Finly August 2022

FINLY

AUGUST 2022 | Issue No. 113

Zombie Unicorns

Intriguing Indeed

Sector Analysis

Eco Section

Sri Lankan Crisis: Bad to Worse

Auto Ancillary

Venezuela Crisis

CONTENTS 01

02

EDI TO R I AL

TEAM F I N L Y

04

07

C O VER ST O R Y

EC O SEC TI O N

Zombie Unicorns

Venezuela crisis

10

14

SEC TO R ANAL YSIS

C O MP AN Y AN AL YSI S

Auto Ancillary

Motherson Sumi

18

22

I N TR IG U IN G IN D EED

EN TR EP R EN EU R SH I P I N N O VAT I O N

Sri Lankan Crisis: From bad to worse

Razorpay

25

27

R EAD ER 'S C H O I C E

C AL L F O R AR T I C L E: WI N N ER

An Explainer on Tax Haven Countries

Shruti Thakre

27 C ALL F O R AR T I C L E: R U N N ER U P

Ishika Gupta

ISSUE NO. 113, AUGUST 2022

Dear Readers,

Editor's Note

“Historically, pandemics have forced humans to break with the past and imagine their world anew. This one is no different. It is a portal, a gateway between one world and the next. We can choose to walk through it, dragging the carcasses of our prejudice and hatred, our avarice, our data banks and dead ideas, our dead rivers and smoky skies behind us. Or we can walk through lightly, with little luggage, ready to imagine another world. And ready to fight for it.” - Arundhati Roy This pandemic is an opportunity to expand our knowledge by finding new ways to circumvent the circumstances, invest in the most intuitive ideas that come to our mind and surpass this havoc. As Ben Franklin rightly said, “An investment in knowledge always pays the best interest,” we at Finstreet are back with the next edition of our monthly magazine “Finly” for the academic year 2022-23.

Team FINLY has always been a dedicated group of people who put in a lot of time and effort to put this magazine together, and we can't thank them enough for their unwavering support and initiative.

The August 2022 edition's cover story revolves around "Zombie Unicorns". The eco section describes the current situation of Venezuelan Crisis. Further, the Intriguing Indeed section delves into the worseing Sri Lankan Economic Crisis.

We are thankful to Prof. (Dr.) Pankaj Trivedi (Course Coordinator, MBA Core and Faculty Coordinator, Finstreet) for providing the much-required mentoring, support and backing to the Finly team.

HAPPY READING!!!

Moumita Biswas

Gaurav Bavkar

|Editor-in-Chief|

|Editor-Finly|

MBA A

MBA B

01

ISSUE NO. 113, AUGUST 2022

TEAM FINLY Faculty in-charge

Dr. (Prof) Pankaj Trivedi

Editing Team Editor-in-Chief

Editor - FINLY

Moumita Biswas

Gaurav Bavkar

Team Coordinator

Priyanka Acharekar

Conceptualization & Design

Kartik Anand

Muskan Jain

Priyanka Acharekar

02

Content Team

Anshul Sharma

Upendra Baliga

Anupreet Lall

Varun Nagur

Moumita Biswas

Jonath Simon

Abhijeet Upadhyay

Tanisha Chaudhary

Tuneer Sarkar

Vidyathmika S

Viram Vora

03

| COVER STORY

ZOMBIE UNICORNS - CURRENT SITUATION IN INDIA AND MEESHO'S CASE Anupreet Lall| MBA-Finance B | 2021-23 Vidyathmika S | MBA- FS | 2021-23

Zombie Unicorns are the companies that once became unicorns but have reached a stage wherein they are generating revenue that is enough to break even but not enough to generate returns for the investors. Their growth is stagnant as they don't offer any unique value proposition. These companies look out to raise funds for sustenance.

However, because of their negligible growth and poor business model, they are not considered an attractive investment opportunity by investors. Basically, A zombie Unicorn is a startup that looked promising yet failed to gain traction and grow into a successful enterprise.

SITUATION IN INDIA From getting its first unicorn in 2011 to completing a century of startups valued at a billion-dollar or more in almost a decade is no mean feat. This gives an average of 10 unicorns a year. However, the real push came

came in the last 16 months. Since 2021, India has minted more than half of its 100 unicorns, i.e., 58.

However, India is witnessing the dawn of the Zombie Unicorns after a startup boom last year. Indian startups raised $5.8 billion in March and April, which is 15% less than the value from the previous year's corresponding period. In November 2021, Paytm IPO crashed by 27% at its debut as it was considered overvalued compared to the company's profitability. While Indian food delivery firm "Zomato" and beauty retailer "Nykaa" had blockbuster listings, their shares are now down by 67% and 43%, respectively, from their peaks. Further, Vedantu laid off 200 staff in May in a "load rebalancing" move based on the company's growth expectations.

According to the data published by entrakr, only 18 out of the 100 unicorns in India have

04

| COVER STORY attained profitability in FY 2021; on the other hand, 57 are reportedly deep in losses.

Investors are concerned about the fact that the valuations in India are too high, even when startups' business models are being led by discounts, and there is a bleak outlook for revenue. Even the Venture capital funds are planning to cut down on their investments because they are incurring losses.

year, and Farmiso (Meesho's grocery brand) is yet to scale beyond a handful of cities.

The hyper-competitive grocery sector idominated by Flipkart, Amazon, Big Basket, BlinkIt, Swiggy, and JioMart, which have built key procurement and logistics capabilities.

With deep pockets, they all have shown the appetite to fund losses at scale. Hence, it's difficult for Meesho to get a toehold in this space.

Surprisingly, the startup showing the telltale signs of turning zombie is Meesho.

PROBLEMS MEESHO IS FACING Five years ago, Meesho started as a social commerce platform for connecting small businesses with millions of resellers associated with the company. However, in 2021, the company suddenly pivoted from reseller model to a B2C model. The reasons for this shift were valid as a business because the resellers had no control over the product and the supplier. Further, they had no experience in selling the products, which led to poor servicing of orders and increased customer complaints. With this shift in business model, Meesho faced fierce competition from brands like Amazon and Flipkart.

Another foray the company made a few months before shifting to the B2C model was their expansion into the groceries segment. In April 2021, Meesho announced plans to start grocery delivery services in more than 200 cities. However, it's been a access

Source: Business Insider With smaller rivals like Shop101 and Glowroad, Meesho could have driven the social commerce market in India at its own pace. But that's not possible when you are competing with large companies. Flipkart took the battle to Meesho's domain in July 2021 by starting its social commerce app Shopsy. The launch of Shopsy did not just unsettle Meesho but also took away many of its resellers. Moreover, Shopsy's zeropercent commission model and its 700-city grocery plans had further taken the sheen off of Meesho.

Another hit friendship

for

Meesho

came

when

05

| COVER STORY southeast Asia's popular e-commerce platform Shopee launched in India last year, chewing up Meesho's future growth prospects. Having built a $150 billion business in around 13 countries across Asia, South America, and Europe, Shopee is known for its aggressive pricing, attractive promotions, and vast assortment. Shopee also offered a no-commission-based structure to acquire sellers and buyers in India.

A FLYWHEEL IN REVERSE Meesho loses money at multiple touchpoints: discounts on products, high marketing costs, subsidized logistics, the zero-commission model for the sellers, and high corporate overheads of running multiple strategies like social commerce, groceries, and international forays (which was called off soon after the announcement). With all this, Meesho is burning nearly $40 million each month.

with its core app and has laid off around 150 staff members. It is also planning to onboard affordable brands and is rebranding itself to attract more customers outside metros.

Meesho has also reduced its cash burn significantly in the past few months as the acquisition cost has come down. While the online retailer still has sufficient capital from its two back-to-back funding rounds last year, conserving cash will play a critical role in its long-term bid to disrupt the ecommerce market where Amazon and Flipkart are well entrenched.

CURRENT SITUATION Meesho is revising its growth plans and cutting costs to stay relevant in the industry.

The company has begun offering discounts on products, with the condition that they can only be returned if they are defective. This strategy would help reduce returns by up to 40% for around 5,000 sellers. The company has also introduced warehouse pick-up services for customers in order to mitigate last-mile costs and is offering discounts to its customers for online payments to reduce dependence on cash on delivery. Meesho has also integrated its grocery business Farmiso

06

| ECO SECTION

VENEZUELA CRISIS Anshul Sharma | MBA Finance B | 2021-23 Viram Vora | MBA Finance B | 2021-23

.

The dangers of creating a petrostate are illustrated by Venezuela, which has the largest oil reserves in the world. Since the 1920s, when oil was discovered in the nation, Venezuela has seen a thrilling but risky boom-and-bust cycle that can serve as an example for other resource-rich nations. What was once one of Latin America's most successful nations, now has fallen into an economic and political devastation due to decades of bad governance.

According to analysts, the government must put in place measures that will stimulate the productive investment of the massive oil earnings, if Venezuela is to recover from its crisis.

WHY DOES THE PETROSTATE PARADIGM EXIST? A resource boom in a country with economic problems draws significant inflows of foreign capital, which boosts imports because they are now more affordable and causes the local currency to appreciate. This drains labour and resources from other economic sectors, like manufacturing and agriculture, which economists argue are more crucial for expansion and competitiveness

WHAT IS A PETROSTATE? A country is referred to as a "petrostate" if it possesses a number of interconnected characteristics, such as: a government that is heavily dependent on the export of oil and natural gas, an elite minority holds a disproportionate amount of economic and political power, political institutions that are weak and unaccountable, and high level of corruption.

Source: The Heritage Foundation's 2019 Index of Economic Freedom

07

| ECO SECTION competitiveness. As these labor-intensive export sectors struggle, unemployment may increase and the nation's reliance on resource exports may become unhealthy. In severe circumstances, a petrostate forgoes domestic oil extraction in favour of obtaining the majority of its oil riches via heavy taxes imposed on foreign drillers. The economies of petrostates are then extremely exposed to erratic changes in the price of energy and capital flight.

The 'resource curse' also has an impact on governance. There are frequently shaky relations between the government and its populace in petrostates since they rely more on export money and less on taxes. The timing of the resource boom may make the issue worse.

The country's resource richness can be used by the authorities to suppress or ally with the opposition.

HOW DOES VENEZUELA FIT THE CATEGORY? According to experts, Venezuela is the prototypical failed petrostate. Even after oil was discovered there more than a century ago, it still dominates the economy of the nation.

From over $100 per barrel in 2014 to around $30 per barrel in early 2016, oil prices fell precipitously, plunging Venezuela into an economic and political tailspin.

Several ominous signs reveal the situation: Dependency on oil: 99 percent of export revenue and about one-fourth of GDP come from sales of oil (GDP).

Declining output: Oil production fell to its ACCESS

lowest point in decades in 2020 due to a lack of proper maintenance and investment, though it is now slowly starting to rise again.

Spiralling economy: Between 2014 and 2020, GDP decreased by almost two-thirds.

Experts predict that in 2022, as a result of the coronavirus pandemic's continued impact on oil demand, GDP will decrease by an additional 5%. (Contrarily, other economists anticipate a minor expansion of Venezuela's economy in 2022.)

Rising debt: Venezuela is reportedly at least $150 billion in debt.

Hyperinflation: Inflation in Latin America is at 1,946 percent annually.

Growing autocracy: To stay in power, President Nicolas Maduro and his associates have disregarded fundamental democratic principles.

These problems, along with international sanctions and the COVID-19 epidemic, have sparked a dire humanitarian catastrophe that has resulted in significant shortages of necessities like food, water, gasoline, and medical supplies. As per a September 2021 study, the highest percentage of extreme poverty in Latin America is in Venezuela with 28 million (i.e., 77% of population) citizens below such poverty levels.

Nearly six million Venezuelans have emigrated since 2014, and some of nations have given them temporary residency. Since

08

| ECO SECTION

the coronavirus pandemic started, more than 130,000 migrants from Venezuela have, nevertheless, returned home, many after losing their employment in other Latin American nations.

This gave states more control over their domestic industries. The first state-run oil business was founded in Venezuela the same year, and the income tax rate for the industry was raised to 65 percent of profits.

HOW DID VENEZUELA GET HERE?

The 1970s boom: The Yom Kippur War embargo by OPEC, which lasted for five months, caused oil prices to double, making Venezuela the Latin American nation with the highest per capita income. The windfall brought $10 billion to state coffers over a two-year period, but it also paved the path for widespread fraud and poor management.

Analysts calculate that just between 1972 and 1997, up to $100 billion was stolen.

A number of economic and political milestones mark Venezuela’s path as a petrostate.

Finding oil: At La Rosa, a field in the Maracaibo Basin, Royal Dutch Shell scientists hit oil in 1922. By 1929, Venezuela's annual output had risen from just over a million barrels to 137 million. The Venezuelan bolivar had inflated, and oil had displaced other industries to account for 90% of exports by the time Gomez passed away in 1935.

Recovering oil rents: In the 1930s, the Royal Dutch Shell, Gulf, and Standard Oil firms held a combined 98 percent of the market share in Venezuela. The goal of Gomez's successors was to reorganise the oil industry in order to increase government revenue. The first move in that direction was the Hydrocarbons Law of 1943, which required foreign businesses to give the government half of their oil profits. The government's revenue surged sixfold in just five years.

The oil glut of the 1980s: As oil prices fell worldwide in the 1980s, Venezuela's economy shrank, inflation shot through the roof, and the country racked up significant international debt by acquiring foreign refineries like Citgo in the United States. Perez introduced a fiscal austerity plan in 1989 as part of an IMF financial rescue after being re-elected months earlier. The actions sparked violent riots.

Hugo Chavez, a military officer, attempted a failed coup in 1992 and became well-known throughout the country.

OPEC: Venezuela became a founding member of the Organization of the Petroleum Exporting Countries (OPEC) in 1960. The largest producers in the world worked together to coordinate prices through the cartel, which later expanded.

Descent into dictatorship: Midway through 2014, the price of oil fell significantly, sending Venezuela's economy into a tailspin. Maduro used political repression, censorship, and electoral fraud to consolidate his position as unrest grew.

09

| ECO SECTION trends in oil demand, and growing concerns about climate change.

Source: IMF, Statista In a race that was largely regarded as unfair and undemocratic in 2018, he won reelection.

IS THERE A PATH AWAY FROM THE OIL CURSE? Analysts predict that countries dependent on fossil fuels will be forced to diversify their economies as the world switches to renewable energy sources like solar and wind. Venezuela is one of over 200 nations that have ratified the Paris Agreement, a legally binding agreement that calls for states to take specific actions to reduce climate change.

Given the severity of its recent political and economic collapse, Venezuela will find it particularly challenging to diversify its economy. Before cultivating and developing other significant industries, the nation will probably need to revive its oil sector. This would, however, require a significant investment, which, according to economists, would be difficult to come by given the unrest in Venezuela's political system, ACCESS

10

| SECTOR ANALYSIS

AUTO ANCILLARY SECTOR Moumita Biswas | MBA Finance A | 2021-23 Tanisha Chaudhary | MBA Finance B | 2021 - 23 OVERVIEW The auto ancillary is one of the major sectors in the country and contributes around 2.3% to the total GDP. OEMs and replacement markets are the primary sources of demand.

There are approximately 1.5 million people employed in the sector. A close relationship exists between this sector and the Indian automobile sector, making it highly sensitive to changes in the latter. Many factors, including cheap and abundant labour and government initiatives, are causing India to become a global hub for sourcing auto components. As a country with an extensive coastline and geographical proximity to important markets such as Europe and the Middle East, India is strategically better positioned than China.

In the last 20 years, the sector has attracted $24 billion in inflows. Moreover, the government has provided interest subsidies

on loans and investments in new plants and equipment worth $200 million. With the pandemic, companies are also looking beyond China for new opportunities and examining whether India can become the next manufacturing hub.

MARKET SIZE & STRUCTURE The global auto components sector comprises of automobile component manufacturers, aftermarket part manufacturers, suppliers, dealers, and retailers. Demand and supply of auto components are directly linked to automobile industry demand and supply.

While China is the world's largest manufacturer of auto components, other Asian countries, like India, are gradually gaining ground due to their more extensive markets and low-cost manufacturing options.

11

| SECTOR ANALYSIS Unorganized players primarily serve the replacement market. Revenues for the automobile component industry stood at US$ 49.3 billion in FY20, up from US$ 39.05 billion in FY16, and are expected to reach US$ 200 billion by FY26.

Source: IBEF

For OEMs, the Indian auto component sector is critical to their value chain. Almost all the companies in the market are Indian, while only a few foreign companies and joint ventures participate.

The Indian auto component industry can be segmented into two broad categories: organized and unorganized segment.

Indian auto components fall into the following subcategories: Engine Parts Electric Parts Drive Transmission and Steering Parts Suspension and Breaking Parts Equipment There are both large and unorganized firms in the Indian auto component industry.

Original Equipment Manufacturers are the largest market for organized firms.

Source: ACMA Report

According to the latest data, the automotive component industry reached USD 45.9 billion from April 2020 to March 2021, a 3% decline from the previous year. A second consecutive year of negative turnover in the industry has been recorded.

It is easy to understand why there was a drop from FY20 to FY21. COVID-19, commodity price spikes, and semiconductor scarcity wiped out the industry's revenue in 2019-2020.

KEY PLAYERS There is not a significant international presence of India's auto ancillary sector.

However, as we consider its ability to grow, this tips the scales in its favour. The automobile sector relies heavily on the auto ancillary sector. Fortunately, India's automobile industry is the fourth-largest in the world, with the country currently

12

| SECTOR ANALYSIS

ranking fifth in car production and seventh in commercial vehicles.

Manufacturer of car wiring harnesses and rear-view mirrors, Motherson Sumi Systems is also a leading automotive wiring harness and mirror manufacturer in India.

The country's largest manufacturer of automobile cables, Suprajit Engineering (SEL), specializes in two-wire and photovoltaic cables. With its low-cost player offering and diverse exposure in India, SEL has gained market share and more business from existing clients as it has expanded from a single product/client firm to a varied exposure.

As a prominent provider of technology and services in India, WABCO India Ltd. helps cars and trucks be safer, more efficient, and more connected. The company also develops, manufactures, and sells air-assisted goods and mechanisms.

For end-to-end engineering and technology solutions, Bosch has the largest development center outside Germany in India.

The company manufactures and trades diesel and gasoline fuel injection systems, aftermarket products for automobiles, auto electricals, machinery for special purposes, packaging machines, electric power tools, and security systems.

GROWTH DRIVERS Cheap Labour: There is abundant cheap labor in India because of its massive population. People may be motivated to shift to other occupations due to the decreasing opportunities in agriculture, which can be an advantage since these people can be trained into skilled or semi-skilled labor.

Carbon Concerns: The developed countries will be forced to reduce their output due to increased carbon worries, resulting in the capacity to relocate outside them. There is enough leeway in India's goal to achieve carbon neutrality by the year 2070 to take advantage of these opportunities. Increasing carbon concerns worldwide have led to a substantial movement from conventional automobiles to electric vehicles. The auto ancillary sector would transform as a result of this enormous change.

Policy Initiatives: The Indian government has come up with numerous policies to support the sector, such as establishing NATRiP centers, Faster Adoption and Manufacturing of Electric hybrid vehicles (2015), and Automotive Mission Plan (2016-26) and NMEM (2020).

13

| SECTOR ANALYSIS

RISKS AND CHALLENGES Since governments continually introduce new policies, the sector threatens such policies. The Indian government recently made a modification that requires all businesses to transition from previously produced BSIV automobiles to the newer BSVI standards for vehicles. As a result of these disruptions, the industry is at high risk of having to make significant adjustments to its production methods.

The new GST system has maintained an 18% and 28% tax bracket for the auto component sector, with almost 60% of the auto components being taxed on the lower slab and the remaining 40% on the higher slab. High taxes reduce the amount of headroom businesses have to control their production costs.

One of the most significant issues the auto ancillary sector had to deal with in FY21 was the nationwide lockdown brought on by the pandemic. It caused havoc throughout the whole sector's supply chain. The current fiscal year is also seeing the consequences of lockdown.

The auto ancillary industry is now dealing with various difficulties, such as a lack of semiconductors, rising metal costs, high container prices, and rising gasoline prices.

OPPORTUNITIES The sector has been a critical engine of economic growth for India. It is predicted to do exceptionally well in the near future due to a change in supply chains brought on by a number of global events. By utilising this chance, India can boost its global auto component trade share to 4-5 percent by 2026.

The Indian automotive components sector is anticipated to have a 23 percent gain in revenue in the upcoming fiscal year as both local and international demand increases.

By 2030, India's domestic market for electric vehicle (EV) batteries might reach US$ 300 billion due to the country's widespread adoption of EVs. In addition to local consumption, the need for exports is anticipated to grow significantly in the near future.

By 2025, the Indian auto components sector is anticipated to become the thirdlargest in the world.

FUTURE OUTLOOK Future projections indicate that the aftermarket section of the auto ancillary sector will have significant short-term demand. The need for repairs on pre-existing and used cars creates a considerable opportunity for short-term growth in auto component sales of the aftermarket segment

14

| SECTOR ANALYSIS

as people delay purchasing new cars due to high prices, low consumer sentiment, lengthy waiting times, and high fuel prices after the pandemic.

The government's supply-side interventions and changes to the definition of the MSME sector, which include tripling the financing for MSMEs, are also expected to benefit the auto component sector.

There is a lot of space for localization and replacement in the car component industry for high-value items, including gearbox parts, fuel systems, engine electricals, and exhaust parts. The players can also work to improve their skills by creating new products that adhere to BS-VI standards, which can assist them in replacing specific imported components with components created in India. Collaborations with international vendors moving manufacturing to India might support these initiatives and promote acquiring new skills.

15

| COMPANY ANALYSIS

MOTHERSON SUMI Tuneer Sarkar| MBA - DSA | 2021-23 Jonath Simon | MBA - FS | 2021-23 COMPANY'S OVERVIEW Motherson Sumi Systems Limited is an Indian automobile component manufacturer and global supplier. The company is one of the world's biggest manufacturers of automotive components. It was established in 1986 as a joint venture between India's SamvardhanaMotherson International Ltd and Japan's Sumitomo Wiring Systems Ltd. (SWS).

The company's name is derived from a profound relationship of trust between a mother and her child.

Motherson Sumi Systems ranks first in manufacturing automotive wiring harnesses and mirrors in India. It is also a major supplier of plastic modules and components in Europe and India. Forbes named the company as one of India's Fab 50 companies.

Fortune India 500 has named Motherson Sumi Systems Limited the number one auto ancillary company in India for the past seven years. Automotive News ranks the Motherson Group 21st among worldwide automotive

suppliers. The company and its subsidiaries had a consolidated revenue of US$9.1 billion in March 2018–2019. The company's headquarters are in Noida, Uttar Pradesh, India. The company has production plants in Gurgaon, Faridabad (Haryana), Bandra (Mumbai), Uttaranchal, Pune, Gujarat, Bengaluru, Chennai, Pondicherry, and Tapukara (Rajasthan), among other places in India.

COMPANY HISTORY Founded in 1975, Motherson was a small family trading company started by the current chairman, Vivek Chaand Sehgal, and his late mother, Shrimati Swaran Lata Sehgal.

Within a short period, the company had various acquisitions and grew significantly.

Year Event 1975 Founded in New Delhi, India 1977

The first established.

cable

factory

was

16

| COMPANY ANALYSIS

Year Event 1983

Reached a technical agreement with Tokai Electric Co. Wiring Harness

Motherson Sumi Systems Ltd. was set up in 1986 a joint venture with Sumitomo Wiring Systems Ltd., Japan.

Wexford Electronics' assets were acquired to create wiring harnesses for material 2002 handling and earthmoving equipment, and a Design Centre was established in Ireland.

Visiocorp's rearview mirror business was 2009 acquired and named SamvardhanaMothersonReflectec (SMR) Peguform, a global tier 1 producer specializing in interior and exterior 2011 polymer modules, acquired and named SamvardhanaMothersonPeguform (SMP) 2014

The wiring harness business of Stoneridge Inc. acquired

PKC Group PLC, Finland, which is a wiring 2017 harness manufacturer for heavy-duty commercial vehicles, acquired Reydel Automotive Group acquired interior 2018 components such as door panels, console modules, cockpit modules, etc.

The electrical component and systems 2019 business of Bombardier's UK rolling acquired Turkey’s Plast Met Group supplies plastic 2021 moulded parts, sub-assemblies, and injection moulding tools.

GOALS AND STRATEGIES While working towards the vision of being a globally preferred solutions provider, all ACCESS

relationships at Motherson are built on trust. The company's goal is to solidify its foundation and use its existing competencies to serve customers in new industries.

FIVE-YEAR PLAN The five-year plan for the year 2020-2025 is the sixth five-year plan of the company. It follows a unique program to achieve its strategic goals and objectives. The company is focusing on generating new value for clients in industries with the launch of Vision 2025. Aviation, Logistics, Technology & Industrial Solutions, and Health & Medical were considered as areas expected to generate 25% of the company's revenues by 2025.

The targets set for the future are as follows: USD 36 billion in revenues with 40% ROCE 25% of revenues to come from new divisions that the company penetrated into Realignment of a diversification strategy to 3CX10. Exposure to any country, component, or customer should not be more than 10% of our total turnover by 2025.

BUSINESS PORTFOLIO Motherson Group provides its clients with a wide range of products and services through its ten business divisions. These divisions continue to develop more robust and diverse due to the customer support 17 ACCESS

| COMPANY ANALYSIS divisions' core moving closer to becoming an internationally preferred solutions provider.

The following are Motherson's ten business divisions: 1. Vision Systems: Motherson is a leading global supplier of vision systems to the automotive industry, with a product portfolio that includes interior and exterior mirrors, as well as camera-based detection, which it offers to nearly all major OEMs. 2. Modules and Polymer Products: The division covers Motherson's primary business line. It designs and manufactures a wide range of products, from simple plastic parts to highly integrated systems and modules, and sells to OEMs worldwide. The group's skills are moulded design, tooling, and elastomer processes.

3. Precision Metals and Modules: The division offers complete system solutions for metal processing, including higher-level assembly integration. It caters to a wide range of sectors with precision machining, modules such as cabins for off-highway vehicles and HVAC systems, body parts, and process equipment.

4. Technology and Industrial solutions: The division's core is technology, engineering, and manufacturing solutions. It ensures that the group's global operations have a solid digital base. It also serves external clients from many sectors throughout the world.

5. Lighting and Electronics: The division's product line comprises external lighting and electronic modules for passenger cars, HVAC and compressors, body control modules, struts, shock absorbers, and backward integration solutions.

2. .

3. .

4. .

5. .

6. Aerospace: Motherson's Aircraft division applies the company's present expertise in wiring harnesses and plastics to the aerospace industry by offering integrated solutions.

7. Logistics Solutions: Motherson's Logistics section intends to improve the automotive supply chain's efficiency, technology, and specialization. It manages the logistics of finished automobiles for internal and external clients in the group's supply chain.

8. Health and Medical: The division seeks to do this by providing products, solutions, and services that assist individuals manage and enhancing their health while also allowing them to access high-quality, affordable care.

9. Services: The division comprises numerous companies that sell directly to end customers and support their manufacturing activities.

10. Wiring and Harness: Motherson's Wiring Harness section is a full-service system provider with complete in-house design, development, and manufacturing capabilities.

OPERATING PERFORMANCE Despite the slowdown induced by Covid-19 in 2020, the company showed exceptional resilience and recovered much of its sales numbers in the following year. Although currently, the company is trading at 2.9 times its book value and had a poor sales growth of 8.44% over the past five years. The company has also had a low return on equity at 7.90% for the last three years, even though it has maintained a healthy dividend payout of 18 ACCESS

| COMPANY ANALYSIS 36.52%. The company’s market cap to sales ratio is at 0.8, currently trending upwards.

With its return to its pre-COVID operating income levels, the market is losing trust, and even Mutual Fund ownership has also been recently lowered.

The company has shown increasingly falling EBITDA margins and Inventory days. The falling debt/equity ratio is a good indicator, although the ROCE falling is of no consolation to the investors.

SALES TURNOVER

KEY PERFORMANCE INDICATORS 2018

2019

2020

2021

2022

Revenue

56293

63522

60728

57369

63535

Net Profit

2121

1985

876

1157

1156

PAT

879.10

813.80

538.50

194.10

799.62

EPS

7.59

5.11

3.71

3.29

2.5

Source: moneycontrol.com Source: Capital Markets FINANCIAL ANALYSIS FUTURE OUTLOOK The working capital has expanded by Rs 2,000cr due to higher inventory amidst uncertain environments. The share of revenues from Indian operations at 55% for FY22, and the share of revenues from EV programs has increased to less than 4% for FY22.

In Q4FY22, reported PAT includes onetime costs of Rs. 48cr related to group reorganization, reversal of deferred tax assets, and income from prior periods.

SALES TURNOVER Ratios

2020

2021 2022

EBITDA margin (%)

7.9

7.8

7.2

ROCE

6.8

4.9

4.1

Inventory days

53.8

55.9

64

Debt/Equity

0.9

0.8

0.7

EV/Sales

0.5

1.3

1

The company has started to stagnant owing to the current market conditions. The EV revolution is imminent in India. Motherson Sumi is betting highly on it being sooner than later. The company has started to invest significantly in preparing itself for the new EV market, and EV vehicles' success will determine the sector's future as a whole. The most significant player in the auto-ancillary sector will significantly impact its operations.

By and large, the company has the potential to grow, considering most of the offerings in its current product catalog are expected to remain in high demand even in the EV market.

It is just a matter of adoption by the EV makers.

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| INTRIGUING INDEED

SRILANKAN CRISIS: FROM BAD TO WORSE LITIGATION FINANCING Upendra Baliga | MBA- Finance B | 2021-2023 The Sri Lankan economic crisis is currently plaguing the island-state of Sri Lanka, started in 2019. It is the worst economic crisis that the country has seen since 1948, when Sri Lanka became independent. The crisis has created unprecedented inflation, near-extinction of forex reserves, scarcity of medical supplies and a rise in prices of essential commodities.

The crisis originated due to multiple compounding issues like tax cuts, a nationwide policy to shift to organic farming, money creation, the Easter bombing incident in 2019, and the impact of the Lockdowns due to COVID-19 pandemic.

Source: World Bank

Source: World Bank

The above points were covered in the May Edition of Finly (Issue No. 111).

Unfortunately the matter has gone from bad to worse ever since, which has been covered in this edition of Finally. Initially for months, the Government headed by Mahinda Rajapaksa and the Central Bank of Sri Lanka (CBSL) resisted suggestions by economic experts and opposition leaders to seek aid from the IMF even with rising risks.

But once the oil prices started soaring in the wake of Russia’s invasion of Ukraine in late February, in March 2022 President Rajapaksa made a statement that his government would work with IMF.

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By the 6th of April, the Sri Lankan rupee had plunged to a record low becoming the worst performing currency on the globe with US$1 trading at Rs. 355 (Sri Lankan Rupee). On April 12, the Government of Sri Lanka published a report indicating that the country temporarily plans to default on all of its external debts which amounts to US$51 billion so that it can avoid the hard default.

In addition to IMF and World Bank assistance, Sri Lanka is negotiating a US$1.5 billion bridge loan with India to facilitate imports, while also approaching China, Japan, and the Asian Development Bank for additional financial assistance. The World Bank agreed to provide financial relief totaling $600 million, with the first $400 million to be released shortly.

This was the end of Sri Lanka's streak of having maintained an unblemished record of external debt service.

On 7 April an expert & elite presidential advisory group was created by the President to assist in the proceedings with the IMF. The bailout talks got underway on 18 April 2022 in

Washington

to

provide

emergency

financial help through a loan package to Sri Lanka. Considering the criticality of the situation, the IMF insisted that any loans to Sri Lanka’s world require debt sustainability, at the same time it welcomed the Sri Lankan government's decision to hold negotiation meets

with

guaranteed

creditors. support

for

The Sri

IMF Lanka

While at the Presidential level, a solution for the crisis was being developed, at the ground level, the people who were directly facing the harshness of the situation started becoming restless which erupted in huge and sometimes violent protests.

has in

mitigating and solving the current economic crisis followed by successful initial technical discussions held between the Sri Lankan delegation led by finance minister Ali Sabry and the IMF officials. The initial round of meets and discussions included several issues, including on-going economic and financial concerns in Sri Lanka and the need to implement a credible, sustainable an,d coherent strategy to restore macroeconomic stability.

Source: Southasiamonitor.com

In March 2022, several areas reported spontaneous and organized protests by political parties and non-partisan groups against the government's mismanagement of the economy. The political opposition staged several protests demanding that the current administration solve the financial crisis and resign immediately after the broader economic crisis.

Lakhs of supporters of the opposition party's United People's Force, led by Sajith Premadasa, demonstrated in front of the

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| INTRIGUING INDEED President's office on March 16th, demanding that the president resign. When Namal Rajapaksa, Member of Parliament of Sri Lanka, arrived for the opening ceremony of a sports ground in Bandarawela on March 30, angry locals blocked the road demanding fuel, causing Namal Rajapaksa to avoid vesting the area and the grounds to be opened by the mayor of the city instead.

On March 31, a large crowd gathered around Gotabaya Rajapaksa's Mirihana residence to protest power outages that had lasted more than 12 hours. The protest began as a spontaneous peaceful protest by citizens, until police attacked them with tear gas and water cannons, and protestors burned a bus carrying riot control troops. In Colombo, the government imposed a curfew. Concurrent protests were reported on the Kandy-Colombo Road, which was blocked by protesters. The government accused the protesters of belonging to an extremist organisation and began arresting them. Candlelight protests were also reported in several areas, as were car horn tooting protests.

On 7 April 2022, the Sri Lankan private sector requested in writing that political stability be restored to foster the economy. Around 38 organisations representing exporters, importers, manufacturers, the shipping and logistics sector, and the tourism sector have petitioned parliament to resolve the economic crisis in order to avoid disaster. On 7 April 2022, the Chamber of Young Lankan Entrepreneurs (COYLE) also appealed to the government to resolve the current economic and political crisis, warning that if the issue

were not addressed with due diligence, businesses would be forced to close. P Protesters set fire to the Rajapaksa family home in May 2022. During the protests, Mahinda Rajapaksa resigned as Prime Minister.

However, Gotabaya Rajapaksa refused to leave as President, and the protests continued.

Rajapaksa fled his official residence in Colombo on July 9, 2022, before protesters breaking through police barricades and entering the premises.

Protesters were spotted occupying the Mansion and swimming in the president's pool.

Later that evening, the Speaker of the Parliament announced that the president would step down on July 13, 2022. Mahinda Rajapaksa's whereabouts were unknown to the public on July 9 and 10, until Sri Lankan military sources told the BBC on July 11. that the President was aboard a Navy vessel in Sri Lankan waters. Later, it was revealed that Rajapaksa and his wife were evacuated from the President's House on July 9 by the navy, which sailed within Sri Lankan territorial waters, allowing Rajapaksa to maintain communications. The ruling party lost its majority, and political turmoil increased, with cabinet ministers resigning.

The shift to organic farming was reversed after a decline in output and food shortages.

The situation escalated further on July 9th, when President Gotabaya Rajapaksa fled his residence in Colombo with the assistance of troops shortly before protestors stormed the compound. He is taken to an unknown

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| INTRIGUING INDEED He emails his resignation as president as soon as he arrives. On the 20th of July 2022, in a decisive Parliament vote on Wednesday, acting President Ranil Wickremesinghe was chosen to lead Sri Lanka.

With the willingness of IMF and other countries to financially aid the country, coupled with the changes in the political situation, it is hoped that the crisis in Sri Lanka will come to a Source: Aljazeera climax, bringing an end to the miseries of location. The footage shows ecstatic protesters people while laying the foundation for the jumping in the pool and exploring the stately future growth, prosperity, and development of bedrooms inside the house. Rajapaksa then the beautiful island country. offered to resign on July 13, according to parliamentary speaker Mahinda Abeywardana in a televised statement. On July 13th President Gotabaya Rajapaksa takes a military plane to the Maldives, accompanied by his wife and two bodyguards.

His departure follows a humiliating airport standoff in Colombo, where immigration officials refused to allow VIP privileges and insisted that all passengers go through public counters. The parliamentary speaker has appointed PM Wickremesinghe as acting president in Gotabaya Rajapaksa's absence. The Sri Lankan government declares an indefinite emergency following the president’s departure.

On July 14, protestors declared they would stop occupying government offices, including the prime minister's office, the presidential palace, and the presidential secretariat. Still, they promise to continue their effort to overthrow the president and president-elect.

President Rajapaksa departs the Maldives for Singapore, according to the administration of the city-state, who claims he is there on a "private visit" and has not requested refuge.

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| ENTREPRENEURSHIP INNOVATION

RAZORPAY Varun Nagur | MBA-IB | 2021-2023 INTRODUCTION Founded by Shashank Kumar and Harshil Mathur in 2013, Razorpay has been in the Fintech space ever since. Razorpay is the only payment solution provider in India that allows businesses to disburse payments and accept and process them using their range of products. Their range of products empowers the users to access all payment modes, including UPI, net banking, credit card, debit card, and popular wallets such as JioMoney, Airtel Money, Mobikwik, FreeCharge, Ola Money, and PayZapp.

Razorpay also enables the users to avail working capital loans via their products. The Razorpay range of products increases efficiency and reduces time lapses in the payment processes and other auxiliary payment procedures, enabling a business to recover money faster and generate revenue efficiently. With Razorpay, companies can receive and send payments online quickly, cost-effectively, and securely. They can also open a current account that is fully ACCESSIBILI

functioning and apply for working on capital loans.

IDEATION The Co-founders ideated the product offering from Razorpay when they realized that the online payment system in India was a bit more complicated and driven by many steps compared to other countries.

Additionally, they concluded that USbased payment systems were not the best for the Indian market, especially considering credit card usage. Later, they realigned themselves to suit the requirements better to focus on the payments issue in India, as it was challenging to apply technology.

FUNDING Razorpay participated in the Y Combinator W15 cohort in 2015 and was awarded $120,000 in cash and accelerated support and coaching for three months

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| ENTREPRENEURSHIP INNOVATION from Y Combinator mentors and investors.

Following this, on March 23, 2015, they were awarded $2.6 million in start-up funding from Y Combinator. Soma Capital, Matrix Partners India, Tikhon Bernstam, Sandeep Tandon, Rohit Bansal, Ram Shriram, Punit Soni, Naveen Tewari, and Michael Sutcliff were among the investors who contributed to the overall funding. On October 27, 2015, Razorpay concluded its Series A funding with a total investment of $9 million from Tiger Global Management and Matrix Partners India.

Razorpay finished the venture capital round in 2016 with money from Mastercard totalling $100,000. Y-Combinator, Matrix Partners, and Tiger Global Management provided $20 million in Series B funding to Razorpay. On June 18, 2019, Sequoia Capital India, Ribbit Capital, Y-Combinator, and Tiger Management Global contributed $75 million to Razorpay's Series C fundraising round. Razorpay successfully raised $100 million in fundraising in 2020 after completing their Series D funding. Along with Ribbit Capital, Tiger Global, Y Combinator, Matrix Partners, and GIC (Singaporean sovereign wealth fund), Sequoia India served as the investment round's co-leads. After becoming a unicorn, Razorpay concluded the Series E investment round, co-led by Sequoia Capital India and GIC, and raised $160 million in April 2021.

MISSION AND VISION OF RAZORPAY The mission and vision of Razorpay are to ensure that businesses find it easy to accept and receive payments.

BUSINESS MODEL Razorpay earns its income by levying a charge of 0.25% to 0.5% per every transaction processed through its gateway.

This online payment gateway system aims to increase the number of products adopted on average from one to two.

Nearly 35 percent of the company's overall revenues are anticipated to come from RazorpayX and Razorpay Capital.

THE ROAD AHEAD Razorpay recently announced in March 2022 that it had acquired IZealiant Technologies, a fintech start-up that offers banks payment technology solutions, for an undisclosed sum. This will make it easier for the business' Banking Solutions Arm to develop cutting-edge payment banking systems for associate banks. Over 45 Indian banks are partners with Razorpay's Banking Solutions Arm. With a $7.5 billion valuation, the fintech unicorn raised $375 million in Series-F fundraising in December last year. It has increased its presence in South-East Asia by purchasing the Malaysian fintech company Curlec.

Indian fintech space has grown at a great pace over the last 5 years, almost 67 percent of the 2,100 or so fintech companies have been established in India, which has been touted as the world's fastest-growing fintech market in terms of growth.

Due to the epidemic, many small firms in 2020 had significant losses, and cash flow

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| ENTREPRENEURSHIP INNOVATION was also severely impacted. Razorpay unveiled Cash Advance, a line of credit without collateral designed to save MSMEs from precarious situations to address this issue. In an interview, Shashank Kumar stated that this service was intended to assist their partner companies in resolving the problem and supporting them during these uncertain times. According to a report

by Business Standard, Razorpay and the National Payments Corporation of India (NPCI) teamed up to introduce the UPI Autopay recurring payment mechanism. For customers, it simplified payment and gave them more control over it. Debit cards were the only available automated payment method before this, but the experience was not great. In a list of the top 10 Start-ups on LinkedIn, Razorpay stood at number six.

Mastercard and Razorpay teamed together in 2021 to empower MSMEs with digital payments. Mastercard's online banking services and Razorpay's payment capabilities were combined through a strategic agreement between the two businesses.

Source: Business Standard, Yourstory

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| READER'S CHOICE

AN EXPLAINER ON TAX HAVEN COUNTRIES Abhijeet Upadhyay | MBA – RM | 2021-2023 DEFINITION

provide are subject to a nominal fee

A tax haven is a location or a group of countries where businesses, individuals, or foreign investors pay little or no income tax.

It can also benefit from favorable macroeconomic conditions, such as stability in the financial and economic system and financial secrecy from tax authorities.

Simply put, it refers to a nation that offers low tax rates and financial confidentiality to foreign citizens and corporate enterprises.

Tax haven countries prefer to charge a small fee for the services they provide.

2. Secrecy of Information A tax haven's highly credible protection of its client's personal and financial information is the second most significant characteristic.

Without the client’s authorization, no information is shared with the foreign tax authorities.

FEATURES OF TAX HAVENS To determine if a nation or jurisdiction is a tax haven, the Organization for Economic Cooperation and Development (OECD) offers many indicators, including: 1. Extremely Low Tax Rates Income earned within their borders, offers or levies a meager tax rate; this can range between nations. However, the services they

3. Lack of Transparency The biggest issue with offshore financial centers is their completely opaque structure. Even the national governments are not given access to financial data. Thus, the technology facilitates money laundering and other criminal acts like tax avoidance.

4. No Substantial Activities Required A tax haven does not demand that outside parties create goods or services under its control. By simply locating the company's headquarters in tax havens or shifting the bulk of the company's financial activities to subsidiaries or shell firms, entities can avoid having their income and wealth ACCESS 27

| READER'S CHOICE generated in nations that levied taxes on them. For instance, you could start your business operations in London and be subject to Cayman Islands tax laws.

HOW DOES TAX HAVENS WORK? A fictitious case study will help you better understand how the working functions.

Say Orange Inc., a huge multinational corporation with its Indian headquarters in New Delhi, generates exceptional revenue on a global scale and is subject to India's corporate tax rate of 15 percent.

Now Orange Inc creates Mango Ltd. in the Cayman Islands, a well-known tax haven for corporate corporations, including Apple Inc., to pay fewer taxes.

Mango Ltd. has no trade or business operations, and no significant assets.

Orange Inc transfers its profits, property rights, and other significant interests to Mango Ltd, making any profits made in India subject to the tax jurisdiction of the Cayman Islands.

So, Orange Inc has successfully saved itself a 15% tax.

BENEFITS TO THE PARTIES INVOLVED The corporation can save taxes and money, which is the main advantage of investing in a tax haven.

Both a person's development and the development of the country as a whole will occur.

Saving taxes is a perfectly legal and sensible activity. The investment is secure because there are no restrictions on the tax implications in the nation dubbed a tax haven.

Since there is no capital gains tax, it encourages businessmen to invest there.

Tax havens also greatly help the economy since they promote fresh investment, which is good for the nation.

DISADVANTAGES TO THE PARTIES INVOLVED Tax havens may also promote some illicit activity.

Tax havens can be highly advantageous, but they can also be something that may draw a higher recovery from the inhabitants by imposing a hefty import charge on the imported goods.

Although tax havens may benefit large corporations, they are usually very advantageous for the local population.

Business deals in tax havens are frequently made up and may deceive the opposite party.

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| READER'S CHOICE

The lack of transparency in the process leaves the parties open to the possibility of betrayal.

WHICH COUNTRIES ARE THE BIGGEST TAX HAVENS? The Financial Secrecy Index (FSI) ranks countries and territories worldwide on two criteria: secrecy and scale.

Secrecy Score: measures how well a country's banking sector can conceal assets.

Analysis of ownership registration, disclosure of legal entities, adherence to financial and tax laws, and collaboration with international standards are all included in this.

Global Scale Weight: What percentage of all cross-border financial services are provided globally? This indicator is mainly based on the IMF's Balance of Payments.

According to the FSI rankings; the top 10 Tax Haven Countries are: 1. the Cayman Islands 2. the United States 3. Switzerland 4. Hong Kong 5. Singapore 6. Luxembourg 7. Japan 8. the Netherlands 9. the British Virgin Islands 10. the United Arab Emirates

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THE IMPACT OF EURO’S FALL TO THE DOLLAR PARITY Shruti Thakre | IIM Calcutta | PGP II The official currency of 19 European Union members is falling since 2008 after hitting its high at 1.598 dollars per euro. Since 2002, the exchange rate between euro and dollar was always greater than 1. The fall of euro in this year is more than 12% leading to 1:1 exchange rate between euro and dollar making both currencies equal. This parity shows the depreciation of Euro and strengthening of dollar against other currencies.

This sharp fall is driven by the economic factor and monetary policy factor for which government is responsible. Economic front includes the slowdown due to Covid-19

shutdown and Russia-UK war. However, the impact of covid on EU was more when compared with US. ECONOMIC FRONT The significant fall is driven by the RussiaUK war as Europe is heavily dependent on Russia for oil and gas. Imposition of sanction on Russia’s oil export and spike in prices of oil due to ongoing war led to the energy crisis. Germany which is the biggest eurozone has a natural gas pipeline from Russia was closed for somedays as Russia is cutting back its oil supplies. This left Europe vulnerable and its inflation accounted ~8.6% in June is also increasing which is increasing the cost of living of normal people.

Energy crisis led to the fear that government will ration the natural gas to industries like steel, agriculture etc. which will affect the businesses leading to further downturn in an economy. Global investors are pulling money from the market as the

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CALL FOR ARTICLE: WINNER risk is increasing and returns are not in line with risk. The future investment in eurozone is declining this is weakening the growth.

Though US economy is also slowing down and possibly it is heading towards recession, investors still feel safe to invest in US. As US is less dependent on energy imports and its economy is strong compared to the European Union.

Hence, we can see the shift in investment from EU to US.

due to high prices and trade can shift to other countries.

EXPORTS The demand for EU’s product in other countries will increase due to decrease in prices and make it more competitive. This can hamper the US domestic companies and its export to other countries.

EDUCATION AND TRAVEL

MONETARY POLICY CPI report states that US inflation increased to 9.1% and Fed is increasing the interest rates to control the situation. This increase is attracting the investors and making dollar stronger. To this move of US, European central bank decided to increase the interest rate but due to other factors like shortage of resources and increasing cost of living bears more risk than US. And if recession hits then the situation of Europe will get worst.

The impact of parity will affect the businesses of both the countries. Depending on the extent and nature of business it has some pros and cons. Increase in risk will hamper the small and medium businesses more compared to large businesses.

IMPORTS The businesses which import raw materials are facing challenge due to increase in prices as the euro is falling which makes imports costly. This is also affecting the US companies which export to Europe. As demand for these products will decrease ACCESS

Fall of euro will make its services cheap and affordable. Americans would prefer to travel and enroll in its educational institution. On one side, this will increase the tourism or demand and increase overall sales but on the other side it will dampen due to less earning per head.

DEBT The capacity to repay the debt decreases as growth hinders. This fall will widen the gap between demand and supply of debt of debt. The lenders will bear more risk and will lead to increase in cost of debt.

Borrowing for weaker states would be more difficult.

The situation will remain stressful until inflation falls and sanctions are removed on Russia’s energy export. Till then EU should focus on strengthening its trade which are less import dependent and can increase exports of these goods.

Source: nypost.com

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| CALL FOR ARTICLE: RUNNER UP

INDIA’S BET FOR ALTERNATIVE FUEL- CNG Ishika Gupta | Great Lakes Institute of Management, Gurgaon Fuel demands in India have seen ever rising hit. The country’s fuel demand soared 4.2% to a three-year high in March as petrol and diesel consumption rose above prepandemic levels as per Outlook India. Diesel, the foremost used fuel within the country accounting for pretty much 40 percent of all petroleum product consumption, saw the demand rising by 6.7 percent to 7.7 million tonnes. Petrol sales, which crossed the preCovid levels some months ago, were up 6.1 percent at 2.91 million tonnes. India's fuel consumption in 2022-23, a proxy for oil demand, could rise to 214.5 million tonnes from the revised estimates of 203.3 million tonnes for the FY22, in keeping with government forecasts. With this increasing demand for energy consumption, it becomes imperative to search out alternative routes which could reduce the gap between supply and demand and are also cleaner and more sustainable. In pursuit of the country’s alternative source of energy CNG (Compressed Natural Gas) seems to be a ACCESS

promising fit.

CNG is natural gas under pressure made of petrol which is mainly composed of methane compressed to less than 1% of the volume it occupies at standard atmospheric pressure.

CNG being a hydrocarbon fuel also produces emissions but unlike its counterparts such as petrol and diesel, it contains up to 95% methane which has only one carbon atom and it gets completely oxidized under normal conditions whereas fuels like petrol and diesel have up to 18 carbon atoms making them more polluting. In terms of environmental impact, CNG may reduce greenhouse gas emissions by 15-25% depending upon the vehicle segment, eliminates evaporative emission that is responsible for at least 50% of hydrocarbon emission produces little or no particulate matter, and shows a reduction of up to 80% in ozone-forming emissions compared to gasoline. In addition to environmental benefits increase in dependence on CNG will acc

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create a diversified fuel basket which will reduce the vulnerability caused due to fluctuation in international oil prices. It is estimated that local reserves for natural gas will last for 27 years at the current rate of demand whereas in the case of crude it is estimated to be 5.5 years. Currently, the share of natural gas in transport is not very significant. Natural gas is majorly used in the fertilizer and power sector but an increase in usage of CNG can indirectly benefit the health industry.

According to the Confederation of Indian Industry report, using CNG instead of conventional fuels like petrol and diesel will save at least 1 billion in health care expenditure. From the consumer’s point of view, CNG seems to be a more viable and cheaper source of fuel as on average the difference between the price of CNG and that of petrol and diesel is normally in the range of Rs.30-40. Coming to the government, there are various schemes or programs launched by the government to promote its usage; the union government has added more than 100 technologies including alternate fuels such as CNG under production linked incentive scheme for automobiles, this scheme aims to boost manufacturing capability of automobile sector. The government has also launched a pilot program for CNG fuelled two-wheelers taking into consideration rising air pollution and the climate crisis. All these factors have accounted for the increase in the popularity of CNG-powered cars in India, and the automotive sector which accounted for 6.3% in previous fiscal years now accounts for 8.6% of total sales in FY22. In the case of the

commercial vehicle, the segment has gone up to 9.59% as against 4.46. Whereas the share of petrol in the auto segment fell from 76.3% (Previous FY) to 71.3 in FY22. Although these numbers give a positive outlook still there are major challenges that are needed to be addressed in the hope of a better future. One of the major challenges that government needs to account for is the lack of CNG stations in the country, as per 2021 data India had 3180 CNG stations in all which is very less when compared to domestic demand which is rising at a greater pace.

Another concern is although CNG is a cheap source of fuel, it involves high purchasing costs. The price of a CNG car is approximately 85000- 90000 higher than that of its counterparts which is a cause of concern for a market where only 3% of the population has a domestic income of more than 16 lakhs. Now vehicles that are not originally available with CNG kits have to pay an additional amount to fix that kit, keeping money concerns aside is a threat to the safety of passengers as CNG is highly flammable and it requires regular service which is an additional burden for the consumer. Additionally, the engine has to go through a lot of wear and tear making its performance less efficient. Although the regulatory and judicial mandates have created opportunities for CNG programs in Indian cities still there is a long way ahead.

With the rising pricing for fuel amid Russia Ukraine war, climate change crisis, ozone layer depletion, and increase in carbon emissions, to meet such challenges India can bet on CNG for its alternative fuel.

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ISSUE NO. 113, AUGUST 2022

About Finstreet Finstreet, the finance committee of K J Somaiya Institute of Management aims at bridging the gap between industry and academic curriculum through effective delivery of knowledge-oriented sessions and events through a network of highly motivated members and renowned industry experts. Through the FINLY magazine, we focus on covering crucial topics for each month and giving our members a platform to express their views.

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