Home First Finance Company- HFFC IPO Review: Just 20 days into 2021 we will be having our third IPO, that too all in one week. Following IRFC and Indigo Paints, HFFC has decided to open its public offer for subscription on January 21.
In this article, we look into the HFFC IPO Review to cover the important information pertaining to the IPO. We also discuss the possible prospects of the company.
HFFC IPO- About the Company
Incorporated in 2010, Home First Finance Co. is a Mumbai-based technology-driven affordable housing finance company. The company primarily mainly caters to the low and middle-income groups. They do so by offering them housing loans to construct and buy homes. The company also offers other loans like loans against property, developer finance loans, and loans to buy commercial property.
One of their biggest strengths has been adapting to technological changes by rolling out their mobile app. The app helps users processing loan applications in a quick and transparent manner. In addition to this, the group has also developed a strong diversified network for gaining possible leads on loans. These include connectors, contractors, architects, affordable housing developers, and others. Over the decade the HFCC has sanctioned home loans to more than 50,000 customers.
The company also has strong penetration in the markets with 65 branches across 60 districts in 11 different states and a union territory in India. Its loan assets are spread throughout the country. Gujarat contributing 39% of the gross loan assets. This is followed by Maharashtra (21 percent), Tamil Nadu (10.5 percent), Karnataka (9.3 percent), Rajasthan (5.1 percent), and Telangana (5.0 percent). In addition, the NPA’s of the company stood at 0.74% as of September 2020.
(HFFC Mascot in an advertisement)
The company’s gross loan assets have grown at a compound annual growth rate (CAGR) of 63.4% between the fiscal year 2018-2020. According to CRISIL Research, the affordable housing outstanding credit will increase at 9% to 10% CAGR to ₹1190000 crores by 2023. As of September 2020, the company had an AUM of Rs 3,730 crore with a net worth of Rs 988 crore.
Despite being affected by the pandemic the company’s collection efficiency has recovered to 96%. The efficiency prior to the pandemic stood at 98%. According to promoter Manoj Viswanathan, only 3-4% of their customers are facing troubles. Despite this they expect their ross NPAs to increase to between 1% to 2% of total loans.
HFFC IPO Review – Key Information
Although the company had received Sebi approval last year their plans for an IPO were quashed due to the pandemic. During the period the company has reduced its fresh issue size to Rs 265 crore from Rs 344.08 crore due to its pre-IPO placement.
During this HFCC offered preferential allotment of over 22.40 lakh equity shares to Orange Clove Investments B.V. This was at a price of Rs 334.72 per share, for a consideration of Rs 75 crore. Employees were also included and allotted 1.22 lakh shares at Rs 334.72 per share, for a consideration of Rs 4.08 crore.
The IPO consists of a fresh issue of Rs 265 crore and an offer for sale of Rs 888.72 crore. The offer-for-sale consists of shares worth ₹435.61 crores by promoter True North Fund V LLP, ₹291.28 crore shares by promoter Aether (Mauritius) Ltd, ₹120.46 crores by investor Bessemer India Capital Holdings II Ltd, and ₹41.3 crores by PS Jayakumar and Manoj Viswanathan.
Following are the important details on the HFCC IPO:
Particular
Details
IPO Size
₹1,153.72 Cr
Fresh Issue
₹265.00 Cr
Offer For Sale(OFS)
₹888.72 Cr
Opening Date
Jan 21, 2021
Closing Date
Jan 25, 2021
Face Value
₹2 per equity share
Price Band
₹517 to ₹518 per equity share
Lot Size
28 Shares
Minimum Lot Size
1 i.e. ₹14,504
Maximum Lot Size
13 i.e. ₹188,552
Listing Date
Feb 3, 2021
Axis Capital, Credit Suisse Securities (India), ICICI Securities, and Kotak Mahindra Capital Company are the book running lead managers to the issue. As per updates, the grey market has set a premium of ₹90-100 for the price band set at ₹517-₹ 518 per share. Once the IPO is concluded, the shares are likely to hit the bourses on February 3. The equity shares will be listed on both the exchanges — BSE and NSE.
Purpose of the HFFC IPO
The net proceeds from the issue will be used for the following purposes.
To augment the company’s capital base to meet future capital requirements.
To achieve share listing benefits on the exchange.
Closing Thoughts
In this article, we covered the HFFC IPO Review. This IPO opens today (January 21) and closes on Jan 25, 2021. The HFCC provides an opportunity to investors to be part of the company’s growth story. But investors must beware of the bearish markets and bearish sentiments that persist in the market. Happy Investing!
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
List of Potential Fast Growth Sectors in India for the Next 5 Years: Hopefully, the Indian economy has already faced the worst or the coronavirus by now. With the number of cases reducing with every day that passes and the Sensex and Nifty higher than on pre covid levels, we can finally start focussing on other important aspects of our lives.
India luckily is en-route to bounce back and being an emerging market is also slowly gaining back the attention from developed countries. Today we take a look at the Potential Fast Growth Sectors in India for the Next 5 Years. Here, we’ll discuss those sectors that show the best prospects for growth in one of the largest growth engines in the world.
5 Fast Growth Sectors in India
1. E-Commerce Sector
The last few months have been the best for E-Commerce as the social distancing requirements have further allowed companies to expand their presence. In fact, many brands are now switching to a retail format in order to establish themselves before it is too late. This can lead to a permanent change in the behavior and mindsets of consumers towards E-commerce. In addition, many large players are also seeking entry into the segment like Reliance.
A few of the popular companies listed on the Indian stock exchange that operates in E-commerce or similar businesses are IndiaMart, Reliance (JioMart B2C), Infibeam, Justdial, Infoedge, IntraSoft Technologies etc.
2. Healthcare and Pharma Sector
COVID-19 has forced people to adopt better hygiene practices, which are expected to become a part of our behavior even post the Covid-19 world. Even prior to COVID-19 the population began looking for healthier lifestyles which have encouraged the introduction of several technological advancements in the country.
Some popular advancements are bought about by increasing consumption of nutrients, acceptance of mental health, founding of startups like CureFit, PharmEasy, Practo, etc. COVID-19 has gone a step further to expose the drawbacks of the industry forcing the medical industry to become more accessible, available, and affordable.
The Indian healthcare market is expected to be valued at $372 billion by 2022. One of the factors that are expected to aid the growth of the sector is the increasing population of the country and the increased life expectancy expected with improvements in the sector.
Ed-tech refers to the advancement of the education industry by making use of technology. The Ed-tech industry is one of the fastest-growing industries globally. One means through which parents assist their children’s success is by supporting their educational needs. They are willing to pay additional amounts for services they believe could give their children an edge.
The sector also receives a boost from the Indian environment that is culturally inclined towards education. In addition, the economic growth of the country demands higher skill development. The COVID-19 has further accelerated the growth of the Ed-tech sector as it has become essential for educators and learners to adopt more efficient digital processes and tools.
From 2014 to 2019, more than $1.8 billion has been invested into Indian ed-tech startups. Many companies like Byju’s have seen significant growth over the last few years.
Infrastructure has been one of the cornerstones of development allowing the economy to grow exponentially. The industry includes projects like roads and expressways, railway lines, aviation, shipping, energy, power, or oil & gas. The pandemic however has had a significant impact on the infrastructure sector as it relies heavily on labor.
But despite this investors can expect healthy growth in the sector over the long term. Especially with the Make in India in India initiative taking off as companies look for alternatives in Asia. The central and state governments’ ambitious plans of smart cities and increased focus on infrastructure development will aid growth in the sector.
5. Fintech Sector
Fintech refers to companies making use of technology to provide financial services to businesses or consumers. Although the Indian market has a large number of players the industry is up for grabs a significant portion of the population still has to be captured. The fintech industry includes digital payments, and access to banking, insurance, and stock markets.
Some popular Fintech companies include Paytm, Razorpay, Google Pay, Zerodha, PhonePe, MobiKwik, PayU, ETMoney, PolicyBazaar, LendingKart, Freecharge and soon may even see Whatsapp entering the space. Last year the Fintech sector received a total funding of $3.18 billion and has emerged as the world’s second-largest fin-tech hub. One of the factors responsible for accelerated growth in this sector has been the digitalization of the economy through smartphones.
Closing Thoughts
In this article, we discussed the list of fast growth sectors in India for investors to keep an eye on. As the economy begins to recover it puts several sectors to the test on whether they should revert back to pre lockdown practices or continue with the newly set norms and pave the path for the future.
The growth however won’t be limited to the sectors above but they definitely have bright growth prospects in the long term.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
A Gist of Azim Premji Success Story: India’s most generous billionaires also known as the Czar of the Indian IT industry, Azim Premji is one of the finest business tycoons the country has ever produced. In this article, we are going to discuss Azim Premji Success Story. Here, we take a look at the reclusive billionaires’ progression through the years into what is today known as one of India’s greatest success stories.
Azim Premji – The 21-year-old CEO
“I was 21 and had spent the last few years in Stanford University Engineering School at California. Many people advised me to take up a nice, cushy job rather than face the challenges of running a hydrogenated oil business. Looking back, I am glad I decided to take charge instead. Essentially leadership begins from within. It is a small voice that tells you where to go when you feel lost. If you believe in that voice, you believe in yourself.” – Azim Premji
The company Wipro was started by his father Mohamed Premji in 1945 as Western Indian Vegetable Products Ltd. His father was already an established rice merchant known as the rice king. Although one may not expect that the company had anything to do with computers back then it will still surprise you to know that the company manufactured hydrogenated cooking fats.
After Azim Premji completed his schooling in Mumbai he was sent to Stanford University in order to pursue electrical engineering. Sadly due to the untimely death of his father he had to come back home. But on reaching home he also was thrust into the role of chairman in his fathers’ company.
This however did not sit well with the shareholders of the company who opposed a 21 year old leading the company that was valued at $2million. There was nothing much they could do as Premji owned 90% of the business. Surprisingly Premji rose up to the role and soon expanded the company to also diversify its product line to produce hydraulic cylinders, toiletries, soaps, and lighting products.
Premji Enters Computers
After diversifying and entering new markets Premji also decided to update the name of the company. He dropped ‘Vegetable Products’ from its name, creating Wipro in 1977. The year also marked a change for the Indian business climate a the Morarji Desai government began taking an aggressive stance towards FDI and foreign companies.
This forced businesses like IBM to leave the country. This is where Premji’s business acumen stood out as he was quick to identify the opportunity in the Indian IT sector. Wipro soon entered the IT space in 1980 which gave the company enough room to easily set up their business unbothered due to lack of competition.
The company began in the hardware sphere by manufacturing microcomputers under a technology-sharing agreement with Sentinel Computers a US-based company. The company soon entered the software sphere of the industry as well. In 1989 Wipro entered into a partnership with General Electric(GE). Here Wipro manufactured and distributed imaging products called Wipro GE Medical Systems.
Growth of Wipro under Azim Premji
“Success is achieved twice. Once in the mind and the second time in the real world.” – Azim Premji
Premji never rested on the laurels that the company had earned so far. Wipro soon diversified into the manufacturing of other IT products like printers, scanners, and medical and diagnostic equipment by 1991. At the same time, they also maintained and grew their other businesses to also produce lamps, powders, oil-based natural ingredients.
By 1999 Wipro successfully entered into a partnership with KPN to provide internet services in India. In 2000, Wipro was the second-largest listed company in India and also India’s largest software exporters. Wipro was India’s best-performing stock from 1998-2003. Much of Wipro’s success is also owed to its then CEO Vivek Paul.
Under Paul and Premji’s leadership, the company continued to grow with IT being the core of its business. In 2002 Wipro also became a BPO, a business it is well known for to this day. After Paul left Wipro in 2005 Premji once again became CEO. It would seem hard to believe at first but under Premji, the revenues of the group rose 3500 times in 50 years. From $2 million in the 1960s to around $7 billion by 2014.
In 2005 and 2011 he was awarded the Padma Bhushan and Padma Vibhushan by the government of India respectively. He also has been voted as one of the 20 most powerful men in the World by Asiaweek in 2010. He also has twice been listed in Time Magazines 100 most influential people around the world. Azim Premji stepped down from the board of Wipro in 2019. He currently has a net worth of $6.6 billion.
Azim Premji Philanthropy Works
His contribution to the Indian IT industry is massive and he also holds an unbeatable record of revenue growth. There is also one other aspect where Azim Premji serves as an for all Indians and that is Philanthropy.
He was the first Indian to sign up for The Giving Pledge. The initiative was led by Warren Buffet and Bill Gates. It encourages the wealthiest people to commit to giving up their wealth for charity. His lifetime donations stood at $21 billion as of June 2020. According to EdelGive Hurun India Philanthropy List, his charitable donations amounted to $22 crore per day during the year.
“I strongly believe that those of us, who are privileged to have wealth, should contribute significantly to try and create a better world for the millions who are far less privileged.” – Azim Premji
Azim Premji success story is an inspiration to all. He rose up to the challenge at a very young age of 21 and still managed to drive his company to deliver excellence. Despite achieving so much he still has dedicated his life and wealth to the betterment of society.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
Indian Railway Finance Corporation – IRFC IPO Review: 2021 is off to a great start as markets are at an all-time high and scheduled IPO’s only add to the excitement. The first IPO for 2021 will be the huge public offering by IRFC which opens on the 18th of January.
In this article, we are going to cover the IRFC IPO Review. Here, we’ll look into important information on the IPO and find out the possible prospects of the company.
IRFC IPO Review – About the Company
Founded in 1986 the Indian Railway Finance Corporation (IRFC) is a government-owned company. The IRFC acts as the borrowing arm for the Indian Railways. Its purpose lies in financing the acquisition of rolling stock assets, leasing of railway infrastructure assets and national projects of the government, and lending to entities under the Ministry of Railways (MOR).
The MOR procures rolling stock assets and for the improvement, expansion, and maintenance of project assets and IRFC is responsible for raising the necessary funds. As per the DRHP, IRFC is registered with the RBI as an NBFC-ND-IFC (i.e. a Non-Deposit accepting Infrastructure Finance Company).
When it comes to leasing the IRFC purchases railway assets and then provides them on lease to the Ministry of Railways. The lease period is typical of the duration of 30 years comprising a primary period of 15 years. This is followed by a secondary period of 15 years. The IRFC also lends funds to companies in the Railway sector like Rail Vikas Nigam Limited (RVNL), Konkan Railway Corporation Limited, Rail Land Development Authority, Railtel Corporation of India, and Pipavav Railway Corporation Limited.
When it comes to performance as of September 30, 2020,the company did not have any Non-Performing Assets(NPA). The company also has received the highest credit ratings from the following :
CRISIL – CRISIL AAA and CRISIL A1+
ICRA – ICRA AAA and ICRA A1+
CARE – CARE AAA and CARE A1+.
In FY20, the company financed Rs 71,392 crore, which accounts for 48.22 percent of the capital expenditure of the Indian Railways. In the financial year 2020, the company’s total revenue rose 22.15% to Rs 13,421 crore from Rs 10,987 crore in 2019.
The promoters of the company include the President of India, acting through the MOR, Government of India. DAM Capital Market Advisors, HSBC Securities, and Capital Markets, ICICI Securities, and SBI Capital Markets will be the lead managers for the public issue. Kfin Technology Private Limited will act as the registrar to the IPO. The IPO will include a fresh issue of shares and the sale of existing shareholder stakes.
Following are the important details on the IRFC IPO
Particular
Details
IPO Size
₹4,633.38 Crores
Fresh Issue
1,188,046,000 Eq Shares of ₹10
Offer For Sale(OFS)
594,023,000 Eq Shares of ₹10
(aggregating up to ₹[.] Cr)
Opening Date
Jan 18, 2021
Closing Date
Jan 20, 2021
Face Value
₹10 per equity share
Price Band
₹25 to ₹26 per equity share
Lot Size
575 Shares
Minimum Lot Size
1( 575 shares - Rs.14,950)
Maximum Lot Size
13(7475 shares - Rs. 194,350)
Listing Date:
Jan 29, 2021
IRFC IPO – Purpose of the IPO
The net IPO proceeds are proposed to be utilized for the following objects:
To augment the company’s equity capital base to meet business future growth requirements.
To meet general corporate purposes.
IRFC IPO – Grey market information
The stocks of IRFC were sold in the grey market at a premium of Rs.1.60. This however paled in comparison to the Indigo paints stock which commanded a 60% premium in the grey market. One reason for this could be the huge size of the IPO. The other being investors simply not viewing IRFC as the next IRCTC.
IRFC IPO Review – Competitors in the Industry
Indian Railway Finance Corporation is one of a kind company in its industry and faces no direct competition. There are no similar listed entities in the line of business for IRFC.
Closing Thoughts
The IRFC can be considered a settled company in the Railway industry. When it comes to the long-term prospects there is a possibility that the company will perform well. This is after considering the electrification and expansion in the railway sector. Let us know what you think about IRFC IPO by commenting below. Happy Investing.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
Indigo Paints IPO Review 2021: The new year has already brought several great news. Two of them being the IPO’s set for next week. This includes the IPO for Indigo Paints. Indigo Paints IPO opens next week between Jan 20-Jan 22, 2021.
In this article, we look into important information on the Indigo Paints IPO 2021 and find out the possible prospects of the company.
Indigo Paints IPO – About the Company
Indigo Paints was incorporated in the year 2000 by IITian Hemant Jalan in Jodhpur. He started the company as he felt that there was a big market for Cement Paints. Jalan faced many hurdles in scaling his business this was because the industry already had strong competitors that already had a place on retail shelves. Advertising too was made impossible when competing with these giants.
This was when Jalan decided to take a different approach towards the market. He introduced differentiated products in the industry. Indigo paints introduced Metallic paints in India which gave a unique look. This product was welcomed by retailers even with the lack of advertisement.
Since then the company has introduced many more products to the market like Floor coat paint which can withstand vehicular traffic, ceiling coat paint, tile coat paint, Dirtproof & Waterproof Exterior Laminate, Floor Coat Emulsions, Exterior, and Interior Acrylic Laminate, and PU Super Gloss Enamel.
Due to its differentiated product line, Indigo paints today is one of the fastest-growing paint companies in India. It is the 5th largest company in the decorative paint industry. The sales of their differentiated products have been continuously growing from 26.68% in 2018 increased to 28.62% in fiscal 2020.
Indigo Paints also has a strong distribution network across 27 states and seven union territories. The company also has strategically set manufacturing facilities in Jodhpur (Rajasthan), Kochi (Kerala), and Pudukkottai (Tamil Nadu). Over the years Indigo Paints has been successful in capturing 2% of the paint industry.
Effects of the Pandemic on Indigo Paints
Indigo Paints did not suffer any adverse impacts due to the pandemic. This was because of its negligible exposure the company has to big cities. They only account for 1-2% of their sales. The company predominantly operates in Tier 2-4 cities.
Indigo paints received the nod from SEBI earlier this month and will be open for subscription from January 20 and close on January 22. Kotak Mahindra Capital Company, Edelweiss Financial Services, and ICICI Securities will be the book running lead managers to the public issue. The IPO will include a fresh issue of shares and the sale of existing shareholder stakes. These include Sequoia Capital, SCI Investments, and promoter Hemant Jalan.
Important Indigo Paints IPO details
Particular
Details
IPO Size
Rs. 1176 Crores
Fresh Issue
Rs. 300 Crores
Offer For Sale(OFS)
Upto 58,40,000 shares
Opening Date
Jan 20, 2021
Closing Date
Jan 22, 2021
Face Value
Rs. 10 per Equity Share
Price Band
Rs. 1480 to Rs. 1500 per Equity Share
Minimum Lot Size
10 shares (Rs.15,000)
Maximum Lot Size
130 shares (Rs. 195000)
Listing Date:
Feb 02, 2021
Indigo Paints IPO – Purpose of the IPO
The proceeds from the IPO will be used for the following purposes
The company intends to open one more manufacturing facility in Tamil Nadu. Here it will be adding capacities to manufacture water-based paints to cater to the growing demand for these paints. The manufacturing unit in Tamil Nadu will have a capacity of 50,000 KLPA and is expected to be operational during FY2023.
The proceeds will also be used to purchase tinting machines and gyroshakers.
Indigo Paints has come a long way especially considering the number of large players and moats present. But do you think the company will be to replicate the success of large brands like Asian Paints now that it is competing in the big leagues? Let us know what you think about Indigo Paints IPO by commenting below. Happy Investing.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
Tata vs Reliance Group Comparison: Everywhere in our daily lives, from the calls we make, the internet we use, transportation, groceries, to even the seasoning of our foods we see the names of two Indian titan-sized conglomerates i.e. Tata and Reliance. But have you ever wondered which of these two conglomerates is bigger? In this article, we answer this very question in various areas like total Mcap, revenues, etc.
Tata vs Reliance this past year
In the month of November last year, Mukesh Ambani-controlled Reliance Industries (RIL) became the first Indian company to reach the $200 billion Mcap in September. This also saw a significant increase in the wealth of its promoter, Mukesh Ambani. But soon after the shares of the company fell by 17% losing the status. The reduction led to the valuation of the company dropping to $167.45 billion by November 2020.
But since then the aggregate Mcap of major TATA companies have been icing closer to the $200 billion mark. As of November 27, the total MCap of 18 Tata companies stood at Rs 14,50,502 crore ($196.11 billion). Tata Trusts control the group companies through the holding company Tata Sons.
The two companies have various differences that affect their style of operations and the way they are run. The Tata conglomerate is a diverse group of companies running different businesses independent of each other. Reliance on the other hand is run as a single company, controlled by its promoter despise having interests in several businesses. Tata is considered a global brand whereas Reliance is much more concentrated in India despite some of its companies having interests around the world.
When it comes to revenues the Tata group earns greater as they made $106 billion in comparison to Reliances $92 billion.
TCS vs Reliance Industries
Of all the companies that are part of the conglomerates, it is TCS and Reliance Industries which contribute the most to the respective groups.
TCS alone contributes up to 60% of the Tata group’s value. The company operates globally with a significant market in North America. Reliance on the other hand derives most of its value from being in the tightly regulated domestic petrochemical business. Reliance has come a long way as TCS had been leading in terms of Mcap from 2013 to 2017. It was in April 2017 that Reliance overtook TCS with a Mcap of Rs.4.60 trillion. As of 10 January, 2021 Reliance Industries exceeds TCS Rs.1170875 Crore to Rs.1307141 Crore.
Quick Note: You can find more about the Tata and Reliance Group Business Companies on Buckets section at Trade Brains Portal.
Closing Thoughts
Mukesh Ambani is currently the second richest man in Asia and 14 richest in the world with a net worth of US$74 billion. In comparison, Ratan Tata the patriarch of the Tata family is dwarfed as he barely makes it to the list with a net worth of $1billion.
This, however, is not due to the performance of the two companies. Mukesh Ambani owns a 49.14% stake in Reliance. Ratan Tata on the other hand owns only 0.83% of Tata. This is because 66% of the Tata group is owned by charitable trusts i.e. Sir Dorabji Tata Trust and Sir Ratan Tata Trust and their allied trusts. These trusts are headed by Ratan Tata. If this were not the case Ratan Tata today would have been one of the top three richest in the world.
But these matters are trivial to Ratan Tata as what matters most to him are philanthropic and charity works. Even though Reliance may have exceeded Tata in some other fronts they have miles to go before they catch up with Tata in philanthropy.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
List of Founder/Promoter Family Managed Companies in India: It comes naturally for a man to wish and attempt to try and get rich quick. Barring means that heavily rely on luck, there are a few that provide returns like that of entrepreneurship for the majority of the population. These businesses last for two to three generations if successful in most cases whereas a few outliers go on to become the Tata’s, Birlas, Ambani’s.
These outliers are immensely successful as promoters and play an active role in their business across generations rather than finding a way out for quick bucks. In this article, we cover the top family managed companies in India i.e. such family owned businesses that still strive along with their businesses in India.
About the family business in India
Most of the top conglomerates around the world started out as family businesses but transitioned into public held companies with the promoters taking a minority position. In India however, the promoter families still hold a majority in the company. These family business enterprises have played a crucial role in the Indian industry. Even those that are not listed create significant economic value and employment.
As of 2018, India ranked third on the list of countries with the highest number of family-owned businesses with 111 such companies. India only ranked behind China and the US which had 159 and 121 companies respectively. The study only included companies with a minimum cap of $250 million or more.
How do these companies compare to non-family owned businesses?
The most recent study conducted by Credit Suisse during the pandemic found out that family-owned businesses outperform non-family-owned companies by an annual average of 370 basis points. This was strongest in Europe and Asia where family-owned businesses outperform non-family-owned companies 470 basis points and more than 500 basis points per annum, respectively.
Even during the pandemic, it was noticed that these promoter family-owned businesses tend to have above-average defensive characteristics that allow them to perform well. Following are some more findings from the report
— Higher growth and profits
The analysis conducted by Credit Suisse shows that since 2006 revenue growth generated by family-owned companies has been more than 200 basis points higher than that of non-family-owned companies. The analysis also shows thatfamily-owned companies tend to be more profitable. These superior returns were observed globally.
— Higher ESG scores
ESG stands for Environmental, Social, and Governance. This is a modern metric introduced to analyze companies on non-financial factors. According to the Credit Suisse ‘Family, 1000’ report family-owned companies on average tend to have slightly better ESG score results than non-family-owned companies. In addition, older family-owned companies have better ESG scores than younger firms.
Top Founder/Promoter Family Managed Companies in India
Following are some of the top family-owned businesses in India. These families still play an important role in the management of the company and are a driving force in their respective industries. The list is prepared based on the Family 1000 rankings created by Credit Suisse in 2018, 2020, and the Family Capital World’s top 750 family business rankings.
1. Reliance Industries
The Reliance organization was brought into existence by the late Indian business tycoon Dhirubhai Ambani. Hailing from the state of Gujarat Dhirubhai was the son of a teacher. What is surprising is that one of the richest men at the time of his death once worked at a petrol pump in Yemen. He left Yemen in 1958 and returned to India with the aim of entering the textile market. Hence Reliance was born.
Dhirubhai’s first employees included his younger brother and nephew and former schoolmates. In 1973 the company was renamed Reliance Industries. At the time of his death in 2002 Reliance was already a conglomerate having its business in the Oil and Gas, Refining, petrochemical, Electricity, Telecom, and Financial services industry. Due to his untimely death, Dhirubhai had not left a will behind. After a bitter feud, the assets were split between the two brothers Mukesh and Anil Ambani.
Under the leadership of Mukesh Ambani, Reliance Industry slowly but steadily scaled new heights. By 2007, it was the first Indian company to exceed $100 billion in market capitalization. Today Mukesh is the Second richest man in Asia with a net worth of $76.5 billion. It is expected that the company will pass on to the third generation(Isha, Akash, and Anant Ambani) of Ambani’s in the business. All three are appointed as directors in the company.
Wipro Limited was started by the man known as the Czar of the Indian IT industry, Azim Hashim Premji. Azim was born into a family that already had its roots in business. His father Mohamed Hashim Premji was known as the Rice King of Burma and after Independence was even invited by Jinnah to live in Pakistan which he declined. Azin Premji graduated in Electrical Engineering from Stanford University, USA. He returned to India post the death of his father in 1966.
He initially took care of his father’s business but after IBM was forced to leave India in 1980 he saw an opportunity to fill a gaping hole in the IT Industry in the country giving birth to Wipro. Today Wipro has emerged as one of the global leaders in the software Industry. Premji has two sons– Rishad Premji and Tariq Premji. Both the sons serve on the board of the company but Rishad has been named as the successor.
3. Dr. Reddy’s Laboratories
(GV Prasad and Satish Reddy)
Dr. Reddy’s Laboratories is an Indian multinational pharmaceutical company founded by Dr. Kallam Anji Reddy. Dr. Reddy was the son of a turmeric farmer from Andhra Pradesh. Dr. Reddy founded Dr. Reddy’s laboratories in 1984. The company entered the Indian pharmaceutical sector by reverse-engineering the best-known drugs of western MNCs at a fraction of their prices.
During the 1990s the company began trying to discover its own patentable drugs. Dr. Reddy passed away in 2013 after suffering from cancer. His son Kalan Satish Reddy currently serves as chairman of the company. His brother-in-law G.V. Prasad serves as the co-chairman and managing director of Dr. Reddy’s Laboratories.
4. HCL Technologies
(Shiv Nadar with daughter Roshni Nadar)
HCL Technologies Limited was founded by Shiv Nadar an Indian industrialist and philanthropist. Shiv Nadar began HCL in 1976 in partnerships with several friends and colleagues from his job at Walchand group’s College of Engineering, Pune (COEP). HCL was founded with an investment of Rs. 187,000.
As of 2020, the company boasted revenues of $10 billion. His only childRoshni Nadar Malhotra serves as the chairperson of HCL Technologies and the first woman to lead a listed IT company in India.
5. Cipla
(Cipla founder Khwaja Abdul Hamied with son, Dr. Yusuf Khwaja Hamied)
Cipla has its roots in the pre-independence period. The company was founded in 1935 by Khwaja Abdul Hamied, a disciple of Mahatma Gandhi. His family had sent him to England for his Ph.D. but Hamied changed ships and chose to go to Germany. He completed his Ph.D. at the Humboldt University of Berlin in Germany.
He also met his future wife a Lithuanian Jewish with whom he fled the country after the nazi’s gained power. CIPLA) was founded in 1935 with an initial capital of Rs. 2 lakhs. The name stood for ‘The Chemical, Industrial & Pharmaceutical Laboratories’. After his death in 1972, the company was inherited by his son Hamied who led the company for the next 52 years and still serves as its chairman.
Some of the other top companies run families who are still promoters include Hinduja Group, Aditya Birla Management, Rajesh Exports, Bajaj Finance, TVS Motors, etc.
6. Tata Group
The Tata Empire was begun by Jamsetji Tata in 1868. Jamsetji Tata was born to a family of Parsi Zoroastrian priests. He broke the tradition to become the first member of the family to start a business. Before his death, he went on to scale the company in the Iron, Steel and Cotton, and Hotel Industry. He inaugurated the Taj Mahal Hotel in 1903, priding it as the only hotel in India that had electricity.
Jamsetji Tata is regarded as the legendary “Father of Indian Industry”. His eldest son Dorbji Tata and following successors which included JRD Tata and Ratan Tata played a crucial role in scaling the company to the heights it has reached today. Under Ratan Tata, the group’s revenues grew over 40 times, and profit, over 50 times. As of 2020, the group had revenues of $106 billion.
Although Tata Group has been a family managed companies in India for decades, however, currently it is professionally managed. As of 2021, Natarajan Chandrasekaran is the Chairman of the Board of Tata Sons, the holding company and promoter of more than 100 Tata operating companies with aggregate annual revenues of more than US $100 billion.
Why do these family owned-companies perform better?
One major factor that differentiates businesses is the long-term perspective. Family-owned businesses often outperform because they often have a longer-term investment focus compared to non-family-owned companies. Due to this, they end up driving significant excess returns for all shareholders.
This has particularly been the case in the Asia Pacific where returns were compounded in excess of close to 5% a year since 2006. This long-term focus could be fuelled with the aim to transfer the business to the next generation.
Another report studying family businesses by PwC showed that family businesses have a clear sense of agreed values and purpose as a company and that the family that owns the business has a clear set of family values. These values are often generic revolving around honesty, hard work, integrity, respect, and so on.
In some cases, these values were written down in the company’s mission statement which included additional aspects of family values like – community, customers, people, commitment, ethics, sustainability, quality, innovation, trust, fairness, and openness. Indian businesses are also gradually putting their value statements and purpose down on record.
90% of Family-owned businesses in India also stated that they involve themselves in philanthropic activities. This involves giving money to good causes and local communities. Family-owned businesses also focused more on social policies since the outbreak of the COVID-19 pandemic
Closing Thoughts
In this article, we covered the family managed companies in India. Even though family businesses perform better than their counterparts in a number of metrics, they still face their own set of challenges. The study conducted by PwC identifies the need to innovate as the biggest challenge for family businesses.
Another challenge they face is that of attracting professionals to their companies. Businesses face this as professionals often fear a lack of independence in decision making and the absence of a clear path to the top. These however may not include the top-tier businesses like the ones mentioned above.
In India, 92% of family businesses allow family members to work in the business. 73% of the next-gen work in the family business, which is higher than the global figure (65%). Further, 58% of the next-gen in India, compared to 43% globally, are a part of the leadership team. 50% of the next-gen are senior executives and 43% are on company boards. 60% plan to pass on management and/or ownership to the next-gen.
When it comes to diversity family-owned businesses fall behind in comparison. Women average only 15% on the board and 13% on management teams in Indian family businesses. This falls short compared to 21% on the board and 24% in management teams across the globe. In addition, fewer family-owned businesses have support groups for the lesbian, gay, bisexual, and trans (LGBT) communities.
Do you think this will impact your decisions when comparing family-owned and non-family owned companies? What do you think about promoters remaining in businesses through generations? And How important are promoters and their family’s future prospects to you when it comes to investing? Let us Know!
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
Top White Good Industry Stocks in India 2021: First of all, let’s understand what do we mean by the White Good Industry? In short, they refer to home appliances. White good industry includes refrigerators, dishwashers, washing machines, air conditioners, and similar other appliances used at home. They were known as the white good industry as they were traditionally available only in white.
Today, we have a wide variety of choices not only when it comes to color but also companies. Let us take a look at the prospects of the industry and its top players. In this article, we’ll discuss the top White Good Industry Stocks in India. Let’s get started.
Top White Good Industry Stocks in India
— Whirlpool Corporation
Whirlpool Corporation is a multinational manufacturer and marketer of home appliances ad is headquartered in Michigan, United States. The company entered India in the late 1980s as part of its global expansion strategy and is headquartered in Gurugram. The company has entered into a joint venture with the TVS group.
Whirlpool owns three state-of-the-art manufacturing facilities at Faridabad, Pondicherry, and Pune. The company’s product portfolio includes washing machines, refrigerators, microwave ovens, and air conditioners. Whirlpool is also a Fortune 500 company. According to Yale Appliance statistics, Whirlpool is the most reliable brand in its affordable lines with the lowest percentage of service calls.
— Samsung
Samsung is a South Korean MNC headquartered in Seoul. The company initially began as a trading company and eventually diversified into other areas. As of 2020, Samsung has the 8th highest global brand value.
It’s home appliance portfolio includes a wide variety of refrigerators, air conditioners, stoves, washing machines, air purifiers, etc. According to yale lists, Samsung is one of the top luxury appliances brands in India. Excellent for people who are willing to spend a bit extra to invest in high-tech features, large appliances, and the latest designs.
— LG Electronics Inc
LG Electronics is a South Korean MNC headquartered in Seoul, South Korea. The company entered the Indian markets in 1997. According to the JD power report, LG ranks highest in appliance ratings for washers, dryers, dishwashers, oven ranges, French door refrigerators, and top-mount freezer-fridge setups. The company is also the world’s second-largest LCD television manufacturer.
Haier is one of the world’s top-selling home appliance companies. It is a Chinese MNC. It designs, develops, manufactures, and sells products including refrigerators, air conditioners, washing machines, microwave ovens, etc. According to data released by Euromonitor Haier was the number one brand globally in major appliances for 10 consecutive years from 2009–2018.
— IFB Industries
IFB Industries Limited originally known as Indian Fine Blanks Limited started their operations in India in 1974 in collaboration with Heinrich Schmid AG of Switzerland. The company currently offers appliances such as washing machines, washer dryer, laundry dryer, dishwasher, microwave oven, Chimneys, Air Conditioners, and other cooking appliances.
IFB also introduced the country’s first smart load washing machine, India’s first Dishwasher, India’s first clothes Dryer, and India’s first front load washing machine.
— Godrej
Godrej Group is an Indian conglomerate company headquartered in Mumbai. The company was established in 1897 in the locks business. Its roots can be traced back to India’s Independence and Swadeshi movement. Godrej was also the first company to introduce refrigerators in India 60 years ago.
— Philips
Koninklijke Philips N.V. is a Dutch MNC founded in the year 1891. Its first product included the lightbulb. Today Phillips is one of the largest electronics companies in the world. Philips began its operations in India in 1930. They established Philips Electrical Co. (India) Pvt Ltd in Kolkata as a sales outlet for imported lamps.
— Bosch
Robert Bosch GmbH is a German multinational engineering and technology company founded in 1886. Consumer goods form one of its four businesses.
Bosch set-up its manufacturing operation in India in 1951. These have grown over the years to include 18 manufacturing sites, and seven development and application centers. The Bosch brand is famous for cooktops and wall ovens, plus wide range microwaves. Bosch is second only to LG according to J.D. Power Rating.
— Bajaj electricals Ltd
Bajaj Electricals Limited is a renowned and trusted company Indian company. The company was founded in the year 1938. It has diversified with interests in lighting, luminaries, appliances, fans, cooking appliances, etc. The company is part of the US$5.3 billion Bajaj Group.
— Voltas Ltd
Voltas Limited (a TATA enterprise) is India’s largest air conditioning company. The company was founded in 1954 and specializes in areas such as heating, ventilation and air conditioning, refrigeration.
They are the market leaders in the manufacturing of room/split air conditioners, industrial air conditioning, refrigeration equipment, water coolers, etc.
The white good industry in India has been growing rapidly all the while keeping up with the trends and technological advances around the world. According to IBEF, the appliances and consumer electronics industry is expected to double to reach Rs. 1.48 lakh crore (US$ 21.18 billion) by 2025.
There have been many reasons for this growth. One of them being the expansion of retail stores throughout the country. Despite this, the industry still has huge untapped potential. A majority of this comes from the 400 million Indian middle-class households and the disposable income with them.
E-commerce sites have been a boon to the industry as they now allow effortless sale and purchase of white good products. Government initiative also adds to the pace as initiatives on power and electrification open up unexplored markets.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
Understanding the Why and Pros/ Cons of Privatization of PSU banks: Every year we see multiple banks getting scammed, failing, and eventually RBI and government intervening for its rescue. These instances have happened way too many times to recall all of them. Many economists have suggested the government after viewing public banks with unease to take action and now the government is in talks to privatize banks in the sector. Today, we take a closer look at this decision of Privatization of PSU banks, along with its pros and cons.
Introduction to Banking: Private vs Public
Banks play a very important role and are one of the key driving forces in our economy. Most of us are already accustomed to their basic functions of receiving deposits and providing loans to the people. But over the years banks in India have evolved to perform functions like providing lockers, insurance, mutual funds, transferring funds, and also play a key role in digital payments and transfers. They also aid the growth of the country by absorbing the excess capital from the economy and redirecting its use towards productivity and growth.
Banks are classified into 2 categories i.e. Public and Private banks. A public sector bank is one where a majority of its stake is held by the Government. On the other hand, a private sector bank is one where a majority of the shares of the bank are under the control of its shareholders.
Although the banks being public or private perform the same functions, due to their aims and period of existence customers notice significant differences depending on the banks they choose. Private banks arrived relatively late in the Indian banking sector thanks to the reforms introduced in 1991. This is one of the reasons why people find public banks secure as they already have been around longer enabling them the gain their trust. Also, the confidence that the government will not let a public bank fail adds to this security. Private banks make up for these security concerns through their technological advancements and superior customer service.
Anyways, last year (2020), the Indian government has drawn a list of five big PSU banks, namely, Punjab & Sind Bank, Bank of India, Bank of Maharashtra, UCO Bank, and IDBI Bank, in which they want to disinvest equity.
Post-Independence the banking industry was dominated by private sector banks. The government soon realized that this was leading to a major section of the population being left out by banks. This section included the poor as the banks had mainly catered to the rich. This prompted the government to take steps to nationalize 14 major banks of India in 1969 after independence.
By 1980, 6 more banks were added to the list. This allowed citizens to bank services throughout the length and breadth of the country regardless of income levels. The numbers kept increasing but after a list of mergers and acquisitions in the last few years, we now have 12 Public banks functioning in the country. Private banks were again permitted only post liberalization of the economy in the early 1990s.
Despite successfully being accessible to the population the public banks have failed in many aspects. According to the RBI as of March 2016, public sector banks accounted for over 90 percent of the ₹5.5 lakh crore gross NPAs (Non-Performing Asset). NPA’s refer to interest and principal is due for a prolonged period of time and its recovery is not expected or doubtful.
RBI data as of March 2017 showed that 9.3 percent of the industry loan book for private sector banks was stressed whereas 28.8 percent for PSBs.
As a result, the Indian government has announced a $19 billion recapitalization plan. This recapitalization may help the banks survive but are not a long term solution. This has led to the government considering privatization as a means for transforming the banks into entities that are commercially viable. Recommendations were made by the Niti Aayog to the central government about the privatization of few Indian Public Sector Banks.
Privatization refers to the sale of government-held assets or shares to the private sector. It is often achieved by listing the new private company on the stock market. This has previously been performed in other sectors.
Privatization of government-held securities was also successful in the UK where state-owned companies such as BP, BT, British Airways, electricity companies, gas companies, and rail networks were privatized. Currently, four banks that are considered to be privatized are Punjab & Sind Bank, Bank of Maharashtra, UCO Bank, and IDBI Bank.
Privatization of PSU banks: Pros of Privatization
Bank privatization is likely to provide a lot of different benefits. They include:
Most private banks are profitable, to a big extent. A lot many PSUs are not making profits and the government is thinking that the privatization of PSU banks, may convert them from loss-making ventures to profitable self-sustainable businesses.
It is found that the Private sector banks are more advanced than Public sector Banks. They are also known for their operational efficiency. One of the major motives private banks achieve this is profit. This makes them more competitive with superior service in order to gain customers. a private firm has pressure from shareholders to perform efficiently.
Privatization will also help to reduce the burden of the Government of India. This is because private banks are stricter towards loans and frauds. It is startling to see PNB being defrauded of $1.8 billion by a few junior level bank officials. Frauds of such scale do not occur in private banks like Citibank etc.
The foreign investors prefer to invest in private sector banks rather than the public sector banks.
When faced with problems governments take decisions based on what would be best for the next election. Public banks are also constantly bullied for political motives. Privatization will allow these banks to focus on their long term goals with reduced government interference.
Privatization of PSU banks: Cons of Privatization
Privatization also comes with its set of challenges.Some of these are:
This will adversely affect the poorer sections of society. This is because private banks will no longer function for the social benefits of the poor. It will also wipe out the USPs of the public banks which is trust in the government. This encourages depositors.
Public banks open branches, ATMs, banking facilities, etc even in the non-profitable rural areas of India or the poorer sides where the possibility of getting big deposits or making money is less due to the government or political demands. However, Private banks are not inclined to do so and they may prefer opening such facilities mostly in megacities or urban areas.
This is also unjust and will create added problems for employees who have specifically strived to secure government jobs. Privatization may also introduce variable income. This decision will most likely result in panic and protests across the country.
Unfortunately, the public sector has been shown in a bad light in the recent past due to the bad loans and rising NPA’s. This is like to affect the governments’ ability to raise funds through their sale.
Closing Thoughts
As the advantages outweigh the disadvantages and the fact that public banks have been a menace in the recent past, privatization would mark the start of turning the banking sector around. This does not mean that the government must sell its share and wash its hands off the sector. It is very important to consider that Privatization alone would not solve all of the problems faced by the sector.
Looking back at past failures it is also important that the government introduces adequate governance among other measures to ensure that banks do not once again enter their prior state.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
Understanding the Role of RBI in Financial Market: In the current times while dealing with the economic slowdown news that includes the RBI has been a hot topic. This is because everyone looks up to the RBI and awaits the steps that it can take in order to revive the economy once again. Today we take a look at the responsibilities and role of RBI in financial market. Here, we’ll discuss the functions that the banker to the government plays in our financial system.
Reserve Bank of India (RBI) is the Central Bank of the country and so its roles differ from other retail banks. The Reserve Bank of India was established in 1935 and was privately owned until 1949 post which it was fully owned by the Government of India. The RBI takes on greater responsibilities like ensuring credit supply, managing payment systems with the aim of promoting economic development.
Role of RBI in Financial Market
The RBI plays the following role when it comes to the financial markets of the country
1. Ensuring stability and Growth of the Infrastructure
The financial markets play a very important role in the financial system and very few entities in the country have the power and resources to ensure their stability, one of them being the RBI. Financial Market Infrastructure (FMI) is a multilateral system that includes participating institutions where the operator looks after the clearing, settling, recording payments, securities, derivatives, or other financial transactions. The FMI includes PAyment Systems, Central Securities Depository, Securities Settlement Systems, Central counterparties, trade repositories(an entity that maintains electronic records of transaction data), etc.
It is very important that these functions work as smoothly as possible and have the right infrastructure as Financial markets are the channels that concentrate risks in the economy which if not managed properly can transmit shocks across the economy. In order to address these problems, the RBI sets up organizations and committees to look after and develop the infrastructure of the financial markets.
Some of these infrastructures include the Securities Settlement Systems (SSS), Real-Time Gross Settlement System (RTGS), and Clearing Corporation of India Ltd (CCIL), Negotiated Dealing System- Order Matching (NDS-OM), etc. The NDS-Om, for example, is owned by the RBI and is an electronic order-driven trading system for govt securities. The NDS-OM accounts for 90% of the trading volume in government securities.
2. Ensuring the growth of Payment systems in India
The RBI oversees these payment infrastructures out in place in order to ensure its efficiency and safety of its participants. This role has been of growing importance especially as the country is encouraged into adopting the electronics payment system and keeping up with international developments.
This is only possible because the RBI ensures that the payment and settlement systems are safe, efficient, and accessible throughout the country.
3. Supervising the Payment and Settlement systems
The RBI designates specific responsibilities to various other institutions it sets up in order to ensure that the system is regulated and supervised. The RBI also sets up the legal framework that governs these systems. For eg. the RBI has set up the PSS( Payment and Settlement Systems Act, 2007).
This act empowers the RBI to set standards for the format of payment instructions, timings to be maintained, manner of fund transfer, etc. The RBI is also given the power to access any information relating to the operation of any payment system, enter and inspect any premise where the payment system is operated, and carry out audits and inspections.
4. Regulating OTC Derivatives
The trade repository for Over-the-counter(OTC) derivatives are set up as required by the RBI and are regulated by two separate frameworks i.e. the Reserve Bank of India Act, 1934, and Forward Contracts (Regulation) Act, 1952.
The RBI has the power to influence the supply of money by adjusting the deposits, reserves (SLR and CRR) it expects banks to maintain, and interest rates that it charges commercial banks that wish to borrow money. These rates and requirements are changed according to the requirements of the economy.
The RBI also plays an important role when in stabilizing the value of the Indian currency by maintaining gold bullions and foreign currency reserves. Another important aspect that the RBI looks into is controlling its arch-nemesis i.e inflation.
Closing Thoughts
Today, we discussed the role of RBI in financial market. The RBI has evolved into one of the most important and dependable entities in the country over the last 85 years. This can be seen even today where the RBI is looked up to in distressing times when the economy is exposed to global and internal shocks.
Along with the rising scale of growth and scope of the Indian economy, the RBI also ensures that the internal working environment of the Indian financial markets is stable and reliable and at the same time is evolving to match global standards.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
List of Indian ADR’s listed on NASDAQ and Understanding why do Indian companies trade in US: If you had the opportunity to visit the NASDAQ you might be caught off guard when you find quotes of Indian companies being flashed on their screens. But why would an American stock exchange be reflecting the prices of Indian companies? The short answer is because these companies have opted for means where they can be traded in the NASDAQ.
Today we take a look at which Indian companies have listed themselves on the NASDAQ. We also take a look at why and how these companies listed on the NASDAQ.
Why do Indian companies get listed on NASDAQ?
The top two American stock exchanges are- the NYSE (New York Stock exchange) and the NASDAQ ( National Association of Securities Dealers Automated Quotations). They respectively hold the spot for the largest and the second-large stock exchanges in the world. In order to put things into perspective let us compare them with our exchanges.
The Bombay Stock Exchange which is the major trading venue for Indian companies and their stocks had an MCap of 2.056 trillion in 2019. In comparison, the NYSE and the NASDAQ had MCaps of 22.9 and 10.8 trillion respectively in 2019. The Indian companies have realized the capital and growth potential in the American markets and have been tapping its exchanges since 1999. The United States is home to the deepest and most liquid capital markets in the world. In addition, these include well to do companies from various sectors like technology, financial, pharms, and industrial.
In addition to this, the markets offer other advantages like reliability. This is because listing on these markets would require the companies to abide by stringent laws and disclosure requirements. This, in turn, increases the credibility of the company throughout the world. For companies that want to raise huge amounts of capital and be global in every way, it makes sense to list on the US bourses.
How can Indian companies list on the NASDAQ?
Although the regulations are ever-evolving presently Indian companies can access the American equity markets through ADRs (American Depository Receipts). An ADR is created so that American investors can buy foreign securities at ease. Otherwise, the process would generally involve exchanging USD for the required currency like INR. Then opening a brokerage account and purchasing the foreign security. This would most likely be done at midnight due to timezone differences. By then the exchange rate would have probably changed. ADR’s put away all this hassle for the American investor.
An ADR is a security that trades in the US but is a representation of a specified number of shares from a non-US company. These securities are offered to American investors in US dollars (regardless of the base currency of underlying shares). They also trade and settle like any other security priced in the US market.
These securities are negotiable certificates issued by a U.S. depositary bank representing a specified number of shares—often one share—of a foreign company’s stock. These ADRS’s attract American investors and their capital. These investors would otherwise would have shied away due to the hassle of buying foreign shares.
How are these ADR’s created?
As Indian companies cannot directly list their equity shares in the US markets as of now they adopt the ADR route. The first step involves the Indian company offering its shares to a U.S. bank who will purchase these shares on a foreign exchange. This bank holds these shares as deposits and issues receipts to the Indian company.
The US bank then issues ADR’s that are equal to the value of the shares deposited with the bank. The ADR issued will represent the underlying shares on a one-for-one basis. These may also be a fraction of a share or multiple shares of the underlying company. This is decided by the bank as per the value of the conversion rate. The bank does this to sure the price of the ADR price is not too high or low.
The broker then sells the ADR’s in its place in either the New York Stock Exchange (NYSE) or the Nasdaq. In order for this process to be successful, the Indian company will be required to comply with all the regulations set by the SEC for any company being listed in a US exchange.
These ADRs are then quoted and trade in US dollars. The ADR’s closely track the price of the company’s stock in its home exchange due to arbitrage. All dividend payments to the holders of ADRs are made in US dollars. The company pays out the dividend to the US bank in its native currency which is then distributed by the brokers to the investors in dollars after accounting for foreign taxes and currency conversion.
Despite India’s large size and economy, only the following handful of Indian corporations are trading as ADRs in the US NASDAQ.
Company ADR trading on NASDAQ
ICICI Bank ADR
Infosys ADR
HDFC Bank ADR
Wipro ADR
Tata Motors ADR
Vedanta Ltd
Yatra Online
MakeMyTrip
Dr Reddys Labs
WNS Holdings
Azure Power Global
Sify
Rediff.com India
Mahanagar Telephone Nigam PK
Why do exchanges like the NASDAQ allow foreign companies to list on their exchanges?
Apart from providing an opportunity for US-based investors, the exchanges have other benefits too. Foreign stock exchanges often try to pursue foreign companies. These include not just the US-based exchanges. They include the London Stock Exchange, Tokyo Stock Exchange, Bermuda Stock Exchange, Singapore Exchange, Luxembourg Stock Exchange, and the SIX Swiss Exchange sending delegations to invite Indian companies.
The Luxembourg Stock Exchange has over 100 Indian companies listed. One reason is that the Indian markets although risky are known for their growth prospects. Apart from this, about 10 to 20% of the income of many foreign stock exchanges are from their listing fees apart from the trading revenues they earn.
Closing Thoughts
Although ADRs have been a popular route of entry into foreign markets the government as of 2020 has looked and announced other possibilities. Although all the framework is still to be set, the government has announced that it is looking into allowing Indian companies to directly list on foreign exchanges without even requiring them to be listed in Indian exchanges first.
It would expand the route through which Indian capitals raise offshore capital. This, however, has raised domestic concerns about the possibility of Indian investors losing out on domestic opportunities.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
Debugging why do most Indians not pay Taxes: In one of his lectures, Clinical psychologist Jordan Peterson posed a question to his students- What happens if we all stop paying taxes? He comes to the conclusion that there is nothing much that the government could do in such a scenario. After pondering a little on the question that the government would find itself outmanned to go after every person not paying his taxes. Although Mr. Peterson comes to the conclusion that we pay taxes because we a good people.
If we take the case of India, the Prime Minister announced earlier this year that only 1.5 crore people of the country pay their taxes. What does this mean? Is this because of a possible boycott? Today, we analyze what this statement means and why the numbers are so low?
What Percent (%) of Indians pay taxes?
The income tax department later clarified the Prime Ministers’ statements in a series of tweets stating that actually only 1.46 crore people pay tax on their income in the country. The Indian auto industry had sold more two-wheelers (21 million) than this figure in 2019.
The CBDT tweeted that “… 5.78 crore individuals filed returns disclosing income of the financial year 2018-19”. Of these,1.03 crore have shown income below Rs 2.5 lakh and 3.29 crore individuals disclosed taxable income between Rs 2.5 lakh to Rs 5 lakh, it added. Of the 5.78 crore returns filed during this financial year,4.32 crore individuals have disclosed income up to Rs 5 lakh. Only 3.16 lakh individual taxpayers have disclosed income more than Rs 50 lakh. In addition, they also stated that the number of individual taxpayers who have disclosed income above Rs 5 crore in the whole of the country is only around 8,600. These taxpayers created Rs 24,23,020 crore gross tax revenue for the government in the budget 2020.
Who bears the brunt of the taxes?
The Budget speech of 2018-19 had noted that on average a salary earner pays three times more income tax than a non-salaried taxpayer (Rs 76,306 versus Rs 25,753). This is however is not because the entrepreneurial class earns lesser than the salary citizens.
The tax department believes the tendency to evade tax is higher among the nonsalaried. This resulted in 0.26% of the population paid close to four-fifths of the individual income tax in the Assessment Year.
Analyzing the 1%?
Before jumping to any conclusions let us analyze the 1% that actually pays taxes. According to The Economic Survey of 2015-16,“For the level of democracy, India’s ratio of taxpayers to voting-age population is significantly less than that of comparable countries. This implies that while at present about 4% of citizens who vote pay taxes, the percentage should be about 23″. This seems like a gigantic figure in comparison to reality. But let us take a closer look.
Out of the total population, a significant portion includes proportions below the age of 18. India has one of the largest proportions in the younger age groups in the world at 41%. In addition to this women make-up, half of the population but have very low participation in the workforce. Their participation stands at just over 25%. This excludes 75% of women or 37.5% of the population from the workforce.
In addition to this agricultural income is not taxable in India. This puts a majority of the i.e. 50% of the workforce not liable to pay taxes. This puts the population liable for tax at a little over 10%. And after considering that millions are automatically exempt. This is because they simply are too poor reducing the figure by a large chunk. This gives a new perspective to the 1.46% liable to pay taxes instead of being compared to 100% of the population.
One of the major reasons why individuals prefer not to pay taxes is because of the question, “Where is my tax money going?”. This is hard to answer when every year a new scam or case of corruption breaks out involving politicians. In addition to this thousands of crores are spent on creating statues and initiatives like the Central Vista project. The justification for this is given by stating that they add to the national pride. But this too passes when one’s vehicle crosses another pothole.
In addition, the healthcare system and education seem non-existent in some states, the judiciary still works at a slow pace and the system is still riddled with corruption. This makes the salaried middle class often feel cheated.
The Indian economy has always traditionally preferred cash as the mode of payment. This makes it easier to evade taxes as a majority can also under-report their incomes. Vinod Gupta, the vice president of the market’s traders’ association, confirms that income tax evasion is prevalent among businesses that rely on cash. He says the small shop owners and stall vendors who make up about 25 percent of the market evade paying altogether. On being further questioned on the role of tax inspectors investigating the local businesses he states that their services are hired through bribes.
The Economic Survey of 2015-16 pointed out: “If the state’s role is predominantly redistribution, the middle class will seek—in professor Albert Hirschman’s famous terminology—to exit from the state. They will avoid or minimize paying taxes; they will cocoon themselves in gated communities; they will use diesel generators to obtain power; they will go to private hospitals and send their children to private educational institutions.” Luckily for the government, this is not possible.
Another reason also lies in the fact that a majority of the population that depends on agriculture is not liable for any taxes. This is a very necessary initiative to support the majority of poor farmers. But it fails its purpose when there is no limit set to the tax-free nature allowing rich farmers to further avoid taxes.
Rich farmers can not only not pay taxes but also receive a subsidy. This is given for their inputs like water, seeds, and electricity. Considering the current upheaval due to the Farm Bills no changes can be expected in this area anytime soon.
Closing Thoughts
In this post, we tried to look into Why do most Indians not pay Taxes. Anyways, for any changes to be seen in the majority of the individual’s tax behaviors it is important for the government to firstly show citizens a link between good government- services and the duty to pay taxes. Otherwise, an individual would keep trying to find loopholes in the system to avoid taxes.
That is until he sees an answer to his question “Where is my tax money going?”.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
A Walk through Ratan Tata’s Story: Today marks the birth of one of the finest and respected industrialists in India, Ratan Naval Tata, former chairman of Tata Sons. Today Tata has its presence in almost all areas, from the cars we travel in, the clothes we wear, the hotels we vacation in, to the tea we drink.
So how did Ratan Tata manage such a colossal group? And at the same time scale it to become the country’s largest conglomerate? Today, on Ratan Tata’s 83rd birthday, we pay respect by taking a look at Ratan Tata’s Story, the journey of Ratan Tata and his achievements along the way.
Ratan Tata’s Story: Childhood and Youth
(Ratan Tata with his grandmother, Lady Navajbai Tata)
Ratan Naval Tata was born to one of the richest families on December 28, 1937. He is the great-grandson of Jamsetji Tata, the founder of Tata Group. His father Naval Tata was the adopted son of Ratanji Tata and Navajbai Tata. Despite hailing from a prominent family Ratan went through a disturbing childhood growing up. This was because of his parents splitting up when he was just 10.
Following the split, he was raised by his grandmother, Lady Navajbai Tata, at a manor called Tata Palace. His grandmother formally adopted him through the J. N. Petit Parsi Orphanage. He recalls being ragged at school over the divorce of his parents as this was uncommon in the 1950s.
As time passed the ragging only got worse when his mother remarried. It was during these tough times that his grandmother played a very important role in shaping his character. His grandmother taught him to the importance of retaining dignity at all costs. This gave him an alternative instead of fighting back.
He has been quoted multiple times stating how his grandmother helped him develop a strong set of values and ethics system which have guided him ever since he was a boy. He also recalls that it was his grandmother who helped him muster the courage to speak up and at the same time also taught him to do so in a kind and dignified manner. She always stood by his side in instances where he disagreed with his father like when he wanted to study in the US instead of the UK and when he decided to become an architect against his fathers’ wishes of him becoming an engineer.
Ratan Tata went on to study in the US at Cornell University where he received a degree in Architecture in 1959. He got an architecture job right out of college where he worked for two years. Ratan speaks of Los Angeles highly as he spent some of the best years of his life in Los Angeles. He loved the weather, had a job and owned a car.
In his post in Humans of Bombay Ratan Tata speaks about how he fell in love and almost got married in Los Angeles. Unfortunately, he was forced to move to India due to his grandmother’s failing health. Even though he expected his future spouse to move with him to India her parents weren’t comfortable with this due to the instability in India due to the Indo-China war. This meant the end of their relationship.
Ratan Tata’s Story: A New Beginnings at Tata
In 1961 after returning to India Ratan Tata joined the Tata Group. His first job involved working with the blue-collar employees at Tata Steel Ltd in Jamshedpur. “It was a total waste of time — I was shuffled around from department to department, but nobody actually told me what to do! I guess, I was looked at as a family member, so no one said anything to me — but I spent 6 months just trying to make myself look ‘useful’,” Tata said. He worked as an apprentice on the shop floor and his responsibilities included shoveling limestone and working with the furnaces.
After gaining experience he was promoted to management during the 1970s. He was made director and tasked with leading National Radio and Electronics (NELCO). He was able to turn the company around, but the company eventually collapsed during an economic slowdown. In 1977, he was tasked to turn around another troubled company, the Mumbai-based Empress Mills. He succeeded in doing so but the refusal to add investment into the company and the Mumbai textile workers’ strike led by Datta Samant eventually led to its closure in 1986.
Ratan Tata’s Story: Appointment as Chairman
(Ratan Tata with JRD Tata)
In 1991 the legendary chairman of Tata Sons JRD Tata stepped down and named Ratan Tata as his successor. This came as a surprise not only to the management of the group but also to everyone outside the company including the media. One of the existing executives like Russi Mody,(Tata Steel) Darbari Seth (Tata Tea, Tata Chemicals) Ajit Kerkar (Taj Hotels), and Nani Palkhivala (director on the boards of several Tata companies) was expected to succeed JRD Tata.
They were already established names in the industry. This led to a bitter feud within the group. Mody even went on to openly voice his disagreement over Ratan. The media too went after Ratan Tata and branded him as the wrong choice and a result of nepotism. Unfortunately for Ratan Tata, he didn’t possess the charisma of his predecessor.
One of the first reforms he put in place was setting a retirement age. According to this policy, the retirement age for directors was set at 70 and senior executives at 65. This began replacing the staff with younger talents. Mody was sacked after a messy scrap, Seth and Kerkar retired over the years as they crossed the age limits and Palkhivala quit citing ill health.
Once the succession issue was sorted Ratan Tata could now focus on what was important i.e. leading the group. He convinced group companies to pay a royalty to Tata Sons for the use of the Tata brand name and also made individual companies report operationally to the group office. Under him, the group exited businesses such as cement, textiles, and cosmetics even as it increased its focus on others such as software, and entered telecommunications, finance, and retail. Looking back this can be seen as prepping the company to lead changes that were already taking place in a developing nation. During this process, JRD Tata guided Ratan as a mentor amongst all the criticism that was thrown at him.
Ratan Tata’s Story: Achievements
“I don’t believe in taking right decisions. I take decisions and then make them right.” – Ratan Tata
Ratan Tata had set out to reestablish the groups’ identity. For this, it was very important that he welded the organization together in a more cohesive way than it had been in the past so that it could identify itself more as a group. This new identity couldn’t have the same rusty image the company had over the years. Factors that helped here were the infusion of younger talent which made way for innovation and disinvestments from several companies.
One of Tata’s biggest achievements would be of the role it played in the Indian Automobile Industry. Although one would think of Nano when it comes to Tata, it is actually Indica which brought forward this revolution. The Indian truck maker set its eyes on creating India’s first truly Indian car, ‘Indica’. The car was the brainchild of Tata. He promised a vehicle with the dimensions of a (Maruti) Zen, the cabin size of an Ambassador, and the fuel efficiency of a Maruti 800. Its launch in December 1998 transition the group into serious car-making.
Today the group has gone ahead to become one of the largest car companies in India. Despite the manufacturing and quality problems an initial loss ( ₹ 500 crore loss declared in 2001), the Indica became a bestseller and marked the real entry of Tata Motors into cars, although the company had already signaled its intent with the launch of the Sierra, which would be called a cross-over vehicle today, and the Estate, a station wagon.
Another revolutionary introduction by the Tata’s was the Nano. The Nano was the dearest project of Ratan Tata. He decided to create a car at a price-point within reach of the average Indian consumer after seeing a family of 4 on a motorbike in the heavy Bombay rains. His concern for the safety of nuclear families led to him promising to make a car that would cost only a lakh rupee. Tata implemented all means to reduce its price and maintenance cost. He was the one who suggested that the car should be fitted with just one windscreen wiper. Despite these efforts at the time of the launch, the cost of the car was still higher. But since he had made a promise he went ahead and delivered on the promise.
Today Tata also serves on the boards of Fiat SpA, Alcoa, Mitsubishi, the American International Group, and Rolls Royce.
Another one of Ratan Tata’s greatest achievements was taking the Tata group to a global stage. This was made possible over a series of acquisitions. In 2000 the group acquired London-based Tetley Tea, in 2004 it purchased the truck-manufacturing operations of South Korea’s Daewoo Motors, and Indian Hotels Co. Ltd took over management of The Pierre in New York.
Tata’s biggest acquisition was its purchase of Anglo-Dutch steelmaker Corus Group Plc in 2007. The company has since been renamed Tata Steel Europe. The acquisition of Corus, which was Europe’s second-largest second-largest steelmaker, catapulted the company into becoming the world’s seventh-largest steel producer
Under Ratan Tata, TCS went public and Tata Motors was listed in the New York Stock Exchange giving it international recognition.
During the 21 years, he led the Tata Group, revenues grew over 40 times, and profit, over 50 times.
Among many other honors accorded him during his career, He is also the recipient of two of the highest civilian awards of India, the Padma Vibhushan (2008) and Padma Bhushan (2000).
How did Ratan Tata deal with challenges?
Ratan Tata had faced many challenges during his tenure at the helm of Tata. Initially, when the group had entered the passenger car business it seemed as if it was a huge error on his part. Tata decided to sell his business struggling passenger vehicle business, Ford officials voiced their interest after a trip to Tata’s Bombay Headquarters.
But when Tata and his team visited Detroit, they were humiliated by Ford. The then chairmen Bill Ford reportedly said to Tata that he was quite out of his depth. An ex-employee employee of Tata who was presented in the meeting recalls they were told ‘you do not know anything, why did you start the passenger car division at all’. They said they will do us a favor by buying our car division.”
The humiliation ended when the group decided to return to New York the same evening. Tata was reportedly somber the whole flight.
Tata turned the tide by thriving in the Indian markets. Nine years later Ford was on the verge of bankruptcy after the 2008 global financial meltdown. Tata swooped in and acquired the auto company’s iconic Jaguar Land-Rover brands for $2.3 billion. Ford chairman Bill Ford thanked Ratan Tata, saying “you are doing us a big favor by buying JLR.”
Another testament to Tata’s leadership would be during the 26/11 attacks. Even with the risks surrounding him he stood all alone outside the Taj hotel and supervised the activities to help the victims. He also personally visiting the families of all the 80 employees who were killed or injured and even asked the families and dependents as to what they wanted him to do.
Closing Thoughts
“Ups and downs in life are very important to keep us going, because a straight line even in an E.C.G means we are not alive.” – Ratan Tata
In December 2012 Tata retired as chairman of the Tata Group at the age of 75. Despite this Tata has stated that never before has he felt the urge to do more. He has now diverted his efforts towards philanthropic activities and continues to head the groups’ charitable trusts.
Morgen Witzel states that in hindsight, Tata’s ascension in 1991 was the best thing that could have happened to the Tata group.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
Meeting Best seller author Prasenjit Paul in an Exclusive Interview on Stock Investing: Hello investors. Recently, we interviewed the author of the best-selling book ‘How to avoid loss and earn consistently in the stock market?’ – PRASENJIT PAUL. This book is to date the highest rated book written by an Indian on Stock Market Investing in Amazon.
This interview will give a great insight to the beginners who are planning to start their journey in the exciting world of the stock market and even to the matured investors. Therefore, make sure to follow this interview closely.
Brief Introduction About Prasenjit Paul
Prasenjit Paul is an Equity investor, Entrepreneur, and as mentioned earlier, the author of the book ‘How to avoid loss and earn consistently in the stock market?’. This book was first published on 14 July 2015 (First Edition).
If we look into Prasenjit’s Background, he is a software engineer by qualification with a bachelor of engineering degree from IIEST, Shibpur. Prasenjit started investing at an age of 18. Due to his passion for the stock market, he left his job at IBM on the first day to pursue his dreams in the investing world. Fast forward a few years, currently, he works as an Equity Analyst and is running a successful Equity advisory firm- Paul Asset Consultant Private Limited, with clients from over 18 countries.
Meeting Prasenjit Paul: Best-Selling Stock Market Book “Author”! (2020)
Here’s our latest interview with Prasenjit Paul and is a MUST-WATCH video for all the aspiring stock market investors. Do watch this video till the very end because Prasenjit has got a lot of informative things to tell and share with you.
Topics discussed with Prasenjit in this Interview:
Brief Introduction & how Prasenjit started his investment journey
His inspiration to write a book?
A few best concepts/chapters covered in his book
Prasenjit’s advice to newbie investors on how to start stock investing!
Archive Interview – Conversation with Prasenjit Paul (Nov 2017)
Below is an archive interview with Prasenjit Paul which was originally published in Nov 2017. Along with the above video, the questions and answers will also help you to know his journey better and learn stock investing tricks and secrets from him.
Q. Hi Prasenjit. My first question to you is an obvious one- How did you enter the world of investing?
While I was 18, my father told me about the stock market. After that reading books like “Rich Dad Poor Dad” and few others made me determined for taking the stock market very seriously.
Since then, I had spent my entire college life learning various aspects of the stock market. Although I was pursuing B. Tech in Information Technology, still I had completed around 25-30 books and countless websites related to the stock market.
Even I had started offering equity advisory service on a Trial basis while I was in the final year. Thus even before my career took off in the IT field, I was ready for a career in the stock market solely through self-learning.
Q. Why did you quit IBM on your first day?
I had accepted the offer from IBM just to gather an idea of the working culture of the corporate world. Once I interacted with few employees and visiting the office I was sure that I couldn’t give my 100% to an IT job. Moreover, even after spending in an IT job for 5-10 years, I didn’t foresee financial freedom or any meaningful reward.
Thus, I made my mind to take the risk of quitting a fixed salary routine.
It was a very tough choice because of two reasons. Firstly, my parents, relatives, and others were never in support of business instead all of them favored corporate jobs. Secondly, during that time, I was not earning even fraction of the amount that IBM was offered.
However, I took that risk, and later it paid off very well!
Q. When did you start ‘Paul Asset’ and how long were you running the business before you started paying yourself?
I had an edge because I started Paul Asset during my college days and during those days I have no such compulsion of paying myself. Even after leaving college I had no liabilities like EMIs, paying to parents, rent etc. So, even with any amount of money, my target was to just stick to the target.
I was confident that with true dedication sooner or later your hard work pays off. So, the point is the earlier you start, the higher would be the reward. Every aspiring entrepreneur should begin the journey during their teenage or during early twenties. With the growing age, it becomes difficult.
Q. Walk me through the step-by-step process that you went through after quitting your job, to get to where you are today?
Actually, I had started the journey much before quitting my job. Apart from Paul Asset, I had even attempted two other business ventures during college days and failed badly. My target was to become an entrepreneur so within college life itself I had attempted various ventures and later Paul Asset clicked while the rest of others failed.
So, the point is to keep trying. No matter how talented you are, you can’t be successful in business with just one attempt. I just stick to the basics. Irrespective of failures, setbacks, depression, monetary loss, you have to keep trying with full dedication while keeping morals intact. Sooner or later Success will be yours.
Q. When did you decide to write a book? Tell us about your journey from a novice to the author of the best-selling book on stock market investing.
I had purchased the domain www.paulasset.com in the year 2011 while I was in the 2nd year of my Engineering. Initially, the target was to write blogs on the Stock Market and monetise via Google Adwords. Fortunately, Google rejected few times while I submitted my blog and that inspired for starting subscription-based advisory service.
Today, the advisory revenue is so big that I can’t even consider Google Adwords. In spite of rejection from Google, I noticed that almost all of my readers liked my writing style. That inspired me writing a book to reach the larger audience.
It took me more than two years to complete the book “How to Avoid Loss and Earn Consistently in the Stock Market”. The way people liked the book was also beyond my imagination. Since the last few years daily on average 50+ copies are being sold!
Writing a book is very difficult because you need months-long concentration and patience, unlike a blog post that can be completed in one day itself. After the massive success of my first book, I am also working on the second book (not directly related to the stock market but related to the Money). However, due to my current schedule, I can rarely concentrate over a very long duration of few weeks and be realising the real challenge of writing books!
If you haven’t checked out his book ‘How to avoid loss and earn consistently in stock market’ yet, here is a link on amazon. I personally recommend you to read this book if you want to learn investing in Indian stock market from scratch. – Kritesh Abhishek
Q. How do you start your workday? What’s like a day in the world of an investor?
I have a relaxed work schedule. Although with the growing business, I have to look after so many things, work on multiple things simultaneously still it never created pressure on me. I never keep sitting in front of trading terminal.
Daily price fluctuation doesn’t affect me at all.
I start my day with reading newspaper or magazines and then as usual. What I learned from my own experience is that to become a successful investor you must have a calm and cool head.
Every day you will come across so many news, so many contradicting views. Many times your stocks won’t perform, you would stare at a loss. In spite of all those, you have to keep your basics intact. I also idolize MS Dhoni and try learning a lot from his temperament.
Q. What’s your investment strategy?
I prefer growth over value. While you are investing in one of the world’s fastest-growing major economy like India, you must have to put higher focus on the growth over value. I generally prefer bottom-up analysis with a long-term investing approach. I like companies where the market size is huge enough to maintain a high growth rate with free cash flow generation while keeping a light balance sheet.
And I never attempted short-term, intraday trading, Futures, and Options, etc. The reward and peace of mind from long-term investing is sufficient enough to ignore any short term options.
Q. Who do you admire the most in the stock market world?
I can’t take one or two names. I admire and try to learn a little bit from many renowned personalities including sports person, businessman, authors and even politicians. There is something to learn from any successful person in any field.
Among Indian investors, I admire Ramdeo Agarwal, Vijay Kedia, Porinju Veliyath, and Basant Maheswari.
Outside India, I have deep respect for Warren Buffet, Charlie Munger, Peter Lynch and many others.
Having said that I never attempted following any particular investor’s principles because I know I can’t be another Warren Buffet or Ramdeo Agarwal. So, I must have to be myself, and that is very important. Thus, I admire many successful personalities, try learning a little bit from all of them and finally be myself.
Although not directly related to the stock market but the book “Rich Dad Poor Dad” motivated me a lot for starting my investment journey during my college days. I strongly recommend the book “Rich Dad Poor Dad” to all youths. Even outside stock market, I owe much of my success to the authors like Robin Sharma, Shiv Khera, Robert Kiyosaki and many others.
The biggest challenge is to maintain performance and reputation. Since 2012, the brand Paul Asset helped many retail investors for wealth creation. It makes me happy while I come to know that we helped many investors in reaching their personal goals like house, car, child’s education, marriage, etc.
The biggest challenge is to maintain our own past performance for the next many decades. It is easy to score a century on three consecutive matches but very difficult to maintain a 50+ batting average over few decades-long Cricket career. Success is a journey, not a destination.
Q. If a newbie investor walked up to asking for your advice and you only had a few minutes to give ‘em your best tip, what would it be?
Practice, Practice and Practice.
You can’t be a successful investor just by reading 2-3 books. If you do, then it is only you are lucky in a few particular instances, and it can’t be repeated, i.e. you can’t maintain the consistency. Remember from Nursery to Graduation you have spent 18+ years to become successful in your current profession. So, there is no shortcut. With the advent of the internet, everything at your fingertips but you have to work hard and give time to master any art.
Q. What’s next for you?
From the beginning, my target was to add values while keeping morals intact. Name, fame and money would automatically follow. So, the next is also value creation keeping the morals intact. Everything else would automatically follow.
Q. Thank you so much Prasenjit, for sharing your valuable time and knowledge. Anything else that you would like to share with our readers?
Keep doing whatever you believe for yourself. Successful journeys are always filled with obstacles. Successful peoples are not Lucky. Instead, Luck is attracted towards them for their honest dedication and hard work.
Whatever you are today is the result of your last 5-10 years. So, if you really want a better future for yourself in any field, make sure to dedicate at least 5-10 years while keeping morals intact. Good Luck!
Thank you so much Prasenjit for sharing your time. Your journey is truly inspiring for all the new and old investors. Let me quickly summarize a few of the learnings from Prasenjit Paul:
Prasenjit’s View on life and goals
Follow your dream.
Start as early as possible.
Prasenjit’s View on investing:
Many times your stocks won’t perform, you would stare at loss. In spite of all those, you have to keep your basics intact.
Prefer growth over value. While you are investing in one of the world’s fastest-growing major economies like India, you must have to put higher focus on growth over value.
Avoid short-term, intraday trading, Futures, and Options, etc. The reward and peace of mind from long-term investing is sufficient enough to ignore any short term options.
Finally, Practice, Practice, and Practice.
That’s all. I hope this interview is encouraging for all our readers to take their next step in the investment world. Do comment below if you have any other questions that you’ll like to ask him. We’ll forward your questions to him. #Happy Investing.
Hi, I am Kritesh (Tweet me here), an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting
List of Top Indian Philanthropist Businessmen: “Is the rich world aware of how four billion of the six billion live? If we were aware, we would want to help out, we’d want to get involved.” these are the words of once richest man Bill Gates who himself has donated over $36 billion. But do we have businessmen who think similarly to him when it comes to philanthropy in India? Lucky for us we do some who believe in the act of giving.
Today, we take a look at the Top 10 Indian Philanthropist Businessmen. Below are the best Indians who have made significant donations in 2020 – the year we needed it the most.
Top 10 Indian Philanthropist Businessmen for 2020!
1. Azim Premji
Wipro chairman Azim Premji has topped the list of philanthropists to become India’s most generous person for 2020. The Seventy-four-year-old tech magnates donations amount to Rs. 7,904 crore. Azim Premji is the founder-chairman of Wipro. In 2013, he signed The Giving Pledge to donate at least half of his wealth, a campaign started by Bill Gates and Warren Buffett.
So far he is well on course towards achieving this goal as he has donated $21 billion to Azim Premji Foundation, an education-focused non-profit he founded in 2001. On April 1, 2020, Azim Premji Foundation (₹1,000 crores), Wipro (₹100 crores), and Wipro Enterprises (₹25 crores) had committed ₹1,125 crores towards tackling the Covid-19 outbreak. These were in addition to Wipro’s annual Corporate Social Responsibility (CSR) activities. His donations for the last 3 years amounted to Rs. 9143 crores.
2. Shiv Nadar
HCL Technologies’ founder chairman and Padma Bhushan awardee Shiv Nadar comes second on the list. Nadar donated ₹795 crores for charitable causes. Nadar was at the top of the list of India’s most generous billionaires last year. So far Nadar is said to have donated over $900 million through the Shiv Nadar Foundation, impacting over 30,000 students directly. The foundation pursues creative philanthropy.
Among other things, the foundation supports rural education and provides scholarships for underprivileged students to study abroad. Nadar’s wife, Kiran Nadar chairs the Kiran Nadar Museum of Art, India’s first private philanthropic art museum exhibiting modern and contemporary works from India and the subcontinent. His donations for the last 3 years amounted to Rs. 2391 crores.
3. Mukesh Ambani
Asia’s richest man Mukesh Ambani came in third on the list. Mukesh Ambani is the Chairman and Managing Director of Reliance Industries and was born into the billionaire Ambani family.
A majority of his donations were directed towards disaster relief with Rs. 500 crores being donated towards the PM CARES Fund. He also donated Rs. 5 crores each to the Chief Minister’s Relief Fund of Maharashtra and Chief Minister’s Relief Fund of Gujarat to support their fights against the Covid-19. The 63-year old billionaire has donated Rs.1297 crores in the last three years.
4. Kumar Mangalam Birla
Kumar Mangalam Birla & family ranked fourth on the list. The group has donated Rs. 400 crore to the PM CARES Fund. They also have specifically allocated Rs 50 crore for supplying N95 Masks, PPE’s and ventilators. Their donations for the last 3 years amounted to Rs. 374 crores.
5. Anil Agarwal
The fifth position is occupied by the founder and chairman of Vedanta, Anil Agarwal who donated Rs 215 crore. In September 2014 Anil Agarwal pledged 75 percent of his wealth to charity.
A majority of his donations are directed towards healthcare. His foundation also works towards education and computer literacy, vocational training, women and child empowerment, and community welfare. His donations for the last 3 years amounted to Rs. 352 crores.
6. Ajay Piramal
Ajay Piramal & family rank 6th among the nation’s top philanthropists with donations of Rs. 196 crore. The Piramal family runs a conglomerate that specializes in pharma, healthcare, and financial services. They participate in philanthropic activities through the Piramal Foundation, initiating projects in areas of healthcare, education, livelihood creation, and youth empowerment. His wife Swati is vice-chairman and their children Nandini and Anand serve on the board.
On 31st March 2020, Piramal Group commits Rs. 25 crores to PM CARES Fund. In November 2019, Piramal Foundation and Gates Foundation partner to set up a Tribal Health Collaborative and will work closely with the Government of India to achieve Sustainable Development goals by 2030. Their donations for the last 3 years amounted to Rs. 596 crores.
7. Nandan Nilekani
Co-founder and chairman of Infosys and Chairman of UIDAI ranked 7th with his wife Rohini with a donation of Rs. 159 crore. They too have signed the Giving Pledge in 2017, committing to donate half of their wealth towards philanthropy.
8. Hinduja brothers
The four Hinduja brothers, Srichand, Prakash, Gopichand, and Ashok Hinduja rank 8th on the list with a donation of Rs. 133 crore. They make their donations through the Hinduja Foundation which focuses on Water Stewardship, Healthcare, Education, Rural Development, and Arts and Culture.
9. Gautam Adani
Chairman of Adani Group Gautam Adani claim the 9th spot with donations of Rs. 88 crore. The Adani group handles businesses in ports, energy, agriculture, defense, and aerospace. He is also president of the Adani Foundation, the company’s social responsibility arm founded in 1996. Adani Foundation works in four key areas such as Education, Community Health, Sustainable Livelihood, and Community Infrastructure Development, in alignment with the Sustainable Development Goals.
It has established the Adani Vidya Mandir, a school for underprivileged children in Ahmedabad, Bhadreshwar, and other states and supports 300 government schools, educating over 100,000 children. On 29 March 2020, Gautam Adani led Adani Foundation announced Rs. 100 crore donation to PM CARES Fund. Their donations for the last 3 years amounted to Rs. 138 crores.
10. Sudhir and Samir Mehta
Sudhir and Samir Mehta ranked 10th on the list with Rs. 81 crores in donations. The brothers together operate the Torrent Group. The Mehtas are the second most generous family in Gujarat after Adani’s. The brothers have donated a total of Rs. 138 crores over the last 3 years.
Honorary Mention – Ratan Tata
This top philanthropic list would never be complete without mentioning the Padma Bhushan recipient Ratan Tata and family. Ratan Tata follows in the footsteps of Jamsetji Tata and after retirement has taken up the full-time leadership role of Tata Trusts. In fact, Tata Trusts the philanthropic arm owns 66% of the group holding company – Tata Sons.
The trust donates to various causes, some of them being healthcare, education livelihood, water, sanitation and hygiene, skill development, etc. The Trust has donated over 850 million to date. Their recent donation included Rs 500 crore to procure protective equipment for frontline workers, respiratory systems for treatment of increasing cases, and testing kits in the fight against COVID-19.
Closing Thoughts
Today we covered the list of top 10 Indian Philanthropist Businessmen. The above list prepared by Hurun India and EdelGive gives us insights into the philanthropic sector.
The list also includes Binny Bansal in the 21st position. Binny Bansal became the first philanthropist under the age of 40 to enter the philanthropy list which has an average age of 66 years. The list also highlighted the role played by women in running family charitable trusts. Major philanthropic donations are directed towards Education, Healthcare, and disaster relief.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
Explaining the Harshad Mehta Scam of 1992: The magnitude of the Harshad Mehta scam was so big, that if put into perspective today, it brought a bear market in the Dalal street. If we look into the numbers, this single man deceived the entire nation with an amount of over Rs 24,000 crores (which is way bigger than Nirav Modi or Vijay Mallaya scams).
Today, we take a look at how the Harshad Mehta scam was executed and possibly try to understand how he was able to fool the entire Dalal market and even the Indian banking systems. Further, we’ll also discuss why he plays such a considerable role in our pop culture and that too not as an antagonist.
Harshad Mehta’s Rs 40 Journey
Perhaps what makes the Harshad Mehta story even more interesting is that despite migrating to Mumbai with only Rs. 40 in his pocket he managed to influence the country in such a massive way. Once he discovered his interest in the stock market he worked for broker Prasann Panjivandas in the 1980s. Harshad considered Prasann Panjivandas as his guru. Over the next decade, he went on to work for several brokerage firms eventually opening up his own brokerage under the name GrowMore Research and Asset Management.
By the 1990s, Harshad Mehta had risen to such prominence in the Stock market that he was known as the ‘Amitabh Bachchan of the Stock Market’. Terms such as ‘The Big Bull’ and ‘ Raging Bull’ were regularly used in reference to him. Over time he became particularly known for his wealth in the 1990s which he did not shy away from boasting about through his 15,000 sq. ft. penthouse and array of cars. He was described by Journalist Suchita Dalal as charismatic, ebullient, and recklessly ambitious. Perhaps it was this recklessness that led to his downfall through his ambitious schemes.
The Broken Financial Environment of the 1990s
The year 1991 marks the year of liberalization of the Indian economy. Today we are grateful for this opening-up, however, Indian businesses found their own set of challenges. The public sector was forced to face increased competition and was under pressure to display profitability in the new environment. The private sector, however, responded positively to this news as this would mean more funds from foreign investments.
The new reforms also were welcomed by the private sector as they now were allowed entry into new sectors of businesses that were earlier reserved for the government enterprises. The stock market reacted positively to this with the Bombay Stock Exchange touching 4500 points in March 1992. But liberalization was not the only factor responsible for this. The period also an increase in demand for funds. The Banks were pressured into taking advantage of the situation to improve their bottom line.
The banks are required to maintain a certain threshold of government fixed interest bonds. The governments issue these bonds with the aim of developing the infrastructure of the country. Million-dollar development projects are taken up by the government which are financed through these bonds. How much is to be invested in these bonds depends on the bank’s Demand and Time Liabilities. The minimum threshold that the banks had to maintain as bonds in the 1990s was set at 38.5%. This minimum percentage that banks have to maintain in the form of bonds or other liquid assets is known as the Statutory Liquidity Ratio(SLR).
Along with this, the banks were also pressured to maintain profitability. Banks were, however, barred from participating in the stock market. Hence they were not able to enjoy the benefits of the Stock Market leap during 1991 and 1992. Or at least they were not supposed to.
What did banks do if they couldn’t maintain the SLR ratio?
The banks at times may have temporary surges in the Net Demand and Time Liabilities. In such times banks would be required to increase their bond holdings. Instead of going through the whole process of purchasing bonds the banks were allowed to lend and borrow these liquid securities through a system called Ready Forward Deals (RFD). An RFD is a secured short term loan (15 days) from one bank to another. The collateral here is government bonds.
Instead of actually transferring the bonds the banks would transfer something called Bank Receipts (BR). This is because the bond certificates held by the banks would be of bonds worth 100 crores whereas the requirements by the banks to maintain their SLR would be much lower. Hence BR’s were a much more convenient way of short term transfer.
The BR’s were a form of short term IOU’s (I Owe You). However, when an RF deal was exercised they never looked like loan transfer but a buy and sale of securities represented by BR’s. The borrowing banks would sell some securities represented by BR’s to the lending banks in exchange for cash. Then at the end of the period say 15 days the borrowing bank would buy the BR back (securities) at a higher price from the lending bank. The difference in the buy snd sell prices would represent the interest to be paid to the lending banks. Due to the BR’s, the actual transfer of securities doesn’t take place. BR’s could simply be canceled and returned once the deal was completed.
Was the use of Bank Receipts (BR) allowed?
The RBI set up a Public Debt Office (PDO) facility to act as the custodian for such transfer of bonds. As per the RBI BR’s were not permitted to be used for such purposes. However, the PDO facility was plagued with inefficiencies. Hence the majority of the banks resorted to BR. This system existed with the knowledge of the RBI which allowed it to flourish as long as the system worked.
What roles did the brokers play here?
Brokers in the markets played the role of intermediaries between two banks in the RFD system. They were supposed to act as middlemen helping borrowing banks meet lending banks. A brokers’ role should have ended here where it is done in exchange for a commission.
Where the actual exchange of securities and payments should have taken place only between the bank’s brokers soon found a way to play a larger role. Eventually, all transfer of securities and payments were made to the broker. Banks also began welcoming these because of the following reasons
Liquidity: Brokers provided a quick and easier alternative to dealing with in comparison to dealing with another bank. Loans and payments would hence be provided on short notice in a quick manner.
Secrecy: When deals were made through a broker it would not be possible for the lending banks to find out where the loans were being moved to. Similarly, the borrowing banks too would not be concerned where the loans would be coming from. The dealings were both done only with the broker.
Credit Worthiness: When banks would deal with each other, the transaction would be placed depending on the creditworthiness of the borrowing bank. However, once brokers took over the settlement process this benefitted the borrowing banks as they would have loans available regardless of their creditworthiness. The lending banks would lend based on the trust and creditworthiness of the broker.
Brokers entering the settlement process made it possible that the two banks would not even know with whom they have dealt with until they have already entered into the agreement. The loans were viewed as loans to the brokers and loans from the brokers. Brokers were now indispensable.
The Role played by Harshad Mehta.
Harshad Mehta used to broker the RF deals as mentioned above. He managed to convince the banks to have the cheques drawn in his name. He would then manage to transfer the money deposited in his account into the stock markets. Harshad Mehta then took advantage of the broken system and took the scam to new levels.
In a normal RF deal, there would be only 2 banks involved. Securities would be taken from a bank in exchange for cash. What Harshad Mehta did here was that when a bank would request its securities or cash back he would rope in a third bank. And eventually a fourth bank so on and so forth. Instead of having just two banks involved, there were now multiple banks all connected by a web of RF deals.
Harshad Mehta and the Bear Cartels
Harshad Mehta used the money he got out of the banking system to combat the Bear Cartels in the stock market. The Bear Cartels were operated by Hiten Dalal, A. D. Narottam and others. They too operated with money cheated out from the banks. The Bear Cartels would aim at driving the prices low in the market which eventually undervalued various securities. The Bear Cartels would then purchase these securities at a cheap price and make huge profits once the prices normalized.
Harshad Mehta countered this by pumping money from the stock market to keep the demand up. He argued that the market has simply corrected the undervalued stock when it revalued the company at a price equivalent to the cost of building a similar enterprise. He put forward this theory with the name replacement cost theory. This theory was a fallacy on his behalf or an illusion he resented to the public to justify his investments. Such was his influence in the stock market that his words would be blindly followed similar to that of a religious guru.
He would use the money from the banks which was temporarily in his account to hike up the demand of certain shares. He selected well-established companies like ACC, Sterlite Industries, and Videocon. His investments along with the market reaction would result in these shares being exclusively traded. The price of ACC rose from Rs.200 to nearly Rs. 9000 in a span of 2 months.
The banks were aware of Harshad Mehta’s actions but chose to look away as they too would benefit from the profits Harshad would make from the stock market. He would transfer a percentage to the banks. This would also enable banks to maintain profitability.
Video Credits: Set in the 1980’s & 90’s Bombay, “Scam 1992” tv series based on SonyLIV follows the life of Harshad Mehta
The Scam within the Scam
Harshad Mehta noticed early on the dependence of the RF deals on BR’s. In addition to this, the RF deal system also placed a great deal of reliance on prominent brokers like Harshad Mehta. So he along with two other banks namely Bank of Karad (BOK) and the Metropolitan Co-operative Bank (MCB) decided to further exploit the system. With the help of these two banks, he was able to forge BR’s. The BR’s that were forged were not backed by any securities. This meant that they were just pieces of paper with no real value. This is similar to a situation where you can avail loans with no collateral. Harshad Mehta further would pump this money into the stock market increasing his amount of influence.
The RBI is supposed to conduct on-site inspections and audits of the investment accounts of the banks. A thorough audit would reveal that amount represented by BR’s in circulation was significantly higher than the government bonds actually held by the banks. When the RBI did notice irregularities it did not act decisively against Bank of Karad (BOK) and the Metropolitan Co-operative Bank (MCB).
Another method through which the collateral was eliminated was by forging government bonds themselves. Here the BR’s are skipped and fake government bonds are created. This is because PSU bonds are represented by allotment letters making it easier for them to be forged. However, this forgery amounted for a very small amount of funds misappropriated.
Exposing the Harshad Mehta Scam
Journalist Sucheta Dalal was intrigued by the luxurious lifestyle of Harshad Mehta. She was particularly drawn to the fleet of cars owned by Harshad Mehta. They included Toyota Corolla, Lexus Starlet, and Toyota Sera which were rarities and a dream even for the rich in India during the 1990s. This further interest had her further investigate the sources through which Harshad Mehta amassed such wealth. Sucheta Dalal exposed the scam on 23rd April 1992 in the columns of Times of India.
It has been alleged that the Bear Cartel ganged up on Mehta and blew the whistle on him to get rid of him and the bullish run altogether.
Aftermath of Harshad Mehta Scam Exposure
— Effect on the Stock Market
Less than 2 months after the scam was exposed, the stock market had already lost a trillion rupees. The RBI created a committee to investigate the matter. The Committee was called the Janakiraman Committee. As per the Janakiraman Committee Report, the scam was of the magnitude of Rs.4025 crores. This impact on the stock market was huge considering that the scam amounted to only 4025 crores in comparison to a trillion or 1 lakh crores.
This major fall, however, cannot be attributed to the scam alone but also to the governments’ harsh response. In an attempt to ensure that all the parties involved are brought to justice, the government did not permit the sale of any shares that had gone through the brokers in the last one year. This affected not only the brokers but also the innocent shareholders who may have gone through these brokers to purchase securities. The shares came to be known as tainted shares. Their value was reduced to pieces of paper as their holder was not allowed to sell them. This just resulted in a worsened financial environment.
— Effect on the Political environment
The opposition demanded the resignation of the then Finance Minister Manmohan Singh and the RBI Governor S. Venkitaramanan. Singh even offered his resignation but this was rejected by prime minister P. V. Narasimha Rao.
— Effect on the Banking Sector
When the scam was exposed the banks started demanding their money back and recovery efforts made them realize that there were no securities backing the loan either. The Investments in the stock market by Harshad Mehta were tainted and had reduced by a significant value. A number of bankers were convicted. It also led to the suicide of the chairman of Vijaya bank.
— Further Investigation
The investigations revealed many players like Citibank, brokers like Pallav Sheth and Ajay Kayan, industrialists like Aditya Birla, Hemendra Kothari, a number of politicians, and the RBI Governor all had played a role in the rigging of the share market. The then minister P. Chidambaram also had utilized Harshad Mehta’s services and invested in Harshad Mehtas Growmore firm through his shell companies.
— Effect on Harshad Mehta’s Life
Harshad Mehta was charged with 72 criminal offenses and more than 600 criminal action suits. After spending 3 months in custody Mehta was released on a bail. The drama however never subdued but only intensified. In a press conference, Harshad Mehta claimed that he had bribed the then Prime Minister P.V. Narasimha Rao for Rs 1 crore to secure his release.
Harshad Mehta even displayed the suitcase in which he allegedly carried the cash. However he CBI never found any concrete evidence of this. Harshad Mehta was now also barred from participating in the stock market.
Investigators felt that Harshad Mehta was not the original perpetrator who forged the bank receipts. It was clear that Harshad Mehta capitalized and made profits using these methods. They also saw the possibility of the bear cartels ganging up on Harshad Mehta to get rid of the bearish markets by blowing the whistle on him and having the scam exposed through Sucheta Dalal. This, however, drew the investigators’ attention to the bear cartel as well as they too had used the same means as Harshad Mehta. These other brokers were eventually tried too.
In addition to this, the IT department claimed an income tax owed to them Rs.11,174 crores. Harshad Mehta’s firm GrowMore had significant clientele and the IT department had linked all the transactions that may have involved Harshad Mehta or his firm with Harshad Mehta’s income. His lawyer addressed this as bizarre as Harshad Mehtas lifetime assets were worth around Rs.3000 crores. He highlighted the possibility where by making Harshad Mehta the face of the scam allowed other powerful players a chance to have the focus lifted away from them and escape or slowly be exonerated.
Life after Release and Death
Harshad Mehta made a comeback as a market guru sharing advice on his website and newspaper columns. In September 1999 the Bombay Highcourt convicted him and sentenced him to 5 years of imprisonment. Mehta died while in criminal custody after suffering from cardiac arrest in Thane Prison on 31st December at the age of 48.
— Effect on Harshad Mehta’s Family
When Harshad Mehta died he still had 27 cases pending against him. Although all criminal cases have been cleared before his death there were still several civil cases pending in court. His wife still fights cases with recent victories over the IT department and a broker who owed Harshad Mehta 6 crores. The broker was ordered to pay the amount with 18% interest which roughly accumulated to 524 crores. The cases have dragged on for so long that his brother secured the law degree in his 50’s and represents the family in court. Harshad Mehta’s son now makes headlines regarding his investments.
Despite the scam, Harshad Mehta is still looked up to in certain circles, As reported by Economic Times some financial experts believe that Harshad Mehta did not commit any fraud, “he simply exploited loopholes in the system”. When Harshad Mehta was first released out of prison in 1992 he was greeted with cheers and applause as his return would signify the return of his bullish trend. It is doubted that if businessmen who have been embroiled in scandals with the likes of Vijay Mallya, Nirav Modi will receive the same welcome.
The Harshad Mehta scam can be looked at from two sides. The first is a scam where Harshad looted the stock market and the public or the second way where Harshad Mehta was made the scapegoat as someone had to be blamed and at the same time kept other influential people away from the limelight. The Year 1991 is generally referred to as the year of progress due to liberalization but if seen from this perspective discussed here it just makes one exclaim “ What a mess!”.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
TATA Group bidding for Air India – The story so far: The Tata Group is no stranger to Airplanes or to the business of Aviation, nor is Ratan Tata. At the age of 17 years, the octogenarian chairman of one of the biggest business conglomerate of India (TATA Sons), once landed a plane that had lost its sole engine mid-flight. To add to the tally of Ratan Tata’s credentials, he has also piloted the supersonic F-16 fighter Jet.
Now, with the chance of becoming the biggest full-service carrier in India, TATA sons are in a foray to bid for the ever ailing Air India. If Tata’s Air India bid gets through, it will the second full-service provider (Vistara is already a full-service provider) under the wing of TATA Group. In today’s article of Market Forensics by Trade Brains, we’ll cover the story so far on TATA Group bidding for Air India. Let’s get started.
TATAs Love for Aviation Industry
There is no hidden secret about the fascination of the TATA group with the Aviation Industry, more specifically with the business of Airlines. The following timeline will give a brief snippet of the TATA sons and its association with the business of aviation:
The legendary industrialist and philanthropist J.R.D. Tata was India’s first licensed pilot. He stated TATA Airlines in 1932 as the nation’s first carrier (flying mail between Karachi in then-undivided, British-ruled India and Bombay)
In 1953, the government nationalized TATA airlines and named it Air India.
Later in the 1990s when the economy was liberalized, TATA’s interest grew again and in 1994 they came up with a plan to start airlines with 100 airplanes in collaboration with Singapore Airlines. But the government refused the entry of foreign entrants and the plan didn’t materialize.
Later in the year 2014, a low-cost airline joint venture was entered with Malaysian business tycoon Tony Fernandes’ Air Asia.
And in the year 2015, Vistara was launched as a full-service airline in collaboration with Singapore Airlines. It was started with the motto to redefine air travel in India with “Personalized flying experience”.
In both the ventures mentioned above, TATA sons have a 51% stake.
TATA Group bidding for Air India – The Challenges
— Waving a Non-compete clause with Vistara Airlines
This will probably be the biggest challenge for TATA Sons. As TATA sons have already announced that they would want to consolidate the whole business of aviation into a single entity. And if they manage to win the bid and acquire Air India, it will come under the entity of Vistara. However, the conflict of Interest could arise as Vistara and Air India are both full-service providing carrier. TATA group is willing to go out alone to bid for Air India if Singapore Airlines don’t agree, even if it results in a fallout of the merger between TATA sons and Singapore Airlines.
Essentially even if Vistara were to go ahead and bid for Air India, it would need consent from SIA and Temasek – which owns 55% of Singapore airlines. And earlier Temasek had voiced their opinion against the proposed bidding of TATA sons for Air India.
— Turning the fortunes of National Loss-making Airlines
This could be the second biggest challenge facing TATA sons. If history is to be believed then TATA Sons themselves don’t have a great history running the business of airlines. And owning Air India will come along with its own set of debts and baggage.
In the first quarter of 2020, Air India made losses of rupees 28 crores per day. Its losses widened to Rs 2,570 crore in the June quarter, from Rs 785 crore a year earlier. Moreover, Air India is also famous for its unions and bureaucratic structure, which could sometimes become a tuff nut to crack.
In February 2021, N Chandrasekaran will complete four years as group chairman at TATA sons. The revival of the group’s aviation fortune will be at the top of his priority list. And if the aviation industry experts are to be believed, “The TATA group needs Air India under its wings to salvage the group’s aviation business”
From the time N Chandrasekaran took over the reins of group chairman, Vistara and Air Asia has increased their market share to 13.2% in October 2020 from a meager 7.2% in 2017. But industry leader IndiGo has performed even better. It is an undisputed leader of the aviation industry (51% in October 2020 from 39.5% in 2017)
However, if Air India (11% of domestic market share) were to come under its wings, then the group will have a combined domestic market share of 24.2% (nearly a quarter of the aviation sector pie).
But the real meat of the deal lies in the access to international markets that comes along with Air India. IndiGo does not seem to be too interested in the long haul flights. But with Air India flights, time-slots, and other international offices, TATA will get a firm footing in the international markets. Air India, along with its low-cost unit Air India Express that flies majorly to the Middle-East destinations, has a fleet of nearly 90 aircraft. The airline flies to over 40 international destinations. Air India Express will also be sold along with its parent.
The Government Incentive to Airline Bidders
The Government has sweetened the deal whereby the buyer is supposed to absorb the Rs. 23.286.5 crores of debt and the remaining amount will have to be transferred to Air India Assets Holding Limited (AIAHL), a special purpose vehicle created after the failed sale attempt in 2018. Air India had a total debt of Rs 60,074 crore as on March 2019, as per EoI. The debt would have grown substantially since then as the national carrier suffered due to the curtailed operations during a pandemic.
TATA Group bidding for Air India – What to Conclude?
Looking at the above discussion, it makes a lot of strategic sense for the TATA group to bid for Air India and begin its ascend in the domestic and global airlines market. However, it does come at a cost (buying cost, the debts of Air India, and the bureaucracy). But TATA group has experience in handling these sort of situations. In addition, the TATA group will also get a team of staff who is well trained and has been in the business of Aviation for a long time.
Before we wrap up, here are a few facts about Vistra and Air Asia business of TATA group:
Vistara has flown more than 5 million customers in the last one year, while the fleet size has also expanded significantly.
With 31 aircrafts today, Vistara flies to 27 destinations and operates 170 flights per day.
AirAsia India has 23 aircraft, reaching 19 destinations with 165 flights.
Vistara is the only airline to offer the choice of Premium Economy class for travel between India, Dubai, and Bangkok, in addition to Economy and Business Class.
That’s all for today’s Market Forensics article on the story of TATA Group bidding for Air India. We hope it was useful for you. We’ll be back tomorrow with another interesting market news and analysis. Till then, Take care and Happy investing!
Hitesh Singhi is an active derivative trader with over +10 years of experience of trading in Futures and Options in Indian Equity market and International energy products like Brent Crude, WTI Crude, RBOB, Gasoline etc. He has traded on BSE, NSE, ICE Exchange & NYMEX Exchange. By qualification, Hitesh has a graduate degree in Business Management and an MBA in Finance. Connect with Hitesh over Twitter here!
Introduction to Nifty Financial Services Index: Good News, Good news!! A new and very exciting product has been added to the kitty of the market participants trading in the Indian trading ecosystem. We are talking about the Index “Nifty Financial Services Index”.
In today’s article of Market Forensics by Trade Brains, we’ll be discussing all about the Nifty Financial Services Index i.e what is Nifty Financial Services Index, its constituents, F&O Contract Specifications, and more. Let’s get started.
What is Nifty Financial Services Index?
NSE in its circular published on 10th Dec 2020 made the announcement that they have got permission to allow Nifty Financial services to be traded as a derivative product. From January 11, 2021, Nifty Financial Services will be allowed to trade in Futures and Options contract.
Till now the major indices that are being allowed to trade in the Indian equity market are Nifty and Bank Nifty. However, with the addition of Nifty Financial Services, there will be a total of three indexes allowed to have Futures and Options (F&O) contracts.
Therefore, adding the ‘financial services’ as a tradeable index to the trading ecosystem provides a huge boost and impetus for traders looking for more avenues to trade. And rather than having to trade all the constituents, one can express his/her view on the same by trading Nifty Financial Services.
Constituents of Nifty Financial Services Index
The Nifty Financial Services mainly comprises 20 stocks from various sectors like Banks, Non-Banking Financial Services, Insurance, etc. The following is the comprehensive list of all the constituents along with their weightage as on November 27, 2020. (Source: nseindia.com)
S. No
Stock Name & Weightage (%)
1
HDFC Bank Ltd. (27.13%)
2
Housing Development Finance Corporation (17.51%)
3
ICICI Bank Ltd. (14.14%)
4
Kotak Mahindra Bank. (12.10%)
5
Axis Bank Ltd. (6.46%)
6
Bajaj Finance (5.64%)
7
State Bank of India (4.06%)
8
Bajaj Finserv Ltd. (2.29%)
9
HDFC Life Insurance (2.21%)
10
SBI Life Insurance (1.43%)
11
Power Finance Corporation
12
Shriram Transport Finance Company Ltd.
13
REC Ltd.
14
ICICI General Insurance Co. Ltd
15
Cholamandalam Investment and Finance Company Limited
Criteria to be a part of Nifty Financial Services Index
Here are some of the criteria for companies to be a part of this Index:
NIFTY Financial Services Index is computed using the free-float market capitalization method, wherein the level of the index reflects the total free-float market value of all the stocks in the index relative to a particular base market capitalization value.
The company has to be a part of Nifty 500 to be able to qualify to be a part of this Index. But in case the number of eligible players falls below 10, then the companies will be selected from the Nifty top 800.
The company’s trading frequency should be at least 90% in the last six months.
The company should have a listing history of 6 months. A company, which comes out with an IPO will be eligible for inclusion in the index if it fulfills the normal eligibility criteria for the index for a 3 month period instead of a 6 month period.
The weightage of each stock in the index is calculated based on its free-float market capitalization such that no single stock shall be more than 33% and the weightage of the top 3 stocks cumulatively shall not be more than 62% at the time of rebalancing.
Finally, the rebalancing of the companies included in this index happens semi-annually.
Here are some of the key Nifty Financial Services Futures and Options Contract Specifications:
The contract size for Nifty Financial services will be 40 units.
There will be a total of 7 weekly expiring contracts and 3 monthly expiring contracts
For Option trading, there will be a total of 30 In the Money contracts,1 At the Money contract, and 30 Out of Money contracts.
The strike interval will be 100 for options trading i.e., the gap between two consecutive strike prices will be 100. Say, for example, if the current At the Money Strike Price is 14300, then the immediate Out of Money strike will be 14400, and the immediate In the Money strike will be 14200.
Both Futures and Options contracts will be Cash Settled.
The daily circuit limit for a futures contract is 10%.
Closing Thoughts
The addition of an extra index for trading Futures and Options contracts provides an extra impetus for investors and traders willing to trade in the Indian Financial spectrum. It remains to be seen whether the contract garners sufficient interest from investors. But looking at the popularity of Bank Nifty as a derivative instrument, it is expected that the Financial services contract also attracts similar interest from investors and traders.
That’s all for today’s Market Forensics article on long-short funds in India. We hope it was useful for you. We’ll be back tomorrow with another interesting market news and analysis. Till then, Take care and Happy investing!
Hitesh Singhi is an active derivative trader with over +10 years of experience of trading in Futures and Options in Indian Equity market and International energy products like Brent Crude, WTI Crude, RBOB, Gasoline etc. He has traded on BSE, NSE, ICE Exchange & NYMEX Exchange. By qualification, Hitesh has a graduate degree in Business Management and an MBA in Finance. Connect with Hitesh over Twitter here!
List of Best Metal Stocks in India – Indian Metal Industry: Did you know that the practice of manufacturing practical metals first began in India? Archaeological sites have been found in UP which provides evidence of iron implements all the way back to 1800 BCE. The Metal industry in India already has a significant place in history and today competes to once again achieve the status in global markets as well. Today we examine the Indian metal industry and the top companies that play an important role in the industry.
Post-Independence Indian leaders realized that in order to achieve economic growth one of the sectors they would have to focus on would be the metal industry. Historically too, the metal industry has had a dominant role so much so that it is now widely regarded as an indicator of economic progress. In Order to achieve this goal, it would be necessary to develop the primary(raw material), secondary(manufacturing), and tertiary sector(services sector) simultaneously as metals( primarily steel) was the common link between all three sectors.
India has several advantages over global players in this industry. The first being its strategic location. This puts it right in the middle of fast-developing Asian markets. In addition to this, the local demand is driven by growth initiatives also provides a boost to the industry. These initiatives include expansion of railway networks, the Housing for all by 2022 scheme (20 million houses), the developing shipbuilding industry, the defense sector being opened up to private players, growth in the automobile sector Development of 100 Smart Cities, Power For All, etc. All of these rely on metals hence mandating the metal industry’s growth along with theirs.
Let us now take a look at the different metal industries and the respective top companies in these industries. Here, we’ll cover the best metal stocks in India. Let’s get started.
A) Steel Industry
In 2019 India replaced Japan to become the world’s second-largest crude steel producer at 111.2 MT. The Government realizing the importance and potential of the industry takes special consideration in assisting the improvement of its performance. Currently, the steel industry contributes slightly more than 2% of the country’s GDP. This however accounts for its direct contribution. Indirectly its contribution is much higher. According to the World Steel Association for every two jobs created in the steel industry, 13 more jobs are created across the supply chain. The Ministry of Steel aims to increase the steel production capacity to 300 MT by 2030-31, indicating the opportunities in the sector.
Following are the three best metal stocks in India leading in the steel industry. Together these players account for around 50% of the capacity of the steel industry.
Tata Steel is not only Indias largest steel company but also makes it in the top 10 globally with a capacity of 34 MnTPA. It was established in 1907 and wasAsia’s first integrated private steel company.It also operates in Europe, which accounts for 12.1 MnTPA of its capacity. The acquisition of Bhushan Steel Limited in the year 18-19 added to the size of the company.
Tata Steel has manufacturing units in Jamshedpur, Jharkhand, and Kalinganagar, Odisha. As of 2019 the company had revenues of US$22 billion.
JSW Steel is part of the JSW Group and is the second-largest steel company in India. The company began with a single facility in 1982 and today has grown to have a capacity of 18 MnTPA. Its plants are present in the states of Karnataka, Tamil Nadu, and Maharashtra. The company further plans to expand its capacity to 40 MnTPA. It is also India’s leading manufacturer and exporter of coated steel with a capacity of 1.8 MTPA.
JSW Steel also has an international presence with plates and pipes plant, and mining facilities in the United States, Chile, and Mozambique. As of 2019, the company had revenues of US$12 billion.
Steel Authority of India Limited is a Public Sector Enterprises and was formed in 1974 as part of the government’s efforts to promote the country’s economic growth. It is the 20th largest steel producer in the world and the 3rd largest in India.SAIL produces iron and steel at 5 integrated steel plants at Bhilai, Rourkela, Durgapur, Bokaro, and Burnpur(Asansol) and 3 special steel plants at Salem, Durgapur, and Bhadravathi. As of 2019 the company had revenues of US$9.5 billion.
Unlike in Steel India falls behind in the Copper Industry. The growth in this sector is mainly driven by China. Although India exports copper there is still a significant portion of copper imported into the country. The major challenges that players face in this industry are due to outdated technology, improper infrastructure, high setup cost, high funding cost, and lack of skilled professionals. The period 2011-12 to 2016-17 has seen imports tripling at a CAGR of 15.4%. Following are currently the best metal stocks in India in the Copper Industry.
Steel Authority of India Limited is a Public Sector Enterprises and was formed in 1973. HCL is the only Indian Copper producer that engages in a wide spectrum of activities ranging from Mining, Beneficiation, Smelting, Refining, and Continuous Cast Rod manufacturer. It is the first Indian Copper Producer to be accredited with ISO 9002 certification for Continuous Cast Rod Manufacturer. Its mines and plants are spread across five operating Units, one each in the States of Rajasthan, Madhya Pradesh, Jharkhand, Maharashtra, and Gujarat.
Bhagyanagar India Ltd.(BIL) was founded in 1985 and is the second largest of the companies producing copper products in India. The Company deals in Copper products such as Copper Rod, Strips, Pipes, Busbars, Sheets among others. Over the years the organization has diversified into Telecom products, Solar Products, and Real Estate. The Company has been run by three generations of the Surana family and is Headquartered in Hyderabad.
The company was initially incorporated in 1981 with the name Shri Krishna Strips Ltd before changing it to Arcotech Ltd. It manufactures Copper as well as copper alloys products and aluminum products like Plates/Bars sheets strips foils and rods. It was able to establish itself as one of the major players in the industry Industry mainly by creating a niche in producing micro-thin foils up to 0.035 mm. Apart from copper the company also produces Phosphor Bronze, Nickel Silver, Nickel Brass, Cupro Nickel, Aluminium Bronze.
C) Zinc Industry
Zinc is the fourth most widely used metal globally after steel, Aluminium, and Copper. Just like other metals this industry too is led by China. China accounts for a 33.8% share of the total world production. The Demand for Zinc in India is based on the steel market. This is because Zinc is used in galvanizing and coatings of iron and steel to protect it from corrosion. 70% of the total demand for Zinc is dependent on Steel. Following are currently the top players in the Industry.
Hindustan Zinc is India’s largest and world’s second-largest zinc-lead miner. The company was incorporated as Metal Corporation of India in 1966 as a Public sector undertaking. Today the company is a subsidiary of Vedanta Limited which owns a 64.9% stake in the Company while the Government of India holds a 29.5% minority stake. The company has a reserve base of 114.7 million MT with an average zinc-lead grade of 8.7% and mineral resources of 288 million MT. They have a mine life of over 25 years. The company currently holds a 78% market share in India’s primary zinc industry.
Mewat Zinc is a Public Sector Enterprises and was formed in 1991. It produces zinc metal and related products and conducts business out of India. The company has been promoted by Industrialists and Technocrats.
3. Sunrise Zinc Limited
Sunrise Zinc Limited is an unlisted public company and was incorporated in 1993. It is located in South Goa, Goa. The proposed activities of the company are to manufacture Electrolyte Zinc, Copper Sulphate, and GOB Zinc.
D) Aluminium Industry
In comparison to other non-ferrous metals, Aluminium is the fastest growing metal. Its distinct properties of having higher strength to weight ratio, resistance to corrosion, formability, dampness make it highly valuable. Its demand has increased primarily due to its usefulness in the automobile industry. India is improving its stance in the sector as during 2011-12 to 2016-17 transformed India from being a net importer to a net exporter of Aluminium with a CAGR of 30%. Following are the best metal stocks in India in the Aluminium industry.
Hindalco Industries Limited an Indian aluminum manufacturing company. It is a subsidiary of the Aditya Birla Group. It is also one of the most profitable of all aluminum manufacturing companies in India. Hindalco is one of the world’s largest aluminum rolling companies and one of the biggest producers of primary aluminum in Asia.
The company has plants located in Odisha, West Bengal, Nagpur in Maharashtra, Renukoot in Uttar Pradesh, and Taloja near Mumbai in Maharashtra. Its subsidiary company – Hindalco-Almex Aerospace Limited manufactures high-strength aluminum alloys for applications in the aerospace, sporting goods, and surface transport industries. As of 2019 the company had a revenue of US$18 billion.
National Aluminium Company Limited, is a Public Sector Undertaking and was incorporated in 1981. The company is managed by the Ministry of Mines. The company is one of the largest integrated Bauxite-Alumina-Aluminium-Power Complex in the country encompassing bauxite mining, alumina refining, aluminum smelting and casting, power generation, rail, and port operations. As of 2019 the company had a revenue of US$1.2 billion.
3. BALCO
Bharat Aluminium Co. Ltd. was a Public Sector Undertaking and was incorporated in the year 1965. In 2001 the company was taken over by Vedanta Resources. The company was the first to produce alloy rods for conductors used in the power transmission industry, the first to roll material for Aerospace in the country, and the first to set up the widest Hot Rolling Mill in India.
Today, we covered the Indian metal industry and the best metal stocks in India. In the last few years, India’s domestic metal industry has suffered from a slump one of the causes being that of the trade wars impacting the industry. Most recently the pandemic brought the industry to a halt. This however is temporary and the growth is expected to pick up as soon as India begins focussing on its infrastructure developmental goals.
Unfortunately, the industry being capital intensive send every domestic player in losses in times of economic downturn which reduces demand for these metals. This had made many credit agencies skeptical of lending to the industry. Sound support from the government and a credit boost would go a long way in bringing players back on track
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
5G Network in India is probably the biggest advancement in the mobile connectivity spectrum so far. 5G technology is expected to be the game-changer in the field of telecommunication & connectivity and solve the network problem among mobile users. The technology has already started to be implemented globally in 2019. According to reports published by GSM Association, 5G technology is expected to have a global user base of 1.7 billion by 2025.
Even India is not so far in building the 5G connectivity. All the major telecom players i.e. Reliance Jio, Airtel, and Vodafone are in horde to be the first one to be able to provide 5G network in India. In today’s article on Market Forensics, we’ll be covering the race to build the 5G Network in India and who’s winning. Let’s get started.
What is 5G connectivity?
Before we enter the main discussion, let’s first begin by understanding what exactly is 5G connectivity. As the name suggests, 5G is a fifth-generation technology standard for broadband cellular services and it is the successor of the 4G technology (currently being used by most telephones for connectivity). The main advantage of 5G over 4G is the fact, it has got a higher bandwidth and that will give offer higher download speeds.
Because of the higher bandwidth speed, it is believed that the network will not only serve cellphones but will also be used as general internet service providers for Laptops and Desktops. 5G data at its peak can give a download speed of 20 Mbps. To put it into perspective, by using the 5G network, a full high definition (HD) movie can be downloaded within a minute even in a crowded stadium.
5G Network in India – The Race
The second-biggest telecom market in the world is all ready to brace, the 5G spectrum and it is expected to be a part of India’s telecom ecosystem by the second half of 2021. The race for pioneering the technology seems to be heating up. And by all means, Reliance Jio seems to be in the fray to be the pioneer.
In a speech on Tuesday (8th Dec 2020) at Indian Mobile Congress 2020, the chairman of Reliance Industries, Mukesh Ambani said, “Reliance Jio will pioneer 5G technology in India and it will be available to use by the users by the second half of 2021”.
Mr. Ambani also went on to say that India is one of the most digitally connected nations in the world and 5G can be made available at affordable prices and everywhere as soon as possible. He further went on to add that 5G will not only enable India to participate in the fourth industrial revolution, but also to lead it.
What makes Jio so confident about pioneering 5G in India?
The chairman of the group, Mukesh Ambani is very confident about rolling out 5G services in India by the second half of 2021. Earlier in the month of October, Jio has made an announcement it is expanding its partnership with US wireless giant Qualcomm to roll out 5G services in India. Mr. Ambani went on to say that he is very proud to announce that Jio has designed and developed a complete 5G solution from scratch and it will be his biggest step towards his Make in India commitment.
Once Jio 5G is tested India-wide, it will not only be deployed in India but will also be in a position to be an exporter of 5G solution to other telecom operators globally. Jio as an initiative is building its own 5G solution on a new global initiative called O-RAN (Open RAN)
(Pic courtesy: www.universalnews.org)
What is O-RAN?
Open RAN (O-RAN) differentiates itself from other proprietary networks (Huawei, Samsung, Ericsson, Nokia, etc.) over the simple fact that in the case of O-RAN, the networks are open and include elements and facets (software and hardware) from different vendors. If the network has two components i.e., both hardware and software, then both the components can be bought from different vendors. But in the case of proprietary networks, all the components will have to be bought from the same vendor. So, the O-RAN network gives the obvious bargaining power over other network service providers.
To put things into context, in 2018, Jio had bought US-based software vendor Radisys (as it specializes in system integration and network virtualization capabilities). And it is a known fact that Jio specializes in the software side and it’s putting together an alliance with Qualcomm to manage the hardware side. And the move from 4G to 5G will be more hardware-driven as new antennas will have to be installed in network towers.
What do other Telecom companies have to say?
Sunil Mittal, the chairman of Bharti Airtel is of the view that getting the 5G network to India has its set of challenges. And it will take two-three years more to roll out 5G technology. “I think India, to my mind, in two or three years’ time will be ready to receive the benefit of the investment that the globe would have made onto the 5G standard and 5G ecosystem,” Even another chief executive of Airtel had earlier remarked that the India ecosystem is not ready for the 5G technology introduction yet.
India is slowly but surely becoming the talk of the town while talking about the adoption of new technologies. And India is always known for embracing new technologies. And being the 2nd biggest global player in the usage of telecom, the introduction of 5G technology in India is inevitable. But, it remains to be seen how soon. If the reports are to be believed, Jio could be the first network service provider to provide 5G telecom services in India.
That’s all for today’s Market Forensics. We’ll be back tomorrow with another interesting market news and analysis. Till then, Take care and Happy investing!!
Hitesh Singhi is an active derivative trader with over +10 years of experience of trading in Futures and Options in Indian Equity market and International energy products like Brent Crude, WTI Crude, RBOB, Gasoline etc. He has traded on BSE, NSE, ICE Exchange & NYMEX Exchange. By qualification, Hitesh has a graduate degree in Business Management and an MBA in Finance. Connect with Hitesh over Twitter here!
(GV Prasad and Satish Reddy)
(Shiv Nadar with daughter Roshni Nadar)
(Source: The Wire)
(Ratan Tata with his grandmother, 
(Ratan Tata with JRD Tata)
