ENTREPRENEURSHIP SUMMIT 2015: DAY 2

Day 2 at the Entrepreneurship Summit 2015 saw 2 speakers and a panel discussion. The 2 speakers were Mr. Satish Mandora (CEO, Square Circles) and Mr. John Kuruvilla (MD, GenNext Ventures).

Mr. Satish Mandora is an alumnus of SIBM (1990 batch.) He is a coach and a marketing advisor. He talked about fear and overcoming fear, finding the right partner in your business and the right time to start a business. 

Mr. John Kuruvilla  talked of his life's story and the advertising campaign's that he has worked on. He talked of his trip to the Amazon, and how he survived in the jungle with the help of a counter intelligence expert from Israel. He talked of survival skills needed in the jungle and how the experience helped him find God.

The speaker's have to be listened to, to be believed and be inspired. A paragraph here would not do justice to that. 

Symbi Haat this year had some good food like the last and I had my fill of pasta and pizza.

Is further depreciation of the Rupee exchange rate going to be sustainable?

This blog post is a repeat from a blog I made around one year ago, on an older blog which can be found here: http://niravdesai1209.wordpress.com/ The blog was titled "Can the Rupee drop below 60 to a US Dollar in a sustainable manner?"

Firstly, the Rupee is slipping due to the widening Current Account Deficit (CAD). Foreign fund inflows into financial markets and goods and services exports are the 2 main factors contributing to a stronger Rupee and import of oil, gas and coal is the main factor contributing to the weakening of Rupee.

As  the Rupee weakens, the imports of oil, gas and coal become more expensive and alternative energy sources such as wind, solar and nuclear power become more economically attractively. Moreover, wind and solar power have 0 operating costs and are not affected by inflation at all.

Back in 2013, TATA Power was able to sell coal power from its Mundra Plant at 2.5 rupees per unit. Solar power was priced at 7 Rupees per unit, subsidies brought it down to 5.5 Rupees per unit. Wind power was priced at 4 Rupees per unit or less on average.

Reference: The Hindu story on Power Prices in 2013

Rapidly increasing solar cell efficiencies and system design improvements have brought the price of solar power to Rs. 5 per unit in March 2014.

Reference: The Economic Times story on Cost of Solar Power

Now if we factor in a 5% inflation and a rising price of imported coal (which is about 60% of total coal consumed in India), in another 1 year with the Rupee at 61-62 to a US Dollar, solar and wind power will be cheaper than coal and natural gas in India.  This will reduce the demand for imported coal and the Rupee may stabilize at around 61-62 to a US Dollar.

Reference: Generation costs of imported coal based power are going up

In a free market economy, where the most cost effective power source is used, it is hard to drive the Rupee below 61-62 to a US Dollar in a sustainable manner. I don't see that happening.

What are your thoughts?

Here is the chart from the IEEFA document corroborating my claims:

IEEFA Briefing on cost of solar, wind and coal power in India

Presentation prepared on SAP LUMIRA with data from Government report on the Energy Industry in India which can be found here: Energy Statistics 2013

Trends in the Energy Industry in India from Nirav Desai

ENTREPRENEURSHIP SUMMIT 2015

Today I made my way to the Entrepreneurship Summit 2015 organized by the Social Entrepreneurship and Consulting Cell at Symbiosis Institute of Business Management, Pune.

This is the annual event where SECC invites eminent entrepreneurs to chat with the students and inspire them. There are panel discussions, entrepreneur stories and SymbiHaat - the food festival organized by SIBM students.

The first speaker today was Mr. Paavan Nanda, who is the co-founder of ZOSTELS and ZO-ROOMS.  ZOSTELs are hostels for back-packers that offer affordable and comfortable hostel rooms. They are located on most visited backpacker routes such as Delhi-Jaipur-Jodhpur and Goa. They started off with the idea during their college days at IIM Calcutta and built the first ZOSTEL in Jaipur. They secured funding by participating in start-up competitions and ended up winning all the 14 competitions they participated in, which included the one at India-Wharton Business Summit. From hostels, they moved into budget hotels that are standardized in terms of the amenities and services they provide. ZO-ROOMS expanded rapidly and they operate primarily by converting existing not so well managed hotels into standardized format hotels. What I found inspiring about the talk is that they decided to build a business model around backpacking and signed up with MTV to help them create brand awareness for their hostels. 

The second speaker today was Mr. Milind Sharma, who is an alumnus of Symbiosis School of Economics. He is the co-founder of NuovoEx and PepperTap. Both these start ups operate in the hyper local business format providing logistics services in the business to customer link. NuovoEx provides reverse logistics for the goods the people return when they are bought online from stores such as Flipkart and Snapdeal. PepperTap provides home delivery of groceries from the local store to your home. Mr. Sharma started off with NuovoEx in Gurgaon, working off from a small store in a local market. NuovoEx saw rapid growth as the online retail space saw exponential growth over the last 5-6 years. PepperTap is a more recent venture and is currently operating in 14 hyper local market places across India. They sign up with retail stores and hyper markets and serve 4-5 km area around these stores. It is a promising business model as food retail through hyper markets has grown very rapidly with the development of stores such as MORE and Reliance Fresh. 

The Entrepreneurship Summit 2014 saw founders of Pinstorm (Mahesh Murthy), Goli Vada Pao (Venky Aiyer), Rolocule Games (Rohit Gupta), Doolally (Suketu Talekar), The Pint Room (Pradeep Gidwani) and CarIQ. These were inspiring talks and revealed first hand the life of an entrepreneur. Loved listening to them.

A Hundred Small Steps (contd. Part 7)

This blog post is in continuation of the previous blog posts on Raghuram Rajan's report titled "A Hundred Small Steps" written in 2008 whilst he was with the Planning Commission of India.

The next section of the report describes " The Macroeconomic Framework and Financial Sector Development."

The section discusses the impact of capital flows and Real Effective Exchange Rate (REER) on the economy in India.

We have published a paper titled "The Impact Of Rupee Exchange Rate on Business Opportunities in India" in the IOSR Journal of Economics and Finance that describes the effects of a rapidly depreciating Rupee as was seen in 2012-14 period.

The paper can be downloaded here: IOSR Journal of Economics and Finance: "The Impact Of Rupee Exchange Rate on Business Opportunities in India"

Link to previous blog post in this series: A Hundred Small Steps: Part 6

Next blog post in this series: A Hundred Small Steps: Part 8

The Networked Economy and Make In India

Today we discussed this article from MIT Technology Review in our E-Business class: "Revolution in Progress: The Networked Economy"

The article describes a business and consumer eco-system that is more connected today than ever before. Product development times have shrunk and so have the inventory cycle times. With the advent of IoT, the inventory in the refrigerator may begin to get replenished just-in-time.

The networked economy is giving businesses more opportunities to engage with customers.  Airbnb, Google Waze and eBay are some of the companies that are leveraging this networked economy to the fullest. A company today can shop from an entire gamut of suppliers listed on eBay rather than limiting itself to a traditional set. Airbnb allows you to list a room you have in your home as available for rent and share it with tourists visiting your city. Marissa Mayer highlighted the new sharing economy at DAVOS 2014 when she said "150,000 people let strangers stay at their home last year through Airbnb; 1.5 million people assigned tasks to strangers through TaskRabbit; 56 percent would consider renting out their cars to strangers." Google Waze allows drivers to share local real time traffic and road information.

Earning customer loyalty, enabling open innovation and enhancing resource optimization are 3 key pillars of success in the networked economy. For existing business models, the immediate challenges include preparing for the new workforce and identifying exactly which projects for improving customer experiences or optimizing capacity are most likely to yield fastest return on investment. Vivek Bapat, SAP's global vice president for portfolio and strategic marketing advises thus "Look for areas of quick wins - such as supply chain, procurement, or asset utilization - that may not even be noticeable to customers at first, but that will bring gains in efficiency and drive cost reduction."

This advice becomes particularly important as we are in the midst of major campaigns by the Modi government on Make In India, Digital India and Smart Cities.  We need to be careful about what projects we choose to fund under these initiatives. We should look for sustainability and a good return on investment in projects that the government invests in. Well selected projects will give a positive return in the long run and poorly selected ones will produce a one time growth event in the economy.

We should be careful what we choose to spend on.

How to raise money for a social cause through crowd funding

How to raise money for an NGO from Nirav Desai

A Hundred Small Steps (contd. Part 6)

This blog post is in continuation of the previous blog posts on Raghuram Rajan's report titled "A Hundred Small Steps" written in 2008 whilst he was with the Planning Commission of India.

The third section of the report focuses on "Creating a robust infrastructure for credit."

Proposal 29: Expedite the process of creating a unique national ID number with biometric identification.

The AADHAR Unique Identification number brings us one step closer to this ideal. However there are serious concerns over the integrity and confidentiality of the data in the AADHAR database as is highlighted in this story from CIO.IN: Reduce your risk by refusing to link AADHAR to any databases.

Proposal 30: The Committee recommends movement from a system where information is shared primarily amongst institutional credit providers on the basis of reciprocity to a system of subscription, where information is collected from more sources and a subscriber gets access to data subject to verification of ‘need to know and authorization to  use’ of the subscriber by the credit bureau.

We could introduce a FICO style credit rating system found in USA with access to credit scores provided to businessess on consent of the individuals' consent. FICO scores are used for setting interest rates on home and car loans for individuals in USA.

Proposal 31: Ongoing efforts to improve land registration and titling—including full cadastral mapping of land, reconciling various registries, forcing compulsory registration of all land transactions, computerizing land records, and providing easy remote access to land records—should be expedited, with the Centre playing a role in facilitating pilots and sharing experience of best practices. The Committee also suggests the possibility of special law courts to clear the backlog of land disputes be examined.

Here I would like to mention an article by Dr. Anupam Saraph in MONEYLIFE on 10 digital solutions that can make India the best governed nation. One of the 10 ideas is to protect the country from land mafia. The suggestion is as follows: 

"There is no public directory or map of all the survey numbers of the 32.87 lakh square km across the 595 districts in the country. There is no account of the changes happening in land use across the country. Land records and property records are not standardized across the country. Requiring that all survey maps be geo-tagged, or their exact location on the district map be shown based on latitude and longitude, and display the survey land-use, ownership details, and any legal issues on a single website survey.gov.in will change the way land use happens across the country. Requiring that the North East point of every property have an official GPS device on it will alert a land use information system of any movement of this point."

Proposal 32: Restrictions on tenancy should be re-examined so that tenancy can be formalized in contracts, which can then serve as the basis for borrowing.

The GPS markers suggested above could be used for unique identification of land plots and these could be coupled unique identities for individuals to generate unique land contracts.

Proposal 33: The powers of SRFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002)  that are currently conferred only on banks, public financial institutions, and housing finance companies should be extended to all institutional lenders.

ARCs have additional powers such as step-in rights and the ability to change management, and the right to sell or lease the business. Given these additional powers, it is important that a number of ARCs flourish so that no single ARC has excessive power. There is really no sensible case to keep foreign

direct investment out of ARCs. The kind of risk capital as well as the kind of expertise foreign investors bring is useful in the economy, and can help provide a valuable buffer. From an economic perspective, capital that comes into the country when the banking sector is distressed and a flood of assets are sold to ARCs, is particularly valuable, and foreign investors, not domestic financial institutions, are most likely to be flush with capital at those times.

There are venture capital firms such as Bain Capital that specialize in leveraged buyouts of debt ridden sick companies and turn them around, selling them subsequently for a good profit. Asset Reconstruction Companies should follow a similar business model and there could be potential for growth here.

Proposal 34: Encourage the entry of more well-capitalized ARCs, including ones with foreign backing.

This could lead to better results since a new management model might be what is needed to turn around some these companies and NPAs.

Proposal 35: The Committee outlines a number of desirable attributes of a bankruptcy code in the Indian context, many of which are aligned with the recommendations of the Irani Committee. It suggests an expedited move to legislate the needed amendments to company law.

There is a need for a consolidated bankruptcy law in India, in line with the Chapter 11 in USA. The National Company Law Tribunal has laid certain conditions on bankruptcy proceedings for sick companies. 

The Board for Industrial and Financial Reconstruction established under the Sick Industrial Companies Act also assists in reviving sick companies.

Link to previous blog post in this series: A Hundred Small Steps: Part 5

Next blog post in this series: A Hundred Small Steps: Part 7