Saturday, October 06, 2012

The Reasons for Choosing India as the Launchpad

Philip Mckinney, VP & CTO, Personal Systems Group, HP Reveals to Neha Saraiya the Reasons for Choosing India as the Launchpad for HP’s Latest Offering – HP Dreamscreen and its Future Roadmap

B&E: As you mentioned that there will be an explosion of products in the future, which is that one particular area where HP is planning to bet big in terms of technological advancement?
PM: I think the tablet space is really interesting. It’s set for some real movement in the next 9 months. You are bound to see a flood of tablets ranging from 6 to 12 inches over this period. In fact, in a study that we did with health care providers, we found them really interested in 7 inch tablets as they fit into the doctors’ lab coats. In the US, you can presently see retailers distributing tablets to their sales staff to place and collect orders on time.

B&E: Any other area that may see similar growth?
PM: 3D is the next most potential area, though it may take some time to catch up. But we are already into it with the ENVY 17 laptops that is 3D enabled, though it’s still under experimentation and there is very little content. At HP lab, we are continuously working on it as we are looking at variety of 3D products in future. However, in this segment, we believe that the demand will come more from businesses rather than retail consumers. For example, think of 3D in movies like Avatar. We are behind all the technology provided for these 3D movies. Taking it a step forward, we are now working with other industries like health care, banking and oil and gas.

B&E: You have recently launched the ‘DreamScreen’ in India. But, why did you choose India as the market to launch it first?
PM: First, we have a substantial team at Bangalore and second, we also have a design centre in Delhi. The centre in Delhi actually helps in bringing the pieces from HP technology and then redesigning the same in India as per the requirements of the Indian market. So, we already had resources here, thus, we decided to take advantage of the same. However, the real challenge that we faced was that the products developed here were a lot different from what we created in the other parts of the world. To overcome the problem, we actually built a chart that showed the Internet penetration for thousand homes along with a circle that represented the whole population. We did a comparative study with the developed markets like US, UK and Japan on one side and developing markets like India, China and Brazil on the other side. What we found out was that while India has the largest circles, rate of penetration is very low. Thus, we realised that although the companies are trying to reach to the mass, the consumers are not getting the benefits. But for me, the most important thing was to use the technology in a manner that it can have a fundamental impact on people’s lives. That’s why we needed to build products that are relevant to the market. And for this, what could have been a better option than India where we already have so much of resources.


Source : IIPM Editorial, 2012.

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Friday, October 05, 2012

CLOUD COMPUTING: FLIP SIDE

Cloud Computing has been Hyped Ever since its Evolution by Amazon. But Inherent Contradictions in the Concept Threaten its Potential as the next big thing in The IT Services Space. 

Cost reduction was the sole purpose of cloud computing but India does not get a benefit over there either, as cloud as a service is at a nascent stage in India and the costs of implementation are very high compared to the dollar driven markets. In addition, while cloud computing requires all original software on which one could use the platform, the Indian market still continues to be hit badly by piracy, with 65% of the country using pirated versions; the Indian IT industry loses a whopping $2.03 billion due to piracy as per an IDC report on global piracy. Security on the cloud is again a major concern. In the eighth Annual Global Information Security Survey CSO, 12,847 technology executives around the world were surveyed and most of them were not confident about putting the data on the cloud. Almost 62% cited security concerns. Out of the 49% who have even entered the cloud, a major 39% have deeper concern about their data safety. In a report from Ernst & Young, 72% of respondents from India said they were not ready to take up cloud computing and admitted to deep concerns on security. Vishnu Prashanth P., Senior Manager, CSC quotes “Many of the business in India are slow in adopting cloud solutions because they are not sure about data management on the cloud.” Gartner itself interviewed 148 Indian companies recently and 42% had not deployed or were unsure and negative about deploying cloud computing through 2011.

Sunil Chavan, Director-Software Group & Solutions, APAC, Hitachi Data Systems tells B&E, “Considerations like managing cost, creating virtualized – cloud ready infrastructure for IT agility, adoption of low cost, cloud-based storage solution with a utility-based, “pay as you grow” model, driving revenue growth, improving customer loyalty and generating a higher ROI will be key areas to shift on the cloud”. Vendor lock-in is another big concern for CIOs that’s not allowing them to take the big plunge as cloud consumers. Once you sign up with a cloud service provider, the switching costs and portability issues become huge. So interoperability and standards become critical inhibitors. Even disaster management needs to evolve in the instance of any mishap from the service provider’s end. Gartner also points out that a user company needs to ascertain where its data is being hosted and whether the vendor is complying with the laws of that country. Also, customers need to ascertain the safety of their data if the vendor goes bankrupt or gets acquired.

All in all, while clouds provide significant cost and scalability advantages, deploying the technology is not without a fair share of contradictions and risks, especially with respect to the Indian market. As it stands today, the Indian IT- BPO market, which is estimated to be around $71.7 billion and which contributes 5.8% to India’s GDP, has already developed much of the required infrastructure to sustain for the next 10 years. These companies may attempt to achieve piecemeal objectives through cloud computing adoption, but they look largely unlikely to pursue it as an alternative to their existing framework. Cloud computing could only be helpful to SMBs who will be entering the booming Indian IT market, and there are numerous instances of those happening. Since they aren’t normally amenable to adopting proper diligence and being technology savvy, they may ignore (and in fact some of them are ignoring) the disadvantages in favour of enormous cost savings. In essence, while the hype is big, this is an idea half a decade too early into India!


Source : IIPM Editorial, 2012.
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Monday, September 10, 2012

BANKS ON THE MOVE: LVB

Lakshmi Vilas Bank is planning to grow purely on secured lending. That kind of risk aversion is not only rare but is quite strange given the industry in which the bank operates. But does such a strategy really work? B&E runs through the bank’s top management to understand the answers. 

Seen in the background of the fact that the unsecured loans space (including credit card lending) is growing at a mind-boggling CAGR of 40% (between 2006 and 2009 as reported by RNCOS), what the Angel Broking analyst mentions seems to be pertinent.

Another usual suspect for any regional bank that forwards the ‘going national’ theory is a quick check of its number of branches. And LVB fails even the first identification parade. The bank has a small and concentrated network of just 274 branches (of those 171 are situated in Tamil Nadu alone). Given that India has above of 626 districts, LVB clearly has much to do about everything, and especially its branches. Nevertheless, the bank seems to be waking up and has already applied for 100 licenses with an aim to open up at least 60 new branches in various parts of North and West India.

Compare this plan to the fact that State Bank of India, which already is a huge bank present in most places, has planned to open above of 1000 branches in 2010-11; and you immediately start realising that perhaps LVB doesn’t realise the kind of competition they’re up against.

Moving on, logically, in such small banks where CASA deposits are low, the cost of deposits tends to be very high. LVB is no different. With CASA deposits forming only 19% of the total deposits, the bank is suffering from high deposit costs. And this is making the bank lose out to competitors in the home loan market as well. But now, in their attempts to increase the CASA base, the bank’s total deposits have grown by 23.28% in the last fiscal to Rs.90.75 billion from Rs.76.31 billion in FY’08.

Meanwhile, to strengthen the home loan segment of the bank’s portfolio, which currently forms only 3% (Rs.2 billion) of its gross advances at the end of June, 2010, LVB has firmed up plans to float a housing finance company. This will also help the bank to get rid of the drawback of non-lucrative interest rates due to high cost of funds. Apart from these, the bank has recently attempted to get into other revenue generation ventures like distribution of insurance products. For the same purpose, it has tied up with LIC and Bajaj Allianz for both life and non-life insurance products. As per the bank, these new initiatives are taking off well.

Moreover, to penetrate the masses, LVB is now working on drafting a town-wise strategy, particularly for the semi urban areas where it currently has 105 branches. Also, it is planning to raise fresh capital by diluting 40% of its equity to fuel the capital requirements for expansion and banking upon its IT expertise to gain momentum.

All said and done, when one brings push to shove, one can’t help but implore LVB to reconsider their plans to go national. With a strong regional base, and with limited capital – apart from their legacy risk aversion behaviour – a sensible Sun Tzu driven strategy could well be to decide not to expand nationally now; and live to see another day. RBI’s surveys prove that 40% of the country’s over 1.2 billion population still do not have access to banking, and a considerable lot live in southern pockets of the nation. And given the push of the UID scheme across India’s rural pockets, who knows LVB might actually end up staking its claim for the post of India’s largest (and most risk averse) regional bank.


Source : IIPM Editorial, 2012.
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Saturday, September 08, 2012

Big just got Bigger!

“Power” to Big B as he turns a year older! Or is it younger? A neighbour’s-envy-owner’s-pride kind of a movie lineup apart, Amitabh Bachchan recently scorched the ramp for designers Karan Johar and Varun Bahl, and rekindled the original KBC frenzy on the small screen. All that for a 68-year old… are there any superlatives left in the book?


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
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Tuesday, September 04, 2012

The Battle for Survival!

All lost some, some lost all. Everybody evolved (Hopefully). Change in the air now, with new strategies being adopted by retailers to enable them to better manage the dynamics of this business. But can this misery-inspired ingenuity help organised indian retail produce the numbers that have eluded it so far

The changing contours of the Indian retail industry during and post the slowdown draw interesting parallels with the entire build up to the Commonwealth Games, 2010. Of course, this is ignoring the fact that we are talking about an industry here and not an event. But the fact is that the retail sector has also had its fair share of heartbreaks, controversies, working capital and cash flow problems; and obviously lessons galore. And just like all the ‘misses’ and ‘mis-hits’ at the Commonwealth Games will continue to torment India as a nation for some time to come, the retail sector also continues to face the scars of the slowdown even after we have seen six odd months of revival now.

Rising rentals, store rationalization, working capital management and cost optimisation (rather minimization) are top of mind issues for players of the industry that contributes 12% of India’s GDP. And in the process of coping with such issues post-slowdown, we are evincing a gradual shift from core-focus areas and erstwhile core competencies. And this portends the emergence of a new picture on the Indian retail landscape.

For instance, till the first quarter of FY 2010-11, Spencer from the stable of RPG had shut down 100 stores, which even meant moving away from cities like Delhi, which were unprofitable. Rationalisation of capital expenditure by focusing on core geographic areas that offered low rent premises started becoming – and will continue to be – the short-term focus of Spencer. In conjunction, almost all retailers are frequently changing their strategies to keep their show on – some flailing around attempting to pin the donkey blindfolded, some strategically. But will the mixture of these strategies help organised retail become the next boom industry, which it was slated to be for so long? To that effect, B&E met up with CEOs and leaders within India’s retail industry and in this cover story, provides a quick commentary on the current state of retail affairs. Store rationalisation through adequate working capital management and cost optimisation has been a hitherto hidden penchant, which departmental stores like Spencers, Shoppers Stop (from the Rahejas), Westside and several of their ilk have developed. And to optimize costs, a lesson learned during slowdown is to reduce inventory costs by liquidating slow moving goods (through discounts, et al). According to the KPMG report, ‘Indian Retail: Time to Change Lanes,’ slowing sales were resulting in lower inventory turnovers and increasing working capital requirements. The report also shows that till 2009, sales grew by mere 8% (34% in 2007) and this prevailed till July 2010. This tantamount to the fact that the organized retail penetration, which is currently at 5%, may be able to reach only around 10.4% by 2012 (against the earlier expectation of 16%).

So what happened to those figures thrown up to media by industry bodies; claiming a sunny road ahead for Indian retail? In 2008, CII claimed that till 2013, retail will attract an astonishing $25 billion investment but in reality, we haven’t seen even 50% of that. This was also echoed in the findings of McKinsey, which claimed that the Indian retail industry will grow at 25% till 2013.

In fact, sector analysts claim that the Indian retail market is still facing a slowdown. But the positive side is that it has taught players not to take the route to perdition like Subhiksha & Vishal MegaMart. “In the current context, perhaps the key lesson learned during the slowdown is to never invest too much; rather one should focus more on store rationalisation,” says Sanjay Gupta – VP-General Merchandise, Spencer’s Retail Ltd. So it is quiet logical that the group is not over investing in non-profitable areas like Delhi and Rajasthan and is consolidating its operations in virgin Tier III cities (where no retailers have entered) and core geographic areas like southern India. Players like Subhiksha, Vishal Mega-Mart & Planet Retail miserably failed to handle the liquidity crunch created by the economic meltdown due to over-investment and poor conversion ratio of investments to revenues. On the other hand, the big boys like Spencers are somehow not only learning, but also in some cases mastering the issue of liquidity crunch.

Govind Shrikhande – Customer Care Associate & MD of Shoppers Stop Ltd. admits, “During the slowdown, we have seen the increasing working capital requirements fuel growth, which resulted in liquidity pressures for many retailers and the need of the hour is working capital management.” To manage working capital, the group is managing its rental expenses by opening stores on a revenue sharing basis with mall owners and is managing store operating costs by cutting down 30% of its electricity costs through installing recyclable electronic and air-conditioning systems. Ventures like Arcilia from the group, which have not been generating footfalls, have been shut down. The result was the company, which reported a loss of `650 million in 2008-09, bounced back to record a profit of `192.1 million in the third quarter of 2009-10. Post-slowdown, retailers across the world are shutting down stores that are not generating major footfalls, rather than playing the waiting game. Changing market trends demand that the retail industry expand its reach to more customer touch points to drive them to stores in new areas. For instance, French hypermarket brand Carrefour has shut down 10 stores till July this year in its home market to reduce its reliance on sluggish footfalls. The group is now rolling out stores in new emerging consumer markets such as China and Brazil. This lesson has also been learned by luxury retailers. In the Indian market, you will see that luxury retailers like LVMH, Prada and Hugo Boss are now opening smaller stores rather than large ones. Tag Heuer (from the stable of LVMH) has recently shut shop from one of India’s two luxury malls – DLF Emporio – and is keeping its new stores comparatively smaller in size. “Emporio was not getting the required footfalls. During the slowdown, we have observed that gigantic stores work in China to impress customers; but in India, I think people are not really hooked with the size of your store,” feels Manishi Sanwal, GM – Indian Sub-continent of LVMH – Watch & Jewellery.


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Monday, September 03, 2012

“WE ARE ENGAGING INTO A LOT MORE EXCLUSIVE DEALS”

Siddharth Roy Kapur, CEO, UTV Motion Pictures, talks exclusively to B&E on how the studio model has helped them to retain sustained growth

He heads the most profitable vertical and successful vertical of the UTV group. His association with Ronnie and the group traces back to the time when Ronnie had just started his cable TV venture and had come to Siddharth Roy Kapur’s house to talk about it. Siddharth ended up joining Ronnie then. The man at the helm of affairs for the motion pictures division feels that Ronnie has always tested new waters, which has made his time in UTV very exciting.

B&E: There has been a 14% increase in your revenue this year. How has an IP focus and the ‘Studio Model’ approach helped you in this regard?
SK: Studio model helps in the number of movies you put out and the quality of the movies. You are able to zone in on the quality content in order to keep the level of growth. Intellectual property is the most important thing that you are creating and it has got value beyond the short term. We’ve been able to leverage on that time and again. Our syndication team looks at exploiting each film on every platform in every market across the world and this happens on a continuous basis and not just in the year that the movie has released in the market.

B&E: UTV Motion Pictures has signed a series of non exclusive TV rights syndication deals of over `1 billion. How have you leveraged on that?
SK: We keep doing such deals and off late we have been doing exclusive deals a lot more than the non-exclusive ones because the competition in broadcasting space has become fierce these days. That is why the satellite prices have also gone up. Since we have a lot of movies to offer to the broadcasters, they are able to derisk the acquisition because if one movie doesn’t justify the acquisition price, the other one will more than justify it. Secondly, they are able to come to one studio and do a bulk purchase. And with us they are assured of certain quality as well.


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Saturday, September 01, 2012

Pawan Goenka, Ppresident, Automotive & Farm Equipment

Pawan Goenka, Ppresident, Automotive & Farm Equipment, M&M , Talks about the Group’s M&A Strategy, Future M&A plans and endeavours for a Global Presence, particularly in neighbouring China in this Exclusive interaction with B&E’s Pawan Chabra 

B&E: Can you elaborate on the growth plans that M&M has in mind to leverage from the position of being India’s largest producer of tractors. Are you planning to acquire more companies, especially in China?
PG: We are certainly looking at expanding our global presence in the tractors segment. The last acquisition we made in China was close to one and a half year ago, but we haven’t done any acquisition beyond that point in that region. Clearly, we are looking at markets like China and US as they are among the few important markets for the tractors segment. While we are currently the #5 player in the Chinese market so far, we would certainly aspire to become a player in the top three on a 5-6 year horizon. All I can say is that the strategy will evolve over time and I cannot say today what will happen at a given point of time. For now, I cannot comment on whether we will enter China with two-wheelers or SUVs.

B&E: The company has recently picked up a 20% stake in the Vayugrid’s India operations, What kind of money has been pumped in for same and can you explain the strategic advantage behind the deal?
PG: This was a very small deal which will require an equity infusion of close to `1 crore and close to `4 crore in convertible debentures. It was a start up company, which has a business model somewhat similar to what we want to do in our Farm Equipment division. It focuses on creating opportunities for farmers to be able to manage crops better and enhance their productivity. Moreover, it also offers an option for farmers to buy their crops and we are clearly supporting it by having a small equity stake in it. The deal is not at all focusing on the motive to sell more tractors. What we are looking at is to create a business model out of Vayugrid, which will support farmers to gain more productivity and has a guaranteed off-take in return.

B&E: Is Scooters India next on the list of the company as it will offer a large presence in the three-wheeler segment for your company?
PG: I had said a few days back that we haven’t had a word with the government so far regarding the same, but I recently had a word with Vilasrao Deshmukh, Union Minister for heavy Industries and Public Enterprises and asked whether the government is serious about selling a majority stake in Scooters India. As he said yes, we hope to discuss further.


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Friday, August 31, 2012

PVR CINEMAS: STRATEGY

He joined the company in 2001 when it was poised for the typical big leap. Today, PVR Cinemas is one of the largest cinema chains in India, yet not the largest. Nitin Sood, CFO, PVR Cinemas tells B&E, what it took to reach here and what it would be like ten years later by Amir Moin

B&E: How has the exhibition business evolved in the past ten years or so?
NS: The single most important and the most revolutionary evolution has been the introduction of the multiplex. About 8-10 years ago, there were in general only single screen cinemas. If you look globally, 75% of all cinemas are multiplexes; in India, the number is completely opposite. We have only 10-15% multiplexes compared to 85-90% single screen cinemas. So the industry is evolving in such a manner that people are gradually realising that single screen is a dead model to operate with. Multiplex offers a variety of choice therefore further evolution that takes place will also be the ‘multiplex-isation’ of single screen cinemas.

B&E: There are issues in every industry that hinder growth. What are the challenges for your industry?
NS: I think the biggest challenge has been the regulatory issue. The industry is being plagued by different state tax laws. Different state governments have a different take on how they want to promote cinema and entertainment. That I think is the biggest challenge. The recent amendments that have been introduced on transfer of copyrights is also another challenge. According to this amendment, service tax would be levied on transfer of copyrights. This already comes under the purview of state level VAT laws. Now, the central government is saying that state governments will levy VAT and service tax on the same transaction. However, if the GST gets implemented, we would be able to work on a much more uniform structure. That, I think is the biggest change that this industry should foresee.

B&E: Do you think global companies would be setting base in India?
NS: That would be happening but the size and scale of the Indian movie exhibition industry is too small for global giants right now.

B&E: Does this business have potential to give you a Fortune 500 status?
NS: It definitely has the potential, but the size and scale to reach a Fortune 500 status will take a lot of time. From that perspective, India and exhibition alone would not make a Fortune 500 recipe. It is a very capital intensive business. 


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Thursday, August 30, 2012

Finally, you may forget about it!

After 32 years, the Centre reiterates its irrevocable right over enemies

This is as unfathomable and confounding as it gets, even by Indian standards of justice. Recently the Centre passed the long awaited (32 years long to be precise!) “enemy property bill”, which is expected to close all possible hue and cry over the issue. For the uninitiated, “enemy property” means the property left by those who left for Pakistan after partition. After the 1965 Indo-Pak war, both the countries promulgated the Enemy Property Act in 1968 and seized properties in the forms of lands, shares, bonds etc. as a matter of right. Pakistan seized assets worth `109 crore of Indians who left Pakistan and India seized assets worth `70.99 crore of those who migrated to Pakistan. Since then, Indian relatives of those who migrated have been claiming the land their relatives left behind.

The debate took an interesting turn when President Pratibha Patil passed an ordinance on July 2, 2010 against Amir Mohamed Khan, Raja of Mehmoodabad, preventing him from possessing properties worth `30,000 crore, which his parents had left when they migrated to Pakistan. After 32 years of courtroom drama, the SC gave him the right of possession. Pratibha Patil’s ordinance came all of sudden when his success led to agitation among several others to claim 20,000 other similar properties. The Centre had been quiet for fear of alienating the Muslim vote-bank but after the growing agitation, the Centre was forced to pass the bill to extend the President’s ordinance with a strict clause – once a property is labelled as “enemy property,” it cannot be claimed by relatives. Even the court cannot transfer ownership rights of such property.


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Wednesday, August 29, 2012

What God made, and men ravished

Srinagar is where the shikaras and houseboats wait for the tourists to return...

The city of Srinagar gets it name from two Sanskrit words, Sri and Nagar, meaning the city of abundance and wealth. Situated on the banks of river Jhelum, the valley’s perhaps greatest wealth is its natural beauty. The shikaras ply the waters of the Jhelum, which criss-crosses through the city, and eventually flows into the Wular Lake – the largest fresh-water lake in Asia. Several lakes add to the scenic beauty of Srinagar, with the Dal Lake perhaps being the most well known of them all. Once a favourite with the elite section of the Mughal society, Srinagar’s Mughal gardens still serve as reminders of their long-ago reign. Nine old bridges across the Jhelum connect the two parts of the city. At every turn poetic picture postcards come alive...

The city of Srinagar has a history that goes back to about 2000 years ago. The city was founded in the 3rd century BC and remained peaceful when it was ruled by the Mauryas and then by King Asoka, who brought Buddhism in the city until it fell to the brutal Huns in the 6th century. The Hindu and the Buddhist rule of Srinagar lasted until the 14th century, when the city came under the control of the Mughals and Akbar established his rule in Srinagar.

After the disintegration of the Mughal empire, the city came under the influence of Sikhs and remained one of the princely states during the British colonisation. Gulab Singh was appointed the independent ruler until it became a part of independent India in 1947. Political unrest in the 80s and 90s drove the tourists away and left the houseboats empty, but the situation has improved in the last few years. It continues to be a high security zone with army scattered everywhere in the city. There are bunkers and checkpoints after every 200 meters (or less), and you can be stopped and frisked (or even roughed up) at the slightest suspicion. The locals seem to have accepted this as a way of everyday life. Tourists are advised to check the latest updates before setting forth for Srinagar.

Those who do reach the city, will find the lakes and gardens waiting to beguile them into a world unlike any other. A pyramidal hill, a thousand feet in height, stands by the side of the Dal Lake, supporting the ancient stone temple of Shankaracharya, the oldest shrine in Kashmir. The waters of the Dal reflect the willow and poplar trees lining its edges, as vividly-painted shikaras carry tourists from all parts of the world. Shikaras are a novel way of seeing Srinagar, and are perhaps the reason why Srinagar has earned the title of the Venice of the East. They ferry rides to and fro the banks of the lakes and the houseboats and floating gardens. The magnificent Mughal gardens compliment the startling beauty of the Dal Lake. However, out of about 500 gardens laid down by the Mughals in the 16th and 17th century, only a handful are still there today.


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