FINLY| December 2019 | Finstreet | SIMSR
From the Editorâ€™s Desk
Dear Readers, Greetings from the editorial team at Finstreet. For the past several years Finly has been informing, engaging, inspiring and entertaining a diverse readership -- including alumni, faculty, staff, and students at KJ SIMSR by presenting an intimate, timely and honest portrait of the key activities and events in the Indian and Global economy. We are proud to unveil the December edition of our monthly magazine FINLY for the academic year 2019-20. In this edition, Our Cover Story analyses the Entertainment industry and focuses on the biggest disruption in the industry since television, Streaming. It shares light on the major players and how it has affected the cable operators. Next in line, is the Eco Section, which analyses in detail the standing of India's Economy and shows why the economy is in good shape despite slowdown. In Sector Analysis, the authors inspect the Hospitality Sector with an in-depth analysis of its major players and its future outlook and an analysis of one top Hospitality company of the country, IHCL. This month's Intriguing Indeed covers the Amnesty scheme which aims at capturing the unaccounted wealth in the economy. The article covers the efforts taken by the government, its benefits and challenges. We would like to extend our gratitude to Mr. Amey Patale, PGDM Finance, 2017-19 for his contribution to the Alumni section by sharing his valuable experience at KJ SIMSR and in Industry. We would like to thank Prateek Tripathi for sharing their internship experience with Invesco respectively. We express our gratitude to Prof. (Dr) Pankaj Trivedi (Course Coordinator, PGDM Core, and Faculty Coordinator, Finstreet) for providing the essential mentoring, support and backing to the Finly team. We thank all our readers and faculty members for their constant love and support. Your reviews and feedback are much appreciated. Each edition of FINLY is the outcome of the tireless efforts and dedication of a group of individuals who call themselves Team Finly. We can't thank them enough for their constant support and initiative. Mohak Shah, MMS - Finance, 2018-2020
Saurav Jain, PGDM Core, 2018-2020
Team Finly- December 2019 Faculty Incharge
Dr.(Prof) Pankaj Trivedi
-Conceptualization & DesignHarsh Dhoka
Gaurav Khandelwal Rudra Deolankar
FINLY| JULY 2018 | Finstreet | SIMSR
Editorial Team Finly
04 Cover Story 07 Intriguing Indeed 10
Intern Diaries Alumni Experience
Call for Articles - Winner
Streaming Wars and The Future of Media and Entertainment Industry Gaurav Khandelwal-PGDM A Harsh Dhoka-PGDM B Prachi Agrawal-MMS A
Overview We are at the dawn of the streaming wars. It seems as if a new player enters the streaming industry every time we check notifications on our phone. In the past month, two huge companies Apple and Disney launched their streaming services Apple Tv+ and Disney+ respectively adding to the list of Netflix, Hulu, Amazon Prime, HBO Now and CBS All Access. Peacock from NBC Universal will be coming in April 2020 and AT&T will launch HBO Max in May 2020. Domestically we have homegrown players like Hotstar, Zee 5, Jio Tv, Sony Liv, Voot, Alt Balaji and many other small and big players. India is the second-largest smartphone market in the world and, by 2020, it is expected to become the second-largest video viewing market. What does this imply? With increasing data being consumed on smartphone screens, the Indian media and entertainment (M&E) sector is set for a major overhaul. A need for escapism, knowledge and social acceptance backs India's vibrant M&E sector. With more than 800 television channels, 100 million cable TV households, 70,000 newspapers and 1,000 movies produced annually, the Indian M&E sector has so far managed to buck the global trend and is growing at a healthy rate. The data points, however, can make one believe that the sector is thriving. That's not the case. In fact, the
M&E sector is on the brink of disruption. Streaming has caused the biggest disruption in the media and entertainment industry since the introduction of television. The media consumption habit of Indians is undergoing a huge shift, though it is hard to recognize some of the rapid and enormous changes around us. For instance, footfalls in theatres are stagnating and print advertising revenue is at a decadal low, while internet-based video streaming platforms are exploding in ubiquity. What's behind these changes? An overwhelming digital tsunami. India's M&E sector is at a digital tipping point. For instance, the online video viewing audience in India is projected to reach 550 million by FY23 compared to 225 million in FY18, according to KPMG. The explosive growth seen in digital access and consumption has been aided by the rapid proliferation of smartphones. It accelerated further with falling data cost fueled by Reliance Jio's entry.
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Source: India Today
The Players The proliferation of the internet in India, and with it the possibility of streaming television shows, has everything to do with the smartphone. Indians are now experiencing a sudden revolution: These days, three people in our country discover the internet every second. Thanks to newly cheap smartphones and cellular data plans, tens of millions of Indians are coming online every year. With an average annual income of about $1,775 and a median age of 27, most Indians see these smartphones as their first-ever cameras, computers, and television screens.
There are about two dozen streaming services in India, and digital subscriptions rose 50% to ₹3.9 billion ($60 million) in 2017, and are expected to hit ₹20 billion ($309 million) by 2020, according to an EY report. Amazon Prime Video is one of the most affordable service and at ₹999 for a year, it also bundles Amazon Prime Music as well as shopping and shipping benefits on Amazon India. A Netflix subscription, starts at ₹200 per month for a mobileonly subscription and ₹500 for the regular plans.
Netflix CEO Reed Hastings has said, his company's “next 100 million” subscribers will come from India, where some 800 million people are still waiting to discover the world of the internet and streaming content. As long as China blocks Netflix, no other single country has as much room to grow. Competition among streaming services will be intense. While Netflix has an estimated 2 million users in India—it hasn't released exact numbers—competitors like Hotstar (owned by Disney), which also broadcasts popular cricket games, leads by a gigantic margin and reaches 300 million users every month on TVs and smartphones (although only a fraction of those users sign up to pay for its ad-free content). And then there's JioTV, launched in 2016 and already the country's second-most popular TV app with hundreds of free live channels.
Source: Quartz India
Most domestic services like SonyLIV and Zee5 (formerly DittoTV) are priced at ₹99 per month. Hotstar treads the middle path, a Hotstar Premium subscription costs ₹299 per month and ₹1000 yearly, it also recently launched Hotstar Vip without premium English shows for ₹365 yearly. These three, along with Voot, are owned by media conglomerates that also r un the leading entertainment channels on TV, and hence are very important for those who follow television soaps and reality shows. Also, unlike the two global
FINLY| December 2019 | Finstreet | SIMSR players, these services offer a freemium model (Except Voot, which does not have a paid subscription). A lot of content, including the entire catalogue of their television programming, is available for free while the subscription is mostly for international shows and the latest movies. There are also other players like Alt Balaji, Eros Now and Mx player.
Impact on Cable/DTH operators and Theaters In the U.S., where high-speed unlimited internet is a given, cutting the cord saves money. In the US market, the average Cable-TV prices are between $40-100 a month. If a consumer in the United States decides to subscribe to Disney+ bundle(Hulu, Disney+ and ESPN+), Netflix, HBO Now, Amazon Prime and CBS All Access it will cost him approximately $55 a month and will be able to access on-demand almost all the content on cable, originals of the streaming services and live sports from Espn. For most subscribers, it turns out to be cheaper or approximately the same price as cable with lots of more options. Hence, users in the US see a lot of value and Streaming services are benefitting by this price arbitrage. But in India, that's not exactly the case. Cable TV charges in India range from ₹150 to ₹700 per month. Compare that with the cost of subscribing to Netflix(Mobile only), Amazon Prime Video, Hotstar, Sony Liv and Zee 5 which amounts to ₹796 if subscribing to the monthly plans. Add to that the cost of broadband internet there isn't a lot of value for many Indian consumers to cut the cord just yet. That said, the new tariff guidelines announced by TRAI (where users can now pay per channel) is likely to increase the monthly bill for most subscribers of TV channels, as per CRISIL. In effect, it will hasten the adoption of streaming platforms. The most important value proposition to attract customers is the content. Streaming service providers seem to have already made a mark among millennials in India. But they know that urban India is distinct from rural India. Globally, Amazon Prime Video and Netflix are expected to spend $18 billion combined to buy, create and license content at an extraordinary scale. In India, they have started focusing on building a library of content with mass and regional appeal. Netflix, Amazon Prime Video, Hotstar, and several others have already commissioned slates of new movies and television series fronted by top Indian stars. And much of the new content like Sacred
Games and Mirzapur will be in the local languages that a vast majority of Indians speak. Bingeing will soon have equivalent words in Hindi, Bengali, and Tamil. And once they have a bulk of regional content, there will be value in their offerings and customers especially in metro areas will start to ditch cable operators. In the near term, the threat to cable operators is low because of the cost factor. As of now, local Soap Operas will co-exist with Sacred Games and Mirzapur. But, the disruption caused by OTT players is for real with the potential threat coming from incremental subscribers. For affluent customers, the second TV connection is moving to streaming platforms. Naturally, this would have business repercussions for TV broadcasters who will start losing advertising revenue over the next few years. We can expect to see a wave of collaboration and consolidation in the space. (Recently Alt Balaji agreed to share its entire content library with Zee 5) Streaming platforms are also impacting movie theatres. Netflix Inc has streamed original movies at the same time, or just a few weeks after, their debut in cinemas. Competitor Amazon Studios has said it would like some of its films to play for only two to eight weeks in theatres before hitting the Amazon Prime Video streaming service. Many movies are now also made only for streaming and are not released in theatres. We often see many movies on streaming platforms barely even after a month of their theatrical run. Increasingly many people would prefer to wait a month or two to watch a movie on a streaming platform in the comfort of their homes rather than go to a theatre. Big Ticket films have till now managed to buck this trend with people preferring to watch them in theatres.
Conclusion At this stage, it is not clear who will survive the streaming wars, but one thing that can be said is that with the massive investment in content by streaming platforms it's a great time to be a writer, actor or a producer. Consumers are going to be spoilt for choice with the amount of content on offer. Many players will perish and India's digital revolution will force the reorganizing of the media industry chessboard.
Mihir Mali | PGDM FS | 2019-21 Nihar Shah | MMS | 2019-21 Rudra Deolankar | PGDM A | 2019-21
Amnesty schemes are specialized schemes that aim at capturing the unaccounted wealth in the economy and help the Government treasury increase the tax revenue. Under such a scheme the beneficiary has to pay tax at a certain rate on the total assets which are declared. In exchange, taxpayers are forgiven for tax liability on an earlier tax period or periods. In this way, people can legitimize their assets by declaring them and paying a certain amount as tax. These assets can exist within or outside the country. Through amnesty schemes, individuals and corporations can protect themselves from criminal prosecution which results from a tax investigation. The main purpose behind amnesty schemes is to bring unaccounted wealth on record. Also, it helps in encouraging corporations and individuals to declare their wealth. Such schemes are introduced when governments believe that individuals are hiding their wealth from the tax authorities. Revenue collected from such schemes is utilized for the wellbeing of the state. Countries like Pakistan, Indonesia, Argentina, and the Philippines have launched their own tax amnesty schemes in the past for people to disclose undeclared income without the risk of prosecution. Indonesia had launched a tax amnesty scheme in 2016 to forgive taxes and criminal sanctions that were successful in receiving declarations of hidden assets valued at $367.9 billion from around 970,000 participants during the amnesty period. There are no reliable estimates of how much black money is generated in India every year and how much has been accumulated so far inside and
outside the country. As per the study of the National Council of Applied Economic Research, wealth stashed outside India from 1980-2010 is estimated to be around $384-490 billion.
Efforts by the Government in Past Few Years In the past few years, several attempts were made by the Government to unearth the black money. Black Money (Undisclosed Foreign Income and Assets) Act was passed in 2015. Between July 1 and September 30 in 2015, a window for one-time compliance was provided for taxpayers to disclose their unaccounted foreign assets. Two more compliance windows were provided by the Government, Income Declaration Scheme (IDS) in 2016 and then the Pradhan Mantri Garib Kalyan Yojana (PMGKY) in 2017, after demonetization. All three schemes have yielded around Rs. 75,000 Crores. Even after all the schemes mentioned above Indian economy still faces the problem of black money being stashed through various means. To tackle this problem there are a couple of approaches that were in news recently, Elephant Bonds and Gold Amnesty Scheme.
Elephant Bonds An Elephant Bond would be a rupee-denominated bond with a maturity of 25 years. These 'elephant bonds' would be an active avenue for the people to bring their offshore undisclosed wealth into the
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homeland without any fear of prosecution. The High Level Advisory Group on Trade Policy (HLAG) which was set up under the Ministry of Commerce and Industry in 2018 and chaired by an economist and former member of the Economic Advisory Council to the Prime Minister, Surjit S Bhalla, has recently recommended implementation on “Elephant bonds”. The panel estimates that India can recover up to $500 billion of the black money stashed overseas if their proposal of this type of long term government bond (Elephant bonds) is implemented.
Features Subscribers will invest 40% of their undisclosed income in the bonds and will be issued fixed coupon security in return. 45% of the wealth brought in by the subscribers to these bonds will be credited to the depositor and the remaining 15% will be collected as “tax deducted at source” by the government. Of the amount invested in the bonds, the HLAG has recommended that 75% of the interests earned be collected as tax. The scheme will also be in line with the earlier directions of the Supreme Court on undisclosed income in India. One of the key features is that those declaring their black money will receive immunity from all laws including under black money laws, taxation laws, and foreign exchange laws as well.
Impact on the Economy The HLAG intends to divert the money collected towards funding infrastructure projects in the country. According to the Economic Survey, the country has been able to put in only $100-110 billion (Rs 6.8-7.5 lakh crore) annually into infrastructure, when it needs to pump in $200 billion (Rs 13.6 lakh crore). Thus elephant bonds can potentially help to revive growth in the infrastructure sector in India.
Gold Amnesty Scheme Gold Amnesty Scheme can be used to recover the black money which is present in the form of Gold. Under this scheme, individuals have to pay tax on the entire value of gold that has been purchased without any receipt. Through such a scheme the Government can give people a chance to step forward and account for their undisclosed gold by paying tax on the total amount of their gold. This will not only help them but also will help the government utilize the gold reserves which are
otherwise kept idle at home or in bank lockers for years. Gold Amnesty Scheme can be considered as a part of the comprehensive gold policy in line with suggestions of the Niti Aayog.
Benefits of Gold Amnesty Scheme ŸAccording to the World Gold Council, Indian
Households may have accumulated 25,000 tonnes of Gold and in value, it is more than 70 lakh crores. The actual amount of gold can be a higher and significant portion of it may be without any receipt. Through Gold Amnesty Scheme lot of such undisclosed gold can be brought on record and it can be taxed as well. ŸIt is very well known that many people buy gold to safeguard their black money. Therefore, this scheme can help them convert it into a productive asset and will decrease hoarding of gold to quite an extent. Ÿ This could be a significant step towards the goal of channelizing a large portion of undeclared wealth into normal channels. Ÿ Most of the gold in India is accumulated for
personal cultural reasons rather than as an asset in the financial portfolio to act as a hedge against inflation. Once such gold is accounted for and brought into the formal economy it can be routed to productive assets such as Mutual Funds, Debt Instruments, etc.
Challenges in Implementation of Amnesty Schemes The objective behind Amnesty Schemes is to bring the unaccounted wealth into the mainstream formal channels of the economy. But the implementation is not so easy. ŸLike in the Gold Amnesty scheme it will be
difficult to track the unaccounted gold as people have amassed it over times and inheritance leaves no transactional details. ŸPeople have to pay a hefty tax in return for
immunity and it will make it hard to push people to lose a significant part of their wealth. ŸPeople have expressed their fear of harassment by tax officials once the wealth is declared.
FINLY| December 2019 | Finstreet | SIMSR Ĺ¸Because of such challenges and other undisclosed reasons the Government has clarified that Gold Amnesty Scheme will not be implemented. But the Elephant Bonds Scheme is likely to be implemented.
As the Indian economy is going through a slowdown Government is in need of funds that it can pump into the economy. Unearthing the unaccounted wealth can prove to be a significant source for such a requirement of funds. To strengthen economic health it is important that the Government consistently tries to bring in unaccounted money into formal economic channels. For that, innovative methods such as Elephant Bonds and Gold Amnesty Scheme should be carefully designed and meticulously implemented.
Why the Indian Economy is doing better despite the Slowdown?
Hiral Moody | MMS | 2019-21 Jugal Daiya | PGDM A | 2019-21 Srikant Kolluru | PGDM IB | 2019-21
Recession is a word that is looked upon negatively by everyone when they encounter it, especially in recent times when we hear it more often in news everywhere around the world. Recession is defined as the contraction of GDP for 3 consecutive quarters. India being a developing economy, chances of contraction are rare. India had the last contraction of GDP in 1979. Thus, what India is facing right now is not recession, but growth recession. The GDP growth rate of the Indian economy has slipped to 5 percent in the first quarter of FY20, the lowest in over six years. This is an indication of tougher times ahead. Be it the recent collapse of the automobile sector or the rising number of nonperforming assets (NPAs), sluggish consumer demand or failing manufacturing sector; all have a hand in this deceleration of growth rate. Although the forecasts of growth rates for India's GDP is revised downwards, we must realize that we are still a growing economy and are doing much better than the other major economies around the world as well the overall world's GDP.
As we can see from the graph above, baring China India has been doing better than all the other major economies of the world. Thus, although there has been a slowdown in the growth rate of the Indian economy, it has still been better than considering the global scenario. The growth of the Indian economy had been predominated by consumption inclusive of both viz. Private Consumption Expenditure as well as the Government Consumption Expenditure (GFCE). Over the last five years, the total consumption expenditure by Indian households had accelerated with an average growth rate of 7.8 per cent compared to an average of 6.1 per cent in 2011-14. But the recent sharp fall in PFCE in the June quarter to 3.1 per cent compared to 7.2 per cent in March. Any fall in consumption will lead to a decrease in output and employment and would escalate the crisis even more*. Recession (including growth recession) can be short-lived if corrective actions are taken
FINLY| December 2019 | Finstreet | SIMSR immediately, failure of which can have a prolonged effect on the health of an economy. Thus the Government of India has increased its consumption to make up for the decline in private consumption in recent quarters to avoid the economy getting slipped deeper into the recession. This increase in expenditure has come through various measures adopted by GOI for various sectors. Following are some of the majorly affected sectors in India and the measures are taken by the Government to revive them: 1. Corporate Tax-rate cut: Âˇ The Corporate Tax-rate cut
policy was that a new domestic company incorporated on or after October 1 making fresh investment in manufacturing and initiating operations before March 31, 2023, will have the option to pay 15% tax. And for existing companies , it was reduced from 30 percent to 22 percent. Including a surcharge and cess, the effective tax rate for existing companies would now come down to 25.17% from 35%. Âˇ
India is keen to attract manufacturing companies that are looking to diversify their production out of China. The corporate tax cut has made the country one of the lowest tax jurisdictions in South and Southeast Asia. Companies can opt for higher tax rates or new ones.
Automakers and parts suppliers will benefit from the government's step to cut corporate tax rates. Automakers exploring ways to start manufacturing in India stand to benefit more, as the corporate tax rate for new manufacturing companies were also cut from 25% to 15%, provided they start operations by 31 March 2023.
The current reduction of tax rates to globally competitive levels will incentivize OEMs and their vendors to increase localization, which augurs well for the industry. India imported autocomponents worth $17.6 billion during FY20 (so far) and this is likely to increase further in FY21, given the transitionary phase towards stricter
safety and emission norms that the industry is currently facing. Further, given the increasing USChina trade tensions, revision in corporate tax will attract FDI (foreign direct investment) in the Indian manufacturing sector, as the revised tax structure is now in line with other emerging markets. 2. Real estate sector:
Indian government approved a plan to set up a 25,000 crore alternative investment fund (AIF) to revive stalled housing projects, as it seeks to provide relief to distressed homebuyers and rekindle animal spirits in the ailing realty sector. The projects need to be registered in RERA (Real Estate Regulation and Development Act) and their net worth should be positive. Even if the project has been declared an NPA or dragged to NCLT but not asked for liquidation will also be benefitted from these allocated funds. 3. Financial Sector
Current Repo Rate and History Last Update Rate: 5.15%
The repo rate is the rate at which the RBI lends money to commercial banks. The rate has been revised around 5 times in the past year. The downward trend continued, and the latest rate is 5.15%. The cut in repo rates helped the commercial banks in lending activities. This action by the RBI restored the faith of the banks and the investors in the economy and the RBI. The reasoning behind the decision of the RBI is that lower interest rates will stimulate consumption in the sectors which are affected by the slowdown namely the Automobile and FMCG sectors. Also, India's shadow banking system has been struggling with liquidity pressures after payment defaults by group companies of Infrastructure and
FINLY| December 2019 | Finstreet | SIMSR Leasing Financial Services (ILFS) Ltd last year. A f t e r a y e a r, m a n y n o n - b a n k f i n a n c e companies(NBFCs) have learned to negotiate the troubles. Equity investors, who take a longerterm view than lenders, are still very bullish about this sector. Also , the private equity investors, who have a longer-term investment horizon, have continued to show a lot of interest in funding NBFCs throughout this crisis. Conclusion: Although there has been a sentiment of a slowdown around the world and a decrease in consumption in the Indian economy, it is still doing well than most of the other major economies and the Indian government has played an important role in pushing up the consumption through expansionary Monetary and Fiscal policy.
Hospitality Sector and Company Analysis Aayush Shekhar | PGDM FS | 2019-21 Rashmi Sharma | PGDM FS| 2019-21 Viren Palan | MMS | 2019-21
Overview The hospitality sector was expected to perform better in 2019 as compared to previous years. In the past years the sector faced several issues like over-supply, disruptions due to technology and a slowdown in demand due to macro issues in the country. The experts of the market believe that increasing middle class income, rising disposable income, growing air connectivity and improving infrastructure could push the occupancy, average room rate(ARR) and revenue per available room(RevPar) for the industry this year. There is also a belief that the demand will be outpacing the supply in this year and will lead to increase in the ARR and RevPar and is expected to rise for the upcoming 2-3 years. Prashant Mehrotra, Vice President & Chief Revenue Officer, Lemon Tree Hotels feels that the current financial year started off at a slow pace in terms of occupancy going down by 300 bsp as compared to the previous financial year primarily due to elections. â€œIndia reported occupancy at 67 per cent, ARR at Rs 6169 and Rev Par at Rs 4153. The slump in occupancy rates has also impacted the ARR downwards by Rs 350. However, from second quarter onwards, we foresee a jump in the occupancy rates across India which is expected to result in occupancies slightly over the 70 per cent mark and consequently create a four to five per cent jump in the ARR over FY 19,â€?
Major Players and their market share The major players in the hospitality sector in India currently are Hyatt Hotels Corporation, Marriott International Pvt Ltd., Oberoi Group, Indian Hotels Company Limited, The Lalit Hotels, OYO Hotels and The Leela Palace. The Indian Hotels Company Limited is one of the front runners in the industry. This group has 4 major brands of hotels under it, Taj Hotels Resorts and Palaces, Vivanta, Ginger and SeleQtions.
Porter's 5 Force Model Competitive Rivalry The hotel industry has been performing well in the recent years. One of the biggest threats for hotel industry could be the rapid growth of Airbnb by the customers. Airbnb v/s the hotel industry has been a good competiton that is to be observed and learn from. This app has syphoned demand from hotels and limited-service properties in key and high tourists markets. It has impacted the industry in a great way as it provides customers with rooms at very much the same rates as any other hotels or cheaper. There has been a great shift in use of such apps by the customers and one of the only reason a customer wouldn't use this app would be as it doesn't provide with luxury and security.
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Threat of New Entrants The Hospitality industry face a minimal threat from the new entrants in the marketplace. The industry has high economic risks and also requires high amount of capital to be invested. Customers also prefer to choose brands or group of hotels they are aware of and trust, thus takes time to make a name in a competitive marketplace. The major issue faced by a new entrant would be of land and infrastructure, especially in the metropolitan cities.
Threat of Substitution The threat from subsitutes is very low to the hospitality industry. This as they provide the customers with proper service and great stays which could be different where customers don't get any service like when they opt for villa's. During the time of recession and when customers are travelling for a vacation they would opt for hostels or Airbnb and wouldn't want to stay in hotels. However in case of accommodating large group of people like travelling groups and business travellers the hotel industry doesn't face a substitute but faces competition of differentiation.
the customers will opt for a hotel providing a better deal at a cheaper rate for similar services.
Future Outlook The hospitality sector, we observe that RevPAR has grown by 2.6% over the last year. This deviation from economic behaviour can be attributed to the commercial real estate market, which has witnessed a 20% growth in office stock absorption and 1% decline in vacancy rates across the top seven business cities in India. This gives the hotel industry hope in 2019 moving into 2020, so long as the services sector continues to drive growth in the commercial office market in major cities. The positive outlook of the government on revival of GDP growth and maintaining inflation at targeted level gives the economy as well as the hospitality industry a ray of hope. With the latest reduction of GST from 28% to 18% applicable on room rates above Rs 7,500 per night will provide a great fillip to the premium and luxury hotel sector. Also, the significant reduction of corporate tax will strengthen the investor sentiment.
Company Analysis: Indian Hotels Company Limited
Buyer's Power The customers have a greater buying power over the hospitality industry as the number of customers is high in the Indian market. Certain buyers exercise their powers over the industry when the bookings is to be done in bulk. This could be in the form of tour operators in domestic as well as international hotels. There are various organizations which have a tie up with the hotels. In this case the company's employees are accommodated in those hotels during business trips as well as some of their meetings are organised there. Various hotels also provide business travellers with early check-in as a part of their customer ser vice to attract more organizations. Some of the hotels even provide the facility of business rooms as a part of expansion and market share capture strategy.
Seller's Power The hospitality industry has a low seller's power, this is because it is a service industry. In this industry they have to follow the concept of â€œcustomer is the kingâ€?. They have a need to constantly keep innovating in order to be in the competition and earn profits. Pricing strategy is a very important aspect of this industry. If the hotels fail to adopt an appropriate pricing strategy,
Overview The Indian Hotels Company Limited is an Indian hospitality company which manages a large portfolio of hotels, resorts, jungle safaris, palaces, spas and inflight catering services. It is a subsidiary of the Tata Group conglomerate. IHCL was founded in 1899 by Jamsetji Tata and is headquartered in Mumbai, Maharashtra.
Business Model IHCL is amongst South Asia's largest hospitality companies by market capitalization and represents a global hallmark of quality in hospitality. The Taj Mahal Palace, Mumbai, has remained an iconic flagship and has set a benchmark for fine living with exquisite refinement, inventiveness and warmth. Major brands of IHCL include Taj, SeleQtions, Vivanta, Ginger. IHCL works on the principle of Restructure, Re-engineer and Re-imagine, which helps
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the company to sustain its global position for longterm. It has maintained its sound position in the market and is supposed to have a growing trend in future because of the following factors: ·
Marketing and branding
Dealer and partner engagement
India emerging as key destination
Robust consumption growth
Growing incomes and affordability
Demand for rooms outpacing supply
Strong prospects of the global travel and tourism industry
Expectation of clients in ter ms of technological development
Corporate Governance ICHL has a very strong corporate governance with a board size of 8 members , this moderate size of board members helps to provide ease in decision making. The board contains a good number of independent members, which helps to keep a check on company management and take required actions if necessary for the benefits of the stakeholders. Company's shareholding pattern shows maximum percentage holding i.e. 39.09% by the promoters followed by National banks and Mutual Funds. IHCL works on the ideology of 'Tata Code of Conduct' which outlines the commitment to each of the stakeholders, including the communities in which the company operate, and it proved as the guiding light when the company faced business dilemmas. It helps company to build its ethical base in the market.
STRENGTH · Business Philosophy that not everyone is the same, thus cater the market segment for different income segments and different cultures. Amenities such as spas, jacuzzi, multicuisine restaurants, swimming pools, pubs, resto cafes, fitness centres, banquet hall and m e g a c o nve n t i o n c e n t r e s t o h o s t conferences.
Customer Loyalty programs.
WEAKNESSES · Unequal growth across medium segments and luxury hotels segments. High cost of maintenance.
OPPORTUNITIES · Growth in smaller towns: The Taj Group of Hotels is an established player in the Indian market and the hotel chain is expanding into smaller towns and cities a task which is impossible for the multinational hoteliers.
Source: IHCL Website
Financial Analysis The segment-wise breakup for revenue generation by IHCL shows the income from all the segments has been increased in the year 2019 as compared to the previous year. There has been a significant increase of 11% in the revenue generation by Food, Beverage & Banqueting. The occupancy rate has been increased by 1% while the average rate per room has been increased by 3% as compared to the previous year.
Other heritage properties, Competitors upgrading to international standards of work ethic
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Source: IHCL Annual Report
The financial ratios of the company shows the marginal uptick in this Debt to Equity ratio because of reduced liquidity due to long-term security deposit place and prepayments of renewal license fees for select properties. Optimum use of assets and efficient capital allocation boosted RoCE. Improvement in ARRs, occupancies, restaurant sales and banqueting business facilitated revenue growth and thus resulted in higher profitability. Higher operating income, moderate growth in variable cost and fixed overheads fuelled margin. Robust margin expansion, better asset management and favourable supply-demand gap aided profits.
Future Outlook IHCL is a leading hospitality company in South Asia, which has recently announced a comprehensive five-year business strategy targeted at improving EBIDTA margins by 800 bps. The plan that company will work towards deepening guest experience, strengthening market leadership and achieving transformative growth leading to greater profitability and market leadership in each of the IHCL relative market segments.
major equity, fixed income and alternative asset classes, delivered through a diverse set of investment vehicles. Process The process for Invesco was a case discussion followed by two rounds of interview. We were divided into groups of 8 or 9 for the case discussion. The case was a fairly simple one which did not require any kind of external knowledge and could be cracked by common sense. I just spoke once in the entire discussion but made a pretty relevant and valid point. The moderators generally look for quality over quantity and that is probably what helped me get through this round.
INVESCO Company Overview Invesco Ltd. is an American independent investment management company that is headquartered in Atlanta, Georgia, United States. They have an on-the-ground presence in 25 countries, serving clients in more than 120 countries. They offer a wide range of singlecountry, regional and global capabilities across
Roughly, 10-12 students were selected for the first round of interview. This interview was a pretty generic one. The interviewer primarily asked me questions that were related to my CV and my prior work experience. Other questions were fairly simple finance ones like â€“ the different assets classes in the financial market and what is technical analysis (asked because of my interest in trading). Five students were shortlisted for the second round of interview. The panel for this interview was larger than the previous one. Like the first interview, not many finance questions were asked. The ones that were asked could be answered easily if you paid attention during their pre-placement addressal. Some of them were â€“ who is a custodian, what is a basis point, how does
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Invesco or any other mutual fund generate revenue etc. Eventually, three students were selected for the internship.
My experience I worked in the GPMR department which is the Global Performance Measurement and Risk team. Within GPMR I worked in a team which takes care of Alternative Investments. Alternative Investments are basically the ones apart from the traditional investments like equity and fixed income. They mainly comprise Hedge Funds, Derivatives, REITs etc. The department's work mainly revolved around reporting the performance of the various funds that Invesco handles for its clients. It uses different perfor mance measurement tools which generate reports that are then passed on to the fund manager for further analysis or even to the clients if required. During my tenure, I learnt a lot about the various derivative products that Invesco deals in. I also learnt valuable concepts such as Performance Attribution and Factor Investing. Work culture wise, Invesco is a pretty decent place to work in. I did not find anyone who was unapproachable when in need. Overall it was a great learning experience. A piece of Advice For anyone who wants to intern at Invesco, it is important to know that they are not looking for students who must be very technically sound. They are just looking for students who can show them a willingness to learn and who would be a very good cultural fit for the organization (This was told to me by one of my panellists when I was an intern there). Also, I personally feel that it is quite handy to have good answers to questions such as “why finance” and “why MBA” as these questions tell a lot about the thought clarity of a student. This would not only help with Invesco but with the other companies as well.
Amey Patale The other day when I was asked to write for Finly's alumni section, I reminisced about my b-school and Finstreet days. It's been around 7 months leaving SIMSR but it feels like just yesterday, indeed time flies very quickly. There was a time when I used to look forward to read and get inspired by the Internship and Alumni experiences shared by seniors and now getting an opportunity to share my experience is wonderful. Based on my experience in SIMSR of what I could achieve and what I couldn't, I thought to put forth 3 returns that one must strive to achieve out of their Investment (Time and Money for MBA). 1.) Skills 2.) Networking 3.) Exposure Based on the person who is reading this article a 1st year or 2nd year, we must do a self evaluation whether we have achieved sufficient returns on the
investment in ourselves. If “No” then one must try to make reasonable efforts to gain maximum out of the remaining stint at SIMSR. Now to achieve the maximum of the 3 returns, let me define them, my way. The definition may change person to person. Skills — Some things which can be transferred and used on the Job or while managing our own Business. The must haves in all the industries are Excel expertise, Communication and Presentation Skills. In addition to this, other must haves especially for Finance Industry include Expertise in all the Finance subjects taught at B-school, good understanding of Statistics, ability to analyse infor mation to come up with a view and competency in usage of several tools like Bloomberg, Capital Line etc. Need to have includes leadership and team management. Good to have includes knowledge about programming languages and Analytics. These skills need to be developed while at B-School and this requires considerable efforts to be put in. Once such competencies are developed they make you more employable. Not all roles on offer require all of the skills mentioned above and one may make additions or deletions from the list mentioned above. But the key takeaway from these 2 years should be the skills which can be used. These skills can be developed by putting in honest effort in regular B-school activities like the projects and/ or presentations accompanying each credit, thorough understanding of the different courses taught, par ticipating in several b-school competitions, doing live projects, pursuing additional courses on Coursera, Edx and more importantly staying up to date on current
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happenings through business newspapers. Networking — SIMSR has a large batch size, which can be a concern for many people during placements. However, if we take it positively this large batch size gives us an opportunity to make many new connections including Junior and Senior batches. Making mere connections is not the point but we should strive for meaningful Networking. In my opinion, meaningful networking is all about Sharing. By Sharing I mean, sharing our views on current happenings, sharing our analysis about a sector, company, an event etc. Again, skills are needed for presenting such logical views or analysis. Also, when any company comes for Internship or Placements, we should not hesitate to get to know more about the company, role by reaching out to seniors or people working in the company. Exposure — By Exposure I mean to engage in different activities on the Campus like Sports, Joining different committees etc. SIMSR has a unique offering of lush green campus and several sports which no B-School in Mumbai can offer. So, we should take full advantage of it. Also, you should make sure to attend all guest talks on campus and store key takeaways as these are learning's from several years of experiences of distinguished Industry experts.
companies, for a credit research role, he or she should come up with a model to analyze a company from a credit standpoint etc. Professional certifications like CFA, FRM are good to have as they present a structured learning, however not a must have or need to have as an MBA in finance course would get you acquainted with most of need to know of finance although not in that depth. Also, having patience is the key in final placements. For now, I feel, this is enough of advice as we must also make these last two years of education memorable, by living to the fullest. For me, being a part of Finstreet was really an enjoyable journey and a great experience. Finstreet is a family to me, for there are like-minded people having common aspirations and it did play a huge role in my rollercoaster ride of 2 years at SIMSR. #ProudFinstreeter
Now coming to the next important point i.e. Internships and Final placements. I will share my two cents about them. However, the key to this is having Skills that can be used on Job and also a little bit of luck. Internships and Placements — Internship in my opinion is a dress rehearsal for final placements. While there is not a lot we can do for internships as companies start visiting campus in a month or two of joining the B-School, especially the Engineers. All we can do is to get acquainted to Finance by doing some NiSM/ NCFM courses. I did the same and fortunately it worked for me. However, for final placements we should be better prepared by making a list of companies that visited campus last year and the roles offered. This can be a tedious task but not impossible. We must then try to get skills relevant to the roles which, we would like to get into, for e.g. If a person wishes to enter into an equity research or Investment banking role, he or she should build valuation models for a few listed
Saudi Aramco - The Big Bang IPO
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Sameer Shaikh.R. , FOBA (GLSBBA), GLS University Visualize waking up in your snobbish high-rise penthouse facing the Red Sea. Above the buzzing city hangs a giant artificial moon that live streams images from outer space. You call for an automated flying taxi, and it carries you to your job hereditarily modifying humans to make them stronger. When you return home in the evening, you find that robot maids have made a comprehensive cleaning of the place. Further, you decide to step out for the night at one of the city's many five Michelin star restaurants, followed by a visit to the robot dinosaur park. Sound like science fiction? Maybe. But believe it or not, this is the future envisioned by Saudi Arabia's crown prince, Mohammad bin Salman Al-Saud. Everything I described above is lifted directly from his plans for a brand new city. This “land of the future,” called Neom, is to be built on a Massachusetts-size area of barren desert along the Saudi kingdom's northwest coastline. Its goal is not only to attract “the world's greatest minds and best talents,” but also to lure international tourists and luxury travelers. As ambitious (crazy?) as bin Salman's plan sounds, it's already moving forward. Bloomberg reports that the kingdom has awarded two Saudi construction firms with contracts to begin building housing for workers. When all's said and done, the cost to bring Neom to
fruition will run an estimated $500 billion—which has some investors sweating. This year the oil-rich kingdom's budget deficit has widened further to around 7 percent of its gross domestic product (GDP), according to the International Monetary Fund (IMF) So where does bin Salman expect to come up with this cash? Do I even need to say it?
Saudi Aramco, World's Most Profitable Company, Going Public: It may be no coincidence that Saudi Arabia is finally set to sell shares of its national oil company, Saudi Aramco at the same time that construction starts on Neom. Coincidence or not, the timing is interesting. Early last week, the kingdom's Capital Market Authority announced that, after years of speculation, Aramco will at long last begin trading on the Saudi Stock Exchange, or Tadawul, sometime next month. The energy giant is the world's most profitable company—in 2018 it generated a mind-boggling $111 billion in net income and some $86 billion in free cash flow. And with a valuation of between $1 trillion and $2 trillion, it's worth more than the entire $550 billion Saudi equity market. In fact, at the low end of that valuation, according to Wall Street, Aramco will still be worth more than all Brazilian stocks, and the top valuation would make it worth more than Korean,
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FINLY| December 2019 | Finstreet | SIMSR
Australian, Swiss or German stocks.
But Should You Invest?
Indeed, there's a lot that, on the surface, is enticing about Aramco as an investment. Consider the dividends alone. According to the summary prospectus, Aramco intends to pay out an incredible $75 billion in cash dividends next year. Not only does that amount to a potential 5 percent yield per share, but it's almost 30 times more than the $2.6 billion Apple distributed to investors in 2018. As for production, it has the world's largest oil reserves for any one company, and its cost for extracting the stuff is a low, low $2.80 per barrel far less than any of its rivals.
Despite all this, Aramco may have a hard time convincing foreign investors to look past some of the significant drawbacks. According to estimates by Ellen R. Wald, author of the Saudi 2018 bestseller: The Arabian Kingdom's Pursuit of Profit and Power, For one, shares will only be available to buy on the Tadawul in Riyadhâ€”for now, anyway. Second, the public float will be in the neighborhood of 2 percent of shares, making this a relatively small public debut for such a massive company. Depending on the company's final valuation, and depending on the percent of shares it ends up listing, Aramco could end up making between $30 billion and $51 billion in this round of fundraising. The rest of the shares will be owned, of course, by the crown prince and the House of Saud. This is an absolute monarchy we're talking about, after all, and so global investors should not expect to have any shareholder rights. Aramco's board of directors will have a fiduciary duty not to investors but to MBS and any future monarch. This has some serious implications. In the past, the monarchy has used Aramco as a piggy bank, dipping into its vast coffers to finance any number of pursuits and projects.
The IPO also comes just a short period after Saudi Arabian stocks were finally included on the MSCI Emerging Markets Index, giving a greater number of global investors' exposure to the oil-rich kingdom.
The money rose from the Aramco IPO, and any subsequent offerings, will not go to the company. It will go to Saudi Arabiaâ€”to the king and his government. And every subsequent purchase of Aramco shares will raise the value of the company just a little, further enriching the king and getting him closer to realizing the futuristic city of Neom.