Niveshak December 2021 Issue

FINANCE & INVESTMENT CLUB

NIVESHAK

COVER STORY

FINVIEW

DEALS BREWERY

Semiconductor shortage: Decoding the Hiatus

Mr. Kapil Gupta, Chief Economist, Edelweiss Financial Services Limited

ZEE-SONY Merger: Fusion of two Entertainment Giants

ISSUE IV • VOLUME XV • DEC'2021

NIVESHAK

NOV'21

E D I T O R ' S N O T E QUI N'AVANCE PAS RECULE

Dear Niveshaks, We are delighted to present to you the December edition of Niveshak. This edition highlights several turning events in the landscape of the Indian and the global economy. With Covid 19 infections and a new variant still looming around the corner, the conversation about sustainability is the need of the hour.

This edition begins with covering important news stories of December 2021, including Barclays Asia's revival strategy, Amazon web service chaos, RMC's smartphone incentive to boost vaccination, Turkey's lira free fall, Assault against OPEC, SEBI's new IPO guidelines, and the announcement by GOTO board of members to go public.

The cover story of this edition talks about the global shortage of semiconductors and the reasons behind the chaos. In addition to it, the article explains how different sectors have been affected due to

1 | EDITOR'S NOTE

TEAM NIVESHAK

Aagam Parikh

Aayush Jain

Akriti K.

Akshat Sharma

Darshan K.

Nikhil Chadha

Shashwati A.

Shreyansh D.

Unnati Tanwar

Aritro Dutta

Arushi Mathran

Hardik Goyal

Manish Kumar

Nihar Mehta

Pratyush Kumar

Rakesh M K

Sandhaan G.

Vasundhra Misra

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this crisis, especially the automobile sector.

Further, it dives into the initiatives taken by the Indian government to push the semiconductor sector and other developments happening around the world for semiconductor capacity enhancements.

In the Finview section, we bring you the cognizance of Mr. Kapil Gupta, Chief Economist at Edelweiss Financial Services Limited, who shares his views on building a successful career as an economist, budget day, RBI's role in mitigating the damage caused by pandemic, and revival strategies implemented by them.

DEC'21

Finally, test your finance, economics, and market awareness with this edition's newly designed crossword for you. Don't have a physical copy? Don't worry, scan the QR code and 'Go Digital'!

We would love to hear your thoughts, feedback, and ideas.

Please feel free to reach out to us to let us know what you think!

We hope you derive something from this edition and stay safe and sound in these exciting times!

Stay Invested, Team Niveshak

Know Your Sector focuses on The Education technology Industry.

The section explains the growth catalyst, sub-segments, and key metrics used in the industry to adjudge the financial health of the companies.

Our newly introduced 'Deals Brewery' section covers the latest agreement between Zee Entertainment Enterprises Limited (ZEEL) and Sony Pictures Networks India (SPNI).

FinSupervise' of this edition talks about NFT- Non-fungible tokens, advantages and disadvantages of investing in this asset class tokens, and a few investment tips about the same.

A snapshot of the Niveshak Investment Fund's performance is also shared in the NIF section.

All images, design, and artwork are copyright of IIM Shillong Finance Club © Finance Club Indian Institute of Management, Shillong

Disclaimer: The views presented are the opinion/work of the individual author and the Finance Club of IIM Shillong bears no responsibility whatsoever.

EDITOR'S NOTE | 2

CONTENTS Niveshak Investment Fund

The Month That Was

Know Sect

Educ Techn Transfor way of l

Monthly performance of NIF

7-8

18-1

The Finance Bulletin

5-6 7-8

13-17

9-12

Semiconductor Shortage: Decoding the Hiatus

Cover Story

13-16 Views of Mr. Kapil Gupta

FinView

20-2

A Brighte for Crypt in Shift Interests Investo Equities

Article of t

Your tor

cation nology: rming the learning

9

FinSupervise

Deals Brewery ZEEL & SNPI

Non-Fungible Token (NFT)

27-28

The Crossword

25-26

31

24

24

er Future to Trends ting the s of Indian ors from to Crypto

the Month

Let's Fin Up

29-30

Metro Brands

Something New Something Offered

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DEC'21

T H E M O N T H T H A T W A S THE FINANCE BULLETIN

Barclays r e vr ievvai l

plots

Asia

Barclays plans to make key hires in investment banking and wealth management across Asia next year as the British lender plots its return to some of the world’s fastest-growing economies after a 2016 restructuring.

Barclays also plans to build up its private banking business in Singapore, and investment banking in Australia by hiring locally. The bank plans to invest just over $400 million to grow its corporate, investment, and wealth management business.

Amazon c hcaho as o s

Web

Service

On 7th December, Amazon Web Services (AWS) suffered an outage across many parts of the world and all those smart devices powered by AWS went quiet alongside it. It wasn’t just a smart device problem. Many businesses

5 | THE MONTH THAT WAS

suffered in tandem.

These companies use Amazon cloud solutions to store data, run their applications, and do all sorts of other things and all of them had to bide their time until somebody could figure out what was happening. Amazon did fix the issue soon enough, but not before it became apparent to everyone how dependent we are on the internet giant.

RMC’s vaccination i nicnecnetm ive- A chance to win smartphone.

There are 1.8 lakh residents who’ve delayed getting their second dose and the Rajkot Municipal Corporation is dangling the smartphone carrot. They want to make sure the city is protected against the virus, especially with Omicron, the newest variant, rearing its ugly head. And as a bonus, RMC wants to boast of a 100% vaccination record but since

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offering this instant gratification can be an extremely expensive affair, maybe the best strategy is to rely on the time-tested method of raising awareness and taking the vaccination program to people’s doorstep.

Turkey’s lira free fall Turkish Lira is losing value quickly. In fact, it has lost nearly 40% of its value within a year. It now carries the ignominy of being called the world’s worstperforming major currency. And the plunge is largely thanks to the policies enacted by Turkish p r e s i d e n t — R e c e p T a y y i p E r d o g a n .

Lowering interest rates in order to increase investment has been a major problem when the currency is already weak in comparison to foreign currency.

Assault against OPEC T h e o i l c a r t e l — m a d e u p o f o i l producing countries predominantly from the Middle E a s t — h a s f o r m o n t h s r e f u s e d t o increase oil supply. And many oilconsuming nations including India, China, and Japan are getting desperate.

They’ve been requesting the cartel to somewhat expedite production so prices don’t get out of hand. They’re fighting back and they’re seeking co-operation from some of the world’s biggest oil consumers to take on the OPEC. And in a first of its kind attempt, the US, China, India, Japan, South Korea, and the UK have decided to release a

DEC'21

a portion of their petroleum reserves in tame crude oil prices.

SEBI issues r url u e sl e s

strategic a bid to

new

IPO

The Securities and Exchange Board of India (SEBI) on December 28th, announced tighter rules for companies raising capital from the markets, anchor investors, preferential allotments, and changes in IPO (initial public offering) pricing norms.

The norms for anchor investors have been changed; the existing lock-in of 30 days shall continue for 50% of the portion allocated to anchor investors while for the remaining portion, a lock-in of 90 days would be enforced starting April 1, 2022. Sebi has also imposed a cap of 35% – of the IPO proceeds — that can be used for acquisitions where targets are not specified and for general corporate purposes. .

Indonesia's super app G oGToo t o g o p u b l i c w i t h $10 billion valuation

GoTo’s planned IPO reflects the maturing of the first generation of tech startups in Indonesia, which has seen a flurry of fundraising and startup deals this year. The merged entity raised more than $1.3 billion in the first closing of a fundraising round ahead of its initial public offering and expects more investors to join the fundraising.

THE MONTH THAT WAS | 6

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N I V E S H A K I N V E S T M E N T F U N D PERFORMANCE EVALUATION

NIF SINCE INCEPTION

Sensex Scaled Value

Portfolio Scaled Value

Return measures Total investment value: ₹10,00,000 Current portfolio value: ₹31,28,734 Change in portfolio value: 0.97% Change in Sensex: 0.21%

NIF DECEMBER PERFORMANCE

Sensex Scaled Value

Portfolio Scaled Value

Risk measures Standard Deviation NIF: 44.74% Standard Deviation Sensex: 41.03 Sharpe ratio: 4.76 (Sensex: 4.49) Cash remaining: ₹1,84,140

Comment on equity markets & NIF performance Indian stock markets boomed higher on the last trading day of the calendar year 2021 with Sensex topping over 58,300-mark and Nifty 50 nearing towards 17,360. The domestic equities witnessed a bull run despite mixed global cues. A broad-based buying was recorded with banking and consumer durables stocks emerging as major boosters of the performance. Except for IT, all other sectoral indices were up.

In terms of sectoral indices, on BSE, the Consumer Durables index soared over 800 points, while the Bank's index surged nearly 540 points. The Metal and Auto index advanced nearly 290 points each.

NIF saw a portfolio change of 0.97% (Sensex: 0.21%) and stood at a net value of ₹31,28,734.

7 | NIF

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INDIVIDUAL STOCK WEIGHTS & MONTHLY PERFORMANCE Portfolio Weight

Performance

TOP GAINERS - DECEMBER 21

23.99%

- Paramount Comm

13.64%

- Asian Garnito

6.68%

- Lupin

TOP LOSERS - DECEMBER 21

(13.39)%

- Indiabulls Hsg

(6.83)%

- PVR

(5.99)%

PPAP Automative

NIF SECTORAL WEIGHTS

NIF | 8

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DEC'21

C O V E R S T O R Y SEMICONDUCTOR SHORTAGE: DECODING THE HIATUS

Introduction What are the items you regularly see while confined to our home due to a pandemic? Smartphones, laptops, video games, and televisions are almost certainly among them. On the roads, we see vehicles, two-wheelers, and a variety of devices, and in hospitals, we see medical equipment. The brain of all these modern electronics is what we define as a semiconductor chip. In a nutshell, any gadget, device, item, or product with an electronic display that requires data processing relies on these chips.

They make life easier for people, stimulate economic activity, and advance digital innovation.

A semiconductor is made out of silicon, germanium, or gallium arsenide. It conducts electricity and is used in integrated circuits or microchips.

Keeping the importance of semiconductor chips in view, the Cabinet recently approved a comprehensive program to develop a sustainable semicondu9 | COVER STORY

ctor and display ecosystem in the country with an outlay of Rs.76,000 crore (>$10 billion) in support of Aatmanirbhar Bharat's vision of positioning India as a global hub for Electronics System Design and Manufacturing.

By offering a globally competitive incentive package to semiconductors and display manufacturing and design enterprises, the initiative will usher in a new era in electronics manufacturing. This will pave the path for India's technological leadership and economic selfsufficiency in these crucial areas.

It is expected that this will result in the creation of 35,000 specialized jobs.

Global semiconductor supply has been disrupted as a result of the Covid19 outbreak.

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What led to the global shortage?

Demand for smartphones, laptops, gaming consoles, and desktops shot up due to COVID-19. As a result, manufacturers and consumer electronics companies started stockpiling inventory for the next 12 months.

The manufacturing of semiconductors is concentrated in select regions of the world, which includes the US, Taiwan, Japan, South Korea, and Europe, where there have been some unfortunate events like a snowstorm in Texas, a fire at a major semiconductor factory in Japan, and national lockdowns impacting semiconductor foundries in Malaysia.

Also, manufacturing semiconductors takes at least 12 months which resists a sudden revival of supply up to new levels.

Why is the automobile i n di n uds t r y b e i n g a f f e c t e d the most?

The Auto-Sector consumption makes 5-9% of the global semiconductor production.

The auto-component manufacturers have

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have short-term sourcing commitments that range from a few weeks to three months, which contrasts with other industries that have sourcing commitments up to 12 months. Thus, when the pandemic hit and the demand for consumer electrics shot up, they were prioritized due to longer commitments. Also, automobile manufacturers did not foresee a fall in demand but rather a slump because of the pandemic. Due to this short-sightedness, when the demand shot up, it could not be met due to a shortage of semiconductors (as approximately 80-100 chips are required in a standard car, and the number increases with increased features and complexity models).

This shortage has led to long waiting months to get your cars delivered.

Globally, there has been an estimated loss of $210 billion in the sector due to this shortage. .

The 76,000 cr scheme f ofro ra m e g a p u s h t o t h e semiconductor sector As per claims by the Indian government, semiconductors are a 100 percent import sector, but according to them, India has a distinctive advantage in chip design as several global IDMs have established their design centers in India. Keeping all this in mind, the government has launched a 76,000 cr package to attract know-how and investment in the sector. The government does not want to miss out on opportunities as it did in the past and COVER STORY | 10

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past and is trying to bridge the gap back, taking the initiative of pushing it under its Production Linked Incentive (PLI) Scheme Under the scheme, the government has lined up attractive incentive support for companies engaged in silicon semiconductor fabs, display fabs, compound semiconductors, silicon photonics, sensors fabs, semiconductor packaging, and semiconductor design.

The government plans to set up 20 semiconductor units in the country in two years. Also, under PLI Scheme, land, semiconductor grade water, power, logistics, and research ecosystem will be provided to these companies at a subsidized rate to set up two greenfield semiconductor fabs and two display fabs in the country.

The government has also launched a design-linked incentive scheme that shall extend product design linked incentive of up to 50% of eligible expenditure and product deployment linked incentive of 4%-6% on net sales for 5 years.

This semiconductor mission of India will aid the smooth development of a sustainable and display ecosystem. It can be traced back to the launch of this scheme as a link to the Quad summit on 24th September 2021.

Quad is a strategic security dialogue between the US, India, Japan, and Australia. Though it is 11 | COVER STORY

DEC'21

not explicitly stated, the group is believed to be an anti-China group. Since the pandemic, the anti-China sentiments have been going strong, and it's an activity in the South China Sea, which has led to the revival of the group.

In addition, tensions have escalated between India and China after the recent border standoff.

India needs to be more worried as 40% of semiconductor imports come from China and 26% from Hong Kong, which China is trying to get under its rule. In this meeting, the 4 countries decided to come up with a solution to collaborate and leverage the strength of each country in the process of making semiconductors to overcome the global shortage and reduce dependency on China.

The United States is a leader in semiconductor design, electronic design automation, and licensed intellectual property.

Japanese companies enjoy dominant positions in semiconductor materials and chemicals, and the country is also a market leader in silicon wafers and substrates.

Australia occupies an important place in the broader electronics supply chain as it has access to critical materials and advanced mining capabilities.

The semiconductor design requires a large number of skilled engineering and labor, which is what India fulfills in the supply chain. All of them coming together will help build a robust semiconductor supply chain which

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is independent of China.

India has also partnered with Taiwan, which is now sternly opposing China to establish semiconductor units in India. The Taiwanese contract manufacturers accounted for more than 60% of the total global foundry revenue last year.

Conclusion The government looks forward to the scheme as a significant contributor to their $1 trillion digital economy dream by 202526. It has a production target of close to $128 billion over the next 20 years, and exports are expected to touch 68.97 billion over the next 20 years. Also, developing the semiconductor and display ecosystem will have a multiplier effect across different sectors of the economy with deeper integration to the global value chain. This will help reduce China's dependency and help India become a hub of semiconductors.

This will also help to drive the next phase of digital transformation under Industry Revolution 4.0

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not that evident as it appears.

Setting up all of the infrastructure and production will take time for the initiative to bear fruit because the process is timeconsuming—other factors, such as a lack of high-tech product manufacturing by local companies, will also play a role. Apart from attracting chip makers, the government needs to ensure that local players scale up electronics and hardware in India. Also, the imported machinery used to take 16 weeks earlier, but now it takes 62 weeks because they need to fulfill the needs of their home country first due to growing nationalism sentiments and the ongoing chip shortage. Thus, the purpose of filling the current gap will be defeated if local semiconductor consumption reaches $20 billion with only $1 billion worth of chips produced in India.

Any proposal that's approved now will not be churning out chips in a hurry. .

However, this is not as simple as it appears. Various challenges are COVER STORY | 12

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DEC'21

F I N V I E W SPOTLIGHT ON SUCCESS

Mr. Kapil Gupta Chief Economist Edelweiss Financial Services Limited

Could you please shed some light on your journey on becoming the chief economist at Edelweiss? And how would you guide our readers to pursue a career in economics?

As far as economics is concerned, I stumbled into it. It was not part of the plan at all. I was like many of my friends during my school days and wanted to be an engineer.

Therefore, I enrolled for engineering studies. However, as you grow up, you become more reflective and begin to discover your inner calling. As I read extensively about current affairs, political economy, economic history, I became increasingly convinced about pursuing economics/ political economy. I was fortunate that I could make that transition. I was accepted at University of California, San Diego 13 | FINVIEW

for their master’s program in International Relations and Pacific Studies where I learned a lot about economics & policymaking.

So that's how I got into economics and since then there is no looking back.

Regarding pursuing a career in Economics, there is no dearth of opportunities these days. Apart from growing to be an academic in the fields of economics, there are plenty of opportunities with banks, financial markets, international institutions who look for promising economists. The field of economic journalisms also promising.

That said, economics or any other subject for that matter should not be pursued solely from the viewpoint of job prospects. One must have or develop interest and liking for the subject. And the challenge these days is that there is too much mathematisation of economics at the cost of economic intuition or economic history and so on.

Economics has drifted away from itself by neglecting its own intellectual giants – Adam Smith,

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Karl Marx, John Keynes or Friedrich Hayek or Joseph Schumpeter, and many others – who together form the ground zero of developing a good understanding of economics. As Newton said, "If I have seen further than others, it is by standing on the shoulders of giants".

Therefore, my single point of advice to people who want to truly develop economic intuition, is to go to ground zero, which is learning from these great men and women in the field of economics.

So, as a follow up to this, how do you see an MBA graduate positioned to make a career as an economist?

Economists are required in many places, as I mentioned and it's not limited just to academics.

Financial sector, particularly banks, fund management, hedge funds, businesses, international organization (IMF, World Bank) all have requirements for good economists. But as I said, you might want to study economics for two reasons. One is, of course, the growth opportunities or the professional opportunities that it offers but I guess the deeper reason should be the interest in the field. And one of the ways to stimulate interest in a field is to begin reading extensively.

Especially the most influential men and women in the field.

Unfortunately these economic philosophers are not read much these days.

In the past, I have given a talk on

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“Economics and the March of Progress” where I not only trace the journey of economic progress but bring up key ideas of some of the economic philosophers. It is my own little attempt to re-ignite interest in these giants With our budget day coming soon, what do you expect from the budget of 2022? Do you think this session will provide tailwinds to any particular industry?

Yeah, it is one of those months where the budget becomes allimportant. By the way, budgets are not such a big event in other countries. Ultimately, you know, budget is a fiscal policy statement and some accounting exercise around that. Surely, governments of the day at times use the occasion of presenting the budget to layout its broader economic program but it is not the be-all and end-all of policymaking, right.

Historically, the bulk of reforms and major policy announcements have happened outside the budget.

With that said, I would say that this year, the Budget will have to play a balancing act, given competing objectives. On one hand, I believe that while we have come a long way from COVID-lows, the economic recovery is still a work in progress; not all sectors and segments of the economy have come back equally. So, there is a case for the continuation of policy support, and therefore, rushing towards large consolidation may not be a good idea. On the other hand, fiscal policy setting will also FINVIEW | 14

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have to take into account the external environment, which is turning a bit prohibitive. The US Federal Reserve is on a tightening path at a time when India's trade deficit is on the widening path. In fact, several major countries are now on the path of withdrawal of policy stimulus and India is very much a part of the global boat.

This calls for fiscal prudence. So, it's a kind of a balancing act and therefore I expect modest fiscal consolidation with spending focus tilting a bit towards rural/lower end of the income pyramid given the prevailing weak sentiments.

In terms of sectors, I mean, generally, the budget speech covers a lot of ground in terms of sectors and segments of the economy infrastructure, manufacturing, MSMEs, farm sector, middle class, etc. But I think the emphasis on manufacturing will likely continue especially the PLI scheme which is a scheme for manufacturing revival in India. One may see expansion in scope and allocations to the PLI scheme.

There's also talk about some continued rationalization in the inverted import duty structure to incentivize growth engines such as domestic manufacturing. There could be some SOPs for the MSMEs, given that they have lagged behind and are a major source of employment in the country.

In addition to this, infrastructure support could come from outside the budget, including an asset monetization plan to fund the infrastructure needs of India.

15 | FINVIEW

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How well do you think has RBI performed to limit the economic damage of COVID pandemic and revive the economy?

Do you think increasing inflation has been a result of these policy decisions?

I think monetary policy has done a phenomenal job on all three fronts - the timeliness of the response, the quantum of support, and the nature of the intervention. All three aspects are extremely critical to limit the damage. Remember, in times of extreme stress (e.g. during the first wave), the private sector becomes risk-averse and tends to hoard liquidity and if the problem of illiquidity persists longer, it could turn into a problem of insolvency as well. Therefore, the job of the central bank is to be a lender of last resort in such times and make liquidity amply available. And I think RBI played that role very well and was instrumental in preventing large scarring in the economy. And I don't think that the inflation which we are seeing is something to worry too much about or is the result of RBI action. Think about it, RBI’s mandate on inflation is between 2% to 6% rate, and this fiscal year we are likely to average around 5.5% which is well within the RBI’s mandate. This is unlike the US or even Europe where inflation is running far ahead of their central banks’ targets. So, the situation is not strictly comparable. So not a big issue, I would say.

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With the Fed rate hikes looking inevitable this year, do you think a taper tantrum 2.0 is possible? And what do you think will be the impact of the rate hike on the Indian economy?

So, is tapering happening? Yes, it is happening. But are countries like India or other emerging markets equally vulnerable to tapering and tightening of liquidity in the west? I don't think so. If you go back to 2013, when tapering happened, India was counted among the ‘fragile five’ in the run-up to the tapering. It was fragile because India was running a very high current account deficit, upwards of about 4% of GDP, which is very high by Indian standards and inflation was ruling near double digits, even as growth was slowing, which is exactly the combination that makes you very weak & susceptible to liquidity reversals. The situation today is much different. India's current account deficit has widened of late for sure, but it is by no means alarming and inflation is within comfort range relative to many other countries.

The forex reserves are ample and domestic banking sector liquidity is more than adequate. So from a financial stability standpoint, we are on a much stronger footing today than in 2013. That said, I should say that the indirect impact will come from the growth side. If the Fed gets too aggressive with tapering and tightening, it can lead to a slowdown in the global economy.

And indirectly, it will have some

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spill overs on India's economic growth as well. So it's important to make a distinction between financial stability risks and growth risks. On the first part, I don't think there's much of an issue. On the second side, there could be some indirect impact if the global economy starts to feel the heat of the Fed tightening.

What economy would you look up to in terms of how well they've performed over the past two years of COVID? What do you think can be the lessons for India?

Now that's a tough one. Because I will be totally speculative here.

One has to do more serious research on this, frankly, than I have done, so my thoughts would be very provisional here. But I'll say this much that responding to the pandemic had two aspects.

One is limiting the effect of the pandemic itself on health and loss of life and second, limiting its economic impact.

And unfortunately, it was one of those very rare situations where the two objectives ran contrary to each other. The more you wanted to control the damage from a health standpoint, the more you had to jeopardize the economic wellbeing as lockdowns were the common policy proposal. So that's the contradiction at the heart of COVID's response. So it was an ad hoc approach. Initially, the whole world was locked down but eventually after the first wave of vaccines came on board, the economic side started to take FINVIEW | 16

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precedence although some countries still ran zero-covid policies. But even in hindsight, it's hard to judge which approach was exactly right.

But purely on economic grounds, I'll say that the US economy has been able to come out of it the best because it responded with massive transfers of incomes and credit guarantees to the private sector so that aggregate demand does not falter completely. Now, having said that, we also need to be very much mindful of the fact that not every country cannot respond like the US as the US enjoys exorbitant privilege, because it's the reserve currency of the global economy and everybody demands dollars and therefore, US can run large deficits without getting punished.

So, even though the Fed actions are commendable, it is also the country with special status in the global economy.

When do you think India will hit the glorious $5 trillion economy mark?

And what factors you think will help us achieve that target?

I am more skeptical of targets, not 5 trillion targets, but generally targets. We should focus less on what the target is, in my opinion, and focus more on what policies and growth models deliver. Once we have that right, targets will follow automatically.

So, the question is not of a particular target, but what economic approach delivers the best, right.

And there I should say that India has done quite a lot of work in the 17 | FINVIEW

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last 5 - 10 years. I think economic growth comprises of two things, one is the growth in the labor force, and second, the productivity of that labor. Now, as regards the former, demographically, India’s labor force will continue to expand, and in this regard India kind of sits uniquely among major economies such as China and Europe, and Japan where the labor force has either started slowing or is already shrinking. The second is the productivity of the labor force.

On that front, I think India has covered a lot of ground on reforms, that, over time tend to deliver productivity. Reform of indirect taxes (GST), lowering of corporate taxes along with ease of doing business lifts competitiveness of India’s businesses, liberalization of FDI regime and many others hold India in good stead for the coming years. So, we have certain things already falling in place. And I expect some of these reforms to start to deliver benefits.

But that said, I should say that India needs to spend a little more time on thinking about its growth model. Looking around the world, generally speaking, two models stand out – On one hand is Asia, which funds its growth through domestic savings and exports and then there are several Latin American countries which generally run current account deficits which means they rely on foreign savings. On balance, I am optimistic that India would be able to achieve higher growth rates for a period of time.

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K N O W Y O U R S E C T O R EDUCATION TECHNOLOGY: TRANSFORMING THE WAY OF LEARNING

Introduction The Education industry is one of the biggest industry, and it works as a seed to all the other sectors.

There is a significant correlation between success to the quality of education. In this era, we can witness an emerging trend where technology plays a pivotal role in transferring learning from tutors to students. It has become so big that it is now a separate sector known as Education Technology Industry (EdTech). As per Fortune Business Insights, the Global EdTech market size was $77.66B in 2020 and is expected to grow at a CAGR of 10.3% until 2028 to reach $169.72B.

test preparation, and vocational training apps to B2B products aiding conventional educational infrastructure to go online.

Apart from Covid-19, multiple factors lead to the increased adoption of EdTech platforms.

These factors include growing digital penetration, increasing students base, higher disposable income, increased dependency on smartphones, government support, & lower cost of online education.

Most importantly, EdTech provides immense convenience to the users as they can switch on their devices anytime & anywhere for learning.

Growth catalysts Covid-19 was a blessing in disguise for the EdTech industry as educational institutes were required to shut down overnight, but had to find a way to continue their operations. The only feasible solution was educating through online mode. Covid-19 also helped expand the product portfolio from supplemental education platforms

Source: RBSA Advisors

KNOW YOUR SECTOR | 18

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Sub-segments EdTech can be divided into two main segments, i.e., K-12 [Kindergarten to 12th standard] and Post K-12. These can be further classified as follows.

Learning Management System Supplemental Education Language Classes

K-12 & Major Players

Test Preparation

Certificate & Online Courses Digital Tutoring Enablers

Post K-12 & Major Players

Higher Education

Vocational Training

Test Preparation

Key Metrics Now that we know about different kinds of companies and the operational aspect of EdTech companies, let's delve deeper into analyzing the financial health of the players using key metrics.

Monthly Run Rate (MRR) MRR = ARPU (per month) x Number of Customers It is simply the revenue generated in a month; an increase in either ARPU or number is considered a favorable aspect for the company.

19 | KNOW YOUR SECTOR

Customer Acquisition Cost CAC = Total Spend on Marketing and Sales / Number of New Customers Acquired CAC measures the average amount of cash a startup burns in order to onboard a new customer. The CAC forms a part of the basic unit economics for a startup, which, if handled properly, make way for scalability and profitability.

Customer Churn Rate Customer Churn Rate = (Customers Lost in a Period / Total Customers at the Start of the Period) x 100 The churn rate or rate of attrition measures the percentage of customers that a startup loses in a given period owing to different factors.

Monthly and Daily Active Users Stickiness Ratio = DAU / MAU The Stickiness Ratio measures the number of clients that continue using the platform after the first time. A higher Stickiness Ratio is favorable.

Zooming into the future The way of learning has changed & is still evolving. It is imperative that online education is going to be a significant disruptor in the next decade. We have seen a lot of M&A activities in this space in the last 1.5 years, and the consolidation is expected to go on for another couple of years as many companies have set aside enormous corpus to conquer greater market share in this.

DEC'21

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A R T I C L E O F T H E M O N T H A BRIGHTER FUTURE FOR CRYPTO— TRENDS IN SHIFTING THE INTERESTS OF INDIAN INVESTORS FROM EQUITIES TO CRYPTO

BY ATTISO BHOWMICK & RISHABH KUMAR UNIVERSITY OF AGRICULTURAL SCIENCES, BANGALORE

An Imminent LesserKnown Paradigm Shift While the ostentatious mainstream zeitgeist is fueling the crypto revolution, the Indian investors, notorious for being orthodox in their investment regime, have been shown to gradually shift their focus towards crypto from their age-old stock preferences. One of the pillars that determine the financial decisions in traditional economics is the ability to tolerate risk. Risk tolerance is of central importance when discussing the investment nature and preferences for different financial instruments by certain demographics.

Given the deregulated markets and environmental issues, the crypto landscape may not be the ideal investment option, but it has certainly captivated the lexicon of Indian investors. With the ubiquity of other investment options, it becomes worthy to conscientiously scrutinize the factors that led to this shift in

trends. This peregrination into the future from Stock Market to Digital Currency Exchange (DCE) can be attributed to behavioral bias among Indian investors, changes in the demographics of Indian investors, and ultimately the emergence of new investment tools in India. In that respect, it is nothing more than an objective indication of a future paradigm shift in the contemporary investment landscape.

Reasons for this Change Cryptocurrencies provide a more volatile market environment, but with no investment restrictions, improved transaction privacy and security, easy transfers and withdrawals, and much more, thus masking the risks associated with universal access. In addition, with the right knowledge of the market, you can significantly reduce your risk. This rational reasoning is not just an invention of logic or a carefully constructed bias based on cherry-picked data, but a ARTICLE OF THE MONTH | 20

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reality that has touched the hearts of Indian investors. This has led to a great acceptance of cryptocurrencies.

Despite its inherent technological complexity and deregulated markets, cryptocurrencies have found widespread acceptance from Indian investors, as indicated by reports and surveys. One such report published by an online peer-to-peer exchange, Paxful.com highlights the principal reasons for this rising trend.

The graph below demonstrates graphically the results of the survey sampled from a homogeneous pool of metropolitan respondents.

that each transaction in the blockchain is validated, so it also reaffirms cyber security, which is of prime importance in online assets. There are age restrictions to open a demat account in India, which jeopardizes a segment of Gen Z investors from investing in the equity market.

Since cryptocurrencies can be brought or sold by anyone, it has overcome the age restrictions offered by equities and commodities markets.

Interpretation of this data yields some valuable insights. 75.80 % of the respondents finds cryptocurrency ideal for transferring as it is easier, safer and does not incur bank and commission charges. In fact, it has served as an alternative source of foreign outward remittance platform, where significant remittance charges are levied. The blockchain technology ensures

Evidence is more subjective when talking about responses from surveys.

Objectivity is an essential attribute that must exist to check the validity of a hypothesis. Industry-specific data and data on financial phenomena provided by the authorities, due to their intrinsic validity, can provide concrete evidence of such a paradigm shift in investment preferences. According to a Dune

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Is It a Gen Z Phenomenon or a Universal Shift?

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Analytics report, the volume of decentralized exchanges in June 2020 reached a record high of $ 1.52 billion as of June 2020, an increase of up to 70%. This reveals that the market has a relatively positive outlook for decentralized instruments, which are dominated by Bitcoin and other cryptocurrencies. It also shows an emerging economy that accepts cryptocurrency and employs crypto-friendly mechanisms.

Bitcoin trading volume in May 2021 was 99.23

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million rupees. The higher the trading volume, the greater number of investors who prefer bitcoins.

WazirX, the nation's largest cryptocurrency broker, has seen a 337% increase in users over the age of 45.

This eliminates the misconception that cryptography is a Millennial and Gen Z concept. Only specific demographics cannot influence the overall outcome of Indian investor’s shift towards cryptocurrencies from equities.

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Investments Driving this Shift Blue chip venture capital firms known for their risky bets aspire to invest in India's crypto and blockchain startups, but an uncertain political climate and lack of enough Indian investors in crypto disconsolate them from doing so. Meanwhile, as foreign investment funds are picking the initial winners in the blockchain ecosystem and reaping huge returns from India-based crypto startups, much focus is on the Indian investors’ interest on cryptocurrencies, because they are the primary consumers of such startups.

Lightspeed India, Sequoia Capital India, Elevation Capital and others are fervently exploring the Indian blockchain and cryptocurrency industry.

Indian cryptocurrency companies have received less than 0.2% of the $ 5.5 billion global investment allocated cumulatively only on blockchain startups, according to a whitepaper published by India Tech, an industry group represented by Indian internet unicorns, startups and investors.

Although India has the highest number of crypto owners in the world, the investment significantly falls short.

This signifies the priority of the shift in interest of Indian investors from equities to crypto, as they function to actively fuel the development of the nascent blockchain-based fintech companies in India.

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Future Predictions of This Shift When every business owner is trying to figure out where exactly in their business does cryptocurrency fit, the greater acceptance of cryptocurrency by Indian investors will drive real value of the cryptocurrencies, rather than a hype-based valuation, with real-time financial inclusions.

In 2021, cryptocurrencies were utilized to fund millions of ransomwares and criminal activities because of their unique attributes of being borderless, non-traceability and the impossibility to unwind any previous transactions.

The price volatility of cryptocurrencies can become a real problem once it becomes a legally-accepted currency. This introduces us to the concept of stable coins, whose value will be remotely encapsulated with an underlying asset. This will enable Indian investors to buy and sell their own investment assets in terms of stable coins. Equities will be bought and sold with stable coin exchange.

The government of India is also on its way to formulate crypto regulations in recognition of the huge benefits of cryptocurrency and blockchain technology.

At a grassroot level we are going to see an exponential increment in the number of crypto investors in India. Shift of investment volume is going to take place from more

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traditional financial instruments like mutual funds and fixed deposits to cryptocurrencies. A wider age bracket will be introduced to investment options which is likely to increase the general financial literacy of the country.

Final Thoughts Predictive finance is still in its infancy in India, and there is a lack of good research to investigate the future outcomes of cryptocurrency introduction on the Indian investment landscape.

Demographic factors may have served as a backdrop for further development of Indian investors’ paradigm shift to cryptocurrencies, but in fact, it in the technological innovation that has provided a concrete developmental momentum in this regard.

Without the ease of intermediary services offered by online crypto brokers like WazirX,CoinSwitch or Binance and without a mobile internet or smartphone, it's hard to imagine

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the painstaking task of managing cryptocurrencies.

From fixed deposits being favored by the boomers in our country to the cool cryptocurrencies flashed by the millennials, Gen Z and also the boomers, perhaps the perpetual shift towards different investment options among Indian investors was not a paradigm shift, but a by-product of a generationspecific fascination with new financial instruments prevalent in their respective times.

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D E A L S B R E W E R Y ZEE - SONY MERGER: FUSION OF TWO ENTERTAINMENT GIANTS

Deal Highlights Zee Entertainment Enterprises Limited (ZEEL) and Sony Pictures Networks India (SPNI) finalized a deal to merge their television channels, assets, and streaming platforms to create a combined entity. The merger deal announced on September 22 was signed after the 90-day due diligence period came to an end on December 21. As per the regulatory filing, SPNI and ZEE signed definitive agreements to create a merged entity, which will be publicly listed in India.

SNPI holds 50.8%, while domestic shareholders will hold over 47%.

Zee promoter family is set to initially hold a 2.2% stake that will go up to 3.99%. The entity is set to have a market share of 27%, the largest, followed by Star with 24%. The merged entity will have a viewership share of 13-15% in the OTT segment.

Zee and Sony have entered into a non-binding term sheet to bring together their linear networks, digital assets, production operations, and program libraries.

According to the term sheet, the promoter family can increase its shareholding up to 20%, in a manner that is in accordance with applicable law. Sony will also infuse growth capital into SPNI as part of the merger such that SPNI holds a controlling stake.

The deal also serves to ward off a challenge from investment manager Invesco, Zee’s largest shareholder, seeking the removal of ZEE promoter and MD, Punit Goenka.

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About ZEEL ZEEL is an Indian media conglomerate headquartered in Mumbai. It dwells with television, internet, film, mobile content, and allied businesses. It operates 45 channels worldwide. The company was launched in December 1991 as Zee Telefilms, a brand name that was retained until 2006. In 2016 ZEEL forayed into video-ondemand with the launch of its OTT platform OZEE. In 2018, the service Rebranded as ZEE5.

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Deal Synergies The combination of ZEEL and SPNI is expected to achieve business synergies, and given their relative strengths in scripted, factual, and sports programming, respective distribution footprints across India, and iconic entertainment brands, the combined company should be well-positioned to meet the growing consumer demand for premium content across entertainment touchpoints and platforms

About SPNI Sony Pictures Networks India (SPN) is an indirect wholly-owned subsidiary of Sony Corporation, Japan. SPNI manages and operates 26 television channels, 1 OTT platform, 1 film production arm, and 1 independent production venture for original content and IPs for TV and digital media.

The combined company will create a comprehensive entertainment business, enabling us to serve our consumers with wider content choices across platforms - Punit Goenka Chief Executive Officer of ZEE. DEALS BREWERY | 26

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FINSUPERVISE NON - FUNGIBLE TOEKN

Overview The modern age has ushered in digitizing several aspects of our lives. Over time, the opportunity to engineer a new asset class was realized, exhorted by novel technologies like blockchain, replicating the properties of physical items like scarcity, uniqueness, and proof of ownership in the digital space.

While the limitations of already existing blockchain-based crypto currencies' scripting language were inadequate to build such an asset class, the conception of Colored Coins opened possibilities for experimentation and laid the groundwork for NFTs (NonFungible Tokens).

What are NFTs NFTs are one-of-a-kind digital art assets traded on the blockchain.

They can be any art that can be rendered digitally, such as music, film, graphics, memes, or a mix of media. The blockchain certifies that the item is a unique, one-of-akind thing that cannot be reproduced 27 | FINSUPERVISE

reproduced, hence the term "nonfungible." The object is put up for sale on a blockchain platform by the NFT developer. Further, if the object is purchased, the new owner receives custody of it through a smart contract. The new owner may then attempt to resell the NFT for a profit.

Pros of NFT Increase in Market Value When one buys these tokens, just like any other investment, there's always the possibility of growth in value and profits.

Immutability NFTs can’t be changed or replaced in any way if their authenticity is verified on the blockchain. The intrinsic value of authenticity becomes an actual extrinsic value.

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Smart Contracts Smart contracts — the heart and 1.9 soul of blockchain technology — 1.9 make automatic executions after certain events possible.

For example, if the NFT owner resells it for a profit later and the artist attached a royalty “rider” to the contract, the artist gets compensated immediately.

Pride of Ownership and Support for the Arts NFTs, give benevolent patrons a direct way to support the artistic community and add a unique asset to their collections.

Cons of NFTs All-Speculative Market At the moment, NFT's worth is entirely tied to its aesthetic and sentimental value. It’s impossible to gauge its worth as a long-term investment, so right now, it’s nothing but speculation.

Sustainability in Question Creating and selling NFTs accounts for a lot of power usage, as do blockchain transactions.

Some scientists worry that a burgeoning NFT market could cause further harm to a rapidly depleting environment.

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Are NFT's the right i n ivnevset m s t emnetnfto r y o u ?

The NFT movement is very new, but it demonstrates the potential of cryptos to make the digital economy operate for a broader range of individuals. For creators, creating and selling digital assets may make much sense. NFTs, on the other hand, are a speculative investment when it comes to collecting them. The value of a work is unpredictable and will fluctuate depending on the demand for the piece.

If you appreciate collecting art, music, and other items, dabbling in NFT investment may be a good fit for you. When purchasing an asset, consider the asset's creator, the piece's uniqueness, the asset's ownership history, and if the asset can be used to create money once acquired (for example, payment to view a piece or relicensing fees).

There is no set formula for determining which collectibles will appreciate and which will not.

Early detection of a new NFT trend, on the other hand, can pay off handsomely in the long run.

Ownership Doesn’t Equal Control Just because someone owns an original NFT doesn’t mean they can control its distribution or duplication across platforms.

Ownership just means they hold the authentic “original” — they can’t stop “prints” from being made.

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SOMETHING NEW SOMETHING OFFERED METRO BRANDS

Overview Metro Brands, one of India's largest footwear specialty retailers, was established in 1955.

It offers a wide range of branded footwear products for the entire family. It targets the mid and the premium range segments in the footwear market, with a higher presence of organized players and growth in the overall footwear industry. Backed by Mr. Rakesh Jhunjhunwala as an investor since 2007, the company's popular brands include Metro, Mochi, Walkway, Da Vinchi, J. Fontini, and certain other third-party brands such as Crocs, Skechers, Clarks, Florsheim, and Fitflop.

Metro primarily follows the "company-owned and companyoperated" ("COCO") model of retailing through its own Multi Brand Outlets ("MBOs") and Exclusive Brand Outlets ("EBOs") to manage customer experience better.

It follows an asset-light model.

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SUBSCRIBED: 3.64 times IPO: ₹ 1367.5 Cr FRESH ISSUE: ₹ 295 Cr OFFER FOR SALE: ₹ 1072.5 Cr

It outsources manufacturing.

It leases out space on longterm agreements.

It uses advanced inventory management techniques to ensure high asset turnover.

East 75 North 186

South 146

West 191

Geographical presence of Metro Brands (in terms of number of stores) in India

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Inability to identify customer demand

One of India’s largest pan India footwear retailers

Relationship with blue-chip Efficient operating clients

model

Outstanding litigation Intense Competiton proceedings

Strengths

Asset light business

Strong promoter

Rising Net Cash Flow background

Metro Brands IPO The company raised ₹1367.5 cr, which was split into a fresh issue of equity shares worth ₹295 cr and an offer for sale of up to 2,14,50,100 equity shares by promoters & other shareholders.

The purpose of this IPO is to open new stores of the company, under the brands of 'Metro', 'Mochi', 'Walkway' and 'Crocs', and for general corporate purposes. The price band of the offer was fixed at ₹485 – 500 per share. The portion reserved for Qualified Institutional Buyers (QIBs) garnered 8.49 times subscription, while that for non-institutional investors 3.02 times and Retail Individual Investors (RIIs) 1.13 times.

The stock made a weak debut, listing at a 12.8% discount. It is listed at ₹436 on the BSE. According to experts, Metro Brands' tepid listing was expected due to concerns over its valuations.

Increasing competition

Risks

Dependence on third Foreign Risk parties forExchange manufacturing

The stock was priced at ~91 times price to earnings on a one-year trailing basis in the IPO.

Conclusion Metro Brands has poor financials, with a consistent fall in Return on Equity. It also has high attrition rates of employees. But it can leverage its strong network and experienced management team to grow.

Moreover, the Footwear Retail Industry is highly underpenetrated in India, so there is immense scope for the company to flourish.

It should strive to optimize the mix of in-house brands (70% of revenue) and third-party brands (30% of revenue) in MBOs. Experts believe the stock to perform well in the long term due to its asset-light business, strong brands, and wide range of products.

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LET'S FIN UP! THE CROSSWORD

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Across 1. Accounting principle when asset is depreciated over its useful life (8) 4. Insurance industry in India is regulated by (5) 7. Stock Split will cause the par value of share to (8) 9. American word for banknotes(5) 10. Account credited when BOD declares dividend - Dividends ______ (7) 12. Currency of Malaysia (7) Down 2. List of Prices (6) 3. Arena Pharmaceuticals was acquired by this company (6) 5. Verification of company's accounts (5) 6. Manufacturing departments that don't touch products directly (7) 8. To assign costs to products or departments (8) 11. Quick Ratio is also known as (4) LET'S FIN UP! | 31

ANNOUNCEMENTS Team Niveshak invites articles from participants from all colleges across India. We are looking for original articles related to Finance and Economics. Participants can also contribute puzzles and jokes related to Finance and Economics. References should be cited wherever necessary.

The best article will be featured as "Article Of The Month" and would be awarded a cash prize of 3000/- along with a certificate. The runner-up article would be awarded a cash prize of 2000/- along with a certificate.

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ISSUE IV • VOLUME XV • DEC'2021