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Alibaba pre-IPO
coverage

IS FLIPKART OVERVALUED
AT $7 BILLION?
In conversation with

Joel Pannikot
Head, Asia-Pacific Strategy
(Education), Bloomberg

EMPOWERING
POWER SECTOR

BRICS BANK - BUILDING A BANK

BRICK BY BRICS

FIN-Q-NITIE

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Message from the Convenor

Heartiest congratulations to all of you. With the release of yet another
edition of the magazine, we are getting bigger and better and it gives
me immense pleasure and satisfaction to be the convenor of Street.
In-FIN-NITIE has given me the opportunity to work with the students
and advance forth with the common goal of learning and practising
finance.
As always, In-FIN-NITIE brings you something new this time around
too. After a series of issues with identified theme and articles related
to that theme, the current issue just gave the students to write about
finance. Themes and matching articles aside, this issue has a plethora
of written words by students about whatever caught their eye in the
field of finance.
I applaud the effort of Street for their unstinting efforts. I hope they
strive to take the magazine to greater heights, and also hope that issue
will entertain you and keep you engaged about the recent happening is
the world of finance. We look forward for your comments and wish to
bring out more interesting issues in the future
Dr. M Venkateswarlu
Asst. Professor of Finance
NITIE
Patron
Prof. Ms. Karuna Jain
Director, NITIE
Convenor
Prof. M Venkateswarlu
Editorial Board
Anupam Dhamija
Apoorva Garg
Meera Mohan
Nitin Sengar
Kumar Utkarsh
Pinaki Ghosh
Rohit Chopra
Sourav Bhattacharya
Design Team
Pinaki Ghosh
Kumar Utkarsh

Editors Note
Today is cruel. Tomorrow is crueller. And the day after tomorrow is
beautiful. Jack Ma on the e-commerce industry that is shaping the
modern world of both B2B and B2C businesses. The world is not only
getting addicted to transact sitting comfortably in their homes but also
reaping the benefits of the ongoing competition in ecommerce industry
through cheaper price and faster delivery.This edition of In-Fin-Nitie
brings forward the story of Alibaba and Flipkart and talks about the present
scenario in Ecommerce Industry. In our special column, we bring to you in
this edition, a candid interview with Joel Pannikot, Head of Asia-Pacific
Strategy (Education) Bloomberg.
In our quest to bring to our readers all the latest happenings in and around
the financial world, we dive in to other key talking points like establishment
of BRICS bank which is in an indicator of shift in world power towards
Asian countries, fate of new banking licences in India, analysis of power
sector in India and many more.
We are very fortunate to get an overwhelming response from the students
of top B-schools in the country in terms of wonderful articles which
they wrote taking time out of their busy schedule. We extend our sincere
gratitude to all those authors who made this magazine a success. In our
endeavour towards continuous improvement we invite feedback and
criticism at
street.nitie@gmail.com .

CONTENT
In-Fin-Nitie

VOLUME 5 ISSUE 2

Road Ahead For New Banking Licences

Is BRICS Bank the beginning of an alternative ?

Alibaba Pre- IPO Coverage

Street Wall

12

Interview with Joel Pannikot

14

Is Flipkart overvalued at $7 Billion ?

16

Empowering the Power Sector

23

Fin-Q-Nitie

27

ROAD AHEAD FOR NEW BANKING LICENCES

By Nishant Poojary & Divya Roongta (SIMSREE)
The journey of Indian Banking began in the midseventies of the eighteenth century with the setting up
of General Bank of India and Hindustan Bank. The
sector has evolved manifold since then. It has been
servicing the credit and banking needs of the Indian
economy under the regulatory eyes of the Reserve
Bank of India. The much needed boost provided by the
nationalisation of 14 major banks in 1969 and 6 banks
in 1980 has made the sector an integral part for serving
the financial needs of the nation. In post liberalisation
phase, the performance and strength of the sector has
improved significantly. Reserve Bank of India took
major steps towards financial inclusion by lowering
the barriers to entry and issuing licences to new banks
in the private sector. This has helped in making the
sector competitive and usher in the era of innovative
products. The financial depth i.e. percentage of credit
to GDP, has increased from mere 5.8% in 1951 to a
modest 70% by 2013. The population per bank branch
has come down from 64,000 in 1969 to 12,300 in
2012. The sector has become highly organized under
the regulatory eyes of the Reserve Bank of India.
India currently has 26 public sector banks, 22 private
sector banks (including IDFC and Bandhan) and 56
regional rural banks serving the nation. Apart from
1.

banks, there are 12,225 registered NBFCs of which

254 are deposit taking NBFCs and 418 systemically
important non deposit taking NBFCs serving the
credit needs of the economy. India also has 8.45
lakh merchant Point of Sale (POS) terminals which
includes ATMs. However, as envisaged by the 12th
Five Year Plan, banking business needs to significantly
expand to Rs.288 trillion by 2020 to support the
macroeconomic growth of 8%. The expansion of the
established banking business which is dominated by
the public sector with 73% of the total asset at its
disposal requires the additional capital support. An
important way to achieve this capital requirement
along with managing the fiscal consolidation is to
widely distribute the ownership stake in banking.

Need for New Licences

With the vision to increase the geographical
coverage of the banking system in size and
sophistication, the idea of issuing new banking
licences took its inception in the Union Finance
Ministers Budget speech for the year 2010-11.
Banking sector had opened twice post 1991 reform
period for the issue of new bank licences. The purpose
of issuing new bank licences in current times is to
focus on the goal of financial inclusion and expand

the reach of the sector to the maximum percentage of

the population. Apparently this goal seems to be very
distant considering the fact that only 35% of the Indian
population (32% rural and 45% urban) have a formal
bank account, which is even below the average of
41% in other developing countries. A very significant
percentage
of
650,000
Indian
villages do not even
have a single bank
branch. Also, 90% of
small business which
play an important
role in the developing
economy is not
linked with formal
institutions.
The
savings to GDP ratio
also fell from 36.8%
in 2007-08 to 30.8%
in 2011-12. 89% of
the urban areas have
25 or more payment access points per 10,000 of the
population whereas for rural areas it is only 3%.
With these challenges facing the sector and the
country, RBI released the guidelines for Licensing
of New Banks in the Private Sector on February 22,
2013.
Important Guidelines for New Licensees
Entities/groups in the private sector that are
owned and controlled by residents and entities in
public sector shall be eligible to promote a bank
through a wholly-owned Non Operative Financial
Holding Company (NOHFC)
Existing NBFC promoters will be eligible to apply
provided they comply with the RBI guidelines
Entities/groups should have a past record of sound
credentials and integrity, be financially sound with
a successful track record of 10 years
Non Resident shareholding
will be permitted upto
49% and no Non Resident
shareholder can hold more
than 5% of the paid up
voting equity capital of the
bank for upto 5 years from
the date of commencement
of business of the bank
Applicants are expected
to propose a viable and realistic business plan of
achieving the financial inclusion target
The minimum paid-up capital for setting up a
bank has been pegged at Rs500 crores
2

On receipt of licence, promoter has to start

operations within one year and list the company
within three years of commencement of the
business
Atleast 25% of branches of the new banks should
be in unbanked rural centres
New Banks need to maintain 23% statutory
liquidity ratio or SLR
and 4% Cash Reserve
Ratio or CRR right
from the day one of
starting the bank
RBI also provided
defined criteria for the
corporate
structure
which it hadnt done in
the earlier cases of new
licences.The guideline
issued on 22nd Feb,
2013 by RBI was quite
different from the ones
issued in 1990s and
2000s. The earlier guidelines had no mention of
setting up NOHFC or any such corporate entity to
run the bank. The guidelines issued in 1991 required
minimum paid up capital of Rs.100 crores which was
increased to Rs.200 crores in 2001. Also, business
plan as mentioned in the current guidelines wasnt the
case in earlier guidelines.

Aspirants in the Race

When the new banking licences were first issued

in the early 90s it was met with much fanfare with
154 applications out of which only 10 made the cut.
New private banks included ICICI, Axis (then UTI),
HDFC, Development Credit Bank andIndusInd Bank.
A decade later when RBI again made the call for
applications, it received 100 nominations of which
only two were successful in converting the final nod
of RBI, Kotak Mahindra and Yes Bank. However, this
time the response was subdued
with only 26 applications. The
list included three government
organizations
India
Post,
Tourism Finance Corporation
of India and LIC Housing
Finance. The brands that
entered the race were Aditya
Birla Nuvo, L & T Finance
Holdings, TATA Sons (backed
out later), Bajaj Finserv and Shriram Capital. IDFC,
Edelweiss Financial, Bandhan Financial Services,
Muthoot Finance, Reliance Capital, J M Financials
and Religare Enterprises were the NBFCs that had

applied for the licences. The rest of the entities in the

fray were Value Industries from Videocon (backed
out later), Magma Fincorp, SREI Infrastructure,
Suryamani Financing Company from Kolkata, IFCI,
Indiabulls Housing Finance, INMACS Management
Services, Smart Global Ventures, India Infoline from
Mumbai, Janalakshmi Financial from Bangalore and
UAE Exchange & Financial Services from Kochi.
The list was filled with some strong financial players
and proven performers.
However, the only two entities that made the cut this
time were Bandhan Financial Services and IDFC.
Its difficult to predict their success robabilities
but if past recordsis anything to be related to, then
the current
strongest
private banks
in the sector
ICICI, AXIS,
and HDFC
were all once
the public
sector entities.
However, even
before
the
announcement was made of the two new entrants, the
strict RBI norms had led two players backing outand
some not entering the race at all. The strong business
powerhouse Mahindras didnt apply for the licence
even after having Mahindra Finance as a strong NBFC
under its umbrella. The companys spokesperson in
an interview said that under the new rules it would
have been forced to convert each of its 670 branches
into a bank branch in 18 months and also comply with
the rule of 25% bank branches in rural areas.Tatas
pulled out sincecompletion of the new application
formalities required Tatas to obtain approvals from
over 1000 group companies owned by them. Also,
Tatas were reluctant to rejig the global operations
which was required by the regulatory demands.
Another hurdle in Tatas way was the requirement to
move all the financial services they had to the holding
company which affected the flexibility currently
enjoyed by them in running the business. It was quite
clear from these big players stand that it is not easy to
operate a bank in the Indian financial sector.
When RBI was contemplating whether to allow the
corporate houses in the banking sector, Nobel Laureate
Joseph Stiglitz in an interview cautioned the regulator
against the idea quoting that allowing corporate to
take their own money was one thing, while allowing
them to take depositors money was entirely another.
It was maybe the rationale behind RBIs decision
3

too when it only gave the licenses to the NBFCs not

related to any other corporate functions.
Road Ahead for Bandhan and IDFC
Maintaining SLR and CRR requirements from day one
will pose major functional challenges to Bandhan and
IDFC. The requirement of 25% rural bank branches is
a tricky situation as brick and mortar bank branches
take years to break even and rural population needs
to be educated about the advantages of the formal
banking system. The priority sector lending criteria
too needs to be revisited by the RBI which mentions
18%reserved for agriculture of the total 40%. This
made sense when India was predominantly an agrarian
economy with 53% contribution to GDP in 1950-51.
Modern day
I n d i a n
economy
is a service
driven with
agriculture
contributing
mere 14%
to
GDP.
Another
i s s u e
troubling the sector is the rising NPAs which is
threatening the sectors stability. New Banks have
to overcome all this challenges and at the same time
come up with some revolutionary ideas to boost up
the slowing sector just like the liberalisation of 90s.
Currently not a single Indian bank ranks in the top 20
worldwide in terms of market capitalization and with
increasing competition, surely we are headed in the
right direction.
<<<<

Final Word

The process of issuing new bank licences will

definitely fall parallel with a simultaneous goal of
financial inclusion. It would be more strengthened by
the mandate of 25% rural coverage (provided the rural
population is educated about the benefits) to make
the banking sector more reachable and will also help
in channelizing the funds of the population through
a formal medium. When new players will enter the
sector, the apprehension to stay relevant will push the
existing players and make them more competitive,
the result of which may be a positive outbreak or
innovation, similar to the facility of ATMs which
happened in the previous issuance of licences.The
journey ahead for the new licensees will be tough but
if expectations are met then the banking sector can
hope for a revolutionary change and another glorious
chapter in its history.

uly 14th 2014, a day after the FIFA world cup

contest concluded, another landmark decision
emerged from the land of Brazil. It was the
formal announcement of formation of the New
Development Bank, previously referred to as the
BRICS Development Bank. BRICS, an acronym
which stands for Brazil, Russia, India, China and
South Africa, is a congregation of the five major
emerging economies of the world. The Bank
was setup to foster financial and developmental
cooperation between the 5 member countries.
Incubation of the Idea
BRIC (which is now BRICS with the addition of South
Africa) held its first summit in 16th June, 2009. The
summit mainly focused on the global economic issues
and reforms. In 2013, the member nations voiced the
need for a global financial institution intending to vie
with the western dominated International Monetary
Fund (IMF) and World Bank. It was felt that the needs
and requirements of these emerging nations were
very different from the already developed nations and
the existing IMF and World Bank were not catering
to their needs. BRICS countries combined voting
power in World Bank is at 13.09% which is lower
than that of USs which is at 15.01%. Also, the loans
from IMF come with conditional austerity measures
which might not be feasible for a few countries to

accept. This opinion formally received approval

from many corners of the world and the formal
announcement of its inception happened on 14th July,
2014.Other agreements that happened during the 6th
4

Mohit Khaitan & Anirudh Mangipudi

IIM Trichy

IS BRICS BANK THE BEGINNING OF AN ALTERNATIVE?

BRICS summit were the MoU on Cooperation among

BRICS Export Credit and Guarantees Agencies and
the Cooperation Agreement on Innovation within
the BRICS Interbank Cooperation, which will offer
new channels of support for trade and financial ties
between the five countries.

Design
The New Development Bank which is primarily
instituted with the objective of lending for infrastructure
projects, started with an initial capital of $50 billion
which can rise to $100 billion divided equally among
the five countries. To avoid one country having
greater influence over the bank, it will be based out of
Shanghai, and India will preside over its operations
for the first 6 years followed by five-year terms for
Brazil and subsequently for Russia and the first board
chair will be from Brazil. An African Regional Centre
will also be set up in South Africa. Also a $100 billion
currency reserve pool will be setup to help countries
counter short-term liquidity pressures. China will
make the largest contribution - $41 billion- in this
pool followed by India, Brazil, Russia - $18 billion
each- and South Africa contributing the remaining $5
billion.There were also few points of contention like
Chinas argument that of giving greater control to the
members for greater contribution of capital. This point
was severely refuted by India and Brazil. Only after

intense negotiations, that delayed this announcement dollar reserves for the benefit of India and the other
for some years, did China agree for an equal share of member countries is indeed a great positive outcome.
control over the bank.
However, this should not happen at the expense of
exposing Indias sensitive sectors to Chinese players.
Consequences for India
For instance, Anil Ambanis
India, a country which is
Reliance
Communications
currently inclined on infusing
securing
a
large
loan
advance from
massive financial inputs into
a Chinese Bank could have some
its infrastructure development,
strings attached, given that in the
looks upon BRICS bank as the
past, Indian intelligence agencies
bridging factor. IMF and the
have given warnings about the entry
World Bank, which were the
of Chinese players into the critical
conventional institutions that
Indian digital communications
India was always banking upon
sector.
for such funding, have been
accused of being largely partial
to the western world and of
being oblivious to the needs of
the developing nations. Such
a move (establishing the New
Development Bank) can be
viewed by India as an alternative
source of investment where it
can secure funding on the basis
of need, along with the assurance of the Contingency
Reserve Arrangement that in time of crisis can bail
each other out.On a different note having China ,the
2nd largest economy in the world, channelize its vast
5

Roadblocks
The New Development Bank,
whose inception was described as
an unprecedented development in
the developing countries, is not
devoid of its share of problems.
Firstly, the bank which is primarily
instituted to finance infrastructure
projects in the BRICS nations is
being pessimistically viewed as India and Brazils
politically palatable way to tap Chinese cash reserves.
Also, the tussle between India and China over the
location of headquarters, and the one amongst India

and Brazil about the presidency, almost jeopardized

the deal. Finally, an agreement was reached with an
Indian presidency, a Brazilian to chair the board and a
Russian board of governors, all located in Shanghai.
Secondly, the huge differences in the sizes of the
economies also can cause a roadblock like the way
Chinas economy is 28 times the size of South Africas
economy. This asymmetric proportions of economies
between China and the other member nations can
turn BRICS Bank into a Chinese-centric multilateral
organization. The last difference being that member
countries have different deep-rooted authoritarian
regimes. Lively democracies like India, South Africa
and Brazil need to co-exist with
the communist ideating China and
Russia. It took the Bretton Woods
institutions decades to sort out these
nuances and place a system in place
which still has its own inherent
deficiencies. So it remains to be seen
a question of heterogeneity finding
homogeneity in terms of policy
making and whose success can be
measured only with time.
Expert Views
Renowned Economist and Nobel
Laurite Joseph Stiglitz opines that
the BRICS bank is formed out of
a genuine need that the developing
countries are experiencing and that
is not being addressed by the current
global financial system. Globally
the demand for more investment
in the entire developing world is
almost $2 trillion per year and the
IMF and World Bank are not in a
position to invest this quantum. So it is all the more
relevant for BRICS countries to increase the flow of
money through this bank to meet their infrastructural
demands. It reflects a fundamental change in the
global economic scenario and also to some extent
the political power base these emerging markets can
wield on the world. This bank reflects the democratic
deficiency that exists in the world today in terms of
global financial governance. It is also notable that
BRICS countries today are richer than the western
countries back in 1945 when IMF and World Bank
were founded. The bank can be designed to address
the changing demands of the current world with
new financial systems and instruments that were not
available when the Bretton Woods institutions were
formed. Hopefully, this new institution will force its
older counterparts to reform and bring more resources
6

into these developing countries which are more

consistent with their importance and needs.China has
reserves in excess of $4 trillion of foreign reserves
over three-fourths of the combined forex reserves
of BRICS economies - which it aims to put into
something better than investing in just US treasury
bills. Stiglitz goes on to say that experts in China
consider the real value of US treasury bills to be
declining. Contribution to the economic well-being of
developing nations could be a much more worthwhile
investment both geo-politically and financially for
China.Brazil, another member country, has already
setup a similar bank (BNDS bank) which is a bigger
development bank than the
World Bank. Brazil has
demonstrated how a single
country can setup and create
a development bank of such
size.The mere setting up of
this development bank after
years of discussions and
negotiations gives us a vibe
that the emerging markets,
in spite of all the differences,
can work together in a way
that is more effective than
the existing global financial
framework.
An underlying consequence
of the New Development
Bank would be to counter
the dominance of Western
lending institutions and
also the volatility of dollar.
With a combined GDP of
around 20% of global trade
and 21% of global volume, the five member countries
indeed represent one of the largest markets in the
world. The growing contribution of BRICS to the
world economy can be well understood from the fact
that according to the World Bank, BRICS is driving
half of the worlds economic growth. Since the BRICS
economies started to compete with the already wellestablished western economies, a financial institution
catering to the needs and requirements of the
emerging markets became imperative. The BRICS
bank can act as a global alternative to the western
lending institutions and promote more development
amongst the developing nations. With Indonesia and
Turkey also being mentioned as candidates for full
membership of the forum, the future of the bank, as a
preferable alternative to IMF and the World Bank for
financial assistance, looks promising.

NITIE Students Get Leg Up on Financial Services Internships, Jobs.

Institute among First to Offer New, Free Bloomberg Assessment Test.
National Institute of Industrial Engineering is among the first universities in India selected to
provide students with the opportunity to take a new aptitude test developed by the Bloomberg
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The Bloomberg Assessment Test (BAT) enables students to showcase their abilities in areas
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The free, three-hour exam is open to students, no matter what their major, if they are looking
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The exam results are available to the student and included in the BAT Talent Search database,
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The test results provide considerably more insights into a students skills and abilities than
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The recruiter then invites the student, who remains anonymous, to connect with the company
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More than 150 NITIE students have taken the BAT. The test is usually offered on campus or
at a local Bloomberg LP office. Students can register online at www.takethebat.com or contact
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The BAT was developed by the Bloomberg Institute, a subsidiary of Bloomberg LP, in
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####

PRE IPO
COVeRAGE
By Sunil Ramavarapu & Abhiram TKVR - NMIMS

What is Alibaba?

Forget about your competitors and just focus

on your customers

Jack Ma

Flipkart recently had generated a lot of buzz in the VC circles, and the analysts in
India had different opinions about the valuation of Flipkart after its recent funding.
The Flipkart is valued between US $ 5-7 billion, which means it is valued more than
combined valuation of the 15 listed retail companies in India. If thats something
to be described as staggering, then what one would refer to if a company if it goes for
an IPO will result in a market capitalization of anything ranging between US $ 180220 billion, comparable to the giants like Oracle, Samsung and IBM. Mind boggling?
Yes, thats Alibaba for you. The Baap of Flipkart in every possible way.
8

Great things always have humble beginnings. Alibaba

is no different to that. It all started in a small apartment
in the suburbs of Hangzhou in Eastern China in the
year 1999 by Jack Ma, a teacher-turned-entrepreneur.
All he started was a B2B portal called Alibaba.com
in the days when the dial-up connections would take
hours together to load pages. Jack Ma still fondly
remembers how he proved to his friends and TV
people that internet existed after they waited for 3
hours to load half a page of his website.
Alibaba Group is now a group of Internet-based
e-commerce businesses which includes B2B online
web portals, online retail and payment services,
shopping search engine and data-centric cloud
computing services. To give an idea of how big these
businesses are, the two portals
In 2012, two of Alibabas portals together handled 1.1
trillion yuan (approx. US $170 billion) in sales, more
9

than competitors eBay and Amazon.com combined.

The company is on its way to become the first online
retailer to handle $1 trillion a year in transactions.
Alibaba Consumer-to-Consumer portal (C2C) Taobao
features a billion products and is one of the top 20
most visited websites in the world. Alipay, an online
payment escrow service, accounts for roughly half of
all online payment transactions within China.

Alibaba Business Model

The interactions between buyers and sellers create

network effects. The more merchants attract more
consumers, and more consumers attract more
merchants. In addition, Alibabas marketplaces are
interconnected in a way that many buyers and sellers
on one marketplace also participate in the activities on
other marketplaces, thereby creating a second-order
network effect that further strengthens its ecosystem.

The Buyers are:

Chinese
consumers who
buy mostly
on Taobao
Marketplace,
Tmall and
Juhuasuan
While browsing
or
searching
on the Taobao
Marketplace,
consumers
see
product listings
from both Taobao
Marketplace and
Tmall and would
land up buying
the products from
those sites
Global consumers who buy on AliExpress
Global wholesalers who buy on Alibaba.com
The Retail sellers are:
Small sellers in China who mostly sell on Taobao
Marketplace and AliExpress
Most of the Chinese brands sell on Taobao
Marketplace, Tmall, Juhuasuan and AliExpress
and global brands sell on Tmall Global
Sellers source products on 1688.com
The Wholesale sellers are:
Chinese wholesalers and manufacturers supply
retail merchants in China on 1688.com and global
wholesale buyers on Alibaba.com
Chinese wholesalers and manufacturers supply
directly to global consumers on AliExpress
G l o b a l
wholesalers and
manufacturers
supply
global
wholesale buyers
on Alibaba.com.

Alibaba Portfolio
and Eco System
The portfolio of
Alibaba
is
so
complex and diverse
that it is difficult to
find a comparable
company. It is a
mix of marketplace,
search
engine,
10

software Company,
bank,
mobile
services company,
e-learning,
microblogging,
video streaming
and much more.

Alibaba
Financials
Based on the
filings of Alibaba
in Form-A1 for
IPO, the financial
projections were
made
by
the
analysts up to
2020. The Figure
3 gives the Alibaba
Financials for the years ending in March during 201320
The revenues are on an increasing trend with a
CAGR of 29%. China Commerce will remain the
largest contributor to the revenues. The company has
remained on a positive operating profit in the period
of the forecast, ending with US $16 billion. The Net
income is increasing in the forecast period US $13.5
billion. The Alibaba should be compared with the likes
of Amazon and e-Bay to understand its true potential.
The revenues of Amazon are way higher than that of
e-Bay and Alibaba. The revenue of Alibaba is less
than that of Amazon and e-Bay because of its different
business model. The revenue generation from
merchants through advertisements and transactions.
However, Alibaba is more profitable than Amazon
and e-Bay. The
reason
being
that the Alibaba
business
model
makes it doesnt
take the ownership
of inventory, stock
in warehouse and
fulfillment of the
orders.
Hence,
Alibaba handles
transactions
two and a half
times
more
than
Amazon.
Alibaba also has
an advantage of
having a loyal and

in 2005. In fact, this investment gives more returns

to Yahoo than its core business shows the potential of
Alibaba was planning for an IPO since last year. Alibaba.
Initially, it wanted to list the company in the Hong But when Alibaba goes for an IPO, Yahoo will be
Kong Stock Exchange. However, the management diluting its stake in Alibaba by selling almost 50% of
had to abandon its plan due to the share structure. its current share and holding the rest. Initially, it was
HKSE restricts the dual-class share structures also planned to dilute the Yahoo stake by more than
which Alibaba wanted to float. The dual class share 50% but was again changed after the discussions with
structures gives controlling share-holders to possess Yahoo.
disproportionate voting power. Securities and Futures
Commission also rejected Alibabas demand that its Alibaba taking preventive measures to
partners will be able to nominate majority of the avoid IPO flop?
companys board. Alibaba requested the authorities
an exception because of its different business model. Alibaba management is already taking measures so
Though there was a provision, HKSE rejected that the much talked about IPO, supposedly the biggest
A l i b a b a s
in US history
request and
when it lists on
lost US $
NYSE, don not
25 million
end up getting
revenue
a
response
opportunity.
that Facebook
The main
has got two
reason for
years ago. The
HKSE
to
valuations
of
reject
is
the
company
because of
surged
from
the future
$62.5
billion
requests
about a year ago
by
many
after earnings
Chinese
nearly tripled,
State owned
with a listing
enterprises
discount seen as
to bend the
a way to avoid
rules
for
the
plunge
them as well.
Facebook experienced. It is also logical to provide
Alibaba then decided to list the company in NYSE as some discount to the investors when Alibaba is raising
dual structures are not prohibited in US exchanges. so much of money. The analysts hope that the IPO
And hence, all of a sudden Alibaba became the talk would go smoothly but the time would tell if it really
of Wall Street. The recent filing of Form F1 has goes as planned.
given lot of information for the analysts to come up
with their analysis and opinions about Alibaba IPO. Questions still to be answered?
Alibaba is expected to raise a capital in the range of
US $ 16-20 billion dollars through its IPO, making Even though Alibabas IPO is the much talked about
it a bigger than Facebook IPO. The expected market topic in the Wall Street, there are few things that are
capitalization is ranging between US $ 180-220 still unanswered.
billion dollars, comparable to the companies like Will Alibaba shift its focus from China centered and
take head on with Amazon and e-Bay?
Samsung, Oracle and IBM etc.
Will Alibaba be able to shift its focus from China
Who are the Investors in Alibaba?
given that the competition has increased in the
Chinese markets in the past quarters?
The principal investors in Alibaba are shown in the
Will Alibaba IPO be the biggest successful IPO ever
Figure 7. Soft Bank Corp has a major share of the pie
in the US history?
with 34.4% and the founder with 8.9%. Yahoo has
got 22.6% of the share by investing US $1 billion
huge customer base in China.

11

BAT is something different it is not a certification,

it is more an option of introspect whether your skills
matchup to the demands of the industry and how your
skills are as compared to your peer group globally. So,
it just tells you where you are strong and where you
lack, based on that you can take a call which areas you
need to improve and which area you can showcase.

Joel Pannikot

Head, Asia-Pacific Strategy

(Education)
Bloomberg
2: What is the basic skill sets that an MBA student
should possess before entering the financial
Joel Pannikot manages the education vertical for industry?
Bloomberg L.P., the worlds largest decision support
platform for governments and corporations. He Answer: There is definitely value to theoretical
operates across the Asia Pacific region, to support grounding and understanding the concepts.
leading domestic and global educational institutions But the industry primarily looks for three attributes
in benefiting from their relationship with Bloomberg. One The ability to learn from a very evolving market
Through his consultation, these institutions enhance and industry scenario
their infrastructure for curriculum, research, library, Two The ability to learn from your mistakes very
quickly
brand building and placement activities.
Three Asking the right questions and questioning
Before Bloomberg, Joel was an entrepreneur, training
the existing assumptions is very important because
corporations across India in performance, sales
nothing about the markets today is identical as
and communication. He collaborated with business
compared to how it was five years ago.
schools for workshops on corporate life skills and
financial markets as well as conducted pre-placement
3: There are multiple certifications (like CFA,
clinics.
FRM, BAT etc..) available to students in various
Since 2001, his career has spanned education, pharma domains of finance. How does the Industry
business development and international fixed income view these certifications especially in the Indian
derivatives trading
scenario?

About Joel

1: You possess a rich experience in financial

education sector. Can you please enlighten us with
the views about the sector considering the current
market scenario?
Answer: If you are referring specifically to business
management education with in the financial sector,
this govt. definitely promises a lot for business
management. The current focus of the government is
on the skill development directly in line with more
employability. This is where the focus of finance
education seems to shift in the near future i.e. towards
more employability, more industry oriented, and
the ability to directly translating the skills learnt in
classroom in the industry and market context.
14

Answer: There is definitely some value to the

certifications but it depends on the pedagogy of the
kind of organization offering it. Obviously it carries
credibility because with that also comes the guarantee
that the particular certification has been offered
because your achieved some kind of competence. And
different people for different industries have various
perceptions about what is important and what is not.
So before doing any certifications, students need
to figure out their career path and decide on which
certification helps them in elevating their credentials
in that area. Blindly rushing for certifications just
because they need more CV points doesnt help. It is
more important where you want to take your career
before collecting these certifications.

4:Can you give a brief introduction about yourself

and your career path till now?
Answer: I started my career in MBA entrance
education. Then I spent my time in event management
and music marketing and I spent more than three
years as fixed income derivatives trader. After that I
ran my corporate training company for a while and
then I got into Bloomberg. And I have been working
with Bloomberg for the past four and a half years and
now am looking after the asia pacific strategy of our
education.

at same time dovetailing it with the needs of the

industry.
6: Can you please throw more insights into the
Bloombergs business
Answer: Our business primarily revolves around
Bloomberg professional service. This is available in
around three lakh fifteen thousand desks around the
world. These desks are available in conventional
banking sectors, investment banks, investment
management sectors like the hedge funds, mutual
funds, pension funds etc..It is being used by some
governments around the world and within the
educational industry; nearly 800 universities around
the world use this terminal to train their students for
various roles in the industry. Corporate treasury is
very much in every industry around the world and
thats where we are useful.

7: Where do you see yourself ten years down the

5:You once said that you aspire to bring a line?
paradigm shift in the contemporary education
Answer: I see myself continuing with the education
through technology for bringing the real world
sector. Education has always been my first love and
to a classroom. Can you please elaborate on this
that is why I was able to do many things in the past three
point?
years. And we were consistently able to geometrically
Answer: My future plans are very straight forward. increase our presence in India and global in terms of
They are driven by the needs of the industry. For market share. I would like to take this forward. Also,
the new recruit to become productive in their role ten years down the line I see myself doing things at
especially for business management education a more macro level, hopefully able to impact policies
the created objective is to prepare business ready and governmental thought processes towards more
professionals. In that context my job at Bloomberg streamlined education. The role of the teacher needs
is to take the tools that industry uses and translate it to be redefined i.e. not someone who teaches but
to the educational context so that as students prepare someone who finds the interest and sparks it further.
the theoretical concepts, the get exposed to the actual
workflows of the industry.
8: Two years in the MBA career of a student,
what does an interviewer look for apart from the
So whether you wish to become an investment academic activities?
banker or an equity researcher etc.. You actually
have to do what is expected of you. There is nothing Answer: Anything and Everything. Having been a
more attractive to a recruiter than the numbers of recruiter for a decade, one thing I look into a person
achievements in your cv in the role that he is looking is how well rounded the person is. Does the person
to recruit you for. If that can be the focus of your care about anything? Is the person passionate about
learning then that can do wonders and this can be anything? Whether it is from a professional job related
done in a productive environment or with the help of context or something in the personal life. Some might
the educational institutions that is the paradigm shift I be very interested in food or travelling and how much
am speaking about. But I still respect the importance do they explore. Do they really go out of the box and
of learning the ground rules but going beyond that try something out of the ordinary.
and actually learning the practices that you will work Also, one thing I have a problem is the conventional
with in the industry is extremely important. That is definition of the MBA student. It is not the last stage
the focus area of Bloomberg and it is working with of the student life. It is the first stage of your working
educational industry by saving the professors timings life. It is a preparatory program to face the real world.
while making the classroom environment richer and One should be better prepared to face the industry.
15

Investors are finding a great

team at Flipkart, which has
proved that they can execute.
They are also looking at the
market size. The market size
is expected to be really big
and internet is right now at
the inflexion point and that is
attracting a lot of investors
to Flipkart
Sachin Bansal

"It's crazy but justifiable

considering e-commerce in
India has just hit the tipping
point and companies with
most market share will reap
the biggest returns"
Top executive at one of the
e-commerce companies

Tejesh Thota
IMT, Ghaziabad

n 2007, when Flipkart was founded, online retail sector in India was in its infancy. Internet was not an available
resource for a common man at that time. Even International players like Amazon and ebay didnt enter the Indian market.
At the same time, Flipkart entered the market and played a key role in the growth of online retail market in India, as India
has become one of the largest online markets in the world. Flipkart also adapted to the Indian conditions by introducing
cash on delivery, knowing there is very less usage of credit cards and online payments in India at that time.
Since 2007, Online retail market in India had a compounded growth rate of 56% every year and Flipkart outperformed this
rate every year. As of 2014,In India, online retail is just 0.5% of overall retail and 7.9% of overall organized retail sector.
This also indicates that online retail has much growth potential in India.
In recent years, mobile commerce is playing an important role in online retail industry in addition to social networks. New
sites are exploding every day and the mobile commerce plays an important role in expanding the market and it overcomes
the internet connectivity issues in towns and villages.

These days, the media

only looks at e-commerce.
However, you must also ask
if gross margins of any such
company are positive or not.
There is hope of survival
for them when their gross
margins are positive. Im not
saying it is sustainable or it
is not sustainable
Kishore Biyani

"There is a company whose

valuation is very ridiculously
high and there are a bunch of
investors there already who
have put in a lot of money"
Kunal Bahl

With all these amazing prospectus of Flipkart and Indian online retailing,

Is the valuation figure attached to Flipkart is justified?

Lets look into the fundamentals of Flipkart that play an important role in its valuation.

They have proven to be

capable to decide between
build vs buyand have the
utmost ability to attract large
investors to the table,
Subrata Mitra, Accel
Partners

16

Flipkart India (FIPL)

posted a net loss of Rs 192
crore for the year ended
March 2013, taking the
total accumulated losses to
Rs 281.73 crore. Its total
revenues for FY13 stood at
Rs 1,180 crore.
Business Standard Report

Revenue Growth

enhance these areas that created them an absolute

competitive advantage. Flipkart with its effective
supply chain management and competitive advantage
is expected to have an operating margin of 10% by
2025, and settle as a mature business firm as that of
Amazon today. To provide the perspective- Online
retail giant Amazon had 5% margin till 2010 and now
it dropped to 1%.

The e-tailing giant is presently in the growth phase and

is making no profits, a common phenomenon observed
in all the startups and young growth companies. As
we know that the company with continued negative
earnings and cashflows doesnt have any value, young
growth companies like Flipkart are expected to make

Re-investment
share and also 20% of its revenues from outside
India (as Flipkarts founders aspire to take the firm
global). Analysts project that the Indian online retail
market will cross $100 bn by 2025. According to the
above estimates, revenues of Flipkart is projected to
be at $50 bn by 2025, which are just 35% lower than
that of Amazons 2013 revenues and 20% below the
Googles revenues in 2013 and 4.6 times greater than
Facebooks 2013 revenues.

Operating margin
revenues in the future. The expected revenue growth
at Flipkart will be the composite effect of factors like
expected growth rate in Indian online retail business
and expected market share of Flipkart in the future. As,
Flipkart is keen
in making its
presence across
the countries, it
is expected that
its revenue is not
only dependent
on just Indian
online
retail
market
but
also the global
market.
At
present Flipkart
has the market
share of nearly
32% in the Indian
online
retail
market and is
assumed to grow
to 40% within 10
years . Therefore
Flipkart will have
40% of Indian
online
market
18

It goes without saying that every company in order

to grow have to reinvest in the business. Growth is
nothing but how much we reinvest (Reinvestment rate) and how well it is invested (Return on Reinvestment).
As the revenues of Flipkart are expected to grow
heavily in the near future, there is a need to reinvest
in the business in proportion to the expected revenue
growth. Till now, Flipkart has done reinvestment both
in terms of technology and acquisitions. Globally,
online retail firms have sales to capital ratio of
2.26, means every rupee reinvested in the business
generates 2.26 rupees as incremental revenues. This
number can be adapted in the case of Flipkart too, due
to its efficient past growth.

Flipkart at present have negative operating margin

of nearly 4.62%. It has invested huge capital(both its
revenues & Capital raised from VCs) in supply chain,
advertising and developing applications and website
to increase its market reach. Online retail is the sector
in which all
the
players
offer products
with similar
discounts for
the same pool
of customers.
The firm can
differentiate
itself
from
others in the
area of delivery
mechanism
and reliability.
This eventually
results
in
the
lower
operating
margins.
Flipkart since
its inception,
has reinvested
huge amounts
of capital to

Cost of Capital

Cost of Capital of Flipkart is presently at 16.86%

considering the risk of the company, present risk free
rate and risk premium. With the new government
in power, the Indian macroeconomic conditions are
expected to be in a better shape atleast by the next
ten years. Thus Flipkart s Cost of capital would be
reduced to 13.77% at its stable growth period due to
reduced risk premium and risk free rate by the time it
evolves as a matured company with low beta.

19

The Valuation

Taking all the above factors and estimations into

consideration, Flipkart is valued through discounted
cashflow valuation and the value of the firm (or
equity, as no debt) obtained is $2.52bn, way below its
$7bn Valuation. In addition to this, Flipkart also has
given stock options to its employees, which further
reduces the value(ESOP were not deducted, due to
unavailability of data) .
Flipkart is overvalued by nearly 1.78 times. One of
the main reasons for overvaluation is investors high
expectation of growth in Online retail sector. In the
same way, they are pricing(relative valuation) Flipkart
by comparing it with Amazon and Alibaba, in terms
of estimating the future growth and market share.

Misjudging the Market Growth

Any sector cannot have high growth throughout its

life span. Similar to the firms, sectors too attain stable
growth after substantial high growth period. Online
retail sector being no exception, is in its stable growth
stage in US at present. This is the reason why investors
are flooding funds to Indian online retail sector in
the recent years rather than funding US online retail
startups. But one should note that Indian online
retail market too will reach its stable growth period.
Investors and founders of e-Commerce Companies
are now banking high on Mobile Commerce. Inspite
of the high mobile phone penetration, growth in
the m-commerce may not be in par because of the
conservative nature of the Indian customers who
prefer to buy goods offline.

Comparison with Alibaba

50% at present and is expected to continue with the

same in future too.

Many analysts compare Flipkart with Alibaba in

terms of both valuation and growth, as they are
market leaders in the ecommerce business. Though
both of them belong to the markets that are growing
at high CAGR, there are many differences between
them in terms of market share and operating margin.
Unlike Flipkart, Alibaba has a its presence in different
e-commerce segments like Business to consumer,
consumer to consumer, mobile market and online
payment segments in china. In all these four segments,
Alibaba is a market leader with huge presence. In
addition to this, Alibaba has big operating margin of
20

The Amazon Story

Amazon was also valued in its initial days at very high

price, but later market prices it correctly, thats for the
dot com bubble for correcting the valuation. After
watching Amazon and Alibabas success, investors
are betting high on Indian market and Flipkart. In both
US and China, those respective companies were able
to gain absolute monopoly till day in terms of market
share. In 1994, Amazon entered with the unique
business model, and it was the first of such kind in
21

Empowering the
power sector
the e commerce business. It is also important to note
that it is one of those dotcom companies survived
the dotcom bubble burst. Thus Amazon has not only
gained high market share but also perfect monopoly
in the online retail business.
Flipkart, though it lead other firms in terms of market
share in India at present, it definitely lacks the
monopoly that Amazon and Alibaba have. Flipkart will
face problem in gaining such a huge market share in
India in future,
mainly due to
new entrants and
strong existing
players
like
Snapdeal
and
Amazon
who
already
have
considerable
market
share
and are going
good in terms
of both revenues
and
strategic
investments. In
2007, Flipkart
was started with
the same idea
and
business
model
of
Amazon
but
made changes
according
to
Indian market.
After few years,
Snapdeal also worked with the similar model and was
successful in gaining the market share. Therefore it is
the adaption to the market that is gaining market share
in India. So, there is lot of chance for firms with deep
pockets like Amazon to snatch away market share
22

from Flipkart. May be, it is the big expectations on

the growth potential that is making Flipkart look big
for investors.

Relative valuation perspective

Although intrinsic valuation determines the value

of the company by considering all the fundamentals
like growth rate, risk in the company and estimated
cash flows every
year, Most of
the investment
banks
and
Investors value
the
company
on the basis
of
relative
valuation, as it is
easy and simple
method to value
the company by
comparing with
other companies
in the sector by
using multiples
like number of
clicks obtained
or
revenues
generated.
The company
on
relative
valuation gets
overvalued
if the sector
itself is overvalued. This comes true in the case of
Indian online retail sector. Being in young growth
sector, with less number of comparable firms,
Flipkarts Valuations were done solely on the market
expectations and belief.

Abhirup Chakraborti
Harshit Kothari
SIIB
Overview

Generation Issue
Till date coal is the largest commercial source of
primary energy. 74% of the coal is bought by the
power sector making it the largest buyer of coal. But
with deteriorating coal mining India has to import
coal from other countries. Apart from buying the
coal at higher prices it is also making us dependent
on other countries for our basic needs. The exporter
country are taking advantage of this situation and
enacting laws so as to increase the prices. This can
be clearly seen from the import from Indonesia and
Australia where due to policy change we ended up
paying higher price. This dismal nature of the mining
industry also discourages the banks to provide loans.
Currently bank finances only 1.25% of the total
credit to the mining industry. The FDI is mining also
paints a very depressing figure. Even with 100% FDI
in mining only 0.52% FDI inflow is directed to the
mining sector.

Diesel and petrol, which are used
in some plants to generate electricity, are also not
providing ample support to the power industry. 206.8
MT exploration was planned in the 11th Five year
plan. Out of this 176.9 MT was achieved. This led to
additional import burden of $20 Bn. After the NELP
which opened up the upstream exploration only $2.5
Bn was the total FDI inflow.

The union budget is out few days back. The new

government is clearly focusing on reviving the
manufacturing sector. The revival of manufacturing
sector requires support from other sectors too, mainly
infrastructure and power sector. With proper support
the manufacturing sector can give the boost to the
sagging GDP.The Indian Power sector has come a
long way from the days of independence. Then only
1500 villages had access to electricity. Now, almost
5.3 lakhs village have access to electricity. Then
the source of power generation was only coal. Now
power can be generated from natural gas, oil, hydro,
nuclear and most importantly non -conventional
sources like wind, solar, agricultural and domestic
waste. Currently India is the fifth largest producer of
wind energy after China, USA, Germany and Spain.
In 2008 India was the 5th top electricity producer in
the world with 830 TWh.

All the above facts only sugar-coats
the bad state that the power sector is entangled in.
Financial crunch, issues in procuring raw materials,
adherence to the complex and strict laws are some of
the bonds that are pulling the sector down. Because of
all the issues in power sector India lost $68 Bn (0.4%
of GDP) in 2012-13. We have been able to meet only
23% of the annual power generation target for 2013- Transmission Issue
2014. The per capita consumption of electricity is After generation the next important process is
917 units which is one of the lowest in the world.
transmission of electricity. This process is also
plagued with problem. As a matter of fact, it is
Issues faced by the Power Sector
because of transmission that we are not able to supply
The issues faced by the power sector are manifold. electricity to each and every household and also throw
We discuss few of the issues faced by the power away the excess electricity. Indias current electricity
generation capacity is 225 GW but total demand
sector.
23

during peak hours is only 135 GW. Our transmission

capability is short by 9% ~12 GW. Because of this
inability to connect different grids in the country we
are not able to transfer the surplus power from one grid
to another. For E.g. Northern-North, Eastern-EasternWestern (National Grid) has a surplus of 2.3%during
peak hours. The Southern grid has 26% deficit during
peak hours. Chattisgarh being a resource rich state
would have generation capacity of 30000 MW by the
end of 12th Five year plan. The states peak demand
is only 3300 MW and transmission capability of mere
7000 MW. This is leading to wastage of power as well
as revenue.

Today lots of transmission projects are
stalled because of inability of the company to acquire
land and clearances from the requisite stakeholders.
Commissioning a transmission project and getting
forest clearances take almost 4-5 years. All these
hassles have discouraged the investors to initiate new
projects.
Hydro power issue
The hydro power sector is not receiving the proper
boost from the Government. As a result the percentage
of hydro power project in comparison to the total
power is decreasing. In 1970 44% of electricity was
hydro power. Now it has reduced to 17.5%. Even of
the total capacity of 88537 MW envisaged in the 12th
Five year plan, only 10897 MW(12%) is planned to
be generated hydro power. Since 2002-03 26 projects
which were cleared by Central Electricity Authority
(CEA) have not been cleared by Environment
ministry. 21 projects are under CEAs scrutiny.
Inaccessible sites, poor infrastructure facilities, land
acquisition problems, environment and forest issues,
submergence of land, resettlement and rehabilitation
policy, law and order, geological surprises leading to
extra cost, inter-state dispute, security restriction in
border areas lack of manpower and lack of finance are
the issues plaguing the Hydro power sector.
Solar Power Issue
India is one of the countries blessed with 300 days
of sunshine. But solar power contributes only 0.8%
of the total production. As per experts India can
make solar power as the backbone of the Indias
power requirement. But die to lack of funds in solar
power, high cost of raw material and lack of proper
guidance and technical knowhow are the main
hurdles for this sector. The Government is trying to
revive this sector with couple of ambitious projects
like SRRA(Solar radiation resource Assessment) and
JNNSM( Jawaharlal Nehru National Solar Mission.).
However as per industry experts some of the clauses
in JNNSM act as a policy and regulatory barriers.
24

The subsidy approval is a cumbersome process and

getting permission for setting up a solar plant from
multiple government agency acts as a deterrent. As
per JNNSM, solar plant should be setup equally in
terms of capacity for PV technology and thermal
technology. Also the domestic content clause of
JNNSM acts as a hindrance to new as well as existing
players in the solar power generation market. The
market should be allowed to choose the technology
and the source of raw material in an efficient and cost
effective manner.

Need of the hour

At this juncture when the growth of the manufacturing
sector is at its lowest and the power sector fully ridden
with issues, it has become all the more necessary to
come out with new ideas and policies to rejuvenate
the sector. Some of the below mentioned methods are
already mentioned in the New Electricity Act 2003
but yet to be implemented fully and efficiently.

Also just increasing the generation
of electricity will not solve the power crunch in the
country. The distribution should be extensive enough
so that electricity is available to the rural India as well
as Urban India.
Inviting private players for distribution of
electricity: To achieve power-for-all it is required
to take the private players in the stride and increase
the service area. Till recently the private cos were
involved in metering-billing-collection cycles. The
private players were awarded licenses and acted
as franchises. The private franchises should be
responsible for supply of power, collection of revenue,
management as well as up gradation of infrastructure.
This franchisee model would be helpful at those
places where there are high network losses and where
the discoms are under huge debt burden. This model
is already implemented in Odisha, Jharkhand and
Bihar.
Clarity in tariff: Proper tariff structure should
be comunicated to the consumers as well as the
suppliers. Cross subsidization should be reduced to
the minimum. The procurement cost of power should
also be optimized. As per the 12th five year plan
working group report, it is found that the current tariff
is not enough to meet the cost of supply of electricity.
Moreover, default in payment, non-metering of
consumers, no proper energy accounting/auditing,
inadequate up gradation of the distribution systems
add to the woes of the discoms. As per CAG which
had undertaken a study of 24 utilities reported that the
issue of cross subsidy and tariff are not rational.

Open access: The policy of open access is provided

in the New Electricity Act 2003. As per the policy a
consumer can choose his/her supplier of electricity.
This leads to competition in the market and also
reduction in the price per unit of electricity. But
the recent ruling by Karnataka Government and
Gujrat government will raise a big question mark
in the implementation of the law. The Karnataka
Government barred the supplier to export to other
states because of inadequate supply in the state. The
Gujrat government barred the customers to import
power from other states because of surplus of power
in the state. The legislation should ensure that there
is no disconnect between the state and Centre and
implementation of the act is done to the letter.

Union Budget 2014 for power and energy

sector
Tax holiday period extended for power companies
who start production and distribution by Mar 31 2017.
Rs 500 Cr has been set aside for setting up ultramega solar projects in TN, Rajasthan, Gujrat and J&K
to promote renewable energy.
Rs 400 Cr for launching a scheme for solar driven
agricultural pump sets and water pumping stations for
energizing 1 lakh pumps.
Rs 100 cr for development of 1 MW of solar parks
on the bank of canals.
Rs 100 cr for cleaner thermal energy scheme.
Extension of concessional basic customs duty of 5%
to machinery and equipment required for setting up
solar projects.
Rs.500 cr has been allocated for strengthening of
transmission and distribution infrastructure in rural
areas under the Deendayal Upadhyaya Gram Jyoti
Yojna.

Expedition of more UMPPs: Ultra mega power

projects (UMPP) are a series of ambitious power
projects planned to provide power-to-all by the end of
11th Five Year plan. 16 UMPPs were planned, 12 have
been formed and only 2 have been commissioned.
Mundra UMPP in Gujrat by Tata power and Sasan
UMPP in MP by Reliance Power have been
commissioned so far. The UMPP projects should be Conclusion
commissioned in a speedy manner to meet the energy
The IEA estimates that India would overtake
needs of the country.
USA in 2023 and China in 2029 in terms of yearly
Loss reduction: There is 28% on average of installations. Narendra Modi promised electricityaggregate technical and commercial loss as power for-all by 2019. As per 2011 census only 55.3% of
moves through the supply chain from generation to rural households and 67.2% of total households have
transmission to distribution. This loss is transformed access to electricity. To achieve the ambitious target
into huge revenue loss. As per statistics 30-35% all the source of electricity needs to work in tandem.
of the average AT&C loss is due to the metering Moreover, if India plans to achieve the golden GDP
inefficiencies. Projects like installation of high growth rate of 8-9% in the coming years, the power
voltage distribution system, installation of automatic sector needs to be revamped. The policy makers also
power factor controller, replacement of defective need to realize that the policy that are planned and
meter with efficient one, metering of unmetered implemented should be sustainable and does not
consumers should be undertaken to stop the loss. damage the nature. The dependence in non-renewable
Smart meters should be installed for proper tracking source needs to be decreased and on renewable
of the electricity supply to each consumer.
source needs to be increased. India needs to lower
Installation of smart grid should be expedited: As its dependency on thermal power and increase its
already mentioned earlier the inadequate transmission production in hydro and solar power plant. As can be
in comparison to the generation, it is necessary to inferred for the union budget 2014 the government
install smart grid across the country. This would result wants to resurrect the power sector and specially the
in power stabilization, connectivity among different renewable energy sector. This is long term thinking
grids and also ability to transmit power irrespective from the government which wants to reduce the
dependence on coal for power generation as well as
of the source.
well as embrace green solutions to meet the energy
Encourage Solar Rooftop Initiative: The solar
needs of the country. What remains to be seen is how
rooftop Initiative for installations of solar panels on the
efficiently the government is able to implement the
rooftops of houses should be encouraged. Providing
policies. The 12th Five year plan also has planned
assistance financially as well as technically should be
out ambitious projects for the next five years. The
done in a time bound manner. This initiative is already
dedication and contribution of all the stakeholders in
implemented in Gujrat, Kerala, Tamil Nadu, Andhra
the power sector would be tested in the years to come.
Pradesh and Karnataka.
25

FIN-Q-NITIE
an ultimate quiz

1. Identify the personalities and why were they in the

news recently?

2.Identify the logo

6. In June this year, French Bank X was found in

violations of U.S.sanctions against Cuba, Iran and
Sudan. It agreed to pay almost $9 billion, the largest
for violating U.S.Transactions. The bank was found
guilty to falsify business records and conspiracy.
Identify X?
7. She has got many firsts to her credit. She is the first
Indian women to graduate from HBS, first women to
be hired by PWC in India and first women to lead a
foreign bank in India. Who is she?
8. X will become a significant shareholder of Sun
Pharma after Sun-Ranbaxy deal and will have the
right to nominate one director to Sun Pharmas Board
of Directors. Identify X

9. In Aug 2014 X, the credit rating agency, has

downgraded this Ys debt to rating scale which means
3. Both tower serve as the headquarters for X Bank. instruments are in default or are expected to be in
The towers are famously known as Y, the two aspects default soon. Identify X and Y.
of every financial transaction. Identify X and Y.
10. Connect

4. RBI can issue notes upto the value of

a.)
1,000
b.)
20,000
c.)
5,000
d.)
10,000
5. (in pic) Former
chairman and managing
director of Bank X. She
recently joined Bank Y
as independent director.
Identify the personality,
X and Y?

11. Odd one out:

a.
Greenmail
b.
Golden Parachute
c.
White Knight defense
d.
Pac-man
12. Which of the following is least likely to be useful
in evaluating a companys corporate governance
system
a. Statements of managements responsibilities to
directors
b. Quarterly con-calls with analyst after earnings
announcements
c. Performance self-assessments from individual
committees on the board of Directors
d. Companys annual report

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Team $treet

Team That Is $treet

Street is a student run finance
interest group at NITIE that
promotes finance related activities and

Street is a student run finance interest group at NITIE that promotes finance related activities
and is commited to encourage and engage the finance enthusiast in the student community.
Street is one of the most active clubs in the campus and caters to students with a wide variety
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