Post Conference Report
featuring
CEO Track12 CEO presentations6 Thematic presentations
Panel DiscussionIndia Banking: Beginning ofa new era
Re-shaping IndiaRe-shaping India
1September 2013
9th Annual Global Investor Conference
Conference Highlights
2013 so far has been a challenging year, to say the least! Growth parameters are hitting new lows
and current account deficit new highs. The rupee is hurtling down, and global headwinds have
been on a rise. On corporate earnings, June 2013 quarter PAT in fact de-grew 2% YoY, causing ~3%
downgrade in Sensex EPS estimates (FY14 Sensex EPS to grow only 7%). Amidst this challenging
backdrop, we hosted our 9th Motilal Oswal Annual Global Investor Conference in the first week of
September 2013 at the Grand Hyatt in Mumbai.
Motilal Oswal Annual Global Investor Conferences are arguably the biggest in India, a trend which
continued in 2013 as well. During 2-4 September, top management of over 100 leading Indian
companies interacted with more than 600 investors from all over the world, translating into 3,000+
company-investor meetings. During the last two days (Sep 5-6), we also had an insightful visit to
the power corridors in Delhi.
Conference Highlights CEO Track: During the first two days of the conference, 12 of India's leading CEOs shared their
vision, strategies and success stories.
Thematic presentations: By eminent personalities on a diverse range of themes -
Dr Subramanian Swamy, Eminent Lawyer, Politician, Academician, shared his views on
India: The rising role of judiciary & the way forward
Prof Sandeep Desai, The Grassroot Educationalist, discussed his views on Indian Education:
Taking the train less travelled
Mr Deepak Parekh, Chairman, HDFC, spoke on Looking beyond the gloom & doom
Mahatria Ra, Spiritual Guru, threw light on Unleashing human spirit - most & more
Mr Ravi Venkatesan, ex-Chairman, Microsoft (India), Cummins (India), spoke on Conquering
the chaos - Art of doing business in India.
"Food-for-thought" luncheon sessions: On Day 1, we had a panel discussion on India Banking:
Beginning of a new era, featuring leading CEOs from the financial sector. On Day 2, we had an
insightful case study of the Mumbai dabbawalas, by Dr Pawan Agarwal, Management & Motivation
Guru.
We also set up a unique evening on the opening day (Sep 2) - Super Theater - featuring "Blame It On
Yashraj", a unique play combining Bollywood, comedy, dance … and more !
All-in-all, the positive feedback we received makes us believe that the Conference indeed lived up to
its theme of Re-shaping India, leaving global investors with interesting insights, winning themes,
greater conviction, and the best investment ideas.
We thank you for the active participation at the event. We will host the 10th Motilal Oswal Annual
Global Investor Conference in September 2014 and look forward to your participation.
Navin Agarwal Rajat Rajgarhia
CEO – Institutional Equities MD – Institutional Equities
2September 2013
9th Annual Global Investor Conference
CEO Track
CEO Track takeaways12 CEOs, 6 Thematics, Panel discussion on India Banking
3September 2013
9th Annual Global Investor Conference
ICICI Bank
Ms Chanda Kochhar is the MD
and CEO of ICICI Bank, India’s
largest private sector bank
and overall second largest
bank in the country. She is
recognized for her role in
shaping retail banking in
India, leadership in the ICICI
Group and contributions to
various forums in India and
globally. Ms Kochhar began
her career with the erstwhile
ICICI Ltd in 1984 and was
instrumental in establishing
ICICI Bank during the 1990s.
She has held various
significant positions in the
group and assumed the
current role in 2009.
Under Ms Kochhar ’s
leadership, ICICI Bank was
conferred with the “Best
Retail Bank in India” award
in 2001, 2003, 2004 and 2005
and “Excellence in Retail
Banking Award” in 2002
by The Asian Banker.
She was conferred with the
Padma Bhushan award in
2011. In 2013, Ms Kochhar has
been named as the most
powerful business women in
India in the Forbes list of
“The World’s 100 Most
Powerful Women 2013”. She
is the only Indian to be
featured in the Dow Jones
list of “Most Influential
Female Executives in the
World” of the last decade
and is ranked 12th in the
global list.
Covering Analyst(s):Alpesh Mehta+91 22 3982 [email protected]
Sohail Halai+91 22 3982 [email protected]
Key takeaways
Core essence Across business lines, ICICIBC is focusing on a judicious mix of profitability, growth
and risk management to enhance RoE.
Retail to be the key growth driver due to soft outlook on the corporate and SME
business.
Having achieved 15% consolidated RoE, ICICIBC is targeting 18% over the next few
years. Quantifying the timeframe for that is difficult due to current headwinds.
Industry insights The differential between credit and deposit growth rates is not much. A lot of
credit demand is for working capital - not for building inventory but to fund
receivables. There is no cut back in retail lending except for CV loans.
Steps taken by the government - coal imports, reallocation of gas from fertilizer
to power, SEBs raising tariffs - should help, going forward.
Stress in the corporate segment is mainly due to projects having negative cash
flows, which is resulting in postponement of capital investments. Wherever
exposure is high, ICICIBC is advising its corporate borrowers to monetize assets.
There is a possibility of banks converting loans into equity, as several projects
need hand-holding. Provisioning guidelines are not remunerative enough to keep
loans standard by restructuring.
Difference between the slowdown of 90s and now:
1. At that time, money was stuck in half-completed assets/projects. Today, money
is stuck in ready projects.
2. No promoter in the 90s was willing to sell/monetize assets. Today, promoters
are willing to do so, but sale of assets takes time.
Company vision and strategyBalanced approach in tough economic environment
Profitability/NIM: ICICIBC targets to enhance full-year margins, led by
improvement in international margins and loan mix. Improvement in funding
profile will keep cost of funds under control. Strong control over opex is likely to
continue and ICICIBC aims to keep C/I ratio at ~40%. Insurance profitability is
likely to remain superior and drive consolidated earnings.
Growth: Domestic loan growth to be 2-3% higher than system loan growth, driven
by secured retail loans. Cross-selling and further penetration of retail products to
existing client base would drive growth. ICICIBC retains its cautious view on
ThematicPresentation
Ms Chanda Kochhar
Managing Director & CEO
ICICI Bank CEO Track
4September 2013
9th Annual Global Investor Conference
corporate and SME loans, and growth will be driven by working capital loans.
Growth in the Insurance business is likely to improve.
Risk management: ICICIBC is focusing on further portfolio diversification. It intends
to reduce the share of corporate and international business, and increase the
share of retail business. Underwriting norms have been tightened.
Granular retail business - a key focus area in difficult macro environment
Profitability: Margin vulnerability has reduced due to sharp increase in the share
of granular retail deposits. Helped by recoveries from written-off retail loans and
shift towards secured retail loans, credit cost for the retail business has been near
zero for several quarters. ICICIBC expects this trend to continue. While overall
fee income growth remains muted at low single digits, retail business streams
like liability-related, third-party products, asset-linked fees, etc, remain healthy.
Growth: ICICIBC is focusing on secured retail loans and in 1QFY14, disbursements
grew 32% YoY. Home/auto loan disbursements grew 36%/17% YoY and outstanding
loans grew 20%/21% YoY. ICICIBC continues its calibrated approach towards CV
loans and unsecured products. Of the term deposits, 60% are retail deposits. Since
March 2009, savings/retail term deposits have shown CAGR of 20%/17%.
Risk management: ICICIBC continues to focus on secured retail loans and growth
is expected to be moderate in unsecured retail loans and CV portfolio.
Corporate and SME lending - taking a cautious approach
Profitability: (a) Fees: Project financing related fee income generation remains
low; in the corporate segment, ICICIBC is focusing on transaction banking and
forex-related fees, which are granular in nature, (b) Margins: The bank is focusing
on better asset-liability management, improvement in international margins, etc.
Growth: Growth to remain moderate in the large and mid corporate segments.
Focus would remain on working capital loans. The share of SME business is likely
to remain low, considering the tough macroeconomic environment.
Risk management: Credit selection norms have been enhanced and the bank is
closely monitoring all accounts.
Leveraging on distribution network and technology platform
Expanding distribution network: Since March 2012, 70% of its incremental branches
have been opened in rural and semi-urban areas. ICICIBC has the largest network
among private banks, with 3,350+ branches and 11,000+ ATMs. Strong branch
expansion helped in origination (30% of home loan origination is from branches
now) and third party distribution (50% CAGR in life insurance premium since FY11).
Technological initiatives: ICICIBC has launched various technological initiatives
like improving presence on social networking sites, 24x7 branches, mobile apps,
reward programs, superior ATM performance, etc, to improve business growth.
Key triggers/milestones/challenges Resolution of issues plaguing large infrastructure projects
Direction of monetary policy
ICICI Bank
5September 2013
9th Annual Global Investor Conference
Lupin
Dr Kamal Sharma is Vice
Chairman of Lupin Ltd. In a
career spanning more than
three decades, Dr Sharma
has held a range of senior
management positions
managing projects,
corporate development and
general management in
the pharmaceuticals and
chemicals industries. He
has been associated with
the Lupin Group since 1979.
Dr Sharma serves as the
Chairman of Kyowa
Pharmaceutical Industry Co
Ltd. He has a PhD in
Economics from IIT,
Mumbai and has
completed an Advanced
Management Programme at
Harvard Business School,
Boston.
Dr Sharma took over as MD
of Lupin in 2003, when the
company had limited
global presence. Under his
leadership, Lupin today
has become the 5th largest
company by generic
prescription share in the
largest pharma market,
USA. He is also responsible
for steering the company
into Japan, the 3rd largest
pharma market, where no
other Indian player has
been able to establish a
strong enough foothold.
Covering Analyst(s):Alok Dalal+91 22 3982 [email protected]
Hardick Bora+91 22 3982 [email protected]
Key takeaways
Core essence Significant opportunities in healthcare across key markets but regulatory
challenges, price controls by local government will be key challenges for the
industry.
Lupin (LPC) aspires to achieve sales of USD5b by 2018.
Industry insights Opportunities across the globe, healthcare reforms favoring generics, bio-similars
and an ageing population are other opportunities for growth.
A hybrid business model will be the way forward, whereby the originator company
uses its intellectual capital capabilities to merge with the cost capabilities of
generic companies.
Company vision and strategy LPC aspires to be a USD5b company by 2018.
US, India, Japan and emerging markets are the key pillars of growth. Increasing
focus on specialty product launches in the US over next few years. Focus on
expanding branded generic presence in the US.
Backward integration benefits to aid growth and margins in Japan. India growth
outlook seen to be ahead of the industry growth rate.
Key triggers/milestones/challenges With over 116 ANDAs awaiting approval from the US FDA, of which 25 are first-to-
file generics, LPC is very strongly placed in the US generics space. A strong product
mix in India is likely to enable the company grow significantly ahead of industry
on a consistent basis. Japan continues to remain a key long term strategic
opportunity.
Regulatory challenges, changing contours of the ecosystem, holistic thinking
leading to empowerment of people and risk management practices are some of
the key risks faced by the industry and LPC.
Dr Kamal Sharma
Vice Chairman
Lupin CEO Track
6September 2013
9th Annual Global Investor Conference
Zee Entertainment Enterprises
Mr S GopalakrishnanExecutive Co-ChairmanInfosys
Mr Punit Goenka
Managing Director & CEO
Zee Entertainment Enterprises CEO Track
Covering Analyst(s):Shobhit Khare+91 22 3029 [email protected]
Anil Shenoy+91 22 3982 [email protected]
Mr Punit Goenka is MD and
CEO of Zee Entertainment
Enterprises (ZEE). His
strong work ethics and
hands-on approach have
helped steer the ZEE
empire to new frontiers of
success. Under his
leadership, Zee TV has
emerged a leader among
general entertainment
channels in India. He is
now working on
strengthening ZEE’s reach
internationally.
Mr Goenka has grown up
the ranks, handling
various responsibilities
across the Essel
conglomerate for over 15
years. He began his career
with Zee TV in 1995 as
Head of the Music division
and went on to shoulder
addit ional
responsibilities across
group companies. In 2004,
he took charge as the
Business Head of Zee TV
and soon was promoted to
Network Operating Officer
in 2005 and was made
responsible for the
programming, operations,
administration and HR
functions of all of ZEE’s
entertainment channels.
He assumed the current
role in July 2008.
Key takeaways
Core essence Indian TV industry is witnessing structural changes in subscription and advertising
business; Zee to emerge stronger given scale advantage.
Industry insights India remains the fastest growing TV market globally. Regional markets continue
to lead growth, with most growing at 12-15%.
Mandatory digitization yet to be implemented in phase III/IV, which account for
~75% of TV households. DTH could have an advantage in phase III/IV.
Industry estimates indicate 26% subscription revenue CAGR over CY12-17E.
India unlikely to reach US market levels of ~80% subscription revenue contribution
in the foreseeable future.
Digitization offers level playing field to niche channels, which is an additional
revenue opportunity.
Company vision and strategy Zee expects subscription revenue to equal advertising revenue in next four to
five years v/s current ratio of 5:4 for advertising-subscription.
Confident of maintaining margins at current levels despite investments in new
businesses and sports.
Zee has been reducing inventory, resulting in better pricing/ratings and making it
better placed for the implementation of regulations on ad cap.
INR depreciation a concern for sport business, which is currently loss making. Zee
continues to invest in sports, given subscription revenue potential. Ten Network
accounts for ~25% of sports viewership, including cricket and ~50% excluding
cricket.
Movie costs remain high. Company has no plans of entering the movie production
business but can potentially become a studio in the future by acquiring movie
rights, compared to only TV rights currently.
7September 2013
9th Annual Global Investor Conference
Zee Entertainment Enterprises
Key triggers/milestones/challenges Phase III/IV digitization sunset effective from September/December 2014. While
it could provide significant upside potential to subscription revenue, delayed
monetization (phase I/II so far) remains a concern.
Low ARPU/ad pricing and economic slowdown are the key challenges.
Issues pertaining to lack of transponder capacity for DTH operators are restricting
addition of new channels on DTH platforms.
Ad rates to be increased to offset further inventory decline due to 12 min/hr ad
cap regulation effective from October 1, 2013.
Advertising currency shift from Cost Per Rating Point (CPRP) to Cost Per Thousand
(CPT) to be a major positive for content monetization.
Cable & Satellite (C&S) universe has increased ~60% in the past five years but
industry did not get commensurate ad rate increases due to the CPRP model.
8September 2013
9th Annual Global Investor Conference
NTPC
Dr Arup Roy Choudhury is
the Chairman and MD of
NTPC Ltd. Dr Choudhury’s
rich and varied
contribution of over 32
years has been recognized
by prestigious
professional, academic
and government
institutions, both national
and international.
He has the distinction of
becoming the youngest CEO
of a central public sector
enterprise (CPSE) at the
age of 44 when he joined
as Chairman and MD of
National Buildings
Construction Corporation
Ltd (NBCC) in 2001 and also
transformed NBCC from a
sick status to a blue chip
enterprise, having
Schedule “A” and
“Miniratna” status
conferred by the
Government of India.
Dr Choudhury was
conferred Doctorate in
‘Performance Assessment
of Infrastructure
Development Projects’ from
IIT Delhi on 18.04.2013. He
has been ranked at No. 40
in “The Economic Times”
list of India Inc’s top 100
CEOs 2013 and is No. 2
among the CEOs of Public
Sector Enterprises (PSEs).
Key takeaways
Core essence NTPC targets addition of 14gw of capacity in 12th Plan, and has 20gw of capacity
already under construction, on current installed base of 41gw. This provides strong
medium term growth visibility. In addition, 20gw is under development stage.
98% of capacity is covered under long term fuel supply agreement and 76% of
linkages are through own railway network - a key differentiating factor.
Industry insights India has the lowest per capita consumer of electricity globally, lagging Brazil and
China by ~3:1. Per capita consumption of India is only 29% of the world average
and hence the country has huge potential for power consumption.
India needs to add 106gw of capacity in the 12th Plan to regain the GDP growth
target of 8%.
Base deficit has remained range-bound ~8.5-8.7% during FY11-13. However, peak
deficit lowered in FY13 at 9.1% from 11.1% in FY12.
Company vision and strategyA] Robust capacity addition growth
NTPC is targeting to add 14gw of capacity addition in the 12th Plan, of which it
added 4.2gw in FY13. For FY14, management expects capacity addition of 2gw.
Similarly, commercialization for FY13 stood at 4.8gw, its highest-ever in a year.
The guidance for commercialization is maintained at 1.5gw.
Management highlighted that last four years witnessed capacity addition of 10gw
- fastest 10gw addition. NTPC's installed capacity stood at 41gw. Management
highlighted its vision to achieve installed capacity of 128gw by 2032.
It has robust project pipeline with capacity award of 13gw over last 2.5 years. The
total capacity under construction as of now stands at 20gw. Additional 20gw is
under development (3gw under bidding and 16.5gw feasibility report is approved).
B] Enhancing fuel security
Fuel security remains the prime focus, with 98% of capacity covered under long
term fuel agreement. 76% of fuel supply is through its own rail network, which
further adds to stability. Coal import could be on an average of ~10% on long term
basis.
Dr Arup Roy Choudhury
Chairman and Managing Director
NTPC CEO Track
Covering Analyst(s):Nalin Bhatt+91 22 3982 [email protected]
Aditya Bahety+91 22 3982 [email protected]
9September 2013
9th Annual Global Investor Conference
FY14 would be an important year on fuel security front given two vital landmarks:
a) first captive mine, Pakri Barwadih, is to start in December 2013 and b) Jetty for
Farakka and Kahalgaon projects, among the worst hit due to coal supply, is expected
to begin trial operations before 2QFY14-end.
In addition, NTPC has been allocated four new coal blocks, with 2b tons of reserve
for 8.5gw of upcoming capacity.
Company's average cost of power generation is INR2.92/sh, comprising of fuel
cost of INR1.84/unit and fixed cost of INR1.08/unit. This makes its positioning
better on merit order dispatch.
Key triggers Higher generation from coal-based projects and robust PAF/PLF are the key
triggers. In YTD FY14, NTPC's generation de-grew by 2% YoY, comprising of 2% YoY
growth for coal-based projects and 40% YoY de-growth in gas-based projects. PLF
for coal projects have come off by 5.1ps YoY.
Management expects FY14 RAB to grow by ~8% to INR352b (standalone basis),
while FY13 RAB stood at INR326b (a growth of 20% YoY). This would lead to superior
earnings growth ahead in FY14E/15E.
NTPC
10September 2013
9th Annual Global Investor Conference
ONGC
Mr Sudhir Vasudeva is the
Chairman and MD of Oil &
Natural Gas Corporation
Ltd (ONGC), India’s most
valuable Maharatna public
sector unit (PSU). He is
also the Chairman of ONGC
Videsh Ltd (OVL),
Mangalore Refinery and
Petrochemicals Ltd (MRPL)
and five other ONGC Group
companies — ONGC
Petroadditions, ONGC
Mangalore Petrochemicals,
Mangalore SEZ, ONGC
Tripura Power Company and
ONGC Mittal Energy.
Mr Vasudeva is a gold
medalist Chemical
Engineer with Advanced
Diploma in Management.
Under his leadership,
ONGC registered the
highest-ever profit, became
the highest-ever dividend
paying company in India
and often retains the
numero uno position in
terms of market
capitalization. Mr
Vasudeva has received
accolades for outstanding
achievement in Exploration
& Production (E&P) award
by Chemtech Foundation in
2012. He has also been
conferred with NDTV Profit
Business Leadership
Awards 2012 in Oil & Gas
Sector in April 2013.
Covering Analyst(s):Harshad Borawake+91 22 3982 [email protected]
Kunal Gupta+91 22 3982 [email protected]
Key takeaways
Core essence ONGC aims for aggressive long term production targets, pitching for higher net
realization to the Government and build the non-E&P business to reach 30% of
revenue by FY30. It aspires for 2x increase in group production, led by 6x increase
in international production under its Perspective Plan 2030.
Industry insights Technology and innovation is expanding the capabilities of global E&P sector,
helping to explore geographically difficult basins. Arctic region holds ~20% of the
world's undiscovered hydrocarbon reserves.
NOCs (National Oil Companies) getting aggressive in M&A (spent USD112b in 2012)
and hold 90% of proved world reserves currently.
The US has infrastructure advantage (pipeline network, rigs) v/s other countries,
enabling it to become the largest shale gas producer (40% of current US gas
production comes from Shale).
India's primary energy demand at 7.2% CAGR till 2031-32 is expected to be higher
than China at 2.9%, the US at 0.1% and world 1.5%.
Unconventional energy reserves in India - CBM >450tcf; underground coal
gasification (UCG) ~6,900tcf; gas hydrates ~142bcm and shale gas >65tcf.
Company vision and strategy ONGC requires a minimum net realization of USD65/bbl (v/s FY13 net realization
of USD47.8/bbl) for sustainability (production cost of USD40/bbl); does not expect
upstream companies subsidy share at >USD56/bbl in FY13.
ONGC's domestic oil production (incl JV) to reach a peak of 28-29mmt by FY15/16
for two to three years v/s 26.2mmt in FY13. Key fields include G-1/GS-15(KG basin),
D-1 (Mumbai offshore) and B-193 (western offshore).
Company has produced 80mmt of the total estimate of 172mmt additions, aided
by new and marginal field development at the cost of INR342b.
Perspective Plan 2030 envisages to double production to >130mmtoe by 2030,
aided by increasing OVL's production from current ~8 to 60mmt.
Key triggers/milestones/challenges Key things to watch (1) continued diesel reforms, (2) clarity on Sudan and Syria
production for OVL, (3) subsidy sharing (4) visibility on production growth.
Mr Sudhir Vasudeva
Chairman & Managing Director
ONGC CEO Track
11September 2013
9th Annual Global Investor Conference
Infosys
Mr N R Narayana Murthy is
the Executive Chairman of
Infosys Ltd. He co-founded
Infosys in 1981, served as
the CEO during 1981-2002,
as the Chairman and Chief
Mentor during 2002-2011
and as the Chairman
Emeritus during August
2011-May 2013. Under his
leadership, Infosys was
listed on Nasdaq in 1999.
He articulated, designed
and implemented the
Global Delivery Model
which has become the
foundation for huge
success in IT services
outsourcing from India. He
has also led key corporate
governance initiatives in
India and is an IT advisor
to several Asian countries.
Mr Murthy was listed
among the “12 greatest
entrepreneurs of our time”
by the Fortune magazine in
2012. He has been
conferred with several
awards and honors,
including the Padma
Vibhushan and Padma
Shri, the Legion d’honneur
by the Government of
France and the CBE by the
British government. He is
the first Indian winner of
Ernst and Young’s World
Entrepreneur of the year
award and the Max
Schmidheiny Liberty prize.
Covering Analyst(s):Ashish Chopra+91 22 3982 [email protected]
Siddharth Vora+91 22 3982 [email protected]
Key takeaways
Core essence Infosys' (INFO) financial performance over the last couple of years has been of
concern, during which revenue growth fell by 80% and profitability reduced by
~7-8pp. While the performance coincides with the onset of Infosys 3.0, there is
nothing wrong with strategy, and the problem has been with execution.
In its quest to increase the share of revenue in consulting-led transformation
business and Products/Platforms/Solutions, INFO lost focus on the bread-n-butter
traditional business. Such price sensitive large deals are imperative to growth
and the company cannot do away with the required aggression.
Industry Insights Large deals in outsourcing are highly price sensitive and INFO is surprised by the
behavior of some growth hungry peers.
Also, there have been some very complex engagements, driving the requirement
of highly specialized people.
Immigration and other foreign norms are further increasing the strain, with the
added uncertainty around currency.
Given the revived focus in growing the traditional business, company is now
approaching this business with the understanding that while markets determine
the price, INFO can only determine its cost. Hence, there is greater focus on cost
optimization than before.
Company vision and strategyINFO is focused on getting its execution in order, with increased emphasis on:
1. Approaching large deals with requisite aggression and successfully closing them.
2. Reinvigorating the sales team to increase the effectiveness of sales, incentivizing
the sales team appropriately to attain the aspired growth.
3. Re-establishing the excellence in delivery execution - by moving from project
level measures of tracking efficiency to individual level measures.
4. Getting the right quality of talent to help de-lineate revenue growth with
headcount growth.
Key triggers/milestones/challenges While growth will still be the key lever for operating margin, INFO aspires to take
its margins higher by increasing cost efficiencies. One of the reasons for lower
margins was higher employee cost outside India. INFO is striving to reduce the
onsite-offshore efforts mix.
INFO will continue "letting bad news take the elevator, good news take the stairs".
Mr N R Narayana Murthy
Chairman
Infosys CEO Track
12September 2013
9th Annual Global Investor Conference
Godrej Group
Mr Adi Godrej is the
Chairman of the Godrej
Group and several entities
that are part of one of
India’s leading
conglomerates. Over the
last five decades, Mr
Godrej has played an
important role in the
development of a variety of
industries by leading key
organizations of trade and
commerce as the former
Chairman and President of
the Indian Soap &
Toiletries Makers’
Association, the Central
Organisation for Oil
Industry and Trade, the
Solvent Extractors’
Association of India, the
Compound Livestock Feeds
Manufacturers’
Association, the Indo-
American Society and as
member of the Governing
Board of the National
Council of the
Confederation of Indian
Industry. Under his
leadership, the group is
involved in philanthropic
activities too and is a great
supporter of the World
Wildlife Fund of India
(WWFI).
For his contribution to
Indian industry, Mr Godrej
has been the recipient of
several awards and
recognitions, including the
Rajiv Gandhi Award 2002,
Padma Bhushan in 2013.
Covering Analyst(s):Gautam Duggad+91 22 3982 [email protected]
Key takeaways
Core essence Consumption growth, though challenged in the current weak macro environment,
has strong long term drivers, facilitated by rising disposable incomes, youth
demographics and rising aspirations of middle class. There exists significant room
for growth in per capita consumption.
Middle class is spreading to tier II and tier III towns. But credit availability to rural
markets is essential to sustain the consumption growth.
Longer term outlook for Godrej group is extremely positive - specifically, GCPL is
targeting 10x growth in 10 years as a part of its 10 by 10 strategy.
Godrej group is following a CREATE strategy - C-Consumer, RE-Real Estate, A-Agri,
T-Transformational and E-Emerging.
Government needs to act fast and regulators need to ensure timely intervention
to revive short term growth and sentiments.
Industry insightsLong term consumption drivers solid despite near term challenges
Mr Godrej outlined the attractive long term consumption opportunity in India -
driven by favorable macro drivers such as rising disposable incomes, young
demographics and growing middle class.
Significant headroom exists for growth in per capita consumption, which in turn
depends on disposable incomes, extent of urbanization and access to credit.
Shape of India's income pyramid can change due to rising rural consumption. Per
capita consumption growth in rural markets has outpaced urban growth in last
two years.
Pessimism will pave way for optimism in second half, with the onset of harvest
season.
Near term challenges notwithstanding - low growth, high inflation and dampened
consumer sentiments - next wave of growth will come from spreading out of
middle class in tier II and tier III.
Company vision and strategy Godrej group is following a CREATE strategy - C- Consumer, RE - Real Estate, A-
Agriculture, T - Transformational, E - Emerging.
Mr Adi Godrej
Chairman
Godrej Group CEO Track
13September 2013
9th Annual Global Investor Conference
Consumer: Slowdown in premium segment; however, bottom of the pyramid is
flourishing. Household insecticides still remain under-penetrated.
Real Estate: 13 successful launches. The Godrej project in Gurgaon was a big success,
with complete sale in 24 hours. Land Acquisition Bill to increase the impact of cost
of land significantly, especially in rural areas.
Agriculture: Agriculture is at an inflection point. Godrej group participates in agri
sector through Godrej Agrovet Pvt Ltd. Company saw strong growth in oil palm
business.
Transformation: Human capital - Focus is on building strong human capital.
Emerging: Food retailing is a new business and is doing well, with good same
store sales growth and new store-driven growth.
Key triggers/milestones/challenges Short term - lower growth and higher inflation is impacting consumer demand.
While lower dependence ratio is extremely positive for consumption, young
population needs to be absorbed into labor force.
There is limited penetration of financial services in rural markets, which can pose
challenges for PCC ahead. Thus, there is a pressing need to make credit available
in rural geographies.
Godrej Group
14September 2013
9th Annual Global Investor Conference
Bharti Airtel
Mr Gopal Vittal is the Joint
MD and CEO (India) at
Bharti Airtel. He also
served as an Executive
Director of Home &
Personal Care of Hindustan
Unilever since September
2008 to January 2012.
He has more than 16 years
of rich experience across
various aspects of
marketing and sales. Mr
Vittal started his career
with Unilever India,
working across
geographies in India and
Asia. He has led several
branding forays for
Unilever and was
responsible for
conceptualizing, leading,
piloting and rolling out
Project Bharat, Unilever’s
largest rural marketing
initiative in India.
Mr Vittal has also been
recognized as one of
India’s Hottest Young
Executives by Business
Today in 2006. He has 18
years experience in
Marketing & Sales in FMCG
market, including skin care,
soaps and laundry. He has
worked both in India and
Asia for Unilever for over 16
years, following which he
served as the Marketing
Director at Bharti Airtel.
Covering Analyst(s):Shobhit Khare+91 22 3029 [email protected]
Anil Shenoy+91 22 3982 [email protected]
Key takeaways
Core essence With its unique leadership position and strong asset base, Bharti India is well
positioned to benefit from an improving industry structure, latent data potential
and increasing regulatory clarity.
Industry insights Indian wireless industry is undergoing passive consolidation. Top 3 revenue market
share has increased from 66% to 70% in the past five to six quarters, implying an
incremental share of ~90% for the top 3.
There is still significant room for an increase in voice RPM, given huge discount of
30-40%, currently being offered v/s headline tariffs.
Economic slowdown is unlikely to impact the wireless sector due to 1) increased
pricing power, 2) limited impact on ticket-sized product/services like telecom
and 3) strong rural growth, driven by better monsoon.
Young demographics are a tailwind for data growth as aspirations are driving usage
even in the non-urban locations.
Company vision and strategy Driving increased usage through marketing innovations (recently launched INR1/
song store) and usage by enhancing 3G uptake. 3G data subscribers use 5x data
compared to 2G data subscribers.
Enhanced focus on quality of subscriber acquisitions; equipping front-end with
information based on analysis to improve effectiveness and acquire/retain high
value subscribers.
Further headroom to improve cost efficiencies by eliminating wasteful
expenditure on sales and distribution and improving network utilization.
Key triggers/milestones/challenges Regulatory clarity is increasing with the Telecom Regulatory Authority of India
(TRAI) doing a commendable job of maintaining a fine balance in its recent
pronouncements.
Strong US dollar v/s INR and African currencies remains a challenge, given ~10b
USD denominated debt/liabilities.
Africa business continues to face competitive and regulatory headwinds.
Mr Gopal Vittal
Joint Managing Director & CEO (India)
Bharti Airtel CEO Track
15September 2013
9th Annual Global Investor Conference
Ambuja Cements
Covering Analyst(s):
Jinesh K Gandhi
+91 22 3982 5416
Sandipan Pal+91 22 3982 [email protected]
Mr Onne Van Der Weijde is
MD of Ambuja Cements Ltd.
He is a Dutch national
with over 15 years of
experience in cement
industry, including seven
years in the Indian cement
industry. Mr Weijde was
CFO at Holcim Indonesia
from 2001 to 2005. In 2005,
he was appointed General
Manager of Holcim India
Ltd and in 2006 he also
assumed the CFO function
at ACC Ltd until October
2008. From November 2009,
he was the CEO of Ambuja
Cements Ltd. He assumed
the current role of MD in
2010.
Recently Holcim has given
him additional
responsibility by
appointing him as Area
Manager and a member of
its Senior Management
Team. Mr Weijde holds a
Bachelor's degree in
Business Administration
in Economics & Accounting
from Rotterdam,
Netherlands and a
Masters degree in
Business Administration
from the University of
Bradford, UK.
Key takeaways
Core essence Long term demand drivers remain intact, giving confidence of 8% CAGR on steady
state basis. Ambuja Cements (ACEM) would focus on selective growth, cost
competitiveness and deriving synergies from ACC's acquisition to compete in an
over-capacity environment.
Industry insights Short term negative outlook notwithstanding, Holcim continues to believe in India
story. India is one of the most attractive markets in the world, and expects 5.2%/
7.7% demand CAGR over CY13-15E/CY15E-18E.
This growth is expected to be driven by commercial segment (~10% CAGR),
infrastructure (~6.3%) and residential (~5.8%).
Capacity is expected to post a CAGR of 6.3-7% over CY12-16E to 406-415mt.
Company vision and strategy Focus on competitiveness, to exceed cost of capital, in a highly competitive market,
reflecting in RoIC of 39%/37% for ACEM/ACC over 2006-12.
Investments in cost competitiveness is an area of priority viz a) revenue
optimization (through brand premium and focus on retail), b) optimizing fuel mix
(increasing share of pet-coke, captive coal and alternate fuel) and c) logistics
optimization. Making further investments in logistics by professionalizing 'Hub-
and-spoke' architecture.
It is focusing on selective growth through a) region specific (North, Central & East)
expansion and b) M&A opportunities. Objective to deliver return on investments
would be a focus area, rather than maintaining market share. All of its future
capacity expansions (from 58mt to 73.6mt) is in these attractive markets, with
better industry structure, high utilization and pricing power.
Acquisition of ACC is a significant step in the potential merger, although it would
take three to four years to realize entire benefits of synergies. Acquisition of ACC
is at an attractive cost of USD115/ton and offers saving potentials of ~INR9b p.a.
ACEM would have screened almost all cement assets on the block. While M&A
valuation expectations have moderated over last few months, considering the
condition of most plants in India, it would need to invest additional 30-35% to
bring those plants to Holcim's group standards.
Mr Onne Van Der Weijde
Managing Director
Ambuja Cements CEO Track
16September 2013
9th Annual Global Investor Conference
Key triggers/milestones/challenges It is investing for capacity addition in Rajasthan (4.5mt in ACEM by CY15) and
Chhattisgarh (~3.6mt in ACC, by ACC), and also is planning a Greenfield plant at
Ametha (3mt in ACC, by CY17) and Tikaria (1.5mt in ACC, by CY17).
Initiatives to reduce fuel cost escalation - (1) use more pet coke supplies for
north-based plants, (2) captive coal, (3) ensure 20-25% Indonesian coal usage at
coastal plan and (4) increase usage of alternate fuels to at least 12-15% of fuel
requirement. It would need to invest in its plants to derive these cost savings of
8-10%.
Acquisition of ACC offers synergy benefits of ~INR9b driven by:
Supply chain optimization through clinker/cement swaps between ACC/ACEM,
driving savings of INR3.6-4.2b.
Common procurement driving savings of INR2.7-3b.
Fixed cost reductions by improving efficiency and eliminating duplications,
thus driving savings of INR1.5-1.75b.
Ambuja Cements
17September 2013
9th Annual Global Investor Conference
Dr Reddy’s Laboratories
Covering Analyst(s):Alok Dalal+91 22 3982 [email protected]
Hardick Bora+91 22 3982 [email protected]
Mr Satish Reddy is the Vice
Chairman and MD of Dr
Reddy’s Laboratories Ltd.
He steers two of the
company’s core
businesses:
Pharmaceutical Services &
Active Ingredients (PSAI)
and Global Generics
businesses. He joined Dr.
Reddy’s in 1993 as
Executive Director and in
1997 went on to become
the Managing Director.
Mr Reddy serves as a
National Council member
of CII, Chairman of CII
National Committee on
Drugs and Pharmaceuticals
and as an executive
council member of the
Indian Pharmaceutical
Alliance (IPA). Earlier, he
was also a member of the
Drugs Technical
Association Board (DTAB)
of India, the highest policy
making body under the
Drugs & Cosmetics Act in
India between 2005-11.
He received the 2009
Distinguished Alumnus
Award from the School of
Pharmacy and
Pharmaceutical Sciences,
Purdue University, U.S.A.
He was identified as a
“Young Global Leader for
2007” by the World
Economic Forum and was
awarded the “IBLA - India
Corporate Citizen of the
Year” by CNBC in 2005.
Key takeaways
Core essence Emerging markets are likely to play a significant role in the global pharma market
growth over the next decade. Increased regulatory risks, consolidation at the
trade levels, declining product opportunities in the US are key challenges. Dr
Reddy's Laboratories (DRRD) is well placed to counter these challenges by
developing a high value product portfolio, deeper customer engagement in
generic products and newer channels of growth like OTC and institutional business.
Industry insights Global pharma industry is likely to reach USD1.2t by 2016, 30% of which could be
generics.
Emerging markets likely to contribute ~70% to the USD200b sales addition till
2016.
Changing business models and consolidation are strategic choices made by pharma
companies.
Company vision and strategyThree pillars of growth:
Product portfolio shifts: Differentiated generics, including formulations and APIs,
by leveraging on vertical integration. DRRD believes it has a strong record in this
area.
Deeper customer engagement: Unbranded generics, physician and retailer
relationships in branded business in markets like India and Russia.
OTC and institutional channels in branded markets: Scale-up in non Rx channels in
Russia and India (OTC and institutional).
Key triggers/milestones/challengesThree key challenges:
Daunting patent cliff in US: USD42b in sales coming off patent in 2014-17, a 42%
decline compared to 2010-13.
Government interference in pricing of products (Germany).
Increasing regulatory risks: US FDA and local authorities are significantly stepping
up regulatory scrutiny.
Increased consolidation of channels, leading to a shift in balance of power in US.
Mr Satish Reddy
Vice Chairman & Managing Director
Dr Reddy’s Laboratories CEO Track
18September 2013
9th Annual Global Investor Conference
Aditya Birla Group
Covering Analyst(s):Sanjay Jain+91 22 3982 [email protected]
Pavas Pethia+91 22 3982 [email protected]
Mr Kumarmangalam Birla is
the Chairman of Aditya
Birla Group. Mr Birla chairs
the major group
companies in India and
globally. He took over as
Chairman of the group in
1995 and under his
leadership the group has
expanded to telecom,
software, BPO and other
areas. He has restructured
the business and made 26
acquisitions in 17 years in
India and globally, the
highest by an Indian
multinational in India.
He has held and continues
to hold several key
positions on various
regulatory and
professional boards,
including Chairmanship of
the Advisory Committee
constituted by the Ministry
of Company Affairs in 2006
and 2007, membership of
The Prime Minister of
India’s Advisory Council on
Trade and Industry. He also
serves as the Chairman of
Sebi Committee on
Corporate Governance and
is a member of CII.
Mr Birla has received many
awards and honors,
including Forbes India
Leadership Award –
“Entrepreneur of the Year,
2012”, ranked 3rd most
powerful CEO.
Key takeaways
Core essence Aditya Birla Group is a premium global conglomerate, with revenue of USD40b
and operations in 36 countries. Each of its key businesses has focus on quality,
innovation, strong value system, cost & market leadership, and social responsibility
beyond business. The group is last man standing in testing times and first man
forward when the tide turns favorable.
Industry insights Land acquisition bill is likely to slow down growth as the costs and time in acquiring
land for projects will be stretched.
The Cabinet Committee on Investment (CCI) is likely to help in de-bottlenecking
of projects.
Opportunities in aggregation, particularly in North America.
Company vision and strategy To be a global conglomerate at group level but very focused at company level,
with maximum of two businesses.
The group has focused on cash flows, cost leadership and strived to be among the
dominant players. Every business has been built over a long period of time.
Key triggers/milestones/challenges The group's revenue has increased 25x to USD40b and EBITDA has increased 12.5x
to USD5b in 18 years (by FY13), with 53% of revenue coming from overseas
operations. The organization has become younger, with average age falling from
56 years to 36 years.
The group's revenue is expected to increase 63% to USD65b and EBITDA is expected
to increase 1.5x to USD10b as high margin projects start generating cash flows
over next five to seven years. It is likely to witness margin expansion and sharper
increase in cash flows than revenue.
Mr Kumarmangalam Birla
Chairman
Aditya Birla Group CEO Track
19September 2013
9th Annual Global Investor Conference
State Bank of India
Covering Analyst(s):Alpesh Mehta+91 22 3982 [email protected]
Sohail Halai+91 22 3982 [email protected]
Ms Arundhati Bhattacharya
is the Managing Director of
State Bank of India since
August 2013. She also
served as the Corporate
Development Officer and
Deputy MD at State Bank of
India. She joined the bank
as a Direct Recruit Officer
in 1977 and served as its
Chief General Manager of
Bangalore Circle. Ms
Bhattacharya also had a
stint in the bank’s New
York office where she was
in charge of monitoring
branch performance,
overseeing external audit
and correspondent
relations. She has served
as the Chief General
Manager of New
Businesses for Corporate
Centre at SBI and as its
General Manager of
Network-II, Lucknow and
as Chief Development
Officer.
In her extensive service
with the bank, Ms
Bhattacharya had the
opportunity of working in
metro, urban and rural
areas, thus crisscrossing
the length and breadth of
the country. She has
handled large corporate
credit and initiatives like
financial inclusion and
financing of self help
groups.
Key takeaways
Core essence Focusing on retail liabilities to grow balance sheet; growth to be higher than
industry
Stress continues to rise; monitoring accounts closely
Focusing on improving employee productivity to enhance return ratios.
Industry insights Tight liquidity has significantly increased cost of funds at the industry level. Banks
with higher retail liabilities are better placed.
Green shoots are visible in export-driven sectors like Metals and Textiles, and
small businesses focusing on exports. Given the good monsoon, agricultural
production should increase, in turn resulting in improvement in asset quality.
Difference between the 90s and now: (1) This time, asset quality issues are more
on account of domestic factors; (2) Restructuring and asset quality norms are more
stringent now.
Company strategyEndeavour to maintain domestic NIM at around 3.5%
Systemic interest rate has increased. However, SBIN continues to enjoy the
advantage of strong CASA and retail term deposits flow (proportion of bulk
deposits is negligible). This has helped the bank to contain cost of funds at ~6.5%.
While there is marginal increase in blended cost of funds, the bank is tweaking
spreads over the base rate to maintain margins. Currently, SBIN believes that a
base rate hike is not necessary.
The bank has maintained its domestic NIM guidance of 3.5% for FY14.
Growth to be driven by top-rated corporate and retail loans
Demand outlook for new projects remains muted. However, there is huge
opportunity for refinancing of top-rated corporate loans.
Further, healthy growth in the retail segment (especially home loans) and
incremental demand from substitution of CPs and ECBs would help.
The management expects overall loan growth of ~20%, though its expectation of
systemic growth remains low.
Ms Arundhati Bhattacharya
Managing Director
State Bank of India CEO Track
20September 2013
9th Annual Global Investor Conference
Asset quality marred by macros; closely monitoring accounts; focusing on agri NPLs
Headwinds in the mid-corporate and SME segments continue; these segments
will be the key contributors to NPAs.
In 2Q, recoveries from the agriculture segment and upgradation of some accounts
due to restructuring might help contain headline GNPAs.
Restructuring is likely to continue, as the current macroeconomic scenario does
not instill positivity. While SBIN has not given any specific guidance on the
restructuring pipeline, as at the end of 1QFY14, it was at INR100b.
SBIN has raised the income limit for auto loans to INR0.6m to reduce risk on the
portfolio. This is the second time in two years that the bank has increased eligibility
criteria/tightened lending process in this segment. While there may be some
moderation in growth, considering that auto loans are just 2-3% of the overall
book, this will not impact overall loan growth meaningfully.
Key triggers/milestones/challenges Clarity on interest rates and improvement in macroeconomic outlook
Resolution of issues plaguing large infrastructure projects
Default rates might move up if economic slowdown persists
Chairperson change in September 2013 - uncertainty on asset quality; change in
strategy expected
Cost-to-income remains high at 50%+; expected slowdown in income growth and
sticky opex to put strain on profitability
Internal plan to merge subsidiaries - uncertainty on asset quality and opex
realignment with parent.
State Bank of India
21September 2013
9th Annual Global Investor Conference
India: The rising role of judiciary & the way forward
Dr Subramanian Swamy is an
academician, politician,
activist and economist. He
was president of the
Janata Party which merged
with BJP in August 2013. Dr
Swamy has previously
served as a member of
the Planning Commission
of India and cabinet
minister of India and has
written extensively on
foreign affairs of India
dealing largely with
China, Pakistan and Israel.
He is also a published
author. He had earned a
doctorate in Economics
from Harvard University in
1964. Dr Swamy had also
worked as a team with
Nobel Laureate economists
and has served as a
professor of Economics in
Harvard University and IIT,
New Delhi.
He is responsible for
creating the blueprint that
opened India’s economy to
the world in 1991 and also
simplified trade
procedures and formulated
a new export strategy,
which became the
forerunner of trade reforms
adopted subsequently. In
1994, he was appointed as
Chairman of the
Commission on Labour
Standards and
International Trade. Dr
Swamy has been elected
five times to Parliament.
Indian judiciary laying the ground rules for growth
India can grow at double digit through education, innovation and leadership
Young population, innovations spell enormous potentional of India.
Judiciary is not holding back growth but laying foundation for it.
Education is key for India's growth.
Tax concessions may lift near term settlements.
Enormous potential of India Leadership: India's enormous potential needs leadership and policies.
Young population: 70% of India's population is below 35 years, with average age
of only 27 years vs China (37), the US (38), Europe (47) and Japan (50).
Innovations: New innovations to fuel India's growth. Capital and labour are factors,
however, innovation is the multiplier as proven many times be it in the case of
Internet, jet engines, telex or railways.
Excellence: Indian companies are globally recognized as leaders in quality in the
auto ancillary industry and software ahead of even the US. Ironically, Indians seem
to be performing everywhere except in India!
Agriculture: There is enormous potential in Indian agriculture as we are fortunate
of being able to cultivate it for all 12 months. We can easily grow three crops, but
currently grow only one crop or more in 25% of the land. Yields are very low
although our agriculture research has demonstrated capability to achieve seven
times the current yield. We can become leading exporter of agriculture globally.
Judiciary is not holding back growth but laying foundation for it Judiciary and development: Many think that judiciary is holding up development,
but it has actually given hope that India's governance system can really be
improved.
The PIL system: Judiciary was initially designed to be an Appellate Body. But in
1981, while examining the incidence of bonded labor, Supreme Court found that
the Constitution has given them power to address issues raised in public interest,
even though the petitioner is not an affected party.
Landmark anti corruption law: In 1988, under the Prime Ministership of Rajiv
Gandhi, while Parliament passed the Prevention of Corruption Act, the anti bribery
bill introduced a novel section that anybody holding a public office and facilitating
pecuniary gains for any other party, which is not in public interest, is liable for
ThematicPresentationDr Subramanian Swamy
Eminent Lawyer, Politician, Academician
India: The rising role of judiciary &
the way forward
Covering Analyst(s):
Dipankar Mitra
+91 22 3982 [email protected]
22September 2013
9th Annual Global Investor Conference
prosecution, even though he might not have directly benefited from it. These
provisions have been used by Dr Swamy to highlight the recent cases of 2G etc.
Ram Setu: This was another example where Dr Swamy was successful in arguing
that the decision of Tamil Nadu government that time was 'arbitrary', as alternate
and cheaper route is available. Subsequently, the Pachori Committee raised
objection to the project on environmental consideration and now it is on the
backburner.
Some concluding remarks Double digit growth for a decade: India can grow at 12-13% at a stretch for a decade
but should be done in a legal way.
Education holds the key: Such growth is possible in India if we focus on educating
the young population, which enables innovation, the biggest growth multiplier.
Curb discretionary powers: Government is not bad per se, with them playing an
important role in many countries including Japan and even China. But discretionary
powers should be curtailed.
India moved in crisis: India has successfully come out of many crisis, including
food crisis that was overcome by green revolution.
Tax concessions may lift near term sentiments: To lift the mood of investors,
some radical measures could be thought like abolition of personal income tax.
This can be compensated by auctioning huge natural resources that we have or by
bringing back the USD1.5t of illegal money held abroad by Indians.
Vodafone and Vedanta cases: It is difficult to comment on individual cases.
However, the mindset that needs to be adopted is that one should be prepared to
be questioned and subject to judicial oversight.
India: The rising role of judiciary & the way forward
23September 2013
9th Annual Global Investor Conference
Indian Education: Taking the train less travelled
Prof. Sandeep Desai pursued
marine engineering (DMET)
and MBA in his academic
period. He has worked with
a leading shipping
company and has extensive
experience in a marketing
profile at MNCs. He
subsequently shifted focus
to academics and social
causes. He was a
professor at S P Jain
Institute of Management &
Research and a visiting
faculty at several B-schools
across India. Prof. Desai
has devoted his entire life
to improving the lives of
those around him and
people who reach out to
him.
Shloka Missionaries is a
public charitable trust
managed by professionals
dedicated to 'Seva-Bhaav'
way of living. The trust has
been committed to reforms
in education from its
inception and the trustees
believe that 'vidya' is the
true wealth of a nation and
its people. Pursuing this
mission, the trust has been
involved with creating new
pools of learning, where
none existed, and bettering
existing pools of
knowledge.
Raises money from local trains to open free schools for the poor
Motilal Oswal Foundation signs up and so does another investor in AGIC
Prof Sandeep Desai, the man who begs in Mumbai's local trains to fund schooling for the
underprivileged in the interiors of Maharashtra, had a corporate beginning.
As a marine engineer he visited 43 countries and then worked in the areas of marketing and
strategy, following his MBA degree.
Subsequently, he taught at business schools, with added responsibility to teach social studies.
It is then he saw the wide gap in reaching quality education for rural poor.
Appalled by the state of education, Prof Desai filed 32 PILs in the court and won 28 of them.
However, while pronouncing the verdict, the judge asked him, "have you ever run a school"?
It acted as a trigger point in his life following which he embarked on a mission to open
schools imparting quality education for the needy.
He started begging in Mumbai's local trains to raise funds for the school and in the process
got arrested. However, a media outcry followed and he was let off with a fine of INR700 by
the court.
Prof Desai, a bachelor, now is on a mission to set up 100 schools before his death that would
provide good quality English medium schooling to the needy children.
Responding to his call to each corporate adopting a school, Motilal Oswal Foundation
announced sponsoring one school. Another noted investor also announced adoption of
another one.
Prof Sandeep Desai - Making of the man Background: Prof Sandeep Desai studied marine engineering from Kolkata, a career
he had chosen for visiting countries. He visited 43 countries in five-and-half years.
Subsequently, he studied MBA and worked for various MNCs, including Castrol
and Aral AG. Thereafter, he took up an assignment of visiting faculty at SP Jain
Management Institute and later became full time professor of marketing and
strategy.
Early motivation and failures: Prof Desai had an additional responsibility to teach
social studies. It is during this period that he got interested in rural education,
particularly in the field of primary education. He had shot off 200 letters to
corporates for donations but a single help was not forthcoming.
Activism: Appalled by the state of education in various schools, he filed 32 PILs
and won more than 28 that drew adverse sanctions of the court on the wrongdoings
of many schools and colleges.
Trigger point: Once pronouncing a judgement, Justice Singh asked him, "have you
ever run a school?" He replied, "is this a challenge or a suggestion." Justice Singh
replied that he could take it either way. Since then he has not filed a single PIL.
ThematicPresentation
Prof Sandeep Desai
Indian Education: Taking the train
less travelled
Covering Analyst(s):
Dipankar Mitra
+91 22 3982 [email protected]
24September 2013
9th Annual Global Investor Conference
Begging: the unique Desai way to fund schools Begging for a cause: Prof Desai applied his knowledge of marketing strategy in
focusing on a captive audience for raising funds through begging. Initially, he did
not have the courage to take out the box and after two stations he thought 'it's
now or never'.
Lessons learnt in begging: He spoke of the realization that if one can bring down
his ego to ground zero level, communication becomes very easy. In his words, if
we have ego for the little achievements that we have, how much ego the creator
of ever-expanding universe must have! He also considers himself as a product of
common man as they contributed to his funds.
Arrested for begging: Prof Desai was arrested by the railway police force for
begging. Following this, there was a massive media outburst. Hindustan Times
carried a campaign. Oddly, the Rajasthan police came to investigate whether
religious conversions are going on in his institute. Finally, the court imposed a
fine of a paltry sum of INR700, which too was paid by a couple who sat through the
proceedings.
Mission: A hundred schools; Motilal Oswal Foundation signs up; so does aninvestor in AGIC A hundred schools: Prof Desai, a bachelor, now is on a mission to set up 100
schools that would provide good quality English medium schooling to the needy
children.
Many difficulties: The school in Umarkhed would require INR3m in the first phase
(@800 psqf). Land acquisition has become difficult. The cost of each school would
go up to INR10m. The methodology of teaching inculcates not just copying western
techniques but also indigenous and broad-based values.
Motilal Oswal Foundation signs up: Responding to his call to each corporate
adopting a school, Motilal Oswal Foundation announced sponsoring a school. A
noted investor also announced adoption of another school.
Indian Education: Taking the train less travelled
25September 2013
9th Annual Global Investor Conference
Looking beyond the gloom & doom
Mr Deepak Parekh is the
Chairman of HDFC, India’s
leading housing finance
company. Mr Parekh’s
business acumen and
farsightedness has not
only made HDFC the leader
in mortgages, but has
transformed it into India’s
leading financial services
conglomerate, with
presence in banking, asset
management, insurance,
real estate venture fund
and education finance
company.
Besides HDFC Group
companies, Mr Parekh is on
the board of several
leading companies across
diverse sectors. He is often
referred to as the
government’s unofficial
crisis consultant. Be it his
role as Special Director on
the Satyam Board in 2009 to
revive the company or the
crucial role played during
the Unit Trust of India
fiasco in the late ’90s, he
has shared his ideas to
formulate reform policies
across sectors. He is an
active member of various
high powered economic
groups, government-
appointed committees and
task forces.
Look beyond gloom and doom
Lists six areas of positive development
Problems of India are more self-inflicted than emanating from abroad.
Six areas of positivity in India are i) agriculture, ii) containment of fuel subsidies, iii)
readjustment of interest rates, iv) infrastructure debottlenecking, v) disinvestment, vi)
politics.
Agri to contribute 80-100bp to GDP growth this year, food inflation to come down, concerns
of food security overdone.
Government has increased diesel prices consistently and the finance minister is trying his
best to maintain the deficit targets.
RBI's liquidity tightening measures could be scaled back even though rates are not expected
to ease to prior July 15 levels.
Infrastructure bottlenecks are being addressed. The projects are going to take time.
While usual disinvestment should not be done at this time, the disinvestment of Hindustan
Zinc, Balco and SUUTI would be a success at this juncture.
In 2014, chances of a third front led government is very low. The coming state elections
would give us an indication of things to come in 2014.
Self-inflicted wounds of India The contrarian view is missing: Usually, markets have two views, one being
contrarian. However, in the current circumstances, the market view has converged
to doom and gloom.
Self-inflicted damage: However, according to Mr Deepak Parekh, current woes for
India are more of self-making than due to external factors.
Positivity overlooked: In the present gloom, however, people have forgotten to
take note of the six areas in which positive developments are taking place.
Six areas of positive developments Agriculture remains buoyant: Agriculture is the real silver lining this year, with 9%
more area being sown. With this, agriculture is expected to grow at more than 4%
and foodgrains production expected at 260mt. We have five times the stock of
wheat than the buffer stock norm and three times for rice. As a proof of buoyancy
in agriculture, tractor sales are growing fast even as the auto sector has seen ninth
consecutive months of slowdown. Agriculture to contribute 80-100bp to GDP
growth this year and food inflation will come down. Concerns on Food Security
Bill are overdone as the bill would go up by INR400b and its implementation
would take time.
ThematicPresentationMr Deepak Parekh
Chairman, HDFC
Looking beyond the gloom & doom
Covering Analyst(s):
Alpesh Mehta
+91 22 3982 5415
Sunesh Khanna
+91 22 3982 [email protected]
26September 2013
9th Annual Global Investor Conference
Fuel subsidy: At present under-recovery in diesel exceeds INR10 and remains
significant in kerosene and cooking gas. The huge depreciation in INR has made it
imperative to raise diesel prices by INR3-5, post Parliament session. Hence,
subsidies would come down and this would give confidence to the international
rating agencies. The savings of INR400b on fuel can go to fund the additional
expenditure on account of Food Security Bill.
Reversal of RBI's tightening measures: RBI's liquidity tightening measures clearly
did not achieve goals as INR continued to be on a free fall and in the bargain
money and bond market went for a toss. AMCs of mutual funds came down to
INR8t from INR12t. The inverted yield curve does not help growth and development
in India. Thus, MSF and LAF related measures should be reversed. While the
Government has asked eight public sector companies to raise USD8b from the
market, we need to borrow from a position of strength than from weakness.
Infra bottlenecks being addressed: Government is trying its best to address the
infrastructure bottlenecks. These projects are going to take time. However, biggest
reforms have happened by way of allowing purchase of imported coal and higher
costs to be pass-through. Also, SEBs restructuring is happening.
Disinvestment to kick off: Hindustan Zinc and Balco's disinvestment is expected
to kick off soon. The sale in SUUTI is also in the process. These disinvestments can
potentially fetch a large part of the stated targets in the budget.
No third front in elections: General Elections of 2014 may not be preponed, as
feared by some. However, chances of a third front are slim. In the upcoming
elections in five states (Rajasthan, Delhi, Madhya Pradesh, Chhattisgarh and
Mizoram), the dominant parties are largely Congress and BJP, unlike other states
dominated by regional parties.
Conclusion: Long term prospects intact Long term prospects: Long term prospects of India remain intact. Just to look at,
the banking sector is likely to see an exponential growth - branches are going to
double to 140,000 by 2020, ATMs five times and mortgages would grow by eight
times. Besides, tele density stands at 73% and would grow further and two-
wheelers would double by 2020.
More pain ahead for EMEs, India to hold steady: However, EMEs may undergo
some more pain before they stabilize. However, a growth of 5-6% is assured in
India. If recovery happens in the US and Europe, it would further strengthen India.
Land bill and real estate: Land would become more expensive but would be
available for industry post implementation of LARR Bill. While there may be some
correction in real estate prices, no real estate player has ever gone belly-up.
Looking beyond the gloom & doom
27September 2013
9th Annual Global Investor Conference
Covering Analyst(s):
Dipankar Mitra
+91 22 3982 [email protected]
Unleashing human spirit – most & more
Mahatria Ra a.k.a. T T
Rangarajan is considered a
spiritual leader and living
master by his students and
is the founder of Alma
Mater – an organization
dedicated to self-mastery
and holistic personality
development. Alma Mater
is one of the leading
organizations in India that
is spearheading the
spiritual renaissance
raging across the world. It
is a non-political and non-
religious organization that
does not promote any
particular ideology but
with a mission to work for
the betterment of the
individual, society and the
world. It conducts
transformational courses
in the cities of Chennai,
Pune, Bangalore and
Hyderabad in India.
He conducts Higher Deeper
Beyond (HDB) — an
annual spiritual retreat
during which thousands of
students have undergone
deep spiritual transformations
and emerged as better
citizens of the world.
Mahatria is also the Editor
of Infinithoughts (formerly
Frozen Thoughts), a growth
oriented magazine
published monthly by Alma
Mater.
Holistic development of individuals ...
... for corporate success and greater glory of country
Corporate sector is more ethical than high places of religion but has its ownchallenges Corporate sector: It is more ethical than most high places of religion replete with
black money and more stifling hierarchy. While no person has ever been lifted
out of poverty through charity as it only keeps one poor. On the other hand, the
corporate sector provides employment and thus accords constructive charity to
lift the poor.
The gap between early success and later achievement: A lot of people showing
promise at early age did not live up to it. On the other hand, many backbenchers
have made it big in real life. The gap between promise and achievement points to
colossal human waste that is far greater in magnitude than the damage to
environment or ozone layer. Unlike environment, human resources get depleted
when we do not use them.
Inadequacies of curriculum: Our educational curriculum does not teach us
leadership, or equip us to deal with relationships in a heterogeneous group of
people. Neither the values of competitiveness, time management, ways to deal
with failure are taught. Thus, the fear of failure comes in the way of taking
initiatives.
The colonel is ready, army is not: Nearly 80% of the people in every organization
are actually sitting. We keep improving systems, technology, one-day executive
training programme etc, but without the person being ready for it, we still do not
have the peak performing individuals. Change is not successful if not monitored.
Changing the system of annual appraisal (APR) to a quarterly one would usher a
new beginning for the organization. However, many in the organization act as
speed breakers hiding behind the power point presentation. The chair protects a
lot of corporate leaders, 90% of whom feel a sense of incompetence. As demands
of the roles are growing much faster than you, thus the gap between expectation
and delivery increases.
Developing human potential to lead to organizational growth Human beings as a composite individual: We need to see a human being beyond
his degree, skill and attitude and as a composite individual comprising of physical,
mental, intellectual, emotional and spiritual being. Organizations need to harness
these aspects of human potential to grow. Thus, we need to develop organizations
holistically.
ThematicPresentation
Mahatria Ra
Spiritual Guru
Unleashing human spirit – most & more
28September 2013
9th Annual Global Investor Conference
Physical: While it may appear trivial at the first instance, but if one does not have
a healthy body, it starts showing up later in the day. It shows in diseases and
medicines and efficiency of the people. Physical fitness is one of the criteria for
APR. The body is designed in such a way that it would take care of you, if you take
care of it. Hence, an hour to the body is essential.
Mental: The education system is designed to develop the conscious part of mind.
However, the conscious comprises only one eighth of the mind - the remaining
seven-eighth being subconscious. The mind does not differentiate between the
positive and negative emotions but can only recognize the shallow and deep
emotions. The duct to which one programmes his deep emotions is programmed
for recurrence of the same. Thus, one becomes the co-author of his own destiny.
There are three ways to correct this. One is that, anything positive, speak in five
sentence and anything negative say once or do not. Second, anything positive get
emotionally involved, anything negative only intellectually analyze. Third and
most importantly, train yourself to experience shallow hurt and deep positive
emotions.
Intellectual: Mahatriya Ra picked up some simple philosophy from his managers
in his early part of professional career. The first one was "Subordinate your likes
and dislike to the purpose of your life. The second one is to seek solutions always
and not the problems captured succinctly in the phrase "there is a way and the
way is on the way".
Emotional: We all experience positive and negative emotions. But there is a
difference. Ordinary men spit their negative emotion, the extraordinary channelize
their emotions. But they channelize it to positive direction by identifying a goal
larger than emotions. The same happened with Mother Teresa and Mahatma Gandhi
who made their negative experience channelize it in right directions. We live our
life with an enormous amount of sensory overload, with a never ending traffic
jam. Hence, some period of non-doing, a period of quietude may help either by
meditation, walk alone, star gazing etc may help.
Conclusion: Two stories and one lesson Conquering Mt Everest: After failing to climb Mt Everest thrice, Sir Edmund Hillary
said to the painting of it, challenged itself that "more and more you reject me,
more and more I become determined that I would climb on top of you ... because
as Mt Everest you cannot grow but as human being I would continue to grow".
Get the man correct, the world would fall in place: The father reading a newspaper
and not wishing to be distracted by his little daughter, tore the pieces of a paper
where lay map of the world as part of an advertisement of a courier company and
gave that as a jigsaw puzzle to the girl as a precondition to play. Within five minutes
the girl got the map right and replied to the bemused father that on the opposite
side was the picture of a man and she just put the eyes, ears and nose together.
Thus, getting the man right would get the world right!
It starts with you: Everything starts with you. First you grow holistically and then
empower everyone through leadership to grow holistically. If we thus feel
responsible to empower the 1.2b people to grow holistically, give us 25 years and
collectively we can put India on top of the world.
Unleashing human spirit – most & more
29September 2013
9th Annual Global Investor Conference
The Great India Management of Dabbawala
Dr Pawan Agarwal is the CEO
of renowned Mumbai
Dabbawalas (couriers for
lunch boxes to offices) and
is also a well-known
management guru. He is a
proficient professional
involved in conducting
research and contributing
to the design and delivery
of courses for the entire
educational fraternity and
has received several
awards for his work as a
teacher, including the
“Utkrusht Shikshak
Sanmam” from the Mumbai
National Congress in 2010
and the Rajiv Gandhi
Puraskar in 2007. In 2001,
while he was pursuing a
doctorate for the topic “A
Study & Logistics & Supply
Chain Management of
Dabbawala in Mumbai”, he
had approached the
dabbawalas (Mr Raghunath
and Mr Gangaram).
Mr Agarwal has been
involved in the world of
dabbawalas ever since and
works on an honorary basis
to make presentations. He
has been authorized by the
dabbawalas to present their
work for audiences in
English. Outside India, he
has been invited to unleash
the magic of dabbawalas to
organizations such as Young
President Organisations
(YPO) members in Kenya, YPO
members in Nigeria, British
Telecommunication and
Global Services in London
and First Source Solutions
Ltd in London.
Mumbai Dabbawalas - a lesson in management
Rooted in core principles of hard work, customer satisfaction and human values
The success of Mumbai Dabbawalas is built around a few simple and traditional principles
including i) work is worship, ii) customer is god, iii) no alternate to hard work, iv) importance
of human values.
The great Mumbai Dabbawalas services started in 1890 and have 5,000 employees, with an
average literacy rate of 8th grade schooling. They cover a total area of 60-70kms and carry
nearly 0.2m tiffin boxes, totalling 0.4m transactions, 120m transactions every year.
The dabbawalas have a very simple and flat organizational structure, with 13 members at
the top organizational position, including nine directors. The second layer comprises of 800
mukadams and the rest 5,000 are simply members with all equal status.
The cost of dabbawala service is kept low at INR400-450 per month irrespective of weight,
distance and space because if the prices are raised further, they would face competition
from the local restaurants. In all thus, dabbawalas make INR8,000-9,000 per month. This is
added by supplementary income from odd jobs .
Dabbawalas have never resorted to any strike or got involved in any police/court case since
1890. A strict code of conduct is enforced throughout the organization.
Mumbai Dabbawalas have won many awards and accolades, including Six Sigma performance
and ISO 9001:2000 certification, most notably without applying for it. Lastly, dabbawalas
now perform a role of brand ambassador for the country.
Simple principles behind the success The takeaways: The key takeaways from the working of dabbawalas are their i)
passion, ii) commitments, iii) consistency, iv) execution, v) accuracy, vi) dedication,
vii) time management, and viii) complete customer satisfaction.
Four key principles: The four key principles that guide dabbawalas are i) work is
worship, ii) customer is god, iii) no alternate to hard work, iv) importance of
human values.
Functions and workings: The great Mumbai Dabbawalas services started in 1890
and it was registered as a charitable trust in 1956. At present, they have 5,000
employees, with an average literacy rate of 8th grade schooling. They cover a
total area of 60-70kms and carry near 0.2m tiffin boxes totalling 0.4 transactions,
120m transactions every year. It takes around 8-9 hours for this to accomplish,
including the morning three hours of wartime.
Simple organizational structure: The dabbawalas have a very simple and flat
organizational structure, with 13 members at the top organizational position,
including nine directors. The second layer comprises of 800 mukadams and the
rest 5,000 are simply members with all equal status.
ThematicPresentationDr Pawan Agarwal
Management & Motivational Guru
The Great India Management
of Dabbawala
Covering Analyst(s):
Dipankar Mitra
+91 22 3982 [email protected]
30September 2013
9th Annual Global Investor Conference
Impeccable service at a reasonable cost Charges only @400-450 per month: The cost of dabbawalas service is kept low at
INR400-450 per month, irrespective of weight, distance and space. This is because
if the prices are raised further, they would face competition from the local
restaurants who would supply cooked food to the customers. In all thus
dabbawalas make INR8,000-9,000 per month. Diwali bonus, once a year, amounts
to a month's extra payment. Dabbawalas add this with supplementary income,
including delivery of newspapers in the morning and odd jobs in the evening.
No strike or police/court case: Dabbawalas never resorted to any strike since
1890 as they have seen the results of long strikes in Mumbai mills that never
opened thereafter.
Discipline: A strict code of conduct is enforced throughout the organization that
includes the following, i) no alcohol/smoking during business hours, ii) mandatory
white cap during business hours, iii) carry identity card, and iv) no leave without
prior notice. In case of an emergency absence, it is reported immediately.
Some unique features: The average weight carried by a dabbawala is around 60-
65kg. There is no fuel, modern technology, investment or disputes involved in
the entire service. The performance rating is higher than 99.99%, with 100%
customer satisfaction.
A foolproof coding system: Dabbawalas use a simple but foolproof coding system
that mentions i) residential area code, ii) dabbawala code at residential,
iii) building name, iv) floor no., v) dabbawala code at residential station and
vi) destination station.
Delivery of Six Sigma performances against all odds Crowded trains: The Mumbai trains are overcrowded with 12 coach trains, 4,000
commuters, 8,000 disputes but there is no excuse as duty comes first. The tiffins
are unloaded and rearranged as per destination area and building. The reverse
process follows during return journey from all destination stations.
Awards and facilitation: Documentaries have been made on Mumbai Dabbawala
services by various TV channels in India and abroad. Also, they became celebrated
case studies in various business schools across the world. They receive invitation
for lecture among the world's leading institutes. Dabbawalas received ISO
9001:2000 award on August 1, 2006 that too without application! They are included
among DNA's top 50 entrepreneur list of India.
Achievements: One of the most celebrated success of Mumbai Dabbawalas is
that of Six Sigma performance, with an error rate of one in 16m transactions (i.e.,
99.99966 success rate). Besides, they have got recognition at Guinness Book of
World Record, Ripley's "believe it or not" and many other sources.
Brand ambassador for country and other anecdotes: When Prince Charles visited
the dabbawalas, they had to set the venue and time (Churchgate Station between
11.20 AM to 11.40 AM only on November 4, 2003) as they would otherwise be busy
at serving their customers who are god in their eyes. This relationship extended
further when dabbawalas sent gifts on the second marriage of Prince Charles and
when the latter sent his condolence message after heavy floods in Mumbai on
July 26, 2005.
The Great India Management of Dabbawala
31September 2013
9th Annual Global Investor Conference
Art of doing business in India – Conquering the chaos
Mr Ravi Venkatesan is a
Director on the boards of
Infosys and AB Volvo and a
Fellow of the Center for
Higher Ambition
Leadership, Boston. He is
an advisor to several family
run business houses and
entrepreneurial ventures.
He is also a member of the
Advisory Board of Bunge
Ltd, the Global Alumni
Board of Harvard Business
School and of Marico
Innovation Foundation. Mr
Venkatesan is a founding
partner and Chairman of
Social Venture Partners,
India, a network of
engaged philanthropists
attempting to address
complex social issues
through venture
philanthropy.
Between 2004 and 2011, Mr
Venkatesan was the
Chairman of Microsoft
India, which under his
leadership became the
company’s second largest
and one of its fastest
growing geographies. He
was instrumental in
helping Microsoft India
create “Shiksha”, a large
computer literacy program
that helped train over 35
million students from weak
backgrounds. Prior to
Microsoft, he spent 16
years with Cummins Inc as
Chairman.
Mr Venkatesan was voted
the most influential MNC
CEO for 2011 by the
Economic Times.
Key takeaways
Core essence: Many companies enter India or other Emerging Markets (EMs), but
all are not successful. Some MNCs such as Nestle, McDonald's, Vodafone, Bosch,
LG, Reckitt Benckiser succeed, while others like GE, Apple are not that successful.
Why does India really matter? Why bother with the 'chaos'?: India is the perfect
litmus test which MNCs should be willing to take due to: (1) country's growing
market (nominal GDP grew by more than 6x from 1995 till date), despite all current
challenges and (2) the growing middle class.
How can you ascertain if a company is succeeding in India?: (1) The company is #1,
#2 or #3 in the industry and growing faster than average, (2) India provides 10-20%
of the incremental global growth of the company and (3) product capabilities and
talent from India are being used to succeed in other markets.
Three differentiators to success Have a long term mindset - Companies should have a strategic view of the business
and not just a financial view for short term.
Adapt to the market, do not expect the market to adapt to you - Product to be
tailored for India offering '70% of the value at 30% of price.' Companies should
have a localized business model that delivers profitability even at crazy price
points. They should have a granular bottom-up approach.
Get the talent right - Corporates should seek people with potential and then give
them huge challenges which display their hunger, courage, ability to take quick
decisions. Companies should move top talent around globally, especially in
emerging markets.
India - growth spurts followed by periods of slowdown: Empirical evidence proves
that India has always been a place where growth happens in spurts, followed by
periods of slowdown (three to four good years followed by four to five tough
years), despite slack policy-making. Thus, if MNCs are able to adapt during the
tough periods of slowdown, they will reap the benefits during a good run.
Broad recipe for MNCs to win Indian markets Pick a few big markets like China, India, Indonesia to go deep, rather than smear
investments across many.
Look past the short term challenges of these markets. Play the long game and stay
on the course. Sacrifice short term profitability for market leadership.
Send the best leaders for these markets and for five years or more.
Empower the local team to make most operating decisions do not micromanage.
Covering Analyst(s):
Ashish Gupta
+91 22 3982 [email protected]
ThematicPresentationMr Ravi Venkatesan
Ex-Chairman, Microsoft (I), Cummins (I)
Art of doing business in India –
Conquering the chaos
32September 2013
9th Annual Global Investor Conference
Panel Discussion
Covering Analyst(s):Alpesh Mehta+91 22 3982 [email protected]
Sohail Halai+91 22 3982 [email protected]
Mr Ramesh IyerMD & CEO
M&M Financial Services
Mr Ramesh RamanathanFounder, Chairman,
Janalakshmi Microfinance
Mr Romesh SobtiMD & CEO
IndusInd Bank
Mr Vikram LimayeCEOIDFC
Mr Tamal BandopadhyayDeputy Editor MINT
Author
MODERATOR
India Banking – Beginning of a New Era
Consensus of 6-8 new banking licenses to be given
Panelists for the discussion were (1) Mr Vikram Limaye, MD & CEO, IDFC, (2) Mr Romesh
Sobti, MD & CEO, IndusInd Bank, (3) Mr Ramesh Iyer, MD & CEO, Mahindra & Mahindra
Financial Services, and (3) Mr Ramesh Ramanathan, Chairman, Janalakshmi. The moderator
was Mr Tamal Bandyopadhyay, Deputy Managing Editor, Mint.
The panelists agreed that the medium to longer term opportunity remains large despite
the current gloom in the environment. While India needs a bank of global size, there is also
need for small and specialized branches, given the fragmented economics in different parts
of the country.
On financial inclusion, three panelists believed that banking is the correct business model,
while one was of the view that NBFCs are already helping achieve financial inclusion without
a banking license.
6-8 new banking licenses are expected to be awarded if corporate houses are included.
Financial inclusion and use of technology will be the USPs of the new banks.
Background for the panel discussion
Post liberalization, we have seen structural changes in the Indian economy and
Financials have been at the forefront. 1993 saw the emergence of new private
sector banks (10 licenses in 1993 and two more in 2003), which transformed the
competitive landscape, increased financial penetration and improved customer
service levels. The adoption of newer technology reduced intermediation cost,
which in turn reduced overall lending rates in the system without impacting
profitability.
Post the NBFC debacles in the late 1990's and early 2000's, some focused players
emerged stronger and capitalized on the weakness of the banking business model.
Strong growth in the last decade has also seen the emergence of mono-line NBFCs
like IFCs, MFIs and gold financiers.
Discussion focus areas were: (1) Opportunities and Challenges for Banks and NBFCs
in the New Era, (2) How Technology is Playing an Important Role, and (3) Banking
License: (a) Is the banking space getting overcrowded or is the pie big enough to
accommodate 5-6 new players?, (b) Outlook on standalone NBFCs in the longer
term, considering challenges on the liability side and increasing competition in
their niche areas.
Views from Janalakshmi
India has 30m MSMEs officially. There are also ~30m micro-MSMEs, which are
excluded from formal banking channels. These particularly include rural
inhabitants and migrants in urban/metropolitan areas. Overall banking
penetration is not even 5%. The total requirement is INR30t.
With a banking license, Janalakshmi would look at the financial inclusion
opportunity in the MSME segment. It would use an innovative distribution strategy
and technology for financial inclusion.
PANELISTS
33September 2013
9th Annual Global Investor Conference
India Banking – Beginning of a New Era
Views from MMFS
MMFS is not applying for a banking license, as the conditions do not provide
opportunity for co-existence of NBFC and Bank, and the transition time to convert
from NBFC to Bank.
Lending in the rural markets and financial inclusion requires interactive lending,
execution excellence, and the capability to scale up where NBFC platform is
required.
It does not see itself losing out on any opportunities if it does not turn into a Bank.
Customers would be fine dealing with a Bank/NBFC as long as they get good
service and convenience.
Views from IDFC
IDFC was formed with the mandate of tapping the opportunity in the fast growing
Infrastructure segment. However, being focused on only one lending segment
leads to significant volatility and increases the risk to the business model. IDFC
will incrementally look to diversify its lending business, though Infrastructure
will remain the key focus area.
From a longer term perspective, the Banking business provides a good platform
for diversification of assets and liabilities. Mr Limaye pointed out that while India
needs BIG banks, it also needs MORE banks to increase penetration. Diversification
of assets and liabilities is important from a risk and growth prospective. Hence,
applying for a banking license makes sense.
Views from IndusInd Bank
For a new bank to be successful in a highly competitive market, a niche presence
and focused strategy are essential. The Indian market is big enough to
accommodate 6-8 new players.
Both the NBFC and Banking business models have their pros and cons. NBFCs are
doing a great job of financial inclusion, and the RBI will not be against that business
model. However, as the NBFC industry is becoming bigger, regulations are also
likely to become more stringent. This will increase regulatory and operating
expenses, which will impact profitability.