TOTAL INCOME: vourable response from the High Courts,
the slump in construction and infrastruc- ` 1,286 crore says a banker on condition of anonymity.
ture sectors hit its operations. Other factors LEAD BANK:
The bankers are non-committal regarding
such as land availability and green clear- Union Bank of India further funding to the company by way of
ances also escalated costs. Era was unable restructuring.
to recover in following years as turnover INSOLVENCY PROFESSIONAL: Manoj K. Singh, the lawyer who repre-
crashed and interest plus other operating NCLT yet to admit the sents Era at the NCLT, says the company
company for bankruptcy
costs reduced its cash flow. has a huge claim to the tune of `10,000
As Era went down, operational credi- BANKERS SUGGESTION: crore from its projects, including roads, due
tors filed 18 winding-up petitions in High Stake sale in SPVs to deviations in contracts and cost of de-
Courts much before the bankruptcy code lays. It affected the health of the com-
CURRENT UPDATE:
became operational. The Delhi bench of pany, he says. The bankers want to tread
Winding up petitions
NCLT will soon decide on how to go ahead by operational creditors cautiously due to multiple cases filed
with the bankruptcy proceedings with outside NCLT against Era. They may recover some
winding-up petitions already in the civil money through the sale of the SPVs, but no
Consolidated figures; Debt as
courts. The Union Bank of India, the lead on Mar 2016; Promoter stake as resolution is in sight yet.
on Dec 2016; Total income for
2016/17; Accumulated losses
between 2013/14 and 2016/17
ABG SHIPYARD
T
hree years ago, promoters led by
Rishi Agarwal held a 68 per cent
stake in ABG Shipyard, once Indias
largest private sector shipbuilding
yard. Though business started slowing
down post the 2008 global meltdown,
Agarwal the nephew of Essars Ruia
brothers never lost faith and kept increas-
Rishi Agarwal,
ing the stake from 57 per cent in March Chairman
2009. Today, the promoters stake at 10
per cent is less than that of ICICI Bank.
Banks led by ICICI Bank already have 51 DEBT:
per cent equity in the company after invok-
ing SDR in 2015.
`8,731 crore can help the company come back to life.
In the past, there was interest shown by PROMOTER STAKE: This is one of the best and modern ship-
various group including Anil Ambanis 9.74% building yards in India. It is the worst
Reliance Defence, Shapoorji Pallonji ACCUMULATED LOSSES:
business cycle that made the company see
Group, Liberty of UK and Cochin Shipyard. ` 4,802 crore these times. We firmly believe that given
Bankers are hopeful that the deal would be an opportunity, ABG will come back to the
sealed soon under the bankruptcy code. TOTAL INCOME: forefront, he says.
The NCLT bench of Ahmedabad will soon ` 38 crore The shipping and shipbuilding indus-
admit the company based on the applica- LEAD BANK: try has been going through a deep slow-
tion of lead bank ICICI Bank. ICICI Bank down because of excess capacity globally.
Bankers are in complete control of the Other shipyards like Bharati Shipyard,
company with a majority stake. But con- INSOLVENCY PROFESSIONAL: Pipavav Shipyard and L&T Shipyard are
sultants say the equity shareholding of also struggling.
banks is of little consequence because debt Bankers privy to stake sale discussions
has to be right-sized to get the company BANKERS SUGGESTION: say they were under initial discussions
back on track. "There has to be a resolution Good candidate for with Liberty of UK when the RBIS directive
plan, says a consultant. The companys complete sale for bankruptcy proceedings came. There is
debt is at `8,731 crore against revenues of CURRENT UPDATE: now every possibility that lenders would
a mere `38 crore. Mumbai-based ABG Complete sale of continue discussions with Liberty. Some
Shipyard is a good candidate for complete business or liquidation say there is a possibility of competitive bid-
sale to a new promoter or liquidation. ding because of multiple interested parties.
Standalone figures; Debt as
Dhananjay Datar, CFO of ABG on Mar 2016; Total income for You just cannot handover a company to a
Shipyard says the company is fully sup- 2015/16; Promoter stake as on bidder. There will be challenges in courts,
Mar 2017; Accumulated losses
portive of every action of lenders which between 2013/14 and 2015/16 says a corporate lawyer.

Manoj Gaur,
Chairman & CEO
VIVAN MEHRA
JAYPEE INFRATECH
DEBT:
J
ayprakash Gaur, 86, is a rare civil engineer who has lived the entire history of
`7,922 crore India's post-independence infrastructure building. He has built his business ac-
PROMOTER STAKE:
cording to one of his famous quotes: Every time someone tried to explain to me
71.64% that there are limits to what one man can do, I pointed to the boundless sky and
said, there is the limit.
ACCUMULATED LOSSES: Pushing the limits has left Jaypee Infratech with interests in engineering &
`639 crore construction, cement, power and real estate with humongous liabilities. Bankers,
TOTAL INCOME: led by IDBI BANK, have taken Jaypee Infratech to the NCLT for bankruptcy proceed-
`1,164 crore ings. The company is developing the Yamuna Expressway project between Noida
and Agra with township area totalling 25 million square metres. The company
LEAD BANK: did not respond to questions from Business Today.
IDBI Bank
Over the last three years, the company has been on an overdrive to sell assets
INSOLVENCY PROFESSIONAL: hydropower projects in Himachal Pradesh to Sajjan Jindals JSW and cement units
KPMG Partner to Orient Cement and A.V. Birlas Ultratech. We have always worked closely with
banks. We divested and reduced liabilities according to their advice, says an
BANKERS SUGGESTION:
S4A, sale of real estate
executive, on condition of anonymity.
assets Bankers say the value of the companys assets is far more than its debt. But the value
may take a long to mature and, hence, there is a liquidity mismatch, says a banker.
CURRENT UPDATE: There is also a view that the banks may take equity as promoters still hold a 72 per
Company to respond to cent stake. The market capitalisation of the company is `3,000 crore. But some banks
bankruptcy application
might not be receptive to the idea. Why should a bank move from a secured position
by August 4
to equity? says a banker.
Consolidated figures for 2016/17; The companys troubles started with the National Green Tribunals 2013 ruling
Accumulated losses between
2013/14 and 2016/17 staying construction within 10 km of the Okhla Bird Sanctuary. This halted construc-
tion of apartments along the Noida-Greater Noida Expressway. The revenue from real
estate has fallen drastically in the last two financial years. This resulted in a 60 per
cent drop in the company's revenues in 2016/17 from `3,000 crore to less than
`1,000 crore.
The lead bank was considering taking over some assets and bringing in a new
developer. There is a huge inventory which can be sold, says a banker.
The resolution looks certain in case of Jaypee Infratech.
With inputs from Sumant Banerji

DEBT:
ELECTROSTEEL STEELS `7,505 crore

PROMOTER STAKE:
45.2%
ACCUMULATED LOSSES:
`2,705 crore
T
his mid-sized steel maker from Kolkata got embroiled in problems because of delay in
supply of equipment and structures for its plant. The company, promoted by 61-year- TOTAL INCOME:
old Umank Kejriwal and his brother Mayank, exports billets, wire rod and TMT bars to `2,868 crore
neighbouring countries such as Nepal and Bangladesh. As a result of the delay and
LEAD BANK:
shortage of funds, the company incurred significant losses, leading to erosion of net worth. State Bank of India
Electrosteels parent company, Electrosteel Castings, made a profit of `165 crore on a reve-
nue of `2,120 crore in the last financial year; it has a market value of `1,135 crore. INSOLVENCY PROFESSIONAL:
The lead bank, State Bank of India, or SBI, has started bankruptcy proceedings against PwC Partner
the company in NCLT'S Kolkata bench. The bankers, who say that the promoters are cooper- BANKERS SUGGESTION:
ative, are considering giving priority to lenders who put more funds in the company so that Bankers to offer
they are paid first in case of liquidation. The company needed `1,200-1,500 crore for com- additional facility
pletion of the steel plant. Its combined capacity is 2.5 million tonnes. At present, 1.5 million
tonnes is complete. CURRENT UPDATE:
NCLT admitted the
The Piramal Group had shown interest in providing additional funds but backed out.
Edelweiss Group, which has an asset reconstruction company, is also looking at the proceedings
option of offering a line of credit. Bankers say the money would come as promoters are
cooperating with the lenders. Standalone figures for 2016/17;
Promoter stake as on June 2017;
Efforts to contact the company did not succeed. Accumulated losses between
2013/14 and 2016/17
JYOTI STRUCTURES
J
yoti Structures has been grappling 12, referred for bankruptcy proceedings.
DEBT:
with multiple problems. Delayed pay-
ments after execution of orders hurt `3,387 crore The Mumbai bench of NCLT has initiated
the process and appointed consultant BDO
this maker of power transmission PROMOTER STAKE: LLP as the insolvency professional based
towers. The Mumbai-based companys 18.4% on the recommendations by the lead
aggression in the overseas market too did lender SBI. We will now revive the stake
not pay off. Then Jyoti, a leading ACCUMULATED LOSSES: sale plans under bankruptcy code, says a
`2,535 crore
Engineering, Procurement, Construction banker. The company is a good candidate
player in the power sector, made profits TOTAL INCOME: for bringing a strategic investor or a com-
until 2014 but was subsequently hit by `922 crore plete change of management. The pro-
rising interest costs they have shot up moters don't have enough equity to fight
LEAD BANK:
five times in the last five years after loan State Bank of India
back. If need be, the bankers are willing to
defaults. The promoters, Thankur, Valecha convert a part of the debt into equity to
and Mirchandani family, have just 18 per INSOLVENCY PROFESSIONAL: take control of Jyoti for subsequent sale of
cent stake. The bankers did invoke BDO LLP Partner business under the bankruptcy code. An
Strategic Debt Restructuring (SDR) BANKERS SUGGESTION:
email sent to the company management
Scheme in 2015 to take management Stake sale went unanswered.
control, but they failed to convert their The net worth of the company has
part of debt into equity in 210 days, as CURRENT UPDATE: been completely eroded. The bankers
stipulated in the guidelines. Later, the Admitted by NCLT for claim that a new buyer would be found
bankruptcy proceedings
bankers tried hard to sell the company out- soon for Jyoti Structures but the consult-
side SDR but that also didnt fructify. The ants say it wont be easy. ~
bidders included Shriram, Essel, KEC, Consolidated figures for 2016/17; Research inputs by Avneet Kaur
Promoter stake as on Mar 2017;
Kalpataru and Dubai-based Amin Group. Accumulated losses between
Jyoti was the first company, among the 2013/14 and 2016/17 @anandadhikari; @nevinjl

NISHIKANT GAMRE
Piramal Group Chairman

Ajay Piramal: Riding the
nancial services wave
00 BUSINESS TODAY, August 13, 2017

CORPORATE Piramal
PIRAMALS
BIG BET
Ajay Piramal is betting on real estate and nancial
services to create a $20 billion business by 2020.
The Shriram Capital-IDFC deal will fast-track his march.
By P.B. JAYAKUMAR
W
hen Business Today carried a report in April last year about
Piramal Group Chairman Ajay Piramals plans to create a
$20 billion empire by 2020, many felt it was an aspirational,
even aggressive, target. The reason for this scepticism was
simple. In 2010, his net worth was estimated at $1 billion,
and after selling the flagship drug formulations division of
Piramal Healthcare to Abbott for $2.9 billion, the group was
left with a small pharmaceutical business and a struggling
glass business with revenues of nearly `2,000 crore. The
listed Piramal Enterprises (then Piramal Healthcare) got just
`15,000 crore after expenses and paying taxes. After buy-
backs and dividends (`4,866 crore), Piramal decided to invest
the rest in businesses with 20-30 per cent-plus profits and
took three-four strategic decisions. One was investing more
`16,000
in the US and continuing investing in contract pharmaceuti-
cal and over-the-counter, or OTC, businesses, apart from new
crore
The amount the
areas such as knowledge management. Another was to de- Piramal Group is
ploy personal wealth into the real estate business in Mumbai. investing in real estate
August 13, 2015, BUSINESS TODAY 00

CORPORATE Piramal
THE SHRIRAM-PIRAMAL JOURNEY
Acquired 9.96 per cent Acquired 9.98 per cent IDFC and
stake in STFC; Investment: stake in SCUF; Investment: Shriram Group
`1,640 crore `800 crore plan merger
MAY 2013 APR 2014 JUN 2014 NOV 2014 JUL 2017
Acquired 20 per cent stake Ajay Piramal appointed

in SCL; Investment: Chairman of
`2,150 crore Shriram Capital
The third was to enter financial services, mainly funding finally falling into place, slowly but surely.
the real estate sector and investing strategically in com-
panies, in a big way. Among all businesses from phar- Piggy-riding Shriram?
maceutical, knowledge management, OTC, critical care Two years ago, there were unconfirmed reports that Ajay
and glass financial services and real estate have turned Piramal was trying to take control of Infrastructure
out to be the biggest value creators. In 2017, Piramals Leasing & Financial Services, Indias largest unlisted in-
net worth was estimated at $5.6 billion. The recent frastructure financial company. Things did not work out.
proposal for the merger between IDFC and Shriram You need not have a bank to scale up in financial ser-
Group, where Ajay Piramal is the Chairman and Piramal vices. See how HDFC Ltd, an NBFC, grew over the years,
Enterprises one of the largest investors, seems the Ajay Piramal had told BT a few months after these re-
Piramals ticket to the $20 billion goal. But the question ports. A year-and-a-half later, HDFC founder Deepak
is, can they make it work? Though the finer details of the Parekh and Shriram Group founder R. Thyagarajan were
deal are yet to be worked out, the groups recent moves present at the function to announce the merger between
indicate that the pieces of Ajay Piramals grand plan are IDFC and Shriram Group.
The IDFC-Shriram Capital ...And its benets

Merger Proposal...
All operating businesses of both groups to come Will create a nancial conglomerate with a bank
under IDFC Ltd Group with a holding company at its centre. It may become India's largest mass
structure. retail bank-like entity.
The retail-centric business of Shriram Capital, Huge synergy benets of merging wholesale
mainly Shriram City Union Finance, or SCUF, to be corporate lender IDFC and mass retail lender
absorbed into IDFC Bank. Shriram.
Shriram Transport Finance Company, or STFC, to Shriram brings two insurance companies
remain a standalone independent entity under the Shriram Life Insurance and Shriram General
holding company. Insurance on the table
IDFC Ltd to own a substantial stake in life Merger of SCUF will help IDFC expand its balance
insurance and general insurance arms of Shriram. sheet by `20-25,000 crore.
Valuations and details of the deal to be STFC has 20-25 per cent share of the difficult
decided in 90 days. A single composite unorganised market. It also has a large network
scheme of amalgamation route (to be approved with more than 900 distribution points and a
only once by boards and regulators) may balance sheet of close to `80,000 crore.
take 10-12 months.

PIRAMAL
ENTERPRISES
BREAK-UP
PHARMACEUTICAL
3,893
FINANCIAL SERVICES
3,352
INFORMATION MANAGEMENT
1,222
OTHERS
80
TOTAL
8,547
PIRAMAL
GLASS
2,120
(2015/16)
PIRAMAL
REALTY
Anand Piramal wants

1,100
to see Piramal Realty Revenue gures, except for
among the top three Piramal Glass, are for 2016/17;
players in the industry in `crore; Consolidated:
Source: Company
RACHIT GOSWAMI
There has been a certain inevitability about this Ajay Piramal has given us a lot of strength and confi-
merger. After all, Piramal Healthcare spent `4,583 crore dence to go ahead, Thyagarajan said while announcing
in three deals in 2013 and 2014 to buy minority stakes the merger on July 8.
in Shriram Capital, the holding company of Chennai- Rajiv B. Lal, Managing Director and CEO of IDFC Bank,
based Shriram Group, Shriram Transport Finance says the attempt is to create a financial conglomerate with
Company, and Shriram City Union Finance. While many a universal bank at its centre which may become Indias
saw this as a strategic investment like in Vodafone India largest mass retail bank-like entity. The contours and
where it invested `5,863 crore and exited with `8,900 details of the mutually beneficial deal will be worked out
crore in three years it turned out differently. After being in the next three months, he says.
invited to lead Shriram Capital when Thyagarajan, its How the Piramals benefit and what will be the role of
founder, decided to retire, Ajay Piramal saw the invest- Ajay Piramal in the new entity still remain unanswered.
ment as an opportunity for Piramal Capital which is As an investor, we will benefit like any other investor. It
into real estate lending, asset management, corporate fiis too early to predict. We are yet to work out those de-
nance and distressed assets to get a large retail expo- tails, says Ajay Piramal who, deal or no deal, is already
sure and scale up through Shrirams huge experience and the master of a big financial play.
reach, especially in South India.
Though he brought in some of his people into The Real Estate Lender
Shriram Capital and shuffled some business heads, the Ajay Piramal was among the first in India to fund real
biggest move was the appointment of Rajesh Ladda, estate, way back in 2005, with Indiareit. In 2014, the
Chief Financial Officer of the Piramal Group, as group merged the combined Indiareit Fund Advisors
Managing Director and CEO of Shriram Capital, in the and non-banking finance arm Piramal Finance into
last week of June. Ladda, a confidant of Ajay Piramal, Piramal Capital, the holding company, to form Piramal
has been with the Piramals since 2001. He has been a Fund Management Pvt Ltd, or PFMPL, one of the five
part of all major decisions of the group. The merger an- segments of Piramal Enterprises. We have experience
nouncement followed soon after. Our partnership with in this space and know the challenges. We know where

CORPORATE Piramal
you can make money and where you cannot. Our Realising Realty
strategy is to finance land acquisition, construction. Under Ajay Piramal, the group had entered the real estate
Sometimes, we provide equity, even last-stage apart- sector in the 1990s, when it developed marquee real es-
ment funding, too, Piramal had explained earlier. The tate projects such as Indias first modern retail mall,
smartest decision was funding only top-notch develop- Crossroads, and Mumbais landmark business destination,
ers who were unlikely to default. Peninsula Corporate Park. However, in the family split in
After two-three years of lending, financial services 2005, the real estate assets went to the wife of Ajays elder
is the fastest-growing segment of Piramal Enterprises, brother Ashok, Urvi Piramal, and her sons.
accounting for 40 per cent revenues, the second- When Ajay Piramal was firming up plans after the
highest after the pharmaceutical business. For year Abbott deal, his son, Anand Piramal, came to India after
ended March 2017, financial services yielded `3,352 getting an MBA degree from Harvard Business School. In
crore out of Piramal Enterprises total revenue of 2012, he was inducted into the group management team
as an executive director, with the respon-
sibility of heading the unlisted real estate
business under Piramal Realty. Anands
sister, Nandini, also an executive director
PIRAMALS SHRIRAM ADVANTAGE with Piramal Enterprises, was given the
charge of developing Piramals human
Market capitalisation of
resources and consumer health care busi-
nesses. Her husband, Peter DeYoung, is
`36,700 the CEO of Piramal Critical Care, a part of
crore ($5.6bn) Piramal Enterprises.
for listed entities Shriram In their second shot at real estate, the
Transport Finance and Customer base of Piramals decided to limit Pwiramal
Shriram City Union 21.3 mn-plus
Realtys focus to the Mumbai market in
Finance
the initial years. Mumbai has a lot of
opportunities and huge demand. Also, if
you look at the top real estate develop-
ers, none have succeeded in markets
outside their home turfs, says the
32-year-old soft-spoken Anand Piramal.
3,300+ branches EXPOSURE TO RETAIL We are investing `16,000 crore (in-
FINANCING INCLUDES cluding land and development costs) in
Used and New CVs the ongoing projects, he says.
Small and Medium Enterprises There is a big reason why their real
estate play makes more business sense
Consumer and Gold Loans
than that of other players. The Piramals
Life Insurance and General
Manpower strength Insurance have been investing personal wealth in
67,500 real estate in Mumbai over the years.
Sources say Ajay Piramal had got over
Data as of March 2017; Source: Piramal presentation May 2017 `1,200 crore as dividends after the
Abbott deal, and the responsibility of
deploying this money was given to
`8,547 crore. That was a 92.2 per cent increase from Khushru Jijina, Managing Director of Piramal Fund
the `1,744 crore earned in 2015/16. Loan book grew Management. Their biggest advantage compared with
87 per cent to `24,400 crore from `13,048 crore in the other real estate developers is that they own huge land
previous year (this includes `3,600 crore non-real es- banks in various parts of Mumbai bought years ago.
tate lending to companies). Construction finance ac- Their main spending is in construction, which they can
counted for 57 per cent loan book. Total funds under recover in no time, says Sandeep Sadh, CEO of Mumbai
management are $ 5 billion. Property Exchange, a real estate advisory.
The Piramals, in tie-up with several global partners, In 2011, Gliders Buildcon, a subsidiary of the Ajay
are now entering housing and commercial real estate fi- Piramal-owned Piramal Realty, bought a seven-acre
nance. They also plan to offer long-term equity funding textile mill land at Byculla from Mafatlal Industries for
to blue-chip residential developers and enter the business `605 crore. A year later, Ajay Piramal bought a one-
restructuring segment, say sources. acre sea-facing property at Bandra named Gulita from

Hindustan Unilever for `452.5 crore ONGOING
(Gulita was later converted into a PIRAMAL REALTY
home for the Piramals, who also PROJECTS
own a weekend home at Alibaugh
sea shore).
Anand says Piramal Realty has Piramal Vaikunth
been one of the fastest-growing com- Thane
panies in the sector ever since it 32-acre land with
40-storey residential
launched its first project in 2015. In
towers, supported with
2016/17, it reported revenues of commercial, retail,
`1,100 crore. This year, it may post educational and
about `1,200 crore, he says. spiritual centres
Piramal Realty has four big pro- Das, Chief Economist and National
jects under development at Thane, Director, Research, Knight Frank.
Byculla, Mulund and Bandra Kurla Piramal Aranya But the Piramals are putting their
Complex. Anand is trying to make the Byculla best foot forward. They are reaching
projects stand out by stressing quality Three towers of 60-storey out to potential customers with flower
each on a 53-acre plot shows, aggressive marketing and a
buyback guarantee scheme. Vivaan,
one of the most premium towers of
Piramal Revanta Piramal Vaikunth, has been reserved
Mulund for non-resident Indians from Dubai.
Multiple 60-storey towers When Piramal Realty launched
over 8.4 acres near Sanjay Piramal Vaikunth at Thane in
Gandhi National Park September 2015, the first phase in-
ventory of over `400 crore was sold
within 12 days. On the day of the
Piramal Agastya Park launch, over 100 units were sold
Kurla within three-four hours, says a com-
A 17-acre project in two pany press release.
and convenience. We wanted to fo- phases. `5,000 crore Funds for projects are also not an
revenue expected
cus on customer centricity, architec- issue for the cash-rich Piramals. As a
(at exit) for 1.9 million sq.
tural design, quality, safety, and build ft. leasable area policy, the real estate fund belonging
Indias most admired real estate com- to the listed Piramal Enterprises does
pany, and not just for its scale and not fund Piramal Realty projects.
profitability, he says. For that, the That is because of corporate ethics,
Piramals have tied up with several says Anand. The New York-based
global partners. Piramal Realty has also created a board private equity firm Warburg Pincus invested $284 mil-
of advisors that includes HDFC Bank Chairman Deepak lion in July 2015 for a minority stake. A month later,
Parekh, Harvard Business School Dean Nitin Nohria, financial services giant Goldman Sachs invested another
former Emaar CEO Robert D. Booth, McKinseys Real $150 million in what was the largest investment in
Estate/Infrastructure Practice Director Subbu Indias real estate sector. That shows the faith in our
Narayanaswamy and Piramal Enterprises Fund capabilities and our reputation as a group, says Anand,
Management Managing Director Khushru Jijina, who who is planning to buy more distressed assets in the real
was earlier the Executive Director of Piramal Sunteck estate market.
Realty, an erstwhile joint venture of the Piramals. More consolidation will happen in the sector as
many companies we approached earlier are coming back
The Road Ahead to us to sell at a lower price, says Anand. He wants to
But the ride for the young Piramal Realty may not be make Piramal Realty among the top three real estate
smooth, say experts. They have been in the market for companies in India by net asset value by 2020, the year
just two years. The Mumbai property market is highly his father hopes to take the groups net asset value to
competitive, says Sandeep Sadh. $20 billion from $9.5 billion at present. It seems the
The effects of de-monetisation are still there. The Piramal Group is on course to meet its target. ~
demand is shifting towards affordable houses of less
than `60 lakh and low-cost houses," says Dr. Samantak @pb_pbjayan

F
or 62-year-old Vikram Bakshi, who
owns half the stake in the US fast
food restaurant chain McDonalds
North and East India operations, July
13 (2017) might have been one of
his best Thursdays ever. On this day,
the National Company Law Tribunal
(NCLT) in Delhi ordered his reinstate-
ment as the managing director of
Connaught Plaza Restaurants Pvt.
Ltd (CPRL), the 23-year-old 50:50
joint venture (JV) between Bakshi
and McDonalds India Pvt. Ltd (MIPL).
CPRL is the master franchisee for MIPL
in North and East India.
Bakshi and McDonalds have
been at loggerheads ever since he
was unceremoniously ousted as the
Back in
Driving
CORPORATE McDonalds
Managing Director of CPRL in

August 2013.
The proceedings of the meeting
of the Board of Directors held on
06.08.2013 relating to re-election of
Mr Vikram Bakshi as the Managing
Seat
Director of the Company are set aside
and declared illegal, unjust and mala
fide, the judgement says. The status
The National
of Mr Vikram Bakshi as Managing
Director is restored. Company Law
What led to McDonalds loss of
trust in its partner who had once
been the very face of the brand in
Tribunals strongly
India? Bakshis real estate business
was part of the problem. McDonalds
alleged he had leased out his property
worded judgement
to a rival company, hinting at a con-
flict-of-interest scenario. gives Vikram Bakshi
He was also accused of financial
bungling at CPRL. The US firm said
Bakshi had pledged 51,300 of his CPRL
the edge in his battle
shares to get a loan of `20 crore so that
his company Ascot Estate (Manesar)
Pvt. Ltd could develop the Savoy
with McDonalds,
Outlet Mall and service apartments in
Manesar. McDonalds said he did not but the ght is far
take the companys approval before
pledging his shares. It also pointed at a
2007 transfer of `7 lakh from the
from over
companys account to his group com-
By SUMANT BANERJI
pany called Vikram Bakshi and
Company Pvt. Ltd. This action further
highlighted glaring inadequacies
with respect to internal control sys-
tems, Bakshis focus on his other
businesses and the directorship of 25

Vikram Bakshi in front of a
McDonalds outlet in Delhi-NCR
VIVAN MEHRA

CORPORATE McDonalds
SEPT 2013: Bakshi moves

the Company Law Board
seeking reinstatement. JAN 2014: Bakshi offers to OCT 2014:
buy McDonalds 50 per cent McDonalds offers
stake in CPRL. McDonalds Bakshi `120 crore for
says it wants to buy out his stake in CPRL.
Bakshi instead.
AUG 2013: Bakshi unceremoniously
dismissed as managing director of
CPRL. McDonalds accuses Bakshi of
nancial bungling and misconduct.
NOV 2014: In response,
Bakshi demands `1,800
crore; CLB asks McDonalds
OCT 2013 : McDonalds to revise its offer by the end
drags Bakshi to the London of the month.
MARCH 2009: Bakshi
seeks $100 million for his Court of International
stake based on valuation Arbitration or LCIA; Bakshi
done by Grant Thornton. appeals to the Company
Law Board for a stay but it JULY 2016: Delhi High
refuses to oblige. Court allows McDonalds
to pursue arbitration at the
LCIA; Bakshi approaches
NOV 2008: McDonalds Supreme Court for a stay.
increases the offer to $7
million. Bakshi rejects the
offer. McDonald's asks how
much does he want?
The Timeline
SEPT 2016: Supreme
Court rejects Bakshi's plea.
AUG 2008: McDonalds

offers to buy Vikram
Bakshis 50 per cent stake JULY 2017: NCLT
in CPRL for $5 million. reinstates Bakshi as MD
Bakshi rejects the offer. of CPRL.
other companies. In brief, when McDonalds offered to buy Bakshis stake. The latter then in-
McDonalds said Bakshi was being Bakshis stake for $5 million and sisted on a fair market value and of-
selfish and not devoting enough later for $7 million (see The Timeline). fered to sell his stake initially for
time to CPRL. In response, Bakshi waved a valua- `2,500 crore and then for `1,800
NCLTs 134-page ruling is scath- tion done by Granton Thornton that crore. These did not elicit any re-
ing and quashes almost all these put the enterprise value of CPRL at sponse from McDonalds, and finally
allegations. It also seeks to avoid a $200 million and demanded $100 petered out.
repeat of August 2013 by appoint- million for his shares.
ing former Supreme Court judge As the litigation intensified after CPRL Bears the Brunt
Justice G. S. Singhvi as an adminis- August 2013, Bakshi approached CPRL, which runs 168 outlets for
trator with the power to vote in the Company Law Board ( CLB ) McDonalds India, has borne the
CPRL s future board meetings. against his dismissal while brunt of the fight between the part-
Justice Singhvi can also, if needed, McDonalds went to the London ners. Since 2013, the firms expan-
alter articles of association of the JV Court of International Arbitration sion plans have come to a grinding
to avoid any further attempt at oust- and a second round of bidding for halt, and it has faced an employee
ing Bakshi as the managing director each others shares started. In early exodus and loss in market share. Its
unjustly and unfairly. 2014, Bakshi offered to buy supply chain and quality control
The kid gloves might have come McDonalds stake in the JV at a net have gone haywire, and profitability
off only after that fateful August asset value of `150 crore. The US has nosedived.
board meeting, but the first sign of firm shrugged it aside and countered After opening 27 outlets in 2012,
trouble was there in 2008. It was with a `48-50 crore offer for CPRL came up with 14 in 2013

CORPORATE McDonalds
against a target of 35, nine in 2014 the potential that CPRL has missed the company does strengthen his
and three in 2015. Last year saw the although in 2012, both companies case, but it is just one chapter in what
opening of just one outlet in Ajmer, were roughly in the same bracket. promises to be a long-drawn-out legal
which was under construction for Bakshi says CPRL had planned to battle. McDonalds has the option to
three years. The time taken to start open at least 100 new stores during file an appeal against the NCLT ruling
an outlet has also gone up from four 2013-17, which could not happen. in the National Company Law
months in 2012 to 12 months in One fundamental difference be- Appellate Tribunal (NCLAT). Post
2014 to 16 months in 2015. Not a tween the two firms is that that, either of the parties can go to the
single outlet has been opened so far in McDonalds sold its 50 per cent equity Supreme Court. Given the snail-paced
2017. Instead, 43 of the firms 55 in HRPL to Jatia in 2010, making it judicial system that weighs the coun-
outlets in Delhi-NCR were shut down the sole owner of the franchise. HRPL try down, it may mean decades before
in June as they failed to renew eating posted a profit the very next year. a final binding verdict comes in.
house licences. Under Jatia, its revenues quadrupled A verdict on the arbitration pro-
Now that he is back at the helm, between 2009-10 and 2016-17, ceedings in the London Court of
Bakshi says undoing the damage suf- from `274 crore to `930.8 crore (see International Arbitration is also on
fered by the brand over the past four graphics). His cordial relations with the anvil. It will help Bakshi if that
years would be a Herculean task. My McDonalds also helped him experi- goes in his favour, but a contrarian
priority is to bring CPRL back to ment with stores and the menu. For ruling will complicate matters.
where it was in 2013. It was a profit- instance, he has brought in some This is by no means the end of
able, fast-growing company at the
time but today, it is a pale shadow of
its former self, he says, sitting at The Hit
CPRLs Jor Bagh office in Central CPRL started losing edge over HRPL after the dispute
1,000
Delhi. I have to get a grip on the
CPRL
problems in operations and tackle the 800
issues of food safety and quality. But 600
HRPL
first, I have to re-open the restaurants
which have been shut down. This 400
company is my baby. I do not need 200
any additional motivation to set the
house in order. 0
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Figures show revenue in `crore; Source: MCA, Ace Equity and companies
Growth in South, West
In stark contrast, Hardcastle
Restaurants Pvt. Ltd (HRPL), which distinctly desi flavour in tune with the the road. McDonalds has many legal
manages McDonalds franchise in local palate. Given the strained rela- options to seek a quashing of the
South and West, is going through a tions, this kind of gourmet freedom NCLT order. It will surely file an ap-
purple patch. Its revenue has grown was missing at CPRL. peal against it at NCLAT, says a law-
at an average 20 per cent per annum Jatia regrets the state of affairs in yer requesting anonymity. This
over the past seven years and seems Delhi but does not think it has af- judgement does tilt the scales in fa-
to be getting better. For the past fected McDonalds overall image. I vour of Bakshi and based on this, his
eight quarters, we are the only brand do not believe the brand has suffered lawyers will argue strongly in other
in the quick service restaurants cat- in India. If that had been the case, we forums. But ultimately, the partners
egory that has positive same-store would not have done so well, he could be better off settling the disputes
sales year on year. Even during the says. Sure, there are problems in among themselves.
demonetisation-affected November North and East, but it is temporary. Bakshi, too, is under no illusions
quarter, we grew at 5 per cent, says The day these issues are resolved, of a speedy settlement. Its
Amit Jatia, Vice Chairman at Westlife there will be dynamic growth in those [McDonalds] strategy is to play the
Development Ltd of which HRPL is a regions as well. I will not speculate on waiting game and bleed me out, but I
subsidiary. We are looking at dou- whether I am interested [in CPRL]. have also dug in, he says. I have
bling our base every three to five That is for McDonalds to answer. We won the battle, but the war is still on.
years, and the number of outlets will will talk when the time comes. But it has given me the confidence to
grow from 258 to 450-500 with an continue my fight. ~
investment of `700-750 crore. More Hurdles Ahead
HRPLs strong growth underlines Bakshis reinstatement as the head of @sumantbanerji

CORPORATE Infosys
nnual general meetings (AGMs) of

An
Uneasy
most Indian companies are boring
affairs. The management reflects on
the year gone by and gives its per-
spective on the future, while minority
shareholders get a platform to air
their opinions. The 36th AGM of
Truce
Infosys, Indias second-largest IT ser-
vices exporter, held in Bangalore re-
cently, was no different, except for
one thing the atmosphere was
sombre this year. Infosys sharehold-
ers have seen the value of their hold-
ings fall about 20 per cent over the While the public spat at Infosys
past 12 months. The entire Indian IT has abated for now, can the
sector is facing challenges but the fall
in the sector index has been just 11 company regain its winning ways?
per cent. The Infosys shares have By VENKATESHA BABU
given up almost all the value they
had gained after Vishal Sikka took
over as CEO and MD in 2014.
The biggest reason for the poor
investor interest apart from the
challenges that Indias IT sector is
facing is the apparent lack of con-
fidence shown by founder-promoters
in the management and the counter-
response led by Sikka (see Point lion revenue and $80,000 revenue per employee by 2020 will have to be
Counterpoint). Though the not-so- postponed. The company has also seen a number of high-profile exits of late even
pretty spat seems to have abated for as its bets on innovation and higher-value offerings are yet to pay off.
now, will the company be able to do But what seems to be worrying the market more is the differences between
justice to those showing faith in its the management and the promoters. None of the original promoters, who col-
ability to reinvent itself? lectively own about 12.76 per cent of the company, were present at the AGM.
But like Banquos ghost at Macbeths feast in William Shakespeare's play,
The Fight Macbeth, they made a statement that all is not well at the company by
The company is struggling to grow their absence. Though the promoters had stepped down from management/
even in high single digits as the global executive roles about three years back, some of them used to make an appear-
IT services market sees a tectonic shift ance at AGMs to show faith in the company they had built.
from IT outsourcing, where Indian The confrontation had exploded into
players ruled the roost, to digital, full public view in February after the former
cloud, artificial intelligence and auto-
mation. Then there is the opposition
to outsourcing of jobs in big markets
such as the US and the UK that is forc-
20%
The fall in the value of the
Chairman Emeritus and co-founder, N.R.
Narayana Murthy, alleged corporate gov-
ernance lapses at the company. He has
even told a TV channel recently that he re-
ing the players to increase spending Infosys stock over the past gretted leaving the company. Two anony-
for hiring more locals. Infosys has 12 months mous complaints to the Securities and
admitted that Sikkas goal of $20 bil- Exchange Board of India had also alleged

impropriety in a couple of large ac-
quisitions by the company, a charge
that the company and its board had
rejected. The anonymous complaints
also alleged corporate governance
lapses and inappropriate payments to
a former chief financial officer. Infosys
appointed law firm Cyril Amarchand
Mangaldas to investigate the allega-
tions; it gave the company a clean
chit. After the promoters, led by
Murthy, continued to express unhap-
piness over alleged governance
lapses, the board asked Gibbs, Dunn
& Crutcher LLP, a law firm that spe-
cialises in internal investigation and
control risks, to investigate. Two days
before the AGM, it also gave a clean
chit to the company, but the promot-
ers dont seem to be impressed, if their
sullen silence is any indication.
What Next?
The promoters clearly dont seem to
be satisfied. However, they have only
two choices, either sell and exit or
force a vote. It is for them to decide
their next course of action. It isnt
even clear whether all the promoters
are together. Uncertainty is not good
for shareholders in general, says
Shriram Subramanian, Managing
Director of InGovern, a proxy advi-
sory firm. Institutional investors hold
58.6 per cent shares of the company.
Subramanian says they will play a
decisive role in deciding the future of
the company.
Please speak to Infosys for any-
thing connected with them, Murthy
said when Business Today reached out
to him. Infosys did not respond to a
meeting request.
However, a former senior execu-
tive seen as sympathetic to promoters
said: Has there been another exam-
ple of promoters walking away from
a world-class company they created?
Why should they sell and exit such a
NILOTPAL BARUAH
cash-rich company sitting on more

than `30,000 crore? Infosys set cor-
porate governance standards in the
Infosys CEO and MD country and all the promoters are
Vishal Sikka
asking is that the company adhere to
the highest governance standards. Is

CORPORATE Infosys
who can execute his vision. The vi-

Point Counterpoint sion is realistic but he needs a lot
more lieutenants to deliver, he says.
FOUNDERS' CHARGE COMPANY'S RESPONSE But it is here that Sikka must be feel-
ing letdown. The company has, un-
Poor governance standards The company continues to adhere der him, seen quite a few high-level
to highest governance standards exits of late. The latest is Executive
Excessive pay to Compensation includes
Vice President Ritika Suri, who was
top managers performance-related rewards and brought in by Sikka from SAP and led
is in line with industry standards the acquisition of Israeli automation
company Panaya.
Huge severance pay to All pay is in accordance with the A veteran senior executive who
some employees agreement with employees. Only
wanted anonymity as he is not au-
in case of a former CFO has it been
disputed, and is being addressed thorised to speak to the media said,
The promoters should know when
Company culture built Infosys continues its culture to go gracefully. External agencies
over three decades being of sharing rewards, fairness, have said that all the allegations are
ignored accountability and transparency false. The salaries of CEO and COO are
not that high compared with global
standards. To run a global company
The board and the Incorrect. The board has of this scale, we need world-class tal-
Nomination and collectively taken decisions in the
Remuneration Committee best interests of the company
ent. Vishal (Sikka) is doing his best in
have not executed their a challenging market. The promoters
duciary responsibility should support his moves.
properly Though for now the board, led by
Chairman R. Seshasayee, seems to
have thrown its weight behind Sikka,
the promoters unhappiness with
The Forgettable Year Seshasayee seems to have made the
The Infosys stock has been a rank company appoint Ravi Venkatesan
underperformer over past one year as co-chairman. Seshasayee said this
would be his last AGM and he would
120 demit office on attaining the age of
70 in the next few months. He also
made placatory noises and promised
100
he would spend the remainder of his
tenure on increasing shareholder
80 value and smooth transition. We all
recognise that we are but trustees of
Infosys Ltd. S&P BSE IT S&P BSE Sensex an extraordinary institution that has
60
11/07/2016 11/07/2017
been the result of the labour, fore-
sight and genius of an extraordinary
rebased to 100; Source: BSE
group of founders, he said. Sikka
even quoted Murthys dictum that
they should become proactive prob-
that a crime? lem finders rather than reactive
The principal analyst and founder of Constellation Research Inc., a Silicon problem solvers.
Valley-based research and forecast firm, R. Ray Wang, says competitors will Whether these statements
exploit this kind of internal turbulence to create fear, uncertainty and doubt. soothe tensions or the promoter
At this point, there are too many resources chasing the same markets. Real group is just biding time to make its
innovation is difficult as shareholders are harder on listed Indian IT services firms next move will determine the com-
than they are on publicly traded non-Indian IT firms. Infosys has to find a way panys future. For now, though,
to start building software, operate marketplaces and leverage innovation to grow Infosys is clearly at the crossroads. ~
marketshare in big deals, says Wang. Market conditions have changed and
Sikka will need to adopt a more assertive leadership style and appoint lieutenants @venkateshababu

20.8
18.9
16.9 15.6
6
14 16.8 13.
13.5
7.6 15.8
7.4 8.9
7.1
8.2 5.8
7.2
2.1 2.4 6.2
7.2
0.4
June-16 July-16 Aug-16 Sept-16 Oct-16 Nov-16
-4.2
AUTO Sales
A SHORT
-5.9
-7.1
SLIDE
THE AUTOMOBILE SECTOR, HIT HARD BY DEMONETISATION
-20.5
AND BS-IV RULING IN 2016/17, MAY SEE SHORT-TERM

VOLATILITY DUE TO GST. BY NITI KIRAN
I
n the April-June quarter of the current finan- quarter compared to the year-ago period while three-
cial year (FY2017/18), the automotive sector wheeler sales stumbled by 24.75 per cent. However, sales
in India was expected to bleed for two key in the passenger vehicle segment grew by 4.38 per cent
reasons. First, a drop in prices was on the during the quarter.
cards post the launch of the Goods and In some respects, the SIAM figures for the June quar-
Services Tax (GST) on July 1 and buyers de- ter followed the broad trends of the previous financial
cided to stay away from the market till it hap- year (FY2016/17). At the time the sector struggled
pened. Second, auto dealers could not avail of against some major drawbacks demonetisation in
input tax credit on stocks existing before July and, hence, November last year and the Supreme Courts ban on
companies were offering huge discounts, resulting in selling Bharat Stage III (BS III) vehicles beyond March 31,
margin pressure. Short-term demand issues persisted. As 2017, as the country tightened its emission norms. The
per data from the Society of Indian Automobile effect of GST, a standardised tax system, should be tem-
Manufacturers (SIAM), sales across the overall commer- porary, experts say, but nobody knows just how big or
cial vehicles segment declined by 9.1 per cent in the June lasting it will be.

Hitting the Brakes
Subdued sales growth seen
14.6 during demonetisation and 14.3
pre-GST periods
11 11.6
8.7 9.9 10.3
6.7 9.5 9.9
5.7
4.3 3.3
2.4
1.2
1.8
Jan-17 Feb-17 Mar-17 Apr-17 May-17 June-17
-2.4
1.0 -4.2
-5.7 -5.1
-5.9
-9.3
-8.5 Commercial Vehicles
Passenger Vehicles
Two- and Three-wheelers
Total Sales
Figures are year-on-year change in sales (%)
Total sales include commercial vehicles,
-16.0 passenger vehicles and two- and three-
wheelers
Source: CMIE
-25.0
A Painful Past bined bottom line of the commercial vehicle industry, which
Till the time of going to press, auto companies had not filed also reported net losses in the March quarter. During that
their first quarter results for 2017/18, but a performance quarter, Tata Motors commercial vehicle segment saw
analysis of the 13 listed companies that broadly cover the muted demand due to weak replacement growth and sub-
key segments, including commercial vehicles, passenger dued freight demand. If we remove Tata Motors from the
vehicles, two-wheelers and three-wheelers, affirm their bunch, the aggregate looks different, but the outcome re-
continued plight. Overall, this basket of companies saw an mains the same. Operating profits of these companies, ex-
8.4 per cent decline in net profit year on year in the March Tata Motors, have been declining for the last two quarters
quarter of 2016/17, the sharpest fall since March 2013. of 2016/17 and growth went into negative territory for the
Net sales during the period saw a year-on-year growth of first time in the past 12 quarters. Net profit margins de-
6.8 per cent on a standalone basis. clined around two percentage points in 2016/17.
A closer look at the data reveals that Tata Motors, Commenting on the scenario, Rohan Korde, a research
which had posted losses over the last three quarters in analyst with Prabhudas Lilladher, says, The third quarter
2016/17 on a standalone basis, had a bearing on the com- performance [2016/17] of the auto sector was adversely

AUTO Sales 74.1
Q3 FY16
45.7
Q4FY16
Bumpy Ride 52.2
Q2 FY16
Last two quarters spoilt
what could have been a
good 2016/17
Net Sales
Operating Prots
34.77 Figures are year-on year change in %
Q4 FY15
Y15 based on the aggregate of 13 listed auto companies
Source: Ace Equity
22.6 28.2
2
Q4 FY16
Q1 FY16
15.8
Q3 FY16
13.0 11.6
Q1 FY16
9.2 Q2 FY16
Q4 FY15
impacted by demonetisation, which hampered retail de- Left in the Lurch

mand initially. The fourth quarter performance was af- While demonetisation hit auto sales, the apex courts ban
fected due to the discounts given to sell BS-III vehicle in- on the sale of BS-III vehicles after March left the industry
ventory and the ancillary cost/provision related to the with a huge inventory. Due to the Supreme Courts ruling,
conversion of BS-III vehicles to BS-IV-compliant models. automakers had two choices: they could either push sales
In the first two quarters of 2016/17, the auto industry in the next two days (the notification came on March 29)
saw an average growth of 11 per cent in overall sales. or export their stock.
The second half witnessed improved consumer senti- As per CARE Ratings estimates, the industry had an
ments post the seventh Pay Commissions recommenda- unsold BS-III vehicles inventory of around 8.24 lakh units
tions, normal monsoon after two successive years of defi- worth about Rs 14,000 crore as on March 29, 2017.
cit rainfall, lower financing costs, affordable fuel prices and Two-wheelers accounted for the lions share of unsold
healthy replacement demand due to diesel car ban. The stock (6.71 lakh units), followed by commercial vehicles
industry was about to pick up speed when demonetisation (96,700 units), three-wheelers (40,000 units) and pas-
was announced on November 8. This led to negative senger vehicles (around 16,198 units).
growth in the auto industry during December 2016, says Considering the average per-day sales for 2016/17
Darshini Kansara, a research analyst with CARE Ratings. (April 2016-February 2017), the new inventory comes
For the full fiscal of 2016/17, these companies wit- down to 6.84 lakh units in case sales were enhanced by
nessed a single-digit growth of 4.3 per cent in net sales two additional days volume of sales (March 30 and 31).
compared to 13.5 per cent growth in 2015/16. The It would reduce the inventory to zero for the passenger
bottom line was squeezed by 4.2 per cent in 2016/17 vehicle stock. However, the cost of the unsold inventory
as against 7.2 per cent in 2015/16. Operating margins of commercial vehicles, as well as two- and three-wheel-
also came down around two percentage points over the ers, would be around `12,500 crore as on April 1, 2017,
last three fiscals. says Kansara of CARE Ratings.
But the so-called shrink does not worry the likes of According to CARE Research, for manufacturers or
Sugato Sen, Deputy Director General at SIAM. Most of dealers, the cost of working capital (taken at 10 per
the segments would grow in 2017/18 once the market cent) is calculated to be `1,250 crore per annum. If the
settles down, he notes. players export the remaining stock, it will take about 10

months to clear the commercial vehicle stock and about ing the dealers, he adds.
three months to clear the two- and three-wheelers stock In sync with the overall trend, the commercial vehicle
(considering the category-wise monthly average export segment saw a decline of 28.8 per cent in operating profits
sales in 2016/17). Therefore, the additional cost of hold- in the March quarter as raw-material expenses increased
ing the inventory post the ban would be about `105 by 9 per cent, outpacing sales growth. As mentioned be-
crore a month. The normal holding period of stock is fore, Tata Motors hugely impacted the profitability of the
about one month and, hence, the additional holding of segment. The company had an unsold BS-III inventory of
stock would mean around `800-1,000 crore as in- 15,000 units worth `4,000 crore, and plans to export a
terest cost, assuming all this stock would be ex- part of it. Even if we exclude Tata Motors, the profits of this
ported in some time. segment fell by 12.2 per cent and 7.1 per cent, respec-
There is another catch. With the BS-IV tively, in the last two quarters of 2016/17.
norms coming into effect, the cost of Passenger vehicles fared better with 13 per cent rise
production and, therefore, prices are in net sales and profit growth of 17 per cent. Maruti
expected to go up, which could im- Suzuki registered a significant growth of 35.6 per cent in
pact overall demand. net sales and 50.6 per cent growth in net profits year on
year on a standalone basis. Most of the passenger vehicle
makers have shifted to producing BS-IV-compliant
models since the past two-three quarters,
17.2 says Kansara.
Q2 FY17
11.2
Q1 FY17
11.8 6.8
Q4 FY17
10.2 Q2 FY17 2.6
Q1 FY17 Q3 FY17
Segments Falter 0.4

Q3 FY17
The two-wheeler (79 per cent market share) and the Recovery Ahead?
three-wheeler segments were the worst hit during the All is not doom and gloom in the -8.2
March quarter. Net sales were down by 4.3 per cent, auto segment. For one, the industry has Q4 FY17
and growth in operating profits plunged to a 20-quarter welcomed the compliance requirements to be
low. Operating expenses, as a per cent of net sales, followed and is working accordingly. Vass of ICICI
inched up 60 basis points over the last four quarters of Securities thinks consumers have come back, but obvi-
2016/17. On a standalone basis, Hero MotoCorp, the ously, uncertainty [regarding pricing and taxation] will
largest company in this segment, saw its revenue de- not help. However, BS-III ban was a policy decision that
cline 0.3 per cent year on year during the March quar- caught everybody unawares, and it had an impact.
ter while Bajaj Autos revenue fell by 3.7 per cent. In Because of GST, vehicle prices will come down by 3-4
contrast, the revenue of Eicher Motors (the fourth big- per cent, and the price benefits will be passed on to con-
gest) increased by 38 per cent, backed by some robust sumers, which will push demand, says Abhishek Jain,
growth in Royal Enfield sales. senior analyst with HDFC Securities.
The fourth quarter [of 2016/17] came against the Some of these are already happening on the ground.
backdrop of demonetisation, and the two-wheeler seg- For instance, most automakers have ensured price cuts
ment is one of the most cash-dependent products. The in sync with the new tax regime. Ex-showroom prices
financing part is quite low, sometimes as low as 30 per of Maruti Suzuki models have come down by up to 3 per
cent. So Q4FY17, from a demand perspective, had an cent while Hero MotoCorp is offering price reductions
adverse impact, says Nishant Vass, AVP, Equity on mass-selling models ranging from `400 to `1,800.
Research, and Research Analyst, Autos, at ICICI With prices coming down and technology being revved
Securities. At the same time, commodity prices were go- up BS-IV compliance and leapfrogging to BS-VI by April
ing up, putting pressure on margins. There was also a 2020 are proof enough the momentum is building,
one-time impact of BS-III ruling, which led to a massive although slowly. ~
clearance on the last day or so from the inventory re- Additional inputs by Chanchal Pal Chauhan
maining with the dealers. The companies took a one-time
impact on their profit-and-loss accounts for compensat- @niti_kiran

Airports
94 Ports
120
Power Smart
98 Cities
90
Infra
Barons
82
Power
Grids
RAJ VERMA
102
BUILDING THE
INFRASTRUCTURE SPECIAL
nfrastructure is one area where India has perennially lagged.
I
However, over the past few years, there has been a concerted effort
by the government to ensure sustained development, be it in
expressways, highways, rural roads, ports, power, railways and
airports.
Some of that was visible in the last Budget, when Finance
Minister Arun Jaitley allocated `3.96 lakh crore for infrastructure,
much higher than the `2.2 lakh crore given in 2016/17. Some of
the increase is due to the integration of the railway budget with the
Union Budget.
The focus on infrastructure has enabled growth of a host of
industries that feed into the sector. A classic case is that of metro
rail networks. As metro rail projects got commissioned in more cities eight at present
global majors like Alstom and Bombardier set up manufacturing facilities in the
country to meet the demand for equipment and railway cars. Siemens and Alstom are
also in the race to build a plant for electric railway coaches. Another area that should
see sustained growth over the next few years is investment in technology around build-
ing smart cities. The governments Smart Cities project has moved into the implemen-
tation phase in some cities.
Some Indian infrastructure majors such as GMR, GVK and Lanco Infratech have had to
scale down operations as their debt burden grew. Yet, there is a new crop of companies
betting heavily on the infrastructure sector. The package in the following pages brings you
five such players and what they are doing. THE FOCUS
While that is work in progress, the aviation sector has seen immense growth with the ON INFRA
entry of low-cost carriers. The focus now is on driving air traffic to smaller airports under
HAS ENABLED
the UDAN Scheme. Our special report delves into the challenges for the scheme and how it
will take a lot of effort to take flying to the masses. We also discuss the problems being faced
GROWTH OF
by thermal power players due to competition from solar power and the massive task that A HOST OF
the government has undertaken to feed power from renewable sources into the national INDUSTRIES
grid. There is also a report on how the smart cities project is faring. THAT FEED INTO
One thing is for sure. The action in infrastructure is not going to taper anytime soon. THE SECTOR
BACKBONE
How India is creating infrastructure for the future
A. PRABHAKAR RAO

Infra Barons
STANDING
TALL
A MOTLEY GROUP OF
EMERGING INFRASTRUCTURE
COMPANIES HAS SEEN RAPID
GROWTH IN RECENT YEARS
inance Minister Arun Jaitley put
F
the spotlight on infrastructure in
the last budget with a massive
`3.96 lakh crore allocation for
the sector. A signal to infrastruc-
ture companies that more pro-
MEGHA ENGINEERING jects are coming their way.
AND INFRASTRUCTURES But it does not translate into
much joy for infrastructure con-
glomerates the likes of GMR,
P. V. Krishna Reddy GVK, Adani and Lanco who,
Managing Director
for over a decade following
Revenue 8,756.8
Indias economic reforms, had begun to look like the
3 Yr Revenue CAGR (%) 22.6 new face of Indian private enterprise with their asset-
Prot After Tax 1,152.0 owning developer model. Today, they are all sharply
3 Yr PAT CAGR (%) 49.9 focused on internal housekeeping and dealing with the
3 Yr Average EBITDA margin (%) 15.9 challenges of restructuring debt. Estimates show that
the total debt by the four leading players GMR, GVK,
Total Debt 1,104
Adani and Lanco alone will add up to close to `2 lakh
Order Book* 40,000 crore. With such high leverage, it's difficult for them to
* approximate gure as per company venture into newer projects.
Standalone data; latest data for 2015/16
Data in `crore unless otherwise stated Business Today spoke to analysts and industry insid-
Total debt calculated as short-term plus long-term ers to get a sense of which infra players are growing
debt and is consolidated
Source: MCA & Ace Equity
rapidly and, consequently, well placed to make the

IRB INFRASTRUCTURE
DEVELOPERS
INFRASTRUCTURE SPECIAL Virendra D. Mhaiskar

Chairman and Managing Director
Infra Barons Revenue 5,969.1
3 Yr Revenue CAGR (%) 16.9
most of Jaitley's largesse. The exercise threw up a motley Prot After Tax 715.4
group spread across the country. The thread common to 3 Yr PAT CAGR (%) 15.9
the companies featured here is their strength in EPC 3 Yr Average EBITDA margin (%) 55.0
(quickspeak for engineering, procurement and construc- Net Debt 15,149.8
tion) capabilities. In an EPC, a client is billed and he pays
Order book 9,958.9
for the costs incurred for a project as against BOT (Build,
Consolidated data; latest data for 2016/17
operate and transfer) where the company raises its own Data in `crore unless otherwise stated
funds and recoups them after completion of the venture. Source: Company reports & Ace Equity
THE DISRUPTOR
R
iver-linking has often drawn flak for its environ-
mental and socio-economic implications. But here
is an infrastructure company that entered the
Limca Book of Records for the fastest completion of a
river-linking project at Pattiseema in Andhra Pradesh.
Megha Engineering and Infrastructures Ltd (MEIL) took
only a year to link Krishna and Godavari rivers for a lift
irrigation project and commissioned the first pump in 173
days. Our first major river-linking project was in Madhya
Pradesh, called Narmada Kshipra Simhastha Link
Project. We had commissioned it in March 27, 2014,
says P. V. Krishna Reddy, Co-founder and Managing
Director of MEIL. He says his companys strength lies in
EPC. In infrastructure, we are working in all the areas
water, roads, power transmission and hydrocarbons.
The company, says Reddy, is currently handling more
than 100 projects compared to the 60-70 three years ago.
The government projects account for 50 per cent of the
work in MEILS kitty. The company earns about 40 per
cent of its revenue from water projects, 20-25 per cent
from the power sector, about 15 per cent from hydrocar-
bons and about 10 per cent from roads.
Krishna Reddy had always wanted to start his own
business. He joined his uncle, P.P. Reddy, (MEILS
Chairman) to set up a small manufacturing unit in 1989
that produced pipes for irrigation projects. On the small InvIT AND BEYOND
plot of land where this unit once existed, now stands the
I
multi-storied office of MEIL with each floor named after an n May this year, Mumbai-headquartered IRB
Indian river. Last year we had a turnover of `12,000 Infrastructure Developers Ltd hit the head-
crore. This year, we aim to get to $3 billion, he says. lines as it came up with the first-ever infra-
Reddys detractors, however, attribute MEILS rise to structure investment trust (InvIT) in the country
the political patronage it enjoys locally. All projects are and got it listed. It is like a mutual fund where in-
now allocated via e-procurement. Moreover, we operate dividuals and institutional investors can invest in
in 16 states, and it is not possible to curry favour with infra projects. Besides equity and debt, it is, there-
all the governments as we get repeat projects across the fore, a third investment option.
states, sums up Reddy. We have successfully launched Indias

first-ever and much-awaited InvIT and its IPO, which We also bagged three prime projects from the National
saw 8.7 times response from investors. The IPO raised Highways Authority of India. These will add up to more
`5,035 crore, says Virendra D. Mhaiskar, Chairman than 300 km while the project cost will be in excess of
and Managing Director of the 19-year-old company. `6,000 crore.
We need to look at the benefits that the stakeholders Out of these three, the `2,088 crore BOT project on
are receiving such as guaranteed returns on invest- the Rajasthan-Gujarat border has already achieved fi-
ments, which are higher than what the existing in- nancial closure. IRB bagged the project by offering a
struments offer. With the funds raised IRB was able premium of `163.80 crore.
to clear debt in select projects and in a position to take Mhaiskar points out that the company has always
up new ventures. focussed on the BOT sector. IRB is currently operating in
According to Mhaiskar, last year was good. We eight states and is looking at all upcoming BOT projects,
registered 12 per cent growth in net profit for the finan- and may evaluate some HAM (hybrid annuity model)
cial year 2016/17 and 14 per cent growth in revenue. projects as well.
EYEING FULL-SERVICE INFRA PLAY
F
or the promoters of Dilip Buildcon Ltd (DBL), a widely diver-
sified portfolio from roads and highways to urban develop-
ment to bridges and irrigation means getting closer to
their ultimate goal of becoming a full-service infrastructure
company in about three years. The company is currently building
Indias second largest cable suspension bridge in Goa a 640 km
and eight-lanes across the Zuari River. Last year, DBL bagged the
`545.40 crore contract from the Ministry of Road Transport and
Highways. It is the largest suspension bridge being built by a
private sector company, 50 per cent larger than Mumbais Worli
Sea Link, says 30-year-old Rohan Suryavanshi, head of strategy
and planning at DBL and son of the founder Dilip Suryavanshi.
Back in 1980, Dilip Suryavanshi, son of a police officer and a DILIP BUILDCON
civil engineering graduate fresh out of college, started his entre-
preneurial journey by helping his brother set up a soya bean oil
Dilip Suryavanshi
extraction plant near Bhopal. But soon he found his calling in Chairman and Managing Director
construction and set up Dilip Builders as a sole proprietorship
Revenue 5,331.4
company. In the course of his work, Suryavanshi realised the
importance of owning ones own equipment. He got his first stone 3 Yr Revenue CAGR (%) 30.4
crusher in 1996, followed by excavators and dumpers. Today, Prot After Tax 357.7
DBL owns 8,525 GPS-connected and geotracked construction 3 Yr PAT CAGR (%) 14.6
equipment while a fleet of 16,000 drivers operate them. DBL has 3 Yr Average EBITDA margin (%) 22.8
evolved too, emerging as a private limited company in 2006 and
Total Debt 3,780.0
coming up with its initial public offering (IPO) in 2016.
DBL operates in 16 states and has nearly 60 projects in its kitty. Order book 17,568.3
More important, we do everything on our own, from mining on Consolidated data; latest data for 2016/17
Data in `crore unless otherwise stated
the site to developing the sign boards on the roads, says Rohan. Total debt calculated as short-term plus long-
The company has an order book of `17,500 crore, which term debt; Source: Company reports & Ace Equity
would be nearly three times its revenues if it achieves its internal
goal of `6,000 crore this year. Ninety-five per cent of its projects
comes from the central government. Sector-wise, 80 per cent is the governments stated target of 25 km a day,
from roads, 15 per cent from mining and 5 per cent from urban says Rohan. He calls DBL largest road construc-
infrastructure and irrigation. Roads are an important niche for tion company in India in terms of the order book,
us. We are now building about 2.5 km every day, 10 per cent of completed projects and geographical spread.

Infra Barons
SADBHAV ENGINEERING
Vishnubhai M. Patel
Founder
Revenue 4,654.2
3 Yr Revenue CAGR (%) 18.3
Prot After Tax -171.6
3 Yr PAT CAGR (%) NA
3 Yr Average EBITDA margin (%) 20.1
Total Debt 9,504.1
Order Book* 7,683.0
*excludes the two HAM projects worth `1,800
crore; Consolidated data; latest data for 2016/17
Data in `crore unless otherwise stated
Total debt calculated as short-term plus long-
term debt; NA: not applicable since loss making
Source: Company reports & Ace Equity
in 40 per cent of funds during the construction phase and

the developer raises the balance 60 per cent in the debt:
equity ratio most agreeable to the lenders. And in 15
years, it will be paid back as annuity in some 30 odd an-
nuities by the NHAI. The repayment is guaranteed by the
NHAI and the debt is annuitylinked unlike the riskier yield
(density of traffic) linked. Under this model, the NHAI
has so far called for 55 bids for projects worth around
`50,000 crore and out of these, Sadbhav has participated
SHAILESH RAVAL
in 42 of them and emerged the lowest bidder in seven bids

with a total value of around `6,000 crore, says Patel.
With these seven, Sadbhav leads the space winning the
highest number of hybrid-annuity model bids. Out of
these seven, financial closure has been achieved for five
projects. Today, the order book for Sadbhav Engineering
is `9,500 crore. About 65 per cent of the total turnover is
from transportation business (largely highways), 18 per
cent to 20 per cent from irrigation and remaining 15 per
LEADING FROM THE FRONT cent from mining sector, according to Patel.
Typically, Sadbhav Infrastructure, the subsidiary of
N
itin Patel, CFO and Executive Director of Sadbhav Engineering, bids for projects. The execution is
Ahmedabad-based Sadbhav Engineering, takes done by Sadbhav Engineering, the parent company with
great pride in the achievements of his company. strengths in EPC. Today, Sadbhav has presence across 18
Sadbhav is today the leader in the new hybrid annuity states. Currently, the company, Patel seems to suggest, is
model (HAM) for highway projects launched by the gov- driving in top gear, executing 48 EPC projects across the
ernment about 18 months ago, he points out. Under this, country and includes irrigation, mining, metro, road BOT
the National Highway Authority of India (NHAI) pitches and road EPC projects.

RACHIT GOSWAMI
ASHOKA BUILDCON
NEW HORIZONS Satish Parakh

Managing Director
Revenue 3,101.2
T
he year 1997 holds tremendous significance in the
journey of Nashik headquartered Ashoka 3 Yr Revenue CAGR (%) 19.5
Buildcon. That year it graduated from being a pure Prot After Tax -105.8
EPC player and became a developer with its first ever BOT 3 Yr PAT CAGR (%) NA
(Build, Own, Transfer) project - a new concept back then.
3 Yr Average EBITDA margin (%) 30.5
It was the 5 km Dhule bypass in Maharashtra and the
project cost was just `5 crore. Ashoka Buildcons Total Debt 4,447
Managing Director Satish Parakh calls it an early ex- Balance Order book** 7,100
perimental thing that the company wanted to opt for. Consolidated data; latest data for 2016/17; data for
The company was driven by the enthusiasm of the then 2015/16 & 2016/17 were as per IND-AS; Data in
`crore unless otherwise stated; Total debt calculated
state public works department minister and now the as short-term plus long-term debt; NA: not applicable
Union Road Transport and Highway Minister Nitin since loss making; ** givesexecutionvisibility of
EPCbusiness; Source: Company reports & Ace Equity
Gadkari, who was trying to promote BOT projects in
Maharashtra. It has not looked back since then. Today,
Ashoka Buildcon has 29 BOT projects, of which 27 have Buildcon, such as founder and Chairman Ashok
been completed. The key strength of the company, he Katariyas son Ashish and Parakhs son Aditya, and they
says, lies in the fact that it was born as an EPC company are aggressively pushing growth. The company is now
and later graduated to becoming a developer. Our USP is evaluating growth in new verticals such as real estate (it
that we have complete control over the entire value already has bagged a project from Mumbai International
chain, says Parakh. Around 70 per cent of the revenue Airport Limited) and city gas distribution for domestic,
is from roads and about 30 per cent from power. transportation and industrial use. In another three years
Today, the company is present across 16 states. Its we should comfortably be double the size of the company
total consolidated debt is, in proportion to the around (the consolidated income from operations was `2979
`10,000 crore assets that the company owns, according crore in March 2017), says Parakh. ~
to Parakh.
A new generation is now actively involved at Ashoka @EKumarSharma

Smart Cities
GETTING
SMARTER
INDIAS URBAN
INFRASTRUCTURE COULD
CHANGE FOR THE BETTER AS
WORK BEGINS ON SMART CITIES.
By GOUTAM DAS
I
t was too fresh to forget. On October 12, 2014, as the cyclonic storm Hudhud
slapped the port city of Visakhapatnam with wind speeds of over 185 km/hr,
the terminal roof of the citys airport came crashing down; the radar link of its
cyclone warning centre collapsed; colonies were inundated; vehicles damaged.
About 30 per cent of the citys tree cover was lost. The state government esti-
mated the damages at `21,908 crore.
When a smart city awareness campaign kicked off in 2015 through
media announcements, cycle rallies, WhatsApp messaging, door-to-door
surveys citizens of Visakhapatnam picked climate resilience as one of the
top priorities. And during the Urban Development Ministrys Smart City
Challenge, where aspiring cities competed for being selected as a smart city,
Visakhapatnam specifically listed that its disaster and emergency manage-
ment strategy will focus on emergency evacuation plan, delivery of basic
functions and services during emergencies with the goal of eliminating loss of
life and displacement during and post disaster.
The city has progressed well since. It was picked in Round One of the
competition along with 19 other cities. Last year, the city released a set of
Request for Proposals (RFPs).
The first RFPs bundled six projects and all of them were technology-based

Round I: Top 5
Winning Cities
1. Bhubaneshwar
2. Pune
3. Jaipur
4. Surat
5. Kochi
Total winning
proposals:
20
Total cost of
projects:
`48,064 cr
ILLUSTRATIONS BY AJAY THAKURI

Top 5 On Fast Track
1. Lucknow
2. Warangal
3. Dharamshala
4. Chandigarh
5. Raipur
Total winning
proposals:
13
Total cost of
projects:
`29,795 cr
Top 5 in Round II
1. Amritsar
2. Kalyan-Dombivali
3. Ujjain
4. Tirupati
5. Nagpur
Total winning
proposals:
26
Total cost of
solutions. An integrated approach to e-governance and disaster management projects:
was introduced. There were four bidders and the contract was eventually `55,471 cr
awarded to L&T and Fluentgrid, says Vishal Kundra, a city planner and de-
signer with the citys project management consultant AECOM. Fluentgrids
Top 5 in Round III
website says,11 city functions like CCTV surveillance, street lighting, air qual-
1. Thiruvananthapuram
ity monitoring, bulk water supply, solid waste monitoring, green cover 2. Naya Raipur
monitoring and beach safety poles have been integrated with a command and 3. Rajkot
control centre to realise the ultimate safe city monitoring project. 4. Amaravati
Many other cities have rolled out RFPs around a command and control 5. Patna
centre, while a few have already awarded the contracts, much like
Visakhapatnam. But such a contract is just one spec in what is a mammoth Total winning
proposals:
exercise involving everything from affordable housing and redesign of public
spaces to creating core infrastructure, efficient use of energy, proper waste and 30
traffic management. Indias Smart Cities Mission has thus far picked 90 cities Total cost of
across four rounds. The cumulative cost of projects is a staggering `1,89,256 projects:
crore. If successfully implemented, that will impact an estimated 95,955,046 `57,493 cr
of Indias urban population and revitalise cities creaking under rural to urban
migration and out-of-date infrastructure. This mission is critical, considering Source: Ministry of Urban
that 63 per cent of Indias GDP is generated in cities and about 70 per cent of Development
Smart Cities
the countrys net new employment is expected to be 25-seater command and control centre it currently has.
generated in urban areas by 2030. Every city, or state, has adopted multiple ap-
proaches towards how it awards contracts. Seven
Swift Start cities in Madhya Pradesh have cleared the challenge
Round one of the Smart Cities Challenge selected 20 thus far. They have now jointly floated an RFP.
cities with Bhubaneswar, Pune, Jaipur, Surat and Integrated command and control has to be done by
Kochi leading the list. The government then came out every city. So the state decided that instead of taking
with a list of 13 fast track cities. our separate city-level RFPs, they would float a single
Most of the 20 cites in Round One and the fast RFP that has command and control centre on the
track cities have floated RFPs and some on of them have cloud, Murty says. That will be provisioned to every
on-boarded vendors. Work has started, especially city. Each city will only have to just create the physi-
around the technology side, says N.S.N. Murty, cal infrastructure of the local command centre with
Partner & Leader Smart Cities, at consulting major dashboards and video walls. However, the application
PwC. On the hard infrastructure side, work has started and data centre is on the cloud. It will help all cities be
but it will take more time. Time will be taken to execute ready with the platform on the same day.
surveys and the design part. But lot of smart road and Some cities, such as Bhubaneswar, are bundling
solar roof-top projects are being executed currently. many solutions under one RFP. Bhubaneswar has
Tenders have also been taken out for solid waste man- parcelled all smart applications across the city into
agement collection, transportation, vehicle manage- one RFP. It is large and involves traffic management,
ment. Street lighting is taking shape in a big way, he city surveillance, e-governance for the municipal side
adds. PwC is consulting about 15 cities in technology and citizens, city mobile app, vehicle tracking man-
and Public-Private Partnership (PPP) work. agement system for solid waste management, smart
Surat, for instance, has already completed some classrooms, smart health care, elements around traf-
projects such as rain water harvesting. Projects that fic violation management system, etc., says Murty.
could be completed in one year, we have already done Such RFPs require a consortium approach from ven-
that, says M. Nagarajan, CEO, Surat Smart City. dors considering that no company would be able to
Water treatment and sewage treatment plants, intel- meet every requirement.
ligent traffic control systems, Surat Money Card Project, Dr. Krishan Kumar, Municipal Commissioner of
automatic fare collection for city bus these will hap- Bhubaneswar, is a hard working man some consult-
pen in the current and the next financial year, he in- ants this writer spoke to said he worked from 7 a.m.
forms. Surat also wants to build a bigger version of a to 2 a.m. every day when the Smart Cities programme
HOW
CITIES ARE Bhubaneshwar Pune Jaipur
FUNDING IT Total cost: `4,537 cr Total Cost: `2,363 cr Total cost: `2,341cr
PPPs 56.5%
Convergence With Central
11.6% 29.6% 41.5%
And State Missions
SCM State share 10.5% 21.2% 20.9%
SCM Central share 10.5% 21.2% 20.9%
Loans 6.6% 6.6%
Other sources 4.4% 28.1%

Source: NIUA

THE BIG PROJECTS (Over `1,000 crore)
CITY PROJECT AMOUNT (IN ` CR)
Thane 70-acre browneld township 3,974

Bhubaneswar Housing redevelopment/slum redevelopment 2,100
Jabalpur Redevelopment of public land 1,229
Indore Redevelopment of public land 1,418
Raipur Market redevelopment: multi-utility buildings 1,026
Chandigarh Urban retrot development (hotel) 1,312
Chandigarh Urban retrot development (ofce space) 1,256
Source: NIUA
began. His LinkedIn profile tells us of his inclinations: a little bit and think of the entire ecosystem, instead
IAS /Smart Cities/Sustainable Transport/ of jumping from one project to another, Gupta says.
Infrastructure/PPP. He also thinks ahead of time. He cites an example that of Waste-to-energy, a
We are setting up a Bhubaneswar Urban Knowledge specialised subject with many divergent view points.
Centre, which is a soft component. Most of our cities IFC has worked on many projects in China, where the
are short on capacities to perform various functions. waste characteristics are similar to India. There is so
So, the idea was to have experts who can be accessed much we can learn from China. But because we are
by all the city departments, he says. moving in such a hurry, commissioners are not able
The city has proposed projects worth `4,537 to think through this very well. They get directives
crore, more than half of it expected to be financed from the ministry each smart city has to issue mu-
through PPPsa difficult task by all accounts. nicipal bonds and everyone will now make a beeline.
No one is thinking if the city really needs commercial
Irrational Exuberance? financing, and if the city
There is a false sense of optimism, particularly around WHAT SMART can afford it? Can their
the financing part of these projects in many cities, CITIZENS WANT balance sheets leverage
Neeraj Gupta, Principal Investment Officer, PPP municipal bonds?, he
Transaction Advisory, IFC (South Asia), tells this asks. May be a direct loan
writer on phone. is better for the city.
All the officials are very passionate about what Experts believe that a
they are trying to achieve. Nevertheless, it is pretty lot of the output would
safe to say that they will not be able to achieve even be visible by next year
half of what they have planned to in terms of PPPs when many more projects
and borrowings from the commercial market, he Centralised are due for completion.
says. Lenders are worried about the scale of ambition. command and Core infrastructure projects
Some cities want to hike water charges by four times control centre and those around housing,
over the next five years; also raise property taxes. All both heavy ticket invest-
Smart parking
the tough decisions they havent been able to take for system ment areas, may not cruise
the last four decades, they think they will be able to at the pace commissioners
do in the next five years, Gupta says, adding that Common card or even the Ministry of
(payment and
there is a big risk of things going wrong because city Urban Development ex-
operations)
commissioners are in a hurry. pect. The irrational exuber-
In some cities, things could go helter-skelter be- Citizen engagement ance around financing
cause they dont have the right set of advisors; in platform could be the culprit. ~
others because they are influenced too much by pri- Smart water
vate contractors. I wish someone were to slowdown metering @Goutam20

The deserted Mysore airport
which has been included in
the UDAN Scheme
he big, pale blue entrance gate of Ludhiana safety that will prepare them for challenges
T
airport remains shut for most part of the day. after the airport starts functioning again from
It opens only when the airport staff comes to July-end, when it will kick off with scheduled
work or leaves in the evening. Theres hardly flights from Alliance Air and Deccan
been any passenger movement over the last Charters, thanks to the recent government
30 months since Air India closed operations push to regional air connectivity. In June
here. Once in a while, people come to board 2016, the government had come out with a
private chartered flights. civil aviation policy that laid emphasis on
Punjab Police personnel at the gate could making flying more affordable. Then, in April,
barely write. When this was pointed out, the Prime Minister Narendra Modi launched the
Director, A.N. Sharma, said the security staff UDAN (Ude Desh ka Aam Naagrik) Scheme
will shortly undergo training in aviation that caps fares on regional routes at `2,500

Airports
HEADING
FOR
TROUBLE
THE GOVERNMENTS PLAN TO
REVIVE AIRPORTS AND
SUBSIDISE FARES, TO TAKE
VIVAN MEHRA
FLYING TO THE MASSES, IS

RIDDLED WITH PROBLEMS.
BY MANU KAUSHIK
for half the seats in flights with duration of up to one hour. Kolkata account for over 70 per cent of domestic traffic.
In the first phase of UDAN, five airlines have bid for 128
routes covering 70 airports, including 45 underserved/ The Demand Conundrum
unserved ones. Besides this, the government intends to Sharma was selected by senior Airports Authority of
spend `50-100 crore on each of these airports, a large India, or AAI, officials two months ago to speed up the
number of which are undergoing last-minute fixes. renovation work at Ludhiana. His job is to ensure that
However, experts say fare subsidies and capital ex- civil and technical infrastructure is in shape. We did a
penditure alone cannot ensure long-term sustainability survey and found several gaps. The team is working on
of these airports. The biggest lifeline of an airport is pas- them. We are increasing the staff strength from 17 to 22.
senger demand and airport traffic in India is skewed to- Since my joining, we have installed x-ray and metal detec-
wards the metros and tourist destinations. Six airports tion machines, he says.
Mumbai, Delhi, Bengaluru, Hyderabad, Chennai and This is the second attempt to revive this airport. Back

Airports
THERES A NEED TO SUPPORT OTHER

INDUSTRIES AND THE SERVICES SECTOR
IN THESE REGIONAL LOCATIONS TO
CREATE DEMAND
AMIT SINHA, Partner at Bain & Company
in 2014, Kingfisher Airlines and Air India used to fly

to Delhi from here. But high fares and frequent cancel-
lations, especially in winters due to fog, led to a dip in
passenger traffic. The authorities upgraded the naviga-
tion system to DVOR, which costs about `10 crore and
helps aircraft land even when visibility is down to
1,800 metres. The previous system required visibility
of over 5,000 metres. To put this into perspective,
Delhi's IGI airport has CAT III-B equipment that re-
quires visibility of just 50 metres. This did not help as
the airlines had already decided to leave. Ludhiana
has a lot of economic activity. We have demand for
some 20 non-scheduled flights every month, more $80, the fares will go up and that will affect demand. Its
than other regional airports, says Sharma. He is wait- a highly price-sensitive sector, he says.
ing for the state government to approve the Long-term commitment of all stakehold-
master plan, which includes construction of ers is a must for the plan to succeed as ad-
a new terminal building, installation of a QUICK FACTS hocism has not worked in the past. Last year,
superior navigation system, and expansion in a reply to a question in the Lok Sabha, Civil
of runway for narrow-body planes such as
A320 and Boeing 737.
75 Aviation Minister A. Gajapathi Raju said a
little over `600 crore was spent on 25 air-
The number of airports
with scheduled opera- ports in two years when none of these han-
Tough Task tions; there are a total dled even a single scheduled flight. Many of
The airports will have to do a tightrope walk. of 450 airstrips/ these ghost airports, such as Jaisalmer, have
Passenger demand, especially in smaller cit- airports in India fancy terminal buildings and big runways.
ies, is directly linked with timings, connectiv- SpiceJet will be starting flights from Jaisalmer
ity and dependability. If any of these factors `50-100 under UDAN from October.
are ignored, the results could be adverse for crore Critics blame faulty planning of the AAI
both airlines and the airport. For instance, a The amount AAI and political influence for the mess. Demand
flight from Kanpur to Delhi should feed into intends to spend on surveys, they say, have failed to correctly pre-
flights connecting Delhi to other metros. Also, reviving regional dict passenger traffic. Only 75 airports out of
the profile of the city is crucial. Out of 45 cit- airports under regional 450 airports/strips have scheduled operations.
connectivity scheme
ies, just 10 Agra, Jamnagar, Jamshedpur, The government expects the UDAN
Kandla, Pantnagar, Pondicherry, Shimla, Scheme to change things. The scheme offers
Kullu, Ludhiana, Mundra and Shillong are 13 subsidy for 50 per cent seats on regional
large industrial/tourism centres. The number of airports routes, monopoly on the route for three years
To this, G.K. Chaukiyal, Executive AAI makes money from, and a slew of other concessions. Theres al-
Director (RCS) at AAI says UDAN is a demand- out of the 125 ways an element of uncertainty in such
airports it operates
driven scheme and the airlines were supposed projects. We are encouraging airlines to in-
to do due diligence of airport infrastructure vest, and thats why we are giving them ex-
and traffic projections before applying. This is 5 clusive rights to stations, because building
crucial. Traffic growth depends on many Number of private the market takes time, says Chaukiyal.
factors. Oil prices are at $50. If they cross airports in India Will it work? The UDAN initiative, al-

FLIGHT OF FANCY
In the rst phase, AAI will revive
50 underserved and unserved airports with an
investment of `4,500 crore. The airports will be
selected based on the interest shown by
scheduled airlines to y to these destinations
Between 2014 and 2016, the government spent

around `600 crore to revive 25 airports, but could
not attract airlines
It is believed that under UDAN, subsidised air

fares will generate demand from regional
cities, which makes for a strong case for the
revival of these airports. The long-term
sustainability of this demand is questionable
Demand for airports comes mainly from tourists

and businesses. In the absence of these,
the airports are unlikely to do well
Despite over 90 per cent AAI-owned

airports making losses, the national airports
operator remains protable. It generated a net
prot of `2,537.36 crore in 2015/16
THE SUCCESS OF AN AIRPORT DEPENDS
ON REGIONAL GROWTH, AND MANY Airlines is a cyclical business. Since the sector is
SELECTED AIRPORTS LACK SUPPORTING upbeat, airlines are ready to take the risk of ying
to underserved and unserved towns on the back of
ECONOMIC ACTIVITY government subsidies. In a down cycle, they may
MARK MARTIN, Founder & CEO, Martin Consulting need to relook their network
though good, is unlikely to work due to execution challenges. traffic develops, we expect these regional airports to start
The success of an airport depends on regional growth, and earning revenues, says Chaukiyal.
many selected airports lack supporting economic activity. The recent aircraft orders of airlines indicate that
The whole point of UDAN is that its not sustainable, says they have big plans to tap regional markets. Market
Mark Martin, Founder and CEO of Martin Consulting. leader IndiGo, for instance, has plans to buy 50 ATRs;
SpiceJet has signed letter of intent for 50 Bombardier
Airport Infrastructure Q400 aircraft. Both aircraft are suited for smaller air-
The AAI expects that all these airports will be revived by ports. Aviation is a cyclical business. Since the sector
October but some airport officials BT spoke with are not is upbeat, airlines are ready to take the risk of flying to
aware of such a plan. S.S. Magirwar, Airport Director at regional towns on the back of government subsidies. In
Shimla airport, says he does not know about any such plan. a down cycle, they may need to relook at their net-
We renovate our airport every three-four years. Our airport work, says an aviation consultant.
is ready for scheduled and non-scheduled flights. As far as Leisure and native traffic will not stimulate de-
sustainability of UDAN is concerned, it depends on airline mand. Theres a need to support other industries and
operators, he says. Unlike UDAN, where central and state the services sector in these regional locations which will
governments are bearing the subsidy burden, the revival of benefit from new airports, and create demand, says
airports is solely the responsibility of the AAI. Amit Sinha, Partner at Bain & Company.
To a large extent, the regional rush is driven by buoyancy The government is hoping that UDAN will give fresh
in the aviation sector. The AAI, as well as the airlines, are in a stimulus to regional connectivity but it has a lifespan of
reasonably good shape. Despite making losses on 90 per cent three years. Over-dependence on government dole and
airports, the AAI generated a net profit of `2,537.36 crore in lack of demand might take the scheme down the tube.~
2015/16, largely due to earnings from Delhi and Mumbai
airports. The government is funding the entire project. As @manukaushik

Thermal Power
POWER
OFF
THERMAL POWER PROJECTS ARE
STARING AT A BLEAK FUTURE AS
RENEWABLES SURPASS THEM IN
CAPACITY ADDITION.
BY P.B. JAYAKUMAR
SHEKHAR GHOSH
The government seems

to be going slow on
thermal power plants
LESS THAN OPTIMUM
I
n 2000 and 2001, California in the US faced a power crisis. There
were frequent blackouts during peak hours and shortage caused Plant load factor for coal/lig-
power prices to rise up to 20 times. This was despite the installed nite projects has been falling
capacity of 45 GW being much higher than the demand of 28 GW.
Later, it came to light that some energy traders, in collusion with YEAR PLF (%)
Enron, were shutting down lines during peak hours to create artificial 2009/10 77.5
demand. This made a couple of large energy utilities bankrupt. This
is now a case study on distortions in the power market. 2010/11 75.1
Observers of Indias power sector say there is a likelihood of a
2011/12 73.3
crisis here too. Solar power will, in our view, put pressure on power
prices and erode margins of generators, along the lines of what oc- 2012/13 69.9
curred in California, says a recent Morgan Stanley report on the
2013/14 65.6
power sector. It downgraded power utilities, saying that renewable
energy can cause a major disruption for the thermal players. 2014/15 64.46
The analysts said earnings of many thermal power utilities are
likely to come under pressure over the next 12-18 months. Once 2015/16 62.29
battery storage costs reach grid parity, coal-based contracts may 2016/17 59.88
be renegotiated in the long run, they said. Grid parity occurs when
an alternative source generates power at a cost that is less than or 2017/18* 64.92
equal to the price of power from the grid. Companies mainly de-
pendent on thermal power, such as Adani Power, NTPC and JSW *up to May; Source: CEA
15GW
This was the renewable power capacity
added in 2016/17, more than the 11GW
thermal power capacity added during the year
GENERATION BLUES
Conventional power generation has been tapering off after 2014/15
Generation from
conventional Solar capacity
Year sources (BU) Y-o-Y growth Year added (MW) %Growth
2010/11 811.1 5.56 2010 17.8 197
2011/12 876.8 8.11 2011 194.8 993
2012/13 912.0 4.01 2012 1,193.2 512
2013/14 967.1 6.04 2013 2,327 87
2014/15 1,048.6 8.43 2014 3,222.2 44
2015/16 1,107.8 5.64 2015 5,535 71
2016/17 1,160.1 4.72 2016 9,848.2 77
2017/18* 210.2 5.5 2017# 14,588.2 48.1
VIVAN MEHRA
BU is billion units; * Up to May 2017 (Provisional); #till June; Source: CEA, Mercom India
Energy, are likely to be affected, they say. equity players and banks are happy to fund their projects.
Though India has added a record 60 GW thermal While generation and transmission growth plans are
capacity in the last three years, new additions will dry up, on track, the real issue for the sector is distribution.
mainly as power from sources such as solar and wind is Though the financial health of many discoms has im-
reaching critical mass. Last year, for the first time, renew- proved, many are still struggling, and in the long run,
able power capacity addition (15 GW) surpassed thermal many PPAs may have to be re-negotiated, says Sunil
power addition (11 GW). Renewable power cost is now Mathur, Managing Director and CEO of Siemens.
less than `3 per unit, almost on a par with the cost of Private thermal projects are staring at muted de-
power from conventional sources. mand, partly due to non-remunerative tariffs, partly due
While companies are abandoning greenfield expan- to aggressive bids and partly due to adverse perception
sion plans, the sector is facing a host of other issues as due to falling renewable tariffs, Ind-Ra analysts Divya
well. Large underutilised capacities, muted demand, Charen and Siva Subramanian say in another report.
bunched capacity addition, soft merchant power prices, These are valid concerns. India is moving towards
investments in renewable capacities, lack of enough PPAs surplus power even during peak hours. The total installed
(power purchase agreements) and weak discoms add up capacity as on May 31 was 3,30,261 MW, of which the
to a negative outlook for the sector, say India Ratings private sector accounted for 43.84 per cent, according to
and Research (Ind-Ra) analysts. the Central Electricity Authority. The thermal plants ac-
There are several reasons why the future may be counted for 2,21,626 MW, or 67 per cent, capacity. But
worse than the present. The government plans to gener- the Plant Load Factor of conventional plants, which de-
ate 40 per cent electricity from non-fossil sources by termines their health, has been coming down over the
2030 and so wants to discourage new coal-fired projects. last eight years from 77.5 per
An estimated 50 GW thermal capacity is under construc- cent in 2009/10 to 59.88 per cent
tion, but several states are dropping plans for fresh
India had a in 2016/17. The life of numerous
capacities.In the current scenario, I dont think anyone 10.1% old plants is nearing an end. It is
will go for greenfield capacities as many unviable or stuck power decit necessary to undertake modernisa-
brownfield coal power plants are available for sale, says in 2009/10. tion to extend their life and effi-
Anil Sardana, Managing Director and CEO of Tata Power, In 2017/18, ciency, says Mathur of Siemens.
which has offered to give half its equity in the 4,150-MW this is down to India had a 10.1 per cent power
ultra mega power project (UMPP) at Mundra in Gujarat deficit in 2009/10. This is down to
to the state utility. The plant went into trouble after 0.6 % 0.6 per cent. Power generation has
Indonesia changed its coal policy in 2012 that made coal been growing at an average of 6 per
imports from there unviable for independent power pro- cent for the past eight years. Experts
ducers. The government has almost put plans to set up say coal-based companies will continue to operate. They
another five-six coal-based UMPPs in cold storage. may even gain when growth picks up. But those that
While conventional projects are burdened with debt depend on coal should add renewables to balance their
and facing shortage of funds, renewable power developers portfolio and reduce risk, they say. ~
are at an advantage due to falling cost of inputs such as
solar panels and the cost of financing as both private @pb_pbjayan

THE
POWER
GAME
INDIA IS KEEN TO
BECOME A POWER
MAJOR BUT ITS
EXISTING POWER
GRID REQUIRES
A MASSIVE
OVERHAUL
BY ANILESH S. MAHAJAN
Indu Shekhar Jha

Chairman and
Managing Director,
Power Grid Corporation
of India
Power Grid
CAPACITY ADDITION
F
IN 2012
30,000MW
IN 2017
75,000MW or Indu Shekhar Jha, Chairman and

Managing Director of the state-promoted
transmission giant Power Grid
Corporation of India (PGCIL), the priority
FALLING DEMAND (ANNUAL) lies in a different set of tasks. Unlike his
predecessors, he is neither designing
IN 2016/17 * new projects nor struggling with con-
gestion issues. Instead, he is working on
283GW boosting the countrys transmission

capacity that will ensure seamless power
flow from renewable energy sources.
Known as the green energy corridor,
this `43,000 crore project was envis-
BY 2022/23** aged in 2013 and involves grid exten-
sions and upgrades for connecting re-
225GW
*Based on 18th Electricity Power Survey
newable energy plants to the national
grid. While new and upgraded transmis-
sion lines will resolve intermittency is-
sues that often plague green power
**Based on 19th Electricity Power Survey sources, inter-regional and intra-re-
gional transmission networks, and in
many cases, intra-state evacuation sys-
tems, are being revved up to meet cur-
rent and future demand. All these must
VIVAN MEHRA
be top priorities if India is to make good

its Paris climate agreement and achieve
Prime Minister Narendra Modis target
of integrating 175 gigawatt (GW) green
power by 2022.

Power Grid
Where India Stands policy shift has put the company back in the drivers
So, what is the situation on the ground? India has five seat, and it is now fully responsible for implementing
interconnected transmission regions which operate as critical projects such as the green corridor. State gov-
a well-synchronised national power grid. Its capacity ernments, too, find it convenient to work with it, either
was increased to transmit 7,22,949 Mega Volt Amp via the nomination route or through joint ventures.
(MVA) by the end of the financial year (FY) 2016/17 Jhas workload has increased as the Power
from 5,30,546 MVA in 2013/14. The network was Ministry has kept the private sector at bay as far as the
also expanded from 2,91,336 circuit km (CKM) to green corridor is concerned. According to ministry
3,66,634 CKM during the period. India is expected to officials, Power Grid will set up new transmission lines
add another 1,00,000 CKM by 2022. as well as pooling stations. Speed is of crucial impor-
The numbers look impressive, but are these tance here and so Power Grid is roped in for major
enough to meet the generation-transmission gaps? time-bound projects such as developing transmission
According to a report by industry watchdog Central lines to connect solar parks and inter-state transmis-
Electricity Authority (CEA), the current transmission sion systems. Among these are four 765 kilovolt (KV)
projects, those under construction and in the planning Bikaner-Moga transmission lines, which will help
phase, should be adequate as the country has installed evacuate green energy from Rajasthan to North India.
capacity of 329.3 GW and peak power demand of The company has completed the first leg of the
159.8 GW. CEA has projected peak demand at 235 GW Green Corridor project a 500 MVA transmission sys-
and power requirement at 1,611 billion units by the tem for the Ultra Mega Solar Park (UMSP) in Anantpur,
end of 2021/22. It will be around 17 per cent and 15.4 Andhra Pradesh. Now, Jha plans to implement similar
per cent lower than the corresponding projections by systems for eight other UMSPs across seven states. In
the 18th Energy Power Survey Report. May this year, work
Such projections should not be a matter of con- started on the 800 K V
cern. According to Power Minister Piyush Goyal, in- SNAPSHOTS UHVDC (ultra high voltage
creasing energy efficiency and upgraded infrastruc- direct current) Raigarh-
ture will reduce wastage (hence, the projected fall in Pugalur transmission sys-
consumption) and cut down aggregate technical and tem that will connect
commercial losses. The use of LED lights and energy- Raigarh in Central India
efficient appliances has helped India reduce its annual to Pugalur in Tamil Nadu.
peak demand by at least 20 GW. One can expect more There is more to the
when the country adopts smart grids at the local level, report card. Over the past
the minister points out. three years, the national
By 2022, most Indian
Jha, however, expects demand to rise shortly. grids strength improved
homes will have smart
This is a temporary mode. The density of electricity meters. Haryana and from 33,950 MW to
consumption is increasing. We are also expecting Delhi are in a close race 75,050 MW. Also, the
economic activity to pick up soon. We have to be to emerge at the top southern grid has been
ready before the tide arrives, he says. fully synchronised with
Staying future-ready is not braggadocio if one The rst phase of the the western grid with the
takes a close look at the organisation he heads. As the ambitious Green commissioning of the 765
Corridor Project has
central transmission utility, PGCIL does the wheeling KV Raichur-Solapur trans-
kicked off with a 500 MVA
of power generated by all central units and inter-state transmission system at mission system.
independent power producers. It also undertakes the Ultra Mega Solar Park Nowadays, you more
inter-state grid upgrades. On the other hand, state in Anantapur, Andhra or less pay the same tariff
transmission utilities (STUs) look after intra-state Pradesh, commissioned for electricity across the
transmissions and grid upgrades. in April 2016 country. It means conges-
tion issues are over, says
The Green Corridor will
In Drivers Seat be connected with nine Deepak Amitabh,
In 2016, the government brought in a new clause Ultra Mega Solar Parks Chairman and Managing
mandating that all projects of strategic importance in seven states with Director of Power Trading
would be nominated to state-run Power Grid instead a total capacity of Corporation, Indias big-
of allocation via tariff-based competitive bidding. The 7,200 MW gest electricity trading

SMART GRIDS: A BIG LEAP
G
urgaon might be the first city to get a
smart grid project,
but Tata Power-
company. It is another feather in Jhas cap.
Delhi Distribution Ltd
Some private players cry foul as Power Grid is al-
(TPDDL), a power distribu-
lotted work via the nomination mode. But according
tor with a licensed area of
to some solar park developers, the catch lies in imple-
551 sq. km in North and
mentation issues that might have tilted the scale.
North-West Delhi, may
Getting right of way for transmission lines involves
soon speed things up in
extensive negotiations with farmers and other stake-
the capital by launching a
holders, one of them points out. It is nearly impos-
smart grid and smart meters. TPDDL has
sible for foreign investors or outsiders to get it done.
tied up with Nokia to leverage its technology
That is why a PSU is in charge and it is working.
and upgrade its substations. The discom is
also planning to instal smart meters by the
end of 2017.
Will Green Power Thrive?
For Jha, the biggest challenge is the implementation
As smart networks help improve supply re-
of the green corridor. To start with, a sync between
liability, discoms can plan their power pur-
solar parks and corresponding transmission projects
chases and utilise renewable energy even
is not easy. A solar park can be built in about 18
more, especially from solar rooftops. Smart
months or less while a transmission facility takes at
meters also allow people to understand their
least 24 months. Again, it is difficult to get finance
consumption patterns and monetise additional
for a solar evacuation project as cable utilisation is
energy generated by solar rooftops.
at 20 per cent or less. Also, green energy units are
India pushed the National Smart Grid
scattered all over the country and it is not easy to
Mission as a follow-up to the discom debt
sync them.
rejig scheme UDAY (Ujwal DISCOM Assurance
But the biggest bottleneck is the lack of low-cost
Yojana) and also for synergizing green energy
financing. Private players working on transmission
usage with greater energy efficiency. Its target
projects are finding it difficult to achieve financial
is to replace all old meters with smart ones
closure as lenders are not enthusiastic about the
by 2025.
sector. Worse, public sector companies are yet to
As of now, the Ministry of Power is funding
start investing in such projects. For instance, Centre-
around 40 per cent of the cost as grants from
backed Power Finance Corporation and Rural
budgetary allocations to the state discoms to
Electrification Corporation fund states to undertake
implement infrastructure upgrades. The states,
distribution reforms, but no investment is made in
however, find the amount too meagre as they
transmission projects. State-promoted transmission
have to put in initial capital for pilots and tests,
companies are pushing for tariff-based bids to usher
which are not reimbursed. Discoms, too, find it
in more private investments, but the response is still
difficult to convince their consumers to change
sluggish. Despite policy push and the 24x7 power
meters on their own, while making it voluntary
for all by 2022 scheme, which has opened up invest-
would defeat the purpose of moving towards
ment opportunities worth `12 lakh crore, the pro-
smart grids. Ultimately, the savings will be
jects allocated to the private sector slumped to
huge, even though there are initial hiccups. For
`9,800 crore in 2016/17 from `21,200 crore in the
instance, TPDDL is expecting to save at least 12
previous year.
MW daily when it upgrades to smart grids.
Funding issues do not seem to worry Jha, who
What gives the states a little respite is that
has a financial plan in place. Forty per cent money
smart meter and smart grid projects are now
comes from the clean energy fund of the Ministry of
considered a part of the smart city infrastruc-
New and Renewable Energy; another 40 per cent is
ture and, hence, can mobilise resources on their
soft debt [from the likes of Asian Development Bank
own. Smart grids also invite cybersecurity chal-
and KfW], and the rest comes from state transmis-
lenges. Consequently, the power ministry is
sion companies. Confidence is the keyword for him
working on a new outfit called Power CERT-In
and he may need every bit of it with huge and com-
a dedicated cyber intelligence unit for transmis-
plex tasks on his plate. ~
sion as the states want to know all about
safety measures before they take the big leap.
@anileshmahajan

THE
DEFENDERS
START-UP CRON Systems
CRON SYSTEMS IS WORKING WITH DEFENCE

FORCES TO SECURE THE BORDERS
BY DEVIKA SINGH
SAURAV AGARWALA
Co-founder,
CRON Systems
T
SHEKHAR GHOSH
TUSHAR CHHABRA he western borders of India are
Co-founder and often considered the most sensitive
Chief Executive, territory that the armed forces
CRON Systems
have to guard against intrusion.
And people like Rakesh Sharma, a
former Inspector General of the
Border Security Forces ( BSF ),
Jammu Frontier, know it only too
well, especially how arduous the
task is and the chances of human
errors slipping in.
There can be misjudgement in
detection as it is difficult to keep a
human being alert and active for
day and night, explains Sharma.
To avoid such trip-ups, the BSF
decided to deploy cutting-edge
technology that would add an ex-
tra layer of protection in the sur-
veillance system. The solution they
wanted was a virtual wall that
would alert troops about intrusion
attempts and help them decide on
further action in real time.
So, Tushar Chhabra, co-
founder and Chief Executive of
CRON Systems, stayed at the bor-
ders for six months and interacted
with the troops to come up with
the product called Kavach. Simply
put, the intrusion detection system
creates a virtual wall with the help
of poles that work on transmitter-
receiver topology. The transmitter
emits infrared and laser rays, and
the receiver constantly senses
them. Whenever there is an intru-
sion attempt, the receiver is not
able to sense the uninterrupted
beams and raises the alarm.
Whats more, The virtual wall
comes paired with a quick response
START-UP CRON Systems
tool, a console unit that displays the status QUICK FACTS Our business model is simple. We start
of the Kavach units, and also alerts secu- with direct sales, and after that, most of the
rity personnel (in the case of an intrusion) THE BUSINESS money comes from annual maintenance
using CRONet, the companys encrypted Founded by Tushar
contracts, upgrades and services, details
wireless communication network. Then Chhabra, Saurav Agarwala Chhabra. The company also charges for its
there is MICRON, a control-and-command and Israeli national CRONet and MICRON services.
platform, which manages all these units, Tommy Katzenellenbogen, The BSF and Indian paramilitary forces
CRON Systems has
analyses the data received and predicts developed perimeter are among its key customers. But the com-
future intrusion attempts. security solutions pany says it will soon cater to the Indian
Besides Kavach, the start-up has de- Army. CRON has recently completed its
veloped an array of interesting products, FOUNDED IN first product pilot on the western border
keeping in mind the requirements of the 2015 and now plans to set it up across a 50 km
armed forces. Integrated as a whole, these stretch. Chhabra says the basic cost for
devices offer a comprehensive perimeter HEADQUARTERS securing per km is about `25 lakh.
security solution, a field where CRON Gurgaon The company did not disclose its finan-
wants to carve a niche for itself. cials, but as per a filing with the Ministry
INVESTMENTS
The start-up has already tied up with of Corporate Affairs, it clocked `8,47,555
Undisclosed amount from
200-plus original equipment manufac- in revenue between October 2015 and
YourNest in 2016
turers for sourcing parts for its products, March 2016, and incurred losses of more
which it assembles at its facility in Neb REVENUE than `26,000 over this period. CRON
Sarai, New Delhi. However, the designs `8,47,555 between Oct 2015 claims it will break even by the end of the
are its own and a team of electrical and and March 2016 current financial year and also come up
mechanical engineers have been hired to with several products which are in the
design those. To ensure that its products KEY CUSTOMERS pipeline. Plus, it is upgrading all its exist-
have the best possible technology edge, BSF, paramilitary forces ing systems. Its primary aim is to secure
CRON is also working with overseas com- Indias 15,000 km long border, but in the
panies an Israel-based drone manufac- INSTALLATION COST long term, the company wants to expand
`25
turer for drone integration and a defence beyond government business and get into
robotics company for integrating its rov- the fast-expanding B2B space.
ers with CRONs surveillance systems.
The start-up currently employs 36 people A Future beyond Defence?
but plans to expand its team to about 100 Lakh According to Dhiraj Mathur, a partner of
by the end of this year. for securing every km PwC, defence is the space for companies
that either have a significant size and ex-
The Playing Field perience or a huge manufacturing capa-
CRON has done ample research in several bility. He, however, agrees there might be
high-tech areas, including the Internet of scope for start-ups in niche areas, some-
Things (IOT), lasers, artificial intelligence, automation, thing so novel that no one has done it so far; small things,
encrypted communications and data analysis, which has where the investments required are relatively low, and
helped it develop extremely sophisticated intruder detec- there is a large demand.
tion and deterrence solutions. But its foray into the de- With Indias defence spending at `2.74 lakh crore in
fence space has not been smooth. Chhabra says the big- the 2017/18 Union Budget and the governments initia-
gest hurdle was getting permission to stay in borders ar- tive to encourage homegrown products, the outlook is
eas, but convincing investors was not easy either. We positive. Even then, CRONs dependence on defence
are talking about defence hardware. So, most people ask projects may hinder its future growth as these chunky
if it is such a great idea, why somebody has not done it contracts only come up once in two-three years.
before. It is not easy to convince people. Aware of this shortfall, the co-founders have already
Nevertheless, the start-up has managed to raise an started looking at the commercial and residential estab-
undisclosed amount in pre-Series A funding from venture lishments for growth. Perimeter protection is one of the
capital firm YourNest. According to Girish Shivani, one of largest markets in the world. Everybody is trying to se-
the founding partners at the VC firm, investment decisions cure their perimeters. So, there is a massive market. Also,
become easier when the product has been tested in the our primary goal is to automate perimeter protection. So
market and has found a good response. That is what has the products will keep evolving, says Chhabra. ~
made the cut. Add to that a sound revenue model and a
diversified expansion plan and the future looks promising. @DevikaSingh29

PERSONAL TECH
Google
Translate
Smarter
Than You CamCard
Think
With the
right apps,
you can
turn your
smartphone
camera into
a utility
machine. PhotoScan
BY NIDHI SINGAL
t the rear of your smartphone is a send it on mail or save it on the
A
tool that can do much more than cloud, its not the most professional
click scenic landscapes and beauti- way. You dont have to have a
ful portraits. Be it refurbishing old scanning device either. Scanning
documents into sharp PDFS, swiftly apps such as iScanner by BP Mobile
saving business cards into the instantly turns your smartphone
phones contact list or being a per- camera into a mobile scanner. The
sonal translator on your travels app detects the borders of the docu-
abroad the enhanced camera ment, snaps a picture and saves it
optics on the smartphone can do in PDF or JPG format. You can save
these and more, when bundled the document in grayscale, black
with easily available apps. and white or colour formats; and
To save yourself considerable can remove noise as well. The
time and effort, download the apps scanned document is sure to look
below and use the cameras prow- like a professionally scanned ver-
ess to digitise your world. sion, and is ready to be shared,
emailed or printed in one tap.
Scan with OCR: While it is easy While the basic version of the app
to click a picture of a document and is free, the higher version priced

Digital memories: We all have
QR code photos of our childhood and the
scanner good old days that we so desper-
ately wish stayed blemish-free.
Making a digital copy is the best
solution. You can do it using the
free PhotoScan app by Google
which converts physical copies into
digital ones in a few seconds. This
iScanner app detects the edges, straightens
the image, rotates it to the correct
orientation, and also removes
glare. High-quality scanned photos
are then saved to Google Photos
and from there can be shared and
securely backed up.
Translator in your pocket:

When travelling abroad, your
smartphone camera can help you
overcome language barriers. Apps
such as Google Translate can trans-
late signboards, menu cards or any
written text into your preferred
language in real time. All you need
RAJ VERMA
to do is download the Translate

app, select the language you are
translating and the language you
want to read the text in; point your
camera at the text you want to
translate and voila!
QR code scanners: QR code

scanners may not be in frequent
at `400 for iOS and `320 for manually can be cumbersome. You use, but do come in handy. These
Android includes a built-in docu- can make use of apps such as machine-readable codes made of
ment editor that allows you to e- CamCard that scan a business card black and white squares are often
sign the document, offers password and store details in your phone- seen at tourist destinations, on
protection of the scans and also book using your phone camera. It business cards, on advertisements,
recognises text with optical charac- can do so with great accuracy it events, etc. By scanning the code
ter recognition (OCR). It also offers reads details and suggests you to one is redirected to a URL for more
unlimited document scanning, cross-check them before saving. A information. It is also used as a
cloud back-up, and file manager digital copy of the card is also saved destination for e-tickets and cou-
services. Abobe Scan is yet another within the app for future reference. pons, or to give details such as price
app that has a built-in OCR feature While setting up this app, you have and reviews about a product in
allowing you to reuse scanned the option to scan your own busi- stores. Although Androids Play
content by creating high-quality ness card and add a photo to it. The Store has several apps, QR Code
PDFS to work on in Adobe Acrobat next time you run out of physical Reader and Scanner by Kaspersky
Reader. cards, digital business cards can be Lab are the best ones. iOS users can
exchanged using the Card Radar opt for the Free QR Code Reader by
Business card reader: With feature with another CamCard MixerBox Inc.
visiting cards still in vogue, saving user. This app is available for both
them as contacts on your phone iOS and Android users. @nidhisingal

PERSONAL TECH
All Work and Play

With improved hardware, the new 12.9-inch iPad
Pro emerges as a great productivity device.
BY NIDHI SINGAL
Keyboard
iOS 11
Thin and
112 BUSINESS TODAY August 13 2017 lightweight
Apple Pencil
Rich
S
ince its inception in 2010, the display
design of the iPad has remained
fairly unchanged. Apple did
experiment with the display size by apps based on usage across iPhone
launching variants such as the Mini or Mac appear on the right. Swiping
and Pro, while keeping the circular up from the bottom brings up the
home button intact. The new 12.9- dock along with the app switcher for
inch iPad Pro replaces the one multitasking and the control centre
launched in October 2015, and for shortcuts. Switching between apps
competes head on with Microsofts is quick and iOS 11 remembers the
Surface range. The display is super combinations of apps multitasked
bright boasting 2,732 x 2,048 pixel with previously. Apart from split
resolution and the device is sleek at screen view, which the previous iP-
6.9-mm thickness. It is light ads, too, support, the new one has
weighing 677 gm and easily slides additional features such as drag and
into a 13-inch laptop sleeve. drop between apps. For instance, I
Apples touch experience is un- could simply drag an image or a URL
paralleled and now has been further from the Safari browser and drop it
enhanced with its ProMotion technol- into notes or even an email when Split
ogy which is powered by a separate View is open. tions for handwritten notes, but it did
core in the iPads processor. The The new Files app brings together not work for us.
ProMotion technology delivers re- files from apps, cloud and even The full-size smart keyboard en-
fresh rates of up to 120Hz (most de- Dropbox in one place; recently hances productivity manifold. Typing
vices come with 60Hz refresh rate) for worked-on apps can also be accessed is intuitive; it also supports keyboard
fluid scrolling, greater responsiveness from the Recent tab within the app. shortcuts for switching between apps
and smoother motion content. On the There is a new document scanner in and commands such as copy, cut,
new iPad Pro, depending on the con- the Notes feature that automatically paste and more. While this original
tent on the screen, the refresh rate scans documents, and enables digital keyboard is priced on the higher side,
varies from 24Hz to 120Hz. For in- signatures using Apple Pencil. The there are several third-party
stance, the homescreen has a lower Pencil stylus can also be used to mark Bluetooth keyboards that you can
refresh rate, but while watching vid- up screenshots and PDFS with Instant consider. Our review unit came with
eos or playing games the refresh rate Markup. The iPad Pro 12.9-inch is the Apple Pencil and the smart key-
increases. still shipping with iOS 10, but we in- board. When used as the primary
The touch response, for both fin- stalled the Public Beta version of iOS device, the productivity of the 12.9-
ger touch and the Apple Pencil Stylus 11 to test these new productivity inch iPad Pro was impressive be it
(needs to be purchased separately), features. The final version of the iOS typing, switching between apps or
has been improved. Creative profes- 11 will be released later this year. the drag and drop feature.
sionals will be delighted at the respon- Apple also claims to offer search op- Using the Pages app (Apples
siveness of the stylus on this new de- word processor), I was able to share
vice. Apple has also added the A10X documents with non-Apple users.
fusion chip, which is 30 per cent The only thing I missed was the
faster than the previous generation BAG IT OR JUNK IT Archive folder as in the Outlook Mail
iPad Pro, offering a far better experi- Its high on productivity;
go for it, if you dont mind on my laptop. Another let-down is the
ence while editing 4K videos or pho- shelling out extra for lack of a USB port for plugging in flash
tos which can be taken from the 12- accessories drives one has to invest in special
MP rear camera on the iPad (same as drives with lighting connectors. It also
on the iPhone 7). Professionals can PRICE: `63,500 FOR 64 GB falls short on the storage front 64-
WI-FI
use special editing apps like Affinity GB storage in the base model is inad-
Photo, Plotagraph, Adobe Photoshop RATING: 4/5 equate for a primary machine. The
Lightroom, etc, too. battery back-up was impressive even
A lot of credit goes to the produc- PLUS: iOS 11, display, when used as a primary machine; a
processing power, battery
tivity features and enhanced UI of the single charge lasted a day with close
iOS 11. The highlight of the iOS 11 is MINUS: Additional cost for to ten hours of usage documenta-
the app dock where one can add fa- stylus and keyboard tion, browsing, streaming videos and
vourite apps on the left and suggested playing games. ~

EX-LIBRIS
Worms-eye View
A remarkable account of the stark disparity that exists in India and
what policymakers must do to overcome it. BY ANILESH S. MAHAJAN
I n May this year, the streets of India witnessed a paradox of sorts.

While there was much fanfare as the NDA government celebrated
three years in power, a disgruntled lot was out on the streets
protesting against the alleged atrocities they were being subjected
to. As ministers were busy giving interviews and addressing press
conferences, with the propaganda machinery working to its full poten-
tial, farmers and the Dalit community were crying foul. The contrast was
unmistakable. One could not help but question if the establishment was
crumbling. How could such starkly different voices emerge from the same
country at the same time?
Anirudh Krishnas book The Broken Ladder - the Paradox and the Potential
of Indias One Billion, attempts to answer these questions. What it denitely
does is compel you to look for answers with a different perspective.
The author demolishes the typical portrayal of India vs. Bharat, arguing
that India is at the same time a rich country solving rich-country problems
and a poor country trying to solve poor-country problems. He doesnt beat
around the bush, but puts forth his arguments right from the rst chapter
Dollar Economy vs Rupee Economy. Although India has seen rampant
growth in the past two decades, the gap between haves and have-nots has
become wider. These two decades have seen two contrarian views emerge.
The
T
Thhe Broken
Bro
Brok
Br ok
ken
en Ladder:
Lad
adde
der:r: One, professed by academicians such as Jean Drze and Amartya Sen,
T
Th
The
he Paradox
Parado
Pa
Para dox and
dox
do a d
an was that the countrys democracy provided the basis for more effectively
improving the lot of poorer people, and that by making representations,
the
the Potential
Potent
Potenttial
ial off
mounting protests, amassing public pressure, and mediating with public
Indias One Billion
ofcials, civil society organisations would help direct policymakers atten-
BY ANIRUDH KRISHNA tions toward the concerns of the less well-off. They believed that democ-
PAGES: 382 racy, growing stronger, would enable poorer people to climb higher.
PRICE: `599 The other view was that faster national growth by creating employ-
PENGUIN VIKING ment, raising tax revenues and closing the gaps in infrastructure require-
ments would help everyone move up the ladder, providing better opportu-
nities to both rich and poor individuals. The likes of Jagdish Bhagwati and
Arvind Panagariya supported this view.
Krishna, a former IAS ofcer who is now Edgar T. Thompson Professor
of Public Policy and Professor of Political Science at Duke University, US,
believes that both these views are relevant and require immediate actions to
be taken. But is there a middle path? The current NDA government is trying
to portray that it is working towards the worlds biggest poverty alleviation
programme and that its discourse is a blend of both.
Krishna uses his grip on anthropological studies and development re-

THE
THE KNOWLEDGE ILLUSION FORTNIGHTLY
By Steven Sloman and PICK

Philip Fernbach
Price: ` 599
A compelling case from two
leading cognitive scientists that
people are like bees and society
is like a beehive: true intelligence
lies not in our individual brains
but in the collective mind.
BUSINESS BESTSELLERS*
The
T Subtle Art of
Not
N Giving a F*ck
By
B Mark Manson
search to make lucid arguments. Promoting rapid economic growth Harper
H Collins
and strengthening democracy is essential for improving the collective P ` 599
Price:
well-being of a nation. In his arguments, Krishna also slips in that
only those able to make the connections are able to gain the protec-
tion of democracy and benet from the nations economic growth.
To ordinary people, they are wide-ranging and faraway notions. The
reason, according to Krishna, is that these two perspectives also lead
to two perverse consequences setting up of resourceful lobbies to The Unusual
seek favourable contracts or bailouts from a mess, creating an unfair Billionaires
environment. It also undermines the poorer sections ability to invest By Saurabh Mukherjea
in its own education and health. Penguin
He cites this as the key reason why most Indians are not able Price: `499
to harness their talent and capitalise on opportunities. However,
giving rights to the poor, he
says, doesnt mean they have
Only those with developed the capabilities to
realise their potential to succeed.
connections gain Krishna emphasises the need to
understand poverty and the poor Tools of Titans
To
the protection of in a better way. Putting in place a
By Tim Ferriss,
democracy and universal guarantee of minimum Random House
Ra
living standards for all, he is Price: ` 799
Pr
benefit from the certain, would resolve many of
the problems.
nations economic The authors writing style
is empathetic; he brings in
growth real stories to make his points.
Although this form of narrative
is conventional now, Krishna excels with his in-depth knowledge
on the subject and human interest stories. The book is packed with
YYou Too Can
insightful chapters; Beyond-5km Villages: Where the Lights arent
Shining Brightly, Up and Down in the City, and Preventing Fu- BBy Prakash Iyer
ture Poverty deserve a special mention. TThe Times Group Books
The book contains good research, arguments and critical analy- PPrice: `249
ses of counter narratives that Indias policy and law makers can
refer to. With PM Modi talking about eliminating poverty by 2032,
doubling farmers incomes, bringing in social equality among all
sections of the society, the book has come at the right time. ~
*Top books by sales for July 03 - 17;
Includes only books released after Jan 1, 2015;
@anileshmahajan Information provided by
EX-LIBRIS
The Sky Is the Limit

Loaded with realistic advice and experiences, the book is a great
encouragement for women in pursuit of success. By Roma Priya
A nju Jains book Step Up: How Women Can Perform Better for Suc-
cess, speaks about gender disparity, draws out the commonalities
among women and denes the challenges they typically face.
The subject matter of the book is not something we havent heard
about before, but the practicality in her writing makes this book relatable and
distinct from others.
As one ips through the pages, one realises that this book has beautifully
captured the daily challenges a woman faces in her personal and professional
life in a very concise manner by way of illustrations, practical reasoning,
interviews, personal experiences and research data. The author has illustrated
different roles of a womans life as a working professional/entrepreneur, wife
and mother, and the struggles related to performing multiple roles simultane-
ously and striving to full responsibilities and aspirations. She has not only
highlighted the struggles, but also given practical techniques and strategies
that a woman can employ to achieve success.
She emphasises that women should have clarity of purpose and vision for
their life. Women should determine how important that purpose is to them
and then commit to achieving it. Having done that, she states women should
onboard and align all the stakeholders in her life be it her spouse, children,
parents, in-laws, organisation, colleagues and extended networks with her
vision. The constant efforts of onboarding people and their support would
help women focus and prioritise on what is important to them, which in
return will help them realise their aspirations.
I agree with the author that a healthy partnership is important to succeed.
What is refreshing is that the book does not have a feminist undertone and is
not anti-men. Rather, it breaks the stereotypes and looks at men as contribut-
ing participants to womens success.
Step Up: How The book gives very practical takeaways to women on setting goals, mak-
Women Can ing a plan of action, prioritising, taking control, making conscious choices and
Perform Better for informed decisions to lead a more fullling life. It presents a holistic picture
Success that explains how society and role divisions have evolved, their impact on the
present scenario and what can be done to enable a change going forward to
BY ANJU JAIN
PAGES: 304 see more women in leadership roles. She has interviewed leaders, both women
PRICE: `399 and men, on the challenges they faced and the solutions that worked for them.
PENGUIN RANDOM HOUSE Their anecdotes and life stories are indeed inspiring.
Believe you can and you are halfway there, I truly swear by that state-
ment! I relate to Anjus theory about visualising positive outcomes and having
self belief. Fear and self-doubt tend to manifest struggle and failure. I know that
I wouldnt have had the courage to leave my cushy job and take the leap of
faith to start my own venture if I did not trust my capabilities and didnt have
the ability to sustain through uncertainty. As a woman entrepreneur, I have
personally deployed many of the strategies that Anju has emphasised in her
book and have found them to be very useful. ~
The reviewer is Founding Partner at Burgeon Bizsupport LLP

PEOPLEBUSINESS
KALANITHI MARAN
CMD, Sun Group
Crying Foul
The SpiceJet-Maran battle has taken a new turn with former
owner Kalanithi Maran asking for over `2,000 crore as
compensation from the airline and promoter Ajay Singh for
breach of contract. The Marans had sold their stake in the
airline to Ajay Singh in 2015 for `2 and had infused `679
crore in the company seeking issuance of stock warrants in
return. The Marans are claiming compensation since
SpiceJet failed to honour this contract. In a separate case,
SpiceJet has moved the Supreme Court against a Delhi High
Court order which directed the airline to deposit `579 crore
owing to the share transfer dispute with the Marans.
N.R. NARAYANA MURTHY

Co-founder, Infosys AZIM PREMJI
Chairman, Wipro
In Retrospect Sunny Days

Infosys Co-founder N.R. Narayana Murthy in an Wipro Chairman Azim Premji is upbeat on the growth of IT
interview with a business news channel said his services in the days ahead, but expects the volatile economic
decision to leave Infosys was his biggest regret environment to continue for a while. At the companys
ever. A lot of my founder colleagues told me not Annual General Meeting in Bangalore, he talked about
to leave Infosys in 2014, he told the channel. facing 2017 with an increased amount of optimism than in
VIVAN MEHRA
However, he also added that he did not miss being 2016. We continue to see a volatile economic
on the campus daily. Murthy had first departed environment but the economic prospects for our main
from the company in 2011 but joined back in countries of exports are a little better. And clients are
2013 as Executive Chairman when the company looking to spend on tech, as tech is becoming a major
was going through a rough patch. He quit again differentiator, he said.
after appointing Vishal Sikka as the CEO.
COMPILED BY DEVIKA SINGH
A Light Fades Out
By ANANTH KRISHNAN
A
t a time when Donald Trumps America grap- For the first time, lawyers were taking up environmen-
ples with building walls and withdrawing from tal and rights abuse cases, and the press was slowly push-
the world, there has been a growing tempta- ing the boundaries. And Liu Xiaobo was the most recog-
tion for some to see China, the worlds second- nised face of this new emerging movement. His jailing in
largest economy, as the next champion of the liberal 2009 will perhaps be remembered as the day the party
global order. There can perhaps be no starker reality check stamped out this emerging civil society.
and one that should put paid to such notions than the Where does his death and his hasty cremation
untimely death of Liu Xiaobo. (Lius ashes were buried at sea, ostensibly to ensure his
On July 13, Chinas most well-known dissident, writer grave couldnt become a monument for his supporters)
and Nobel Laureate died from liver cancer in a hospital in leave China? At his trial, Liu expressed the hope that he
Shenyang, a city in northeast China where he was serving will be the last victim of Chinas endless literary inquisi-
a 11-year jail term for inciting subversion of state power. tions and that from now on no one will be incriminated
Liu was detained in 2008 over the circulation of because of speech.
Charter 08, an unprecedented pro-democracy call for re- That was not to be. In the eight years since Lius jail-
form signed by more than 300 Chinese intellectuals and ing, the economy of Xi Jinpings China has thundered on
thousands of others. Their key argument was that despite despite hiccups, yet the state has only further curtailed the
Chinas prosperity after three decades of reforms, the exercise of rights enshrined in Chinas own constitution.
countrys one-party political system was an anachronism. Despite everything that he and his wife Liu Xia who
Liu played a role in drafting the text as well as in moderat- has been under house arrest since the Nobel award in
ing its message. The Charter mostly called on the CPC to 2010 went through, Liu remained an optimist. It is
uphold the constitution and guarantee freedom of speech precisely because of such convictions and personal experi-
and association, although its call to end one partys mo- ence that I firmly believe that Chinas political progress
nopoly on power was deemed too threatening by the state. will not stop, and I, filled with optimism, look forward to
As recently as in 2008, Chinese civil society, although the advent of a future free China, he had said at his trial.
still tightly bound by the one-party state, was beginning And that was because Liu knew that how much ever
to find its voice. A growing middle-class, enjoying prosper- the state tried to silence him, his message would
ity, became increasingly concerned about its rights even endure. As Geremie Barme, Australian Sinologist and
REUTERS
if not its political rights, its right to safe food, a clean envi- long-time friend of Lius, wrote in a tribute, Xiaobo will
ronment, independent information and living without always be part of that Other China: the China of possibility,
harassment from the state. hope and humanity.
LEADERSPEAK Jose Roman
India is
among the most
challenging
markets
Jose Roman, Corporate VP & Global Head of Datsun for Nissan Motor tells Chanchal Pal Chauhan that
the company is looking at the next level of affordable mobility solutions.
Q. India remains Datsuns largest market but the the Common Module Family. We harnessed the talents
full potential is yet to be harnessed. Do you agree? of our local India engineering staff to create it, and now
Datsun is a challenger brand and we have been working we build it at our plant in Chennai. The launch of this
hard to compete with established players for three years model is a demonstration of our ability to enter a very
now. Datsun accounts for more than half of Nissan competitive market, where only a few OEMS have suc-
Motors total sales in India. We were the fastest-growing ceeded to answer local customers need for modern,
single brand in FY17 in India, ahead of well-established affordable cars.
OEMS that have been active much longer than we have
in this market. Q. As the focus shifts to electric cars, are you ready?
Whats the electric mobility strategy?
Q. How difficult is it to penetrate the Indian auto Nissan is a pioneer in the development and launch
market? of EVS. The Nissan LEAF, a mass-produced electric
India is among the most challenging markets; if you vehicle, is the worlds best-selling all-electric vehicle.
succeed here, you can succeed anywhere. Customers Over 277,000 Nissan LEAFs have been sold since its
expect good value proposition, stylish design and fea- launch in 2010. Nissan plans to undertake a pilot
ture-rich cars. These characteristics make it a very chal- for feasibility and viability of the EV market in India
lenging yet interesting market. Keeping this in mind, we in partnership with the government and private
decided to offer products which cater to not just the sector players.
needs but also desires of first-time car buyers. Datsun
redi-GO is our response to this market need. Q. Over three million cars are expected to be sold in
India this year. Is Datsuns the right recipe in this
Q. How do you see the emergence of frugally massive pie with a miniscule presence?
engineered mobility solutions? What changes do We believe Datsun is a perfect fit for the Indian car mar-
you foresee? ket especially the entry-level segment. We are a chal-
Datsun redi-GO was born out of Renault-Nissan lenger brand, but we are committed to the Indian mar-
Alliances system of modular vehicle architecture called ket and are most definitely here to stay.
124 Vol. 26, No. 16, for the fortnight July 31-August 13, 2017. Released on July 31, 2017. Total number of pages 126 (including cover)

Business Today August 13 2017

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SPECIAL REPORT UP BUDGET BUSINESS CONFIDENCE

,1)5$6758&785( *$,1(56$1'/26(56 '(35(66('6(17,0(17

www.businesstoday.in August 13, 2017 `70

Editor-in-Chief: Aroon Purie

Visit www.indiatoday.in/apps for more information

10 BUSINESS TODAY August 13 2017

What Forced GSTN to Defer Invoice

Battle with Vikram Bakshi Could Hit

An Feature Find the Right Job on Page: 118-121

` 2.5 lakh crore

"Thats a major This is the amount banks may have

`15 lakh crore-plus

16 BUSINESS TODAY August 13 2017

the government for resolving

18 BUSINESS TODAY August 13 2017

Source: Ace Equity

20 BUSINESS TODAY August 13 2017

August 13 2017 BUSINESS TODAY 21

Gone for a Toss

22 BUSINESS TODAY August 13 2017

BULL RUNS OVER

Apr '84-Feb '86 166

Figures In ` billion; Source: Ace Equity & RBI

The market cap-to-GDP ratio has risen over

record high of 2008

Market cap in `billion, based on GDP at market prices

BSE 500 Mcap

(BSE 500 Mcap to GDP ratio)

FIIs ON SLOW TRACK

Foreign Portfolio Investors' net investment in `crore

2,09,489 2,18,887 3,51,583

BUSINESS CONFIDENCE INDEX

26 BUSINESS TODAY August 13 2017

Services Light Heavy Big Medium Small Micro

OctDec 2016 JanMar 2017 AprJun 2017

THE MACRO VIEW

August 13 2017 BUSINESS TODAY 27

A SENSE OF GLOOM the investment cycle is some distance

28 BUSINESS TODAY August 13 2017

LOSING FAITH basis. There could be some pressure

5 Demand Sales Pick-up stance on inflation. But with inflation,

30 BUSINESS TODAY August 13 2017

32 BUSINESS TODAY August 13 2017

August 13 2017 BUSINESS TODAY 33

around 70,000 are yet to do so. He

password. and customs duties) were using HSN

34 BUSINESS TODAY August 13 2017

August 13 2017 BUSINESS TODAY 35

Making Patents Useful

36 BUSINESS TODAY August 13 2017

Where the Money

40 BUSINESS TODAY August 13 2017

August 13 2017 BUSINESS TODAY 41

Where Other States Stand

BIHAR MADHYA RAJASTHAN UTTAR ALL INDIA

Literacy 61.80 69.32 66.11 67.68 72.99

Per capita 34,168 62,334 76,881* 48,520 94,130

42 BUSINESS TODAY August 13 2017

I By Anand Adhikari and Nevin John

INDIA'S BIGGEST loan defaulters are under the ham-

A Bumpy Road Ahead

46 BUSINESS TODAY August 13 2017

PHOTOGRAPHS BY RACHIT GOSWAMI

August 13 2017 BUSINESS TODAY 47