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A few weeks before Flipkart announced its latest round of funding in which it has added a billion dollars to its war chest, Tata Consultancy

Services Ltd (TCS), India’s most valuable company, scaled Rs.5 trillion in market capitalization. At that number it is ranked ahead of not just

its Indian peers but also such global heavyweights as Accenture. Collapsing time and vintage may seem like a travesty, but in this instance

it could give the younger Indian company a few valuable lessons in building a world-class and world-scale business.

Indeed, it is tempting to dismiss TCS as the past while welcoming Flipkart as the brave new face of India’s technology sector. Except that

TCS is no fuddy-duddy behemoth. Sure, there is an old world air about its success. Anyone who saw the vast cavernous offices of the

company in Mumbai’s Air India building in the 1990s would know how it was run like a factory. But its model of earn before you burn is far

more relevant in these bubbly times.

Flipkart is a typical product of its time, a me-too business which has edged ahead of its competitors with better fund-raising ability as well

as superior delivery systems. TCS, founded 46 years ago, was so far ahead of its time that it is difficult to find a reference to it in the

newspapers and magazines of the 1980s. Flipkart is of course a true blue entrepreneurial venture while TCS was at best a piece of canny

intrapreneurship by its founder Faqir Chand Kohli within the venerable Tata group.

In 1998, TCS’s revenues were just about half a billion dollars, representing 12% of the industry revenues. Having gobbled up rivals such as

Myntra and Letsbuy, Flipkart has the similar opportunity to pioneer a whole new market in India. For that though it must take a few leaves

out of the TCS book.

In 1998, TCS set itself a simple target—to be among the world’s top 10 by 2010. It has done so successfully even while its margins are

among the highest in the business. What would it mean for Flipkart to set a similar target? The company says it is looking at $100 billion in

sales over the next 5-10 years. That’s a tall ask with the total Indian e-commerce business barely $3 billion at the moment. This forces the

company to spend its way to market penetration.

In the last three years the e-commerce start-up has raised $740 million in funding from venture capitalists with another billion dollars

added to that swelling kitty now. Its model of growth needs massive volumes but with the amount of cash it is burning, it also needs the

funding to keep coming. It is in a desperate but audacious race against itself as well as Amazon, the big daddy of the global e-commerce

business, which has just announced it will invest $2 billion in its India business.

What Flipkart can learn from TCS

In his autobiography The TCS Story…& Beyond, S. Ramadorai, the man who as chief executive officer of the company from 1996 to 2009 is

widely credited with its growth, talks of the three waves the company had to ride to success. These were establishing credibility, scale and

leadership. Given the confidence showed in it by its existing investors and the growth in sales, Flipkart looks like it has cracked that first

wave. But it is the next two that are going to be its biggest challenges. At about $200 million of sales in 2013, it is a minnow in the global e-

commerce rankings where number 15, Best Buy, had sales last year of $3 billion. Besides giants such as Alibaba, newer firms such as

Tmall, Aliexpress and Rakuten are scorching the rankings and all of them are from Asia with Tmall and Aliexpress belonging to the Alibaba

group while Rakuten is from Japan. The global tech bazaar is awash with funds buoyed by a booming stock market for tech stocks. Reading

too much into Flipkart’s $7 billion valuation following its latest round of funding is risky. That is just a figure for the next round, whenever

that happens.

The last few years has seen the birth of newer models of e-commerce and the foundations of market leadership are being laid now. Flipkart’s

advantage of course is that it is operating in one of the fastest growing markets for e-commerce in the world. Unlike a TCS or its peers such

as Infosys and Wipro, it doesn’t have to discover a market. What it does need is to look for a differentiator much like TCS did when it

cracked the offshore model. Flipkart would do well to look for such a positioning with the cash it has just raised.

Source- Live Mint

Forfaiting

Tenure- Although discounted receivables often have maturities over medium terms of 1 to 3 years they can be as short as 1 month or as long as 10

years.

Currency-Debt instruments are typically denominated in one of the world’s major currencies, with Euro and US Dollars being most common.

Elements relating to the pricing of a forfaiting transaction-

Discount rate, the interest element, usually quoted as a margin over LIBOR.

Days of grace, added to the actual number of days until maturity for the purpose of covering the number of days normally experienced in the

transfer of payment, applicable to the country of risk.

Commitment fee, applied from the date the forfaiter is committed to undertake the financing, until the date of discounting.

Forfaiting is a form of trade finance that involves purchasing of an exporter's receivables on

a non – recourse basis, at a discount by paying cash. The forfeiter (the purchaser of the

receivables) becomes the entity to whom the importer is obliged to pay its debt.

By purchasing these receivables, which are usually guaranteed by the importer's bank - the

forfaiter frees the exporter from credit and from the risk of not receiving payment from the

importer who purchased the goods on credit. While giving the exporter a cash payment,

forfaiting allows the importer to buy goods for which it cannot immediately pay in full. The

receivables, becoming a form of debt instrument that can be sold on the secondary market,

are represented by bills of exchange or promissory notes, which are unconditional and easily

transferred debt instruments.

Benefits-

- Eliminates risks (political , transfer and commercial risk) of the exporter

- Improves cash flow by providing ready liquidity against transactional documents

- Allows discounting long term debts too.

Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL) was

established by Reserve Bank of India (RBI) as its wholly owned subsidiary on

3rd February 1995 with a view to augmenting the production of bank notes in

India to enable the RBI to bridge the gap between the supply and demand for

bank notes in the country. The BRBNMPL has been registered as a Private

Limited Company under the Companies Act 1956 with its Registered and

Corporate Office situated at Bangalore. The company manages 2 Presses one

at Mysore in Karnataka and the other at Salboni in West Bengal. The present

capacity for both the presses is 16 billion note pieces per year on a 2-shift

basis.

Besides that, Currency Note Press, Nashik and Bank Note Press, Dewas also

prints bank note for RBI.

Sensex Gold (10 gm)

MCX Metal MCX Agri

Crude Oil ($/barrel) Dollar/INR

About Investeurs Consulting Private Limited

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Team Chronicle

Akanksha Srivastava akanksha@investeurs.com

Nidhi Gogia nidhi@investeurs.com

Sonali Yadav sonali@investeurs.com

Harpreet Kaur harpreet@investeurs.com

Disclaimer: Investeurs Chronicles is prepared by Research & Analysis Team of Investeurs Consulting Private Limited to provide the recipient with relevant information pertaining to the world economy. The

information contained in the document is based on the releases made by various newspaper & publications; hence, we are not responsible for any inaccuracies in the information provided.