ECONOMY TRAILS - Fujitsu · S the path ahead. I tHInK 12 KimsuKA nArsimhAn While different companies may be affected to varying degrees, there are some time-tested principles and

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CFO PROFILERAMKUMAR KRISHNAMACHARICFO, JUST DIAL P. 20

I THINKKIMSUKA NARSIMHAN, CFO, PEPSICO INDIA P.12

VOLUME 04 ISSUE 1075

OCTOBER 2013

A 9.9 MEDIA PUBLICATION

ECONOMY TRAILS

The Indian economy is going through tough times. With serious constraints both on the fiscal and monetary side, it will be a long road towards revival. CFO India scopes out the path ahead.

event28 AnnuAl CFO leAdership COnClAveIt was the intense exchange of ideas for over two days among dozens of CFOs that marked the Fourth Annual CFO Leadership Conclave in Goa. A number of participants felt the need for closer cooperation with the government agencies.

Cfo lounge

48 TrAvel | rAjAsThAn

50 GizmOs | sOny vAiO FiT 15e

RegulaRs

04 leTTers TO The ediTOr

52 nOT jusT The lAsT WOrd

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I THINKKIMSUKA NARSIMHAN, CFO, PEPSICO INDIA P.12


OCTOBER 2013


ECONOMY TRAILSThe Indian economy is going through tough

times. With serious constraints both on the fiscal and monetary side, it will be a long road towards revival. CFO India scopes out the path ahead.

I tHInK12 KimsuKA nArsimhAnWhile different companies may be affected to varying degrees, there are some time-tested principles and practices that help the finance function deal with the downturn, believes Kimsuka Narsimhan, CFO, Pepsico India.

InsIgHt36 meAsurinG The Full impACT OF diGiTAl CApiTAlAlthough largely uncounted, intangible digital assets may hold an important key to understanding competition and growth in the Internet era.

In pRaCtICe 24 On The sAme pAGe The CIOs are increasingly responding to the concerns of the CFOs by cutting costs and improving the efficiency of existing resources.

Cover design peterson pj

AD inDex iBM iFC | Canon 0 1 | sodexo 0 5 | tower Watson 0 9 | eurofinance 11 | Check point iBC | vodafone BC

CFO InsIdeo C t o B e r | 2 0 1 3

CoveR stoRy14

Cfo pRofIlerAmKumAr KrishnAmAChAri

A self-confessed fighter and a marathoner, Ramkumar Krishnamachari, CFO, Just Dial, recently capped off a successful public offer for the company.

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leaDeRs WoRlD 42 hAndlinG diFFiCulT neGOTiATiOns

DIFFICULT PEOPLE! One of the greatest challenges we face in negotiating!

eCOnOmy TrAilsIndian economy is on a slow burn with growth almost halving in the last 14 quarters and the macroeconomic indicators showing fragility almost forgotten in the last two decades. CFO India reads the tea leaves on the economy.

History sHows good politics often prefaces progress, peace and prosperity. An improper appreciation of economic realities triggers regime changes, often violently. in the run-up to the 2014 general elections, india is seeing unprecedented violence, both in words and action. in such times, it takes little to recall a foreign queen whose foresight and sagacity ensured decades of relative prosperity and religious unity for her fractured land. that was Queen Elizabeth i of the tudor lineage. the Church of England decisively broke away from rome and crafted a new religious identity during her long reign. yet, England emerged united—safe from sapping religious and military wars. the peace she engineered bred poets (shakespeare), explorers (Francis drake) and ventures such as the East india company.

india of the 21st century ought not to bear any resemblance to 16th century England. yet, it does. religious tolerance is still a contention over sixty years after independence from Elizabeth’s descendants. secularism is debated and communalism is a political tool. Muzaffar-nagar exists in our news headlines only for the lives lost.

growth is the best medicine for much that ails india. when will our rulers really get it? though there has been a sharp public dis-course on the flailing economy, not all is bleak. Equally, it could be much better. we try and make sense of the political and social winds as much as the economic data. this october, among tales of victory of good over evil in the durga Puja and dussehra season, our cover story is on the economy.

Please, do read and let us know what you think. we welcome dissenting notes. A good argument is always energising and often precedes good judgment. that was the message from our 4th Annual Leadership Conclave in goa as well.

this issue, we listen keenly to two CFos. Kimsuka Narsimhan of PepsiCo, our columnist for the month, shares ideas for surviving a downturn even as Just dial Ltd’s CFo, ramkumar Krishnamachari shares his journey in the Profile section. these companies together encapsulate the consumption and the service sector story of the in-dian economy. it pays to listen carefully. Meanwhile, as we enter the festive season do spare a thought and a short prayer for the unfortu-nate in Muzzaffarnagar. And keep the faith as always.

Wisdom of the Rulers

from the MANAGING edItor

Shalini S. [email protected]

subscriber services:

Call +91-120-4010999

visit cFO india’s Website

www.cfo-india.in

MANAgiNg dirECtor: dr. Pramath raj sinha

EditoriALEditor: Anuradha das MathurMANAgiNg Editor: shalini s. dagarAssistANt Editor: Parimal Peeyush

dEsigNsr. CrEAtivE dirECtor: Jayan K Narayanansr. Art dirECtor: Anil vKAssoCiAtE Art dirECtor: Anil tsr. visuALisErs: Manav sachdev & shokeen saifivisuALisEr: Nv Baijusr. dEsigNErs: shigil Narayanan, Haridas Balan& Manoj Kumar vPdEsigNErs: Charu dwivedi, Peterson PJ, Pradeep g Nairdinesh devgan & vikas sharmaCoNsuLtiNg sr. Art dirECtor: Binesh sreedharanMArCoMdEsigNEr: rahul BabustudioCHiEF PHotogrAPHEr: subhojit Paulsr. PHotogrAPHEr: Jiten gandhi

tHE CFo iNstitutEExECutivE dirECtor: Ashutosh sinhaNAtioNAL HEAd, CFo iNdiA: seema MenonAssistANt BrANd MANAgEr: Nisha AnandAssistANt MANAgEr: dr Leena NarainAssistANt MANAgEr - CorPorAtE iNitiAtivEs: deepika sharma

sALEs & MArKEtiNgsENior vP sALEs & MArKEtiNg: Krishna Kumar KgrEgioNAL HEAd (NortH & soutH): rajesh Kandari (+91-9811140424)NAtioNAL MANAgEr (EvENts & sPECiAL ProJECts): Mahantesh godi (+91-9680436623)sENior MANAgEr (south): Anshu Kumar (+91-9591455661) sENior MANAgEr (wEst): deepak Patel (+91-9820733448) BusiNEss dEvELoPMENt MANAgEr: Arjun sawhney (+91-9582220507)

ProduCtioN & LogistiCssENior gENErAL MANAgEr (oPErAtioNs): shivshankar HiremathMANAgEr oPErAtioNs: rakesh upadhyay MANAgEr - LogistiCs: vijay Menon ExECutivE LogistiCs: Nilesh shiravadekarAssistANt ProduCtioN MANAgEr: vilas MhatreLogistiCs: MP singh, Mohamed Ansari

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44 C F O i n d i a o c t o b e r 2 0 1 3

Letters CFO INDIAoctober 2013

10.13 Your voice can make a change: Share your viewpoint on what’s happening in the community and your feedback on the magazine at [email protected]

Happy but… Nice! Nice articles. Leader’s World - Eight ways to Ensure buy-In—very valuable lessons on presentation people often miss out. Dance Lessons on business partnering was a standard article, nothing new. It should have added some new insights given that it is coming from one of the big 4, i.e. Deloitte. Lounge travel ‘Charming prague’ for lighter reading was good. Lastly, on the big data article, I never said “…one does not need technology solutions…” did I?— Sunil Alimchandani, Television 18

MorE oN aNaLytICsthe cover story was very good. What would have made it punchier is possibly some of the open source big data tools and technologies available. It could be redshift from amazon or bigQuery from Google or some big data front-end technologies etc. May be a couple of the members could have contributed to a small chart of available technologies. that would have been very insightful for the CFos.— Badri Sanjeevi, People Group

GooD MIxLiked the issue as usual. Good mix of articles. usually look forward to your car and gadget

I have gone through the current issue of CFo India which has touched upon an important challenge of Data analysis faced by CFos. It has given good insight and I personally gained reading from the article. thank you and keep up the good work.— Mukesh Arora, Director Finance, India Finance, BSI Group

Good Insight COVER STORYBIG DATA & ANALYTICS

1414 C F O I N D I A S E P T E M B E R 2 0 1 3

COVER STORY

SHALINI S. DAGARILLUSTRATION BY ANIL T

Though still in its nascent stage, the trend of analytics providing a strategic business advantage is on the upsurge. CFO India observes some experiments.

Can a 25 cent part hold up an order book of $25-30 million? Yes, it can. When the company concerned is a global IT company whose manu-

facturing lines are flung across the world in different locations and with different vendors, it is a possibility. And it takes a while to figure out where exactly the problem is residing. The ability to drill down to find out which vendor in which country is causing the bottleneck is a dif-ficult ask, especially when multiple product lines with thousands of parts are involved.

Would you ever draw a link between dental hygiene and the likelihood of timely credit card payments? A global credit card company did observe precisely this correlation. A card hold-er who is regular with dentist appointments is more likely to be regular with payments as well.

What about the efficacy of the sales team? One example is that of a Malaysian company where just by being mindful of the timing of the pro-posal was sent to the client (in the morning ver-sus in the afternoon), the sales team could push up the conversion rates from below 50 per cent to above 90 per cent.

These are just some of the striking exam-ples which pop up when Big Data and analytic experts get together. These examples are from complex businesses across the globe and they seem mythical. However, it is this level of pre-cise and actionable business insight that consti-tutes the promise of data and analytics under the ubiquitous term of Big Data.

Big data as a term is quite loosely used. Accord-ing to Steve Lohr in the New York Times, the term apparently originated around lunch table conversations of chief scientist, John Mashey at Silicon Graphics in the mid-90s. In the current day parlance, it relates to the process of analys-ing large quantities of data to discover hidden patterns, unknown correlations (remember the

“As we grew, we needed a single version of the truth. Our early experiments with analytics built the belief for us. Business units need to be the sponsors.”

BIGDATA&ANALYTICS

— Prashant Tripathi Director and CFO, Max Life Insurnace

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reviews (because I am an auto and tech enthusiast). Did not notice any errors. — Rostow Ravanan, CFO, Mindtree Ltd.

HIGHLIGHt rEGuLatIoNI really like the magazine. It is very informative but I suggest that you highlight regulations and compliance and new policies more so that we get to read the experience of the industry experts.— Atul Banshal, Chief Financial Officer, Spaze Towers Pvt. Ltd.

kuDos!the article on big Data and analytics was well-compiled and futuristic. In many ways, it challenged the approach of Jim Collins’ book ‘Good to Great’. the article shows there are both perils and promises in now having access to immediate, real-time data. Measurement in organisations is always a mess. I have seen measurement systems deliver a blizzard of nearly meaningless data that highlights everything in sight and quantifies it, without being put to any significant use. the article highlights the future of work and the importance of data in being enablers for strategic decision-making. Well done!— A Thomson Mathew C, VP–Finance & Operations, Talisma Corporation Pvt. Ltd


Technology

10.13

online advertising lost an important member, the Digital Advertising Alli-ance. Apple’s Safari browser does not allow third-party cookies, and Mozilla has said Firefox will follow suit. Micro-soft’s Internet Explorer has Do Not Track turned on by default, but adver-tisers are under no obligation to follow it. Tracking on mobile devices is a chal-lenge because apps do not use cookies.

The Interactive Advertising Bureau started a group last fall to explore the future of the cookie and alternatives, and many companies are coming up with options. Jordan Mitchell, co-chair of the group and a vice president at the Rubicon Project, a digital ad agency, called the current situation unreliable and uneconomical and “a lose-lose-lose situation for advertisers, consumers, publishers and platforms.”

Apple popularised the idea of an anonymous identifier, which is part of its iPhone software for advertising in mobile apps. On the Web, it would offer advertisers a similar benefit as cookies — building a behavioural pro-file of people based on the sites they visit. But is easier for users to turn off with a single change in settings, or potentially to use a different ID for browsing they want to keep private. Google’s statement implied it was exploring new alternatives to cookies, but did not discuss specific plans.

GOOGlE, ThE BIGGEST online advertising company, is considering a new way to help advertisers track people across the Web and consolidate its power in the industry. Google could create an anonymous identifier, tied to users of its Chrome browser on a specific device, that advertisers would use to target ads, according to a person briefed on the plan who declined to be identified because the plan is one of several options being considered.

The identifier would replace cookies, the tiny files that are the predomi-nant way that advertisers track users across the Web and show ads based on users’ online behavior, but which are believed to be dysfunctional.

Google’s idea, first reported by USA Today, comes as advertisers are beginning to panic about finding alternatives to cookies, and as other efforts to establish standards for online tracking fall apart.

This week, a working group to establish a Do Not Track standard for

Google’s new ad tracking methods

BEER IS what economists call an elastic good; the more it costs, the less of it people buy. But at Oktoberfest, Germany’s debaucher-ous annual beer festival in Munich, the rule doesn’t exactly hold. In fact, it gets flipped on its head.

When this year’s beer festival kicked off on September 21, more than 7 million beer drinkers were expected to gather to drink some 15 million pint glasses. If they are sober enough, they will notice that their lagers, ales and stouts cost more than they did last year. As is the case almost every year, the price of beer at the Oktoberfest has risen faster than inflation, according to UniCredit Research’s Oktoberfest 2013 report. The average beer at this year’s festival will cost €9.66 ($13)—3.6 per cent more than it did last year as reported in the Quartz.

Considering that inflation in Germany is currently hovering somewhere closer to 1.5%, festival goers should be outraged. And yet, like they have virtually every year before this, they will buy and drink more beer per head than they did the year before. Beer consumption per capita at the annual beer festival (the red line in the chart below) has been rising steadily since the mid 1990s. As with so many other festivals, Oktoberfest has become something very different to what it once was. When originally con-ceived back in 1810, it was held to celebrate the marriage of Bavar-ia’s Crown Prince. Over 200 years later, it has become something of a beer-drinker’s mecca, and economic wonder. Now one can safely say, there is a ‘beer brain’ in addition to a beer belly.

Quirky economics

Beer inflation… at Oktoberfest

77o c t o b e r 2 0 1 3 C F O i n d i a

THE CFO POLL

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CurrEnT POLL quEsTiOn

qUEEN BEES ARE experts at takeovers apparently. Once mated, a new queen bee needs a colony of her own over which to rule. This transition happens in a very orderly fashion in the world of bees, reports Wired. First, very few new queens are born. Work-ers control whether a particular female will blossom into a queen with the quantity and quality of food they feed her. New queens are created if the reigning queen is near death, so a daughter can take her place. Alternatively, if the colony gets large enough, a new queen will be born and she will set off with some of the workers to start a new colony (swarm-ing). Stingless bees of the genus Melipona are different. Up to 20 percent of all females develop into queens. What happens to them? Genetic analysis showed unrelated queens frequently invading and taking over colonies in which the reigning queen happened to die. Studies confirm that foreign queen takeovers are common occurrences, especially in the evenings. Clearly, sneakiness pays.

Zoologic

Royal Takeover

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mWHaT’s arOunD ZOnECFO Book: Debasis Nandy ..................................Pg 08

Jargon Decoded: Tiger Teams . .........Pg 08

Bananas ................................................................. Pg 10

CFO Movements ................................................... Pg 10 Very High

High Medium

Very Low

Low

19%

41%22%

7%

11%

O-ZONE


t

ThE WORlD OF automobile technology and consumers is abuzz with news of self-driven cars likely to hit showrooms by the end of this decade. Different reports have derived different conclusions over whether consumers would feel safe while opting for this hands-off experience. The law, however, has not kept pace with this new concept. In the U.S., for instance, the federal government oversees vehicle safety and each state regulates insurance and licensing drivers. Authorities will have a peculiar task at hand in case of a mishap or an accident. The difficulty lawmakers foresee is in assigning liability and responsibility for an accident if an inanimate object rather than a person is driving. If an autonomous car is caught violating traffic laws, who are laws enforced on?

auTomobiles

Are you game for self-driven cars?

Jargon busTerThe Phrase: Tiger Team

THE MEaninGA tiger team is a group of experts assigned to investigate and/or solve technical or systemic problems.

THE usaGE To foolproof the new system we may require to set up a Tiger team.

cfobook

Debasis NandyWall Info Boxes +

What’s on your mind?

i read...And The Mountains Echoed by Khaled Hosseini, The Lowland by Jhumpa Lahiri and the new Companies Act

Debasis Nandy likes... Amjad Ali Khan and two othersThe Himalayas, Classical Music

CFO India and Business Today September 8 at 10.13 · Comments · 22 people like this

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CFO PROFILEANIL CHANANA, CFO, HCL TECHNOLOGIES P. 24

I THINKNAND GANGWANI, CFO,EVALUESERVE P. 18

ON WHEELSAUDI R8 V10 P. 38


SEPTEMBER 2013


BIGDATA&ANALYTICSCOMPANIES IN INDIA ARE TAKING SMALL STEPS TOWARDS INVESTING IN ANALYTICS. CFO INDIA FINDS OUT WHAT LIES AHEAD.

i Listen...Indian classical music 29 comments · 38 people like this

Personal

Zodiac: Aries Views: Liberal

Work

CFO, thomas cook (India) Ltd. (2008 till date) VP-Finance, Domestic

Formulations, Piramal Healthcare Ltd. (2006-2008) Finance Head, Aviva Offshore

Services, (2004-06) Head-Finance, IT & Supply

Chain, (2000-04) Indian Aluminium (1988-2000)

eDucaTion

Chartered Accountant (rank holder) B.Com - St. Xaviers, Kolkata

Debasis nandy believes the volatility of the rupee has

changed the dimensions of the forex and the travel business. September 15 at 06.20 · 18 comments · 24 people like this

Debasis nandy likes to de-stress by listening to jugalbandi by Amjad Ali Khan and Zakir Hussain. September 22 at 17.20 · 21 comments · 32 people like this

Debasis nandy loves Kolkata – the foodies heaven - can’t beat

that in terms of price or choice September 29 at 18.45 · 37 comments · 26 people like this

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monoculture across the northeastern parts. The susceptibility to pests that can plague single crops—together with sometimes lax environmental enforcement—has encouraged the liberal spraying of pesticides, and their frequent reapplication. Unfortunately for aquatic creatures, the Rio Suerte flows through this high-density banana cropland, channelling run-off from the sprayed fruit downstream and into a key conservation area further south. This wilderness refuge, the Tortuguero National Park, is home to spectacled caimans, whose polluted blood first brought the findings to light.

GlOBAlly, retailers have a soft spot for Costa Rican bananas. The Central American country is the biggest pro-vider of the staple fruit in the United Kingdom, contributing 25 per cent of its banana imports in 2007, and maintaining its place over the years as a top exporter to the United States. But researchers in a recent study, as report-ed in the Guardian, have established that run-off from banana plantations is harming the caimans that glide stealth-ily through Costa Rica’s conserved waters. The country’s dependence on banana agriculture as a top ranking export has resulted in an expanse of

enVironmenT

Bananas GivinG BaD BLOOD

hARD DRIvING AND competitive, or easy-going and laid back; which type are you? Why does it matter? Research in the 1950s up to 1970s suggested that Type A personalities – hard-driving, competitive, status-conscious, and seemingly achievement-addicted – were more prone to coronary heart disease and heart attacks. Type Bs were apparently less likely to develop coronary disease. This research seemed to support the common stereotype. Subsequent research, however, questioned these findings. On a more positive note, and not surprisingly, Type As do appear to be more successful in terms of work accomplishments, but Type Bs are better able to enjoy the moment (and there are plenty of successful Type Bs). In real-ity, however, the Type A-B personality is a normally-distributed continuum, with relatively few people being strongly driven and competitive (As) or totally laid back (Bs). Most of us are probably slightly on one side or the other of the A-B divide.

Bigger role for Tata Steel’sK. ChatterjeeIn a top leadership overhaul, the Tata Steel board has appointed Koushik Chatterjee ED and Group CFO as the Group Executive Director (Finance and Corporate). In addition to maintaining responsibility for the company’s finance function, Chatterjee will be responsible for the Tata Steel Group corporate functions including legal and regulatory affairs, corporate communications, strategic procurement, information systems, group investments, global mining projects and assurance. Phew! Chatterjee, an honors Graduate in Commerce from Calcutta University and a Fellow Member of the Institute of Chartered Accountants of India was one of the CFOs who joined the hall of Fame instituted by CFO India.

Sanjay Puria is CFO, WNS HoldingsBPO major WNS has appointed Sanjay Puria as its new CFO. Puria, who has 15 years of experience, served as corporate senior vice-president (finance) at the NySE-listed company. he succeeds Deepak Sogani who stepped down from the post on personal grounds.

Alstom India gets new CFO Alstom India, a leading power generation, transmission and transport company, has announced the appointment of vijay Sharma as its new CFO effective September 1, 2013.

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Tips on effective corporate governance in treasuryPrem ThakurGeneral Manager - Treasury, Steria (India)


cfo i think

Different categories and sec-tors are experiencing the current eco-nomic environment in different ways. in uncertain times, consumers could be more willing to spend on small treats and impulse items than commit to large outlays like a mortgage on a house or a new car. so, for some companies, it could be business as usual, while for others a significant contraction could be on the cards. either way, you could profit by looking at some time-tested tenets for managing during uncertain times. the mantra could easily be summed up as ‘reduce, reschedule and conserve.’1. Reduce fixed costs. if growth comes off a previous high, you need to re-evaluate all fixed costs. there will be many voices around the table which urge you to ‘keep the faith’ in relation to fixed costs commitments, whether in manufacturing, distribution, adver-tising or in people costs. However, we should remember that rightsizing fixed costs in the short term keeps the

While different companies may be affected to varying degrees, there are some time-tested principles and practices that help the finance function deal with the downturn, believes Kimsuka narsimhan, CFO, Pepsico india.

KimsuKa NarsimhaN

Facts & Trivia

PROFESSIONAL QUALIFICATION: Chartered and cost accountant

FIRST JOb: Hindustan Lever as a management trainee

business lighter and healthier, and costs can be re-instated far more eas-ily than cut. 2. Reduce dependence on pricing. the classic business formula is to justify fixed cost by volume expansion and variable cost increases by price increas-es. in a slowdown, there is no such comfort – remember, the consumer of your product or service is trying to balance their books in exactly the same fashion as you are, and will either reduce or eliminate consumption if the price is unattractive. equally, swinging to the other side i.e., building excess capacity and then price discounting in order to absorb fixed overheads, is also a mug’s game. it is well-established that in a downturn, people are much slower to consume more because products are more affordable, but will instantly cut back if they are more expensive. the more balanced approach is to price moderately, use productivity to absorb inflation and/or protect margins and cut variable costs as best as you can.

3. Re-schedule all capex and hiring – unless you are in an industry where you absolutely need to stick to an investment schedule because of long lead times (mining, infrastructure) or where key talent availability is an issue, hiring or capital expenditure spends should be pushed out as much as possible. Both have a tendency to snowball and gather add-on costs/cash implications well beyond their face value. as every rookie accoun-tant with a spreadsheet knows, if the returns on capex in the first few years lag assumptions, the projected returns are hit real hard. and that’s exactly what is at risk in a slowdown: uncer-tainty about the immediate future. 4. Re-schedule all innovation launches. innovation is the lifeblood of business, without doubt. Yet, given the low suc-cess rates of innovations (one in every 10, by one estimation), it could make sense to push launches out to more buoyant times. People are probably more inclined to be experimentative


i think

“if the cash on your balance sheet grows, do not be tempted to invest it just because the textbooks advise a certain asset allocation model”

and try new products and services when they have more money in their pock-ets, than when times are tight. and of course, in the short-term it would save the launch costs and initial losses that a new product invariably runs up. one thing that could work well though is pack-price innovations – both low unit price offerings (lower outlay to attract cash-strapped consumers) as well as larger packs (with per-use econo-mies to value-conscious consumers). 5. Conserve cash. if there’s one thing that you want to watch like a hawk, it’s your operating cash flow. this is the time to ensure you get the best

6. Debt/Equity ratio – You don’t need to be a financial genius to figure that low leverage during a slow-down is the best bet. especially if this is accompanied by a tight and dear money situation, you want to keep exposures to a minimum. Hold on to low D/e ratios for dear life – and again, let no banker talk you into an acquisition which is “cheap and waiting to be bought” just because the seller is willing and your Balance sheet can handle it. When the slowdown has gone on for long enough and green shoots begin to appear, that is when you can cautiously emerge from your shell and sniff around for bargains. again – watch for slowdowns that degener-ate into a full-blown recession – these require a whole new way of working. there is, of course, no one-size-fits-all approach, and what are challenging times for one industry could be when opportu-nities abound for another. Prudence and caution are always good guides in times of economic uncertainty.

(The above article captures personal thoughts of the author and does not reflect her employer’s/ others’ points of view)

credit terms from your suppliers and reduce your credit sales to new lows. the minute you move to a new level of lower growth, a rash of obsolete inventory write-offs is inevitable, but minimise it and ensure that it doesn’t recur through vigilance on order size, re-order limits and levels of inventory through the supply-chain. and if the cash on your balance sheet grows, don’t be tempted to invest it just because the textbooks advise a cer-tain asset allocation model. cash in a slowdown is like gold to the average indian family – tangible, traditional and above all – safe! s

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cover storyeconomy trails

Shalini S. Dagarimaging By peterson pj

indian economy is on a slow burn with growth almost halving in the

last 14 quarters and macroeconomic indicators showing a fragility

almost forgotten in the last two decades. We read the tea leaves.

“in the last nine years, since I started my business, I had not seen a single month of zero revenue ever. And this year, I have already seen two such months due to poor economic prospects,” says Shalabh Sinha (name changed), who runs a recruitment firm in Gurgaon.

Sinha is not worried though. In good times, he had behaved prudently—bought a large office space, built up a good buffer of cash and also organised alternate sources of income. All this, as he kept the business small and manageable. With no rent or monthly installments to worry him, Sinha seems well-fortified.

At a local mall in Delhi, shops which relied on the citizens acquiring a taste for exotic chocolate flavours or other fine tastes, are boarded with regular frequency. The slump in economic growth from 9.4 per cent to 4.4 per cent in the last 14 quarters is showing on the streets around the country. It is also showing up in the government coffers. And the government has not been as sensible as Sinha.

PUBliC FinanCESAnaemic growth has ensured that tax collections are sluggish. A case in point,

corporate advance tax collections for the September quarter (FY14) grew at 8 per cent versus 10 per cent last year. This has happened even as the government com-mitted to higher and rather inflexible spends via traditional food, fertiliser and fuel subsidies and through entitlement schemes.

Continued on page 16

Economy TrailsEconomy Trails

cover story cover story


cover story


Economy TrailsEconomy Trails

cover story


ing complete the volatile mix.With this miasma of uncertainty, is it

any surprise that investors remain wary of the once shining India story? Leave alone foreign investors, even India-based trans-nationals prefer to invest in other global destinations.

Girish Vanwari, partner and co-head, tax at KPMG points out that it is not the tough laws that deter investors. “Investors are able to digest tough laws and can adjust their business models but uncertainty makes it difficult for them,” he says.

Sentiment sours quickly and some-times irrevocably, when a government displays churlishness by overturning the highest judicial pronouncement and legislating a retrospective amendment, as was the case in the Vodafone tax dis-pute. Litigations with trans-national cor-porations are only proliferating.

Inflation has been an additional ugly bug bear. Global crude oil prices apart, retail inflation has been accentuated due to insufficient attention to supply side constraints. The purchasing power of the rupee has eroded both domestically and globally. The Indian rupee plunged by almost 40 per cent in the last nine quarters. Monetary policy, therefore, remains tight.

Global and domestic headwinds have converged to produce worrying macroeco-nomic numbers too—fiscal deficit in the range of 5 per cent of GDP and current account deficit at a stubborn and unprec-edented 4 per cent of GDP.

Nearly no reforms push with big bang measures such as Goods and Services Tax (GST) and Direct Tax Code (DTC), high profile graft, dysfunctional polity and an administrative paralysis in decision-mak-

“You cannot have high growth with high inflation alongside. Inflation hurts growth. It is a historical pattern.”

“Over the next one year, rupee volatility will continue and global growth will not be as robust as people may believe.”

— Subir Gokarn, Former Deputy Governor, RBI

— Anil Singhvi, Chairman, Ican Investment Advisors

2 21.5

0.1

-1.3 -1.3

-2.3-2.8 -2.8

-4.2-4.6

-1

0 0

-2 -2

-4 -4

-6 -6

inDia CUrrEnT aCCoUnT To gDP

Jan/04 Jan/06 Jan/08 Jan/10 Jan/12

source: www.tradingeconomics.com | ministry of Finance, government of india

inDia gDP annUal groWTh raTEpercent Change in gross Domestic product

10 9.49.7

8.5

7.87.5

6.15.8

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8.37.8 7.7

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5.3 5.3

4.7 4.84.4

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10

8 8

6 6

4 42008 2010 2012

source: www.tradingeconomics.com | ministry of statistics and programme implementation

Continued from page 14

cover story cover story


Changing noTESIn the last few months, as the rupee

gyrated to Ben Bernanke’s pronounce-ments on the taper, the seriousness of the situation has even hit policymak-ers. Appropriate noises have ema-nated and there is a change in percep-tion at both the finance ministry and the RBI getting manned by serious professionals—P. Chidambaram and Arvind Mayaram and noted economist Raghuram Rajan at the central bank. Furthermore, there has been a flurry of legislative action with bills on land acquisition, food security and pen-sions getting passed.

In the power sector, fuel supply agreements (FSAs) with 173 power projects, totalling a cumulative capacity of 78,000 MW need to be signed, as per Supreme Court guidelines. Power min-istry points out that 146 FSAs, totaling about 65,000 MW, have already been signed. These FSAs are for projects that have either been commissioned before March 2009, or will be commis-sioned by 2015.

Jyotiraditya Scindia, MOS Power says, “Barring a few issues with some companies, we are well on track. Some companies have not completed their milestones with regard to for-est clearances, land issues and equity investments. Some companies have undergone a name change and a sale prior to signing the FSA in violation of the agreement.”

The Cabinet Committee of Invest-ment has so far cleared 209 projects with an aggregate investment of Rs 3,84,203 crore. Seven stalled mega infrastructure projects, envisaging an investment of Rs 1.6 lakh crore are under consideration.

A good monsoon and the prospects of a bumper harvest have provided further fillip to the optimists. With the U.S. Federal Reserve continuing to keep the liquidity taps open for a little longer, India has some reprieve.

Has this change been noticed by the investors? Or are they dismissing it as pure optics?

“We (Indian economy) are still an Ambassador car. We are not a Mercedes car which you can drive at 250 km per hour.”

— Deepak Bagla, Partner, 3i India

2011-06-30 2012-04-30 2013-02-28

70 70

65 65

60 60

55 55

50 50

45 45

40 40

rUPEE MovEMEnT vS ThE US Dollar

-3

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-5 -5

-6 -6

-7 -7

-8 -82004 2006 2008 2010 2012

percent of the gDpinDia govErnMEnT BUDgET

-3.477 -3.294 -3.272-3.5

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cover story

ThE nEUTral, involvED viEW

“The decision paralysis is certainly over. There is a spate of action,” says Vinayak Chatterjee, chairman Feed-back Ventures, an infra consulting firm. Chatterjee believes a “public-expendi-ture driven construction-led revival” is in the offing. He is expecting construc-tion contracts worth Rs 90,000 crore along freight corridors, DMIC and in the roads sector to push through a reviv-al in the next couple of years.

Investors such as Deepak Bagla, part-ner, 3i India, too are more sanguine about the India story. “We have spent nearly $900 million in India and we have faith in the Indian system. We have not exited a single investment in India and not that we cannot,” he says. The 3i India Infra-structure Fund was widely publicised as having quit India. Bagla counters that the fund merely came to the end of its invest-ing period in India with the remaining funds being set aside for top-up invest-ments and expenses. “As a global inves-tor, ironically, it is the best time to invest in India. Private equity funds of 2013-14 vintage will be outperformers,” Bagla adds. He will, however, wait for the India investments to mature before pushing for another India fund to skeptical global investors, whose appetite for emerging markets and infrastructure has waned in recent times.

Bagla believes the India infrastruc-ture story is a case of structural imbal-ances that get created when there is rapid economic growth for a few years. “It is the first time in the economic history of mankind that private money is being used to create infrastructure in such a broad-based manner. So there are bound to be learnings on all aspects for all economies,” he says.

Infrastructure, which has been a key constraint area for Indian economy, will probably come through in the long term. In the near term, worries persist. DK Srivastava, CFO, Matrix Clothing, which focuses on exports is not very pleased with a sliding rupee as he says that is no guarantee of an uptick in demand in global markets. “The mar-ket dynamics are challenging. We are now facing another challenge as buyers want to re-price contracts,” he adds.

It may sound perverse, but there is enough opportunity even in this down-turn. Vinod Agarwal, country head of Guthy Renker, a direct marketing con-sumer products company has little rea-son to be glum. The company which relies heavily on marketing and has 35 per cent of its cost being accounted for media buying, has seen the market softening. “We are pushing for lower media costs and it seems to be work-ing. On the demand side, at higher price points, demand is relatively

inelastic. Our numbers substantiate the story,” he says.

going ForWarDSeveral sections of the economy, how-

ever, have trained their eyes on the new RBI governor Raghuram Rajan. There are diverse views on his repo rate increase of 25 basis points in the battle against inflation. While some believe he is doing the tough but correct thing for long-term structural strength, others worry about the enormous human costs such a policy will engender. For now, real estate devel-oper Purvankara Projects’ CFO, Anil Kumar, does not worry about the quan-tum of the hike affecting demand just yet as the southern markets are relatively stable. Yet, he does worry about higher borrowing costs.

For India Inc as a whole, the cost of funds has gone up enormously in the last few years. Noted economist Rajiv Kumar believes higher interest rates do not serve any purpose. “My take is that retail inflation will not come down with these measures, and high interest rates with low growth will weaken the econo-my further.”

Credit growth numbers have been fal-tering in mid-teens for sometime. “We will see the targeted fiscal deficit but on much lower growth numbers if the tight monetary policy continues,” said a Mum-bai-based banker. That may well be the case. Sinha’s recruitment firm recently got loads of positions to fill. Indian com-panies are outsourcing their recruitment and HR to outside vendors. That perhaps means layoffs, but for Sinha, it may also be the next big trend which he can ride to a prosperous future.

As 3i’s Bagla sums it up, “India is not a highway on which you drive straight if you want to invest in India. It is like any emerging market, a stream which you cross by taking off your shoes and feeling the pebbles.”

Well, the water seems to be rising... And the pressure to get safely to the other side quickly is high.

Additional reporting by Parimal Peeyush

“Out of the 173 fuel pacts that are to be inked, there

are about 10-15 projects where the milestones have not been

achieved.”— Jyotiraditya Scindia,

Union Minister of State, Power

Untitled-3 1 9/27/2013 12:20:29 PM


cfo Profile ramkumar krishnamachari

cfo, just dial

A self-confessed fighter and

a marathoner, Ramkumar

Krishnamachari, CFO, Just

Dial recently capped off a

successful public offer for

the company.

B.S. SrinivaSalu reddy

RAmkumAR kRishnAmAchARi. it is a name that rings a bell in the minds of not just peer groups of financial officers, but also among merchant bankers, brokerages and discerning investors. he is the man who laid the ground-work for the initial public offering (iPO) of Just Dial Ltd (JDL). concluded a few months ago, this was one of the most successful public issues seen in a sluggish market. The stock rose 15 per cent on the listing day and has since then been on an upward track. The public offer was the result of two-and-a-half years of effort for putting systems and processes and various metrics in place.

Born and brought up in kolkata, krishnam-achari was initially not “very serious about life”. in fact, he wanted to be a cricketer. however, the switch came while he was in college, when his father lost his job. The grim realisation that his father had lost his job because he was not professionally qualified changed his life. his mother urged him to qualify as a chartered Accountant, an idea he resisted at first but eventually when he cast his hat in the rung, he qualified as a Top-20 rank holder in 1989. The same year he also qualified as a cost and Works Accountant with the same rank.

An IPO

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cfo Profile


FIRST JOB

ACC Ltd.

BIG BREAK

RPG where at a

young age I was

exposed to various

roles

AHA! MOMENT

Building a house

for my parents and

taking Just Dial

public

DREAM

Nothing specific

milestones


cfoProfile

“After this, i always had the ambition of con-tinuing to learn,” he says. That is what took him through his professional education as well as his career. This early bump in the road redefined krishnamachari and his attitude. not only does he enjoy sharing what he has learnt with others, but as one of his close friends reveals that krish-namachari extends that quality to his life by help-ing others in need.

his first job was with Associated cement com-panies (Acc), in Patna. After a couple of years, he moved to RPG Group’s leather chemicals manu-facturing set-up, a new plant being established as a joint venture. “Lining up institutional funding for the project, and working capital funding from banks and setting up systems and processes gave me a fantastic exposure to finance and account-ing in a small set up,” said krishnamachari, who was associated with the group for three years. he then joined kPmG as a consultant for Busi-ness Process Re-engineering (BPR) and moved to the united states. his penchant for learn-ing led him to complete cFA and cPA courses while he was in the u.s.

Back in india in 2003, he joined Reliance capital. “it was a good experience. it gave me an insight into the workings of a large group known for innovation, and aggressiveness and exposure to various businesses,” recalls krish-namachari. This was followed by a stint with Royal sundaram General insurance, a different but highly regulated segment which made it quite challenging for a finance professional.

“i would say that the most exciting and chal-lenging job has been the current job. Because, i had to take the company to the public. Going public for the first time is a high profile event for any company and it has been an exciting experi-ence for me,” explains krishnamachari. he had joined the company in August 2010.

JDL is a leading local search company and a dominant player in its operating space. Prepar-ing the company for the iPO as a cFO involved three broad initiatives. “We were a people-driven services company and it was critical to trans-form it to a process-driven company through automation. The second issue involved continu-ous improvement and evolving various metrics. Finally, putting controls in place to plug leakages in a large organisation was a challenge,” krish-namachari explained.

The ecosystem in india is evolving and increasingly more people are using the inter-

net through smart phones. keeping these fac-tors in mind, JDL seeks to help the user not only to search but also to transact for their various local needs. The company offers user-based information on businesses in over 1800 cities and towns in the country. This compre-hensive database is being continuously built as part of regular expansion activity. “As a cFO of an internet-cum-technology company, it is exciting to see the growth prospects. The most important job is to educate and help investors understand my business so that they remain with us as we embark on a journey of further

JuST DIAl wHERE RAM KuMAR TOOK THE cOMpANy puBlIc HAS BEEN THE MOST cHAllENGING ONE FOR THIS MARATHONER

favourite Picks

MAGAzINE

Economist

FAvOuRITE DESTINATION

Kumbakonam for

spirituality and New

York for its energy

FIlM

Shawshank

Redemption

ROlE MODEl

My mother

pASSIONS BEyOND NuMBERS

Music. Hindi and Tamil

songs


cfoProfile

growth for the company,” krishnam-achari says. Looking ahead, Ramkumar adds, “in the next three years, the idea is to take the company to the next level of growth.” The nuts and bolts of this strat-egy would include deepening engage-ment with users, enabling them to do many different things on the platform and including more uses for search of day-to-day things. The company also intends to enhance benefits to small and medium enterprises (smEs) on the Just Dial platform.

One of his childhood friends, kaushik mukherjee, a former advertising and brand professional, describes krish-

namachari as humble, intelligent and a very helpful person. Recalling the way he and krishnamachari used to play cricket on the calcutta roads, he said Ram was a good cricketer but is now shy of revealing his cricketing skills.

Does krishnamachari have a role model? Experience, he firmly believes, is the best teacher. if anybody had inspired krishnamachari, it is his mother. “she taught me that determination and per-severance to achieve goals without com-promising on your values is a virtue.”

krishnamachari adds, “over time i have come to learn that nothing is more important than learning from

your own and others’ experience. Apart from whatever one may learn from books, the best learning one can get is from every day interactions with people, your employees, users and custom-ers,” he argues. he counts fairness as one of the most critical traits. “Be fair in systems and processes, your dealings with employees, customers, and various stakeholders,” he says.

The rest will take care of itself. For krishnamachari who is a marathoner, “the zeal to achieve milestones and a constant race against oneself for self-improvement gives a different high.” The race is far from over for Ramkumar.

“it is our company’s goal to reach a million customers. To do so, we are trying to go beyond search. We are attempting to enter the transaction enablement space.”


in practice Technology

CIOs are increasingly responding to the concerns of the CFOs by cutting costs and improving the efficiency of existing resources.

When India’s economy was going north, the IT department was a clear winner. Organ-isations were focusing more on increas-ing revenue and expanding their foot-prints, instead of reducing the cost of IT infrastructure. The CIO was spared the pressure of a reduced IT budget. Instead, he was given a free hand to expand the IT infrastructure. However, with the economy nose-diving, things have changed dramatically and CIOs are under immense pressure to reduce costs. Although cutting IT costs ranked high among CIOs’ priorities even in 2007, now it has become absolutely integral to survive in the market.

Cost-cutting, however, could be a dangerous game for a CIO. Theoreti-cally, it is easy to cut cost. A CIO can remove some of the applications, ditch software or even lay off some employ-

On the same Page

ees from the IT department. But these methods are not and should not be the first preference, as they are likely to impact productivity and chances are high that these measures could have some negative impact on the business. As a result, a CIO has to consider cost-cutting measures while maintaining business operations or increasing them effectively.

LegaCy inFrastruCtureIn a bid to save upfront capital expen-diture, CIOs often hold on to the exist-ing infrastructure and this is one of the biggest mistakes they commit. Often unaware that their organisation is using some legacy product or applica-tion which is outdated, CIOs also find it very critical for the business to take a risk to remove it.

Getting rid of legacy infrastructure could even ignite employees’ wrath as they are comfortable with the existing infrastructure and oppose change. Muralidharan Ramachan-dran, CIO, Syntel Inc says, “Syntel’s focus has always been to optimise and eliminate waste, resulting in reducing costs rather than purely focusing on indiscriminately cutting costs. A lot of investments, policies and processes are made around enterprise collabo-ration tools, mobility and BYOD on the infrastructure side. Simultane-ously, we have enhanced our focus on developing/upgrading applications to improve business operations. This has resulted in optimisation of capital and revenue expenditure towards devices, travel and communication expenses, recruitment costs and more.”“This is a continuous process and the

Akhilesh shuklA


in practice

money for their enterprises. For example, by setting up online appli-cations which allow direct data input from customers instead of an employ-ee, efficiency of the system gets a boost and employee resources better utilised. CIOs are convincing organ-isations that automation is the way forward and to get to the next level, a organisation has to reduce human interface as much as possible. Auto-mation is automatically doing the sav-ing for them!

LiCense COnsOLidatiOnIt is a known fact that often organ-istions over buy productivity tools. Some of the tools are not fully used, while some are not used at all. Almost every organisation has this problem. CIOs are identifying this problem as another opportunity to bring some change. They evaluate how actively employees are using their licenses and consolidate in this area. CIOs have begun to measure real usage time and this is helping them in decision-mak-ing. In fact, they do not rule out good and useful tools available in the open source community. It is helping them save license costs and this money is being used in some other critical area where funds are required.

renegOtiatiOn OF ratesCIOs looking to cut costs are inviting IT services vendors on the negotiat-ing table. Vendors are well aware of the economic downturn and rene-gotiating rates is not an uncommon practice these days. Vendors who have become strategic partners are using this opportunity to take the relation-ship with the organisation to the next level. Any resistance to such propos-als is viewed adversely in terms of of partnership or the typical vendor-organisation relationship. New rates can come in many forms and compo-nents and CIOs are analysing such proposals to see if any non project

focus will be on improving this fur-ther,” he adds.

CLOud COmputingNo matter how skeptical CIOs are with respect to cloud computing, it is going to be the next frontier for business and will redefine computing in the future. Today, a large number of cloud-based solutions are much cheaper than what desktop solutions have to offer.

As Sesh Rangarajan, CTO - BIM, Capgemini India, points out, “With the opening up of global market and emerging markets, organisations need a more cost-effective IT platform to meet the increasing demand in devel-oping economies. Cloud-based IT infrastructure helps to reduce costs. Cloud-based solutions are pretty much able to replace nearly 80 per cent or

more of total IT Infrastructure cost to provide a more robust, scalable, easy to deploy alternative.”

dupLiCate serviCesCIOs are also evaluating all the product and services being used by employees to avoid overlap. For example, some of the products might also deliver features, apart form their key function, that might work well with other stake holders. If CIOs discover feature overlaps, they go for products offering more features.

Duplication definitely costs money, and CIOs are containing duplication whenever and wherever possible.

autOmatiOnAutomation is a potent and power-ful tool that CIOs are using to save p

ho

tos.

co

m


in practice

-oriented cost is being added.

COnsOLidatiOn & virtuaLisatiOnCIOs are looking at consolidation of IT infrastructure as not just another opportunity to contain cost, but also to make it trim and efficient. How-ever, it does not mean that develop-ment and testing environments are consolidated into one. Consolidation is being carried out in a calculated manner and after proper evaluation.

“Virtualisation is another excellent opportunity to reduce costs on the hardware front. Some of the CIOs are resisting virtualisation as it requires a handsome capital investment. However, a simple cost-benefit analy-sis ensures that it has faster ROI in terms of cost saving,” says Subra-manya C, Chief Technical Officer — Hinduja Global Solutions

dOCument managementDespite the crucial role document management plays in enabling opera-tions and its contribution to produc-tivity and efficiency of the organ-isation, it is still among the most neglected areas in most organisa-tions. The reasons are evident — the ownership is split across functions, costs are not visible and impact on organisational efficiency and produc-tivity is not measured.

As per IDC, about 3-15 per cent of an organisation’s spend is incurred within the document management domain. CIOs are now realising that the costs of having a fragmented, decentralised document strategy are staggering. Effective document man-agement is about using communica-tions and information, both digital and paper, to their full potential.

Vijay Sethi, VP & CIO, Hero Moto-Corp says “We can save a good amount of money through smart doc-umentation. Earlier, we used to make payments by cheque. We incur cost

in printing, besides there was cost of sending couriers. It was also a time-taking and man-hour consuming process. Now we are making 90 per-cent of our payments with the help of digital signatures. It helps in saving cost and time, both. The payment sys-tem has become effective and robust. Even our vendors are happy.”

digitaL seCurityIncreasing technological advances have enabled organisations to access and move around with key informa-tion, both work-related and personal. While this brings flexibility, it adds to the risk of losses. Data breaches have the capacity to not only collapse a company’s reputation, but also result

in direct financial losses.With new trends like social media,

mobility and vast volumes of infor-mation residing on devices ranging from smartphones, laptops, desktops, servers, networks to storage facilities including the cloud, data is vulner-able to loss 24x7. Further, employees, malicious or unknowing, often put information at risk, contributing sig-nificantly to this loss. In fact, Syman-tec’s recent Cost of Data Breach Survey highlights that Indian organ-

isations incurred a monetary loss of Rs 2,271 per compromised record, with over 74 per cent of data breaches across organisations a result of sys-tem glitches or human error. A CIO working closely with the CSO for complete digital protection of the company helps in saving IPR of the company which translates into busi-ness value. Several forward-looking CIOs are already working in tandem with their CSOs towards this end.

Wan OptimisatiOnWith rapid adoption of strategic IT trends such as cloud, mobility and virtualisation, business without bor-ders is the new reality. However, suc-cessful enterprise adoption of these cutting-edge technologies is entirely dependent upon reliable, high-speed network performance. With large vol-umes and new varieties of data such as video and multimedia (travelling thousands of kilometers for routine business needs), CIOs are looking for faster and smarter connectivity.

Over the past ten years, Wide-Area-Network (WAN) optimisation has transformed from a point solution to solve isolated network performance problems to a strategic cornerstone for application performance delivery in the enterprise.

Laly Basu, Head IT, CMC says, “We were facing a problem of network clogging at our Noida office. The net-work bandwidth was at 4 mbps but with increase in user demand it was imperative to increase it. We started exploring other options (since increas-ing bandwidth would mean substan-tial cost). We evaluated Riverbed’s products. We had a Riverbed device lying unused in one of our other sites, which I deployed in Noida. Once rein-stalled, it started working nicely and we achieved a 70 per cent reduction of network traffic.”

this piece first appeared in cIo & Leader

magazine.

a CiO has to consider cost-cutting

measures while maintaining

business operations

and increasing them effectively


fourth annual CFo leadership ConClave

The scenic beaches of Goa can lull you to believe that it is all about fun and frolic. but when dozens of cFOs from across the country assem-bled for the Fourth annual cFO Lead-ership conclave, it meant business. at a time when growth is slipping, rising prices are hurting companies and indi-viduals alike, and policy paralysis add-ing to uncertainty, the conclave saw a vibrant exchange of ideas among cFOs and finance professionals.

cFO india editor anuradha Das Mathur set the ball rolling with the agenda for deliberations, drawing the attention of the audience to a tough economic environment and the need for inspiration. Jamling norgay, an everest mountaineer and son of the legendary Tenzing norgay, was the right person for that. he had the cFO audience in rapt attention as he nar-rated his experience of reaching the top of the world and the challenges

that the team had to face. Leaders often have to take very tough decisions and norgay buttressed the point using an anecdote. The health of one of the col-leagues was going from bad to worse as he was hit by a frost bite. it was a hobson’s choice – the expedition team moved ahead and left him alone to die!

The keynote address by ican advi-sors chairman anil singhvi high-lighted the changing role of the cFOs, who are assuming responsibilities that

It was the intense exchange of ideas for over two days among dozens of CFOs that marked the Fourth Annual CFO Conclave at Goa. A number of participants felt that there was need for closer cooperation with the government agencies.

Reworking the CFO agenda


conclave

are critical to the success of the ceO. singhvi, a celebrated cFO of ambuja cements earlier, urged the packed audience to stand up and make sure that they executed their role without giving in to unreasonable demands. “it was good to manage the companies when growth was 9 per cent. it will be challenging to manage the companies now that growth has slipped to 4.5 per cent. The challenges will be far more acute than they have been in the past,” he cautioned the cFOs.

Dr. ajit Ranade, chief economist, aditya birla Group, spoke of the headwinds that india was faced with because of the global macro-economic situation. Deepak Ghaisas, chairman Glencoval strategic services, further elaborated on the challenges for the cFO as the indian economy faces global headwinds. Rakesh singh, ceO aditya birla Finance, detailed the trou-bles and opportunities that the small and medium enterprises (sMe) sector is going through and the opportunity that the crisis presents for them.

Dr shubhro sen spoke about the idea of capitalism, which can also have a caring face. he cited examples of how companies that cared for the environment they operate in improved their bottomline, underlining the opportunity for cFOs and organisa-tions to have a relook at the alignment with society. “There is a new higher

game of management in town, there is a greater degree of responsibility, a greater requirement for a new level of expertise in our leaders, greater sensi-tivity that our leaders need to bring in their decision-making structures,” he told the gathering.

at the Technology Forum, the key-note speech by Vs Parthasarathy, Group ciO & eVP-Group Finance & accounts & M&a, Mahindra, noted how closer cooperation between the technology and finance departments can help achieve key targets.

While there is a chorus of voices for and against free markets over the last few years, the cFO has to navigate through the risks that he is faced with. Merck cFO Giri Giridhar spoke about the widening risk for a cFO as he helps drive strategy for growth.at the ideas café, cFOs answered

rapid fire questions from moderators on carefully chosen topics. eight tables were assigned with different topics to one moderator each. every 10 minutes, a random set of cFOs moved to a new table and a new discussion.

speaking on Government, Gover-nance and ethics, former comptroller and auditor General of india Vinod Rai, reminded the audience that “good governance is not the sole responsibil-ity of the government alone. it is as much a responsibility of the corporate as it is of the government”.

it is the duty of the government to be responsible towards the people from who they collect taxes, the former caG told the biggest ever gathering at the annual cFO conclave, and also emphasised upon the ardent need for policymakers and the industry to work in closer cooperation.

CFOs and other dignitaries are all ears during a session at the Fourth Annual CFO Conclave that was held in Goa

Deepak Ghaisas, Chairman, Glencoval Strategic Services, talks of the challenges CFOs face in the current state of the Indian economy


fourth annual CFo leadership ConClave

There needs to be innovative thinking on how to handle traditional cost centres such as hr and finance. Procurement, facilities and legal are generally portrayed as necessary evils. Waste can be cut by bench-marking cost against a comparable company or industry. If the basis for incurring the cost is not correct, it should be considered waste and that needs to be addressed. Cutting of waste can also be done by closely studying the organisation design, performance systems, automation, and service delivery orientation among other systems.

The organisation needs to think of innovative ways to handle cost centres. This could result in discussions around what these functions support and the method of allocation of the cost. There may be complex methods of considering cost centres as ‘nominal revenue’ functions and reallocation methods. It is important to understand if the basis for incur-ring a cost is correct. If not, there is waste and it should be minimise.

Companies should focus on identifying costs to the cost centres and then further to its constituent base unit. Consider the cost of running finance as an example. Baseline the cost and arrive at the cost of finance operation as a percentage of revenue. Compare this cost with a compa-rable company in a comparable industry. That should be detailed to the component costs and opportunities to cut waste or improve efficiency. Once benchmarking is done, comparing the cost could become a regular exercise. There should be focussed improvement initiatives. Cutting of waste can be done by studying and improving the organisation design, the processes, the performance systems, accountability, automation, ser-vice delivery orientation, information systems and other areas.

Madhu Menon, CFO, Tesco HSC

Thought Leader:

CFO India, in association with Deloitte, launched a unique initiative to honour and celebrate the thinkers in the financial arena—the FinThinkers Fest 2013. ‘I think. Therefore, I am.’ was the inspiration behind the initiative that got off to a flying start in Goa on September 13, 2013. Judged by a distinguished jury, seven outstanding finance professionals were honoured for the brilliance of their ideas across 13 catgeories. Here is a look at some of the winners and their distinctive ideas.

Festival of Ideas


The fInanCe function should move to a role of key value-addition across strategy, growth, business support and risk management and the transaction controls should become IT driven. Technology should take over day to day accounting cutting down the need for paper work. This will allow the CfO to work hand in hand with the CeO and other business heads. non-fund limits and exposure should be in demat form. all companies and banks must get an account with a central agency and all outstanding bank guarantees and letters of credit should be reflected in this account on both sides – receipts and payments. The company can thus control outstanding expenditure, keep an effective watch on records and tackle cases of forged bank guarantees.

In The startup environment, growth is something not just meant to be in rev-enues. Often in the technology indus-try, acquisition is done with a view to acquire talent. hence, a large number of startups are simply an investment in talent, referred to as ‘acquihire’ in industry parlance. among the tech companies in the silicon Valley, the thumb rule for each ‘aquihires’ is around $1 million. a 20 person compa-ny, hence, can be valued at $20 million. If that is the value a large company pays to acquire such a small company, it has serious repercussions on its existing employees. such hires come with a long lock-in period and progressive award of compensation that equates with most long-term compensation structure of the acquiring company.

Deepak Harlalka CFO Raychem RPG

Badri Sanjeevi CFO People Group

Editor of CFO India Anuradha Das Mathur at the FinThinkers Fest 2013

Participants listen intently at the FinThinkers Fest 2013, part of the annual CFO conclave in Goa

Founder & MD of 9.9 Media Pramath Raj Sinha (r)with the awardees at the felicitation ceremony

Awardees release balloons after being honoured for their ideas at the first edition of the FinThinkers Fest

Cogito ergo sumI think, therefore I am ~ René Descartes

For the power of his/her ideas to transform

CFO India is privileged to recognise

as

MemberFinThinkers Jury

EditorCFO India

Deepak HarlalkaGT Kannan

Madhu MenonSayamdeb Mukherjee

Namita SethiBadri Sanjeevi Sanjeev Varma

Anil Singhvi Anuradha Das Mathur


CEO intErviEw

Rakesh Singh, CEO of Aditya Birla Finance Ltd. believes exports, good monsoons and the festive season will lift the economy in the second half. Speaking to CFO India, he says he expects the RBI to revert to its rate-easing mode in the coming months.

ashutosh sinha

‘We expect RBI to revert to its rate-easing cycle’

Q How do you see the macro pic-ture emerging over the next 12-18 months? Are we close to hitting the bottom?

It’s clear that we are witnessing an investment slowdown cycle that will possibly keep growth low. A num-ber of industries such as auto, steel and cement are facing excess capac-ity issues. While better monsoons and investment project clearances will pro-vide some impetus to growth in the near term, leading indicators of the investment cycle have still not turned. We need to wait and see how these shape up in the backdrop of the macro-economic environment. It would be a bit optimistic to say we are close to the bottom of the current business cycle.

Q How will interest rates shape up in this uncertain environment? The future outlook for interest rates is a very relevant question at the moment. With the cut in MSF by 75 bps, short-term cost of funds will ease from peak levels. While the Dr. Rajan is clearly focussed on CPI, our view on inter-est rates is different. We believe that the recent increase in WPI is largely due to transitory factors (vegetable and

onion prices) and will be reversed in the next few months. Economic slow-down impacting services sectors like construction, trade & transport should result in moderation in CPI over the next 3-6 months. Our view is that RBI will go back to its rate-easing mode over the next few months.

Q Given the uncertain political environment, is credit demand being impacted for the SME sec-tor? How is this affecting your target market?

Macroeconomic challenges have a greater impact on credit demand for the SME sector than political fac-tors. Rising interest rates, volatility in currency markets and weak demand affect credit demand and political uncertainty does not independently change that significantly. Having said that, the demand for working capital and funding for business expansion does not disappear overnight. The pace of credit demand might have slowed, but we do not see a change in the long-term demand for credit. In the short-term, the current scenario does add to the stretch on our cus-tomer segment.

Q What geographical areas in the country are holding up despite weak demand? Which areas saw the biggest drop in demand?In the current scenario, geographies dominated by export-oriented sectors are holding up, especially the pharma-ceuticals industry. The biggest drop in demand in the past few quarters has come from the manufacturing-centric geographies, although the IIP num-bers for July were a pleasant surprise.

Q What positives do you see in the current economic environment?Exports, good monsoons and the fes-tive season will provide a lift to the economy in the second half. The recent changes should also be viewed as positive for the long-term economic environment as well as near term sta-bility in the financial markets. Lower interest rates should be another posi-tive, given the elevated short-term rates, for both investment and con-sumption demand in the economy. Finally, the new RBI governor has not shied away from using innova-tive methods (lower currency swaps to incentivise FCNR deposits) to solve our economic problems.


Clean and consistent documentation is key to avoiding tax trouble, suggests former taxman B M Sinha.

THE KNOTS OF

It Is not often that hardworking CFos get to meet someone who has been India’s top taxman. on August 29, as Mumbai’s CFos posed their queries to BM singh, former Chairman of the Central Board of Direct taxes (CBDt), it was clear that the threat of uncertain-ty that businesses were facing due to the changing tax regime was occupying their mind. Earlier, the same session was held in Bangalore on August 27 for a select gathering. transfer pricing! As this term has become a part of the regular lexicon for the finance community around the country, singh explained the approach that the tax department wants to take in the context of specific domestic trans-actions. singh also shared the resource crunch faced by the CBDt. the team for transfer pricing is often not large

enough and in the past, the number of references to the transfer Pricing officers was so large that they could not have completed their work in the scheduled time. However, expansion is on the anvil. “there will be the odd case where we will find that the taxman is not rule book driven but more discre-tion-led,” singh said, adding quite can-didly, “there will be some cases where we will make really, really high pitched adjustments and your only course will be to get your just rewards in appeal.” several CFos shared their own experiences where they have borne the brunt of such discretionary pow-ers. that, they said, was not business friendly and more so in current times when the government is seeking more investments. singh explained the gov-ernment point of view which in sum-

mary is to rationalise the tax rules and help foster an environment conducive to business. Referring to the process for documentation, singh, during whose tenure the Vodafone tax case was initiated, advised CFos that they should prepare a robust set of docu-ments beginning with the current year. “that is the key to the question, to the problem. If you can get documentation done in a proper manner, you can sit back and relax,” he said, referring to the persistent questions from the audience on how to handle the tax official. safe harbour rules and the new advance pricing agreement (APA) regime, in the process of being final-ised, were also discussed. singh noted that he has been an advocate of the APA regime since it will bring certainty for both MnCs and the taxmen.

CFOs had an opportunity to get an intimate perspective of the transfer pricing issues when former chairman of CBDT, BM Sinha, took the dais in Bangalore and Mumbai.

TaxaTiON

CFO IndIa event

3434 C F O i n d i a O C T O B E R 2 0 1 3

Principles of Innovation

The role of finance is rapidly evolving from its traditional line function to a more value-added strategic role of being an

advisor to the management and board, generating forward-looking analytics, ensuring financial prudence on invest-ments and leading investor and analyst communication. One key activity is to support growth and innovation.

What is innovation?Innovation is the application of new solutions that meet new requirements, or existing market needs. This is accomplished through more effective products, processes, services, technolo-gies or ideas that are readily available to markets, governments and society.

Why do we need to innovate?Organisations today have to deal with short product life cycles, highly knowl-edgeable and demanding customers, breakthrough technological innovations, frequently changing regulatory needs and global markets and supply chain. To excel, organisations need to differenti-ate themselves. Successful innovators apply these core principles reliably:

* It’s all about creating lasting value for all stakeholders – which include cus-tomers, shareholders, employees, sup-pliers and society. It is essential to bal-ance social and environmental impact with economic performance.* Value creation needs to be linked to the organisation’s vision. Research shows that many firms even today are unable to develop a consistent link between value creation and the approv-al, execution and tracking of projects and initiatives. There is little emphasis on long-term and non-financial aims.* Creating value for customers is crucial as eventually it is they who decide how much value the company can create, internally and externally. An excellent case study is that of Nike, which now offers customers the option to design their own shoes, with everything from colour to fit to writing on the shoe, and promises to deliver within a week. This was initially offered only on the Nike website. However, due to its success, a four-floor shop in Buenos Aires was created solely for this purpose.* Always strive to maximise shareholder value. Shareholder value should influ-ence the decisions that are made every-

day, i.e. how to spend time and resourc-es and how to win in the marketplace. The basic formula for creating value has not changed much since Adam Smith. In today’s global markets, shareholder value (and total shareholder return) is driven by market expectations of future cash flows based on the company’s ability to sustain performance and grow. During downturns, the need for visibility into an organisation’s performance increases. Corporate governance is no longer good to have - it’s a must.* Employee-driven innovation too is significant. Companies can innovate and deliver outstanding service only if they tap the commitment, energy, and imagination of their employees, who are the most valuable asset of an organisa-tion and its goals cannot be achieved without the selection, development and reward of the right employees.* Another element is the value of social responsibility. Organisations now need to create benefits for the society at large. Those that meet these expecta-tions are held in high regard by everyone and it eventually leads to high margins. Innovation, shorn of fashionable lingo, is hence a way of working.

deloitte | custom series

Retirement Outcomes of EmployeesArvind Usretay, retirement business leader, India-Mercer

Employers have a critical role to play in preparing their work-force for retirement by sup-porting their efforts to secure

sufficient income for their retirement. Employers who choose to proactively develop a retirement income strategy create competitive advantage in the market. This advantage can be achieved through tighter alignment between retirement and workforce-management strategies and enhanced employee engagement and loyalty.

Why should employers intervene?Because they can. The employment relationship is a natural basis for act-ing collectively since this significantly enhances buying power and leverage. By managing vendors on behalf of its employees, an organisation can dra-matically reduce costs and improve retirement outcomes, particularly in preventing employees from making bad decisions. With the availability of new and innovative solutions in the mar-ket, organisations have better access, options and opportunities to improve retirement outcomes for employees. In India, many employers have started offering National Pension System (NPS)

under the corporate model.It is the right thing to do – Many

organisations realise that corporate social responsibility enhances their employment and commercial brands. Making the additional effort to support the workforce with retirement benefits fits naturally under this umbrella. Such corporations who have started to offer NPS have done so without higher wage bills.

Enhance employee engagement and loyalty. Employers seen to be active in managing and supporting employees with their retirement have an opportu-nity to differentiate their employment proposition and improve employee engagement. Mercer’s What’s Working survey revealed that participants rated good retirement planning as a reward component very close to base pay.

Any post-retirement income design plan needs to focus on building a robust retirement income floor that will ensure sufficient income for both the individual and potentially his or her spouse. There is mounting evidence that many work-ers do not understand this. In fact, many overestimate their ability to meet their future needs and do not realise how quickly funds will be exhausted. This is

a grave concern, particularly given the decline of defined benefit plans. Clarity is the most critical element of a retire-ment income strategy.

Broadly, there are two tiers that can be used to define the level of income floor:

Tier 1 - The minimum requirements: the level of income required to meet basic day-to-day living expenses.

Tier 2 – Replacement: the level of income required to preserve broadly current living standards, recognising that expenditures tend to vary in the post-retirement years.

Retirees tend to consume more in their early, active retirement years. Retirement income needs to level-off as they enter their more passive phase of life, only to increase again towards the end of life, with addi-tional medical and care expenses becoming increasingly important during this 'frail' period. Post-retirement income structures should accommodate these consumption patterns while maintaining the desired income floor.By Arvind Usretay, retirement business leader

- India, Mercer. The views expressed are per-

sonal. Arvind can be be reached at arvind.usre-

[email protected]

— Arvind Usretay, Mercer

mercer | custom series



insight Governance

ph

oto

s.c

om

Although largely uncounted, intangible digital assets may hold an important key to understanding competition and growth in the Internet era.

On July 31, 2013, the US Bureau of Economic Analysis released, for the first time, GDP figures categorizing research and development as fixed investment. It will join software in a new category called intellectual-property products.

In our knowledge-based economy, this is a sensible move that brings GDP accounting closer to economic reality. And while that may seem like an arcane shift relevant only to a small number of economists, the need for the change reflects a broader mismatch between our digital economy and the way we account for it. This problem has serious top-management implications.

To understand the mismatch, you need to understand what we call digital capital—the resources behind the pro-cesses key to developing new products and services for the digital economy. Digital capital takes two forms. The

MeAsurIng the full IMpAct of dIgItAl cApItAl

Jacques Bughin and James manyika

insight


first is traditionally counted tangible assets, such as servers, routers, online-purchasing platforms, and basic Inter-net software. They appear as capital investment on company books. Yet a large and growing portion of what’s powering today’s digital economy con-sists of a second type of digital capital—intangible assets. They are manifold: the unique designs that engage large numbers of users and improve their digital experiences; the digital capture of user behavior, contributions, and social profiles; the environments that encourage consumers to access prod-ucts and services; and the intense big-data and analytics capabilities that can guide operations and business growth. They also include a growing range of new business models for monetizing digital activity, such as patents and pro-cesses that can be licensed for royalty income, and the brand equity that com-panies like Google or Amazon.com cre-ate through digital engagement.

Conventional accounting treats these capabilities not as company invest-ments but as expenses, which means that their funding isn’t reflected as capital. Since the amounts spent aren’t amortized, they take a large bite out of reported income. Spending on those capabilities sometimes should be treat-ed as capital. Amazon.com’s develop-ment of an internal search process that promotes recurring sales or the efforts of Netflix to fine-tune personal recom-mendations to increase video viewing and retain customers are certainly more than expenses. Such capabilities, which are complex to build and replicate, can often help companies create enduring competitive strengths.

We’re acutely aware of misguided efforts to justify sky-high valuations during the late-1990s Internet bubble by claiming that finance and account-ing fundamentals were no longer rel-evant. We also recognize that we’re far from the first to note the relationship among intangibles, company-level growth and productivity, and overall economic growth. What we want to

suggest here is that those relationships, which once represented a small minor-ity of business activities, are becoming the rule in the digital economy.

In fact, much of today’s digital spend-ing could pay for long-lived intangible assets that will define the competitive landscape going forward. The rising stakes are seen in the copyright battles between Internet and consumer-elec-tronics companies and in major spend-ing on patent portfolios. Above all, we want to emphasize the importance, for many business leaders, of making the mind-set shift required to embrace the importance of digital capital fully. The disruptive nature of digital assets is intensifying in markets such as search, e-commerce, and social media (where attackers can build business models with near-limitless scale). Disruptive digital assets are also important in seg-ments where behavioral data and user participation can be monetized, by defining entirely new business oppor-tunities or fostering breakthroughs in collaborative innovation. As the mobile-payments start-up Square is demonstrating in the credit-card arena, increasingly, companies that deploy these assets have the potential to threat-en large existing profit pools thanks to the challengers’ vastly different eco-nomics or radically new ways.

The big piCTureThere are parallels between what’s occurring today and during the period,

100 years ago, when electric motors gained widespread adoption. Early in that cycle, companies invested in physi-cal motors, which like today’s servers and routers provided a new growth platform. But the more important kind of value appeared after companies began to understand how motors could change almost every process, improve productivity, and stimulate innovation. Companies that captured these benefits were more successful and more valu-able than others.

Today, the market valuations of many Internet-based companies are higher than those of their counter-parts in other sectors, including high tech. Many Internet leaders earn lower returns on equity than established technology companies do, yet there’s no reason to believe that markets are making irrational bets on the growth potential of digitally adept companies. As the box “Valuation and intangibles: Viewing the numbers differently” on the following page illustrates, treat-ing digital intangibles as assets rather than expenses clarifies the logic behind valuations. (We based these pro-forma valuation calculations on data compiled by academic researchers, as well as assumptions about rates of intangible and digital investment from our own and outside research.)

Macroeconomic studies we have done suggest that digital capital is not only growing rapidly but has also become a major contributing factor in global economic growth. We examined the

A large portion of what’s powering today’s economy consists of intangible assets. Conventional accounting treats these capabilities as expenses.

insight


national-accounts data of 40 countries, assigning values to tangible and intan-gible assets. In 2005, digital-capital investment represented barely 0.8 per-cent of GDP for those countries. This year, it will exceed 3.1 percent of GDP.

Likewise, the accumulating global value of digital-capital investments has reached more than $6 trillion, about 8.5 percent of nominal world GDP. Glob-ally, levels of digital intangible invest-ment are more than half those of digital tangible investment. In more highly digitized economies, such as Israel, Japan, Sweden, the United Kingdom, and the United States, spending on intangibles represents two-thirds of digital capital’s total value.

This activity is starting to power growth. We estimate that digital capital is the source of more than one percent-age point of global GDP growth (rough-ly one-third of total growth). Intangible capital already accounts for two-thirds of that slice, tangible investment for the rest. This growth flows from not only capital deepening but also increased labor productivity—a remarkable thing, since the digital economy has emerged in the relatively brief space of 15 years. By contrast, it took 80 years for steam engines to increase labor productivity to the same extent, about 40 for electric-ity, and more than 20 for conventional information and communications technologies. (For more on the link between capital formation and produc-tivity, see box “Innovation, capital, and productivity growth.”)

Intangible digital capital’s role in economic growth gives policy makers one more reason to favor investments in broadband and other Internet infra-structure. Such investments correlate strongly with overall digital-capital lev-els. In our experience, though, the impli-cations are even greater for executives, who often are not tuned into their orga-nizations’ digital strengths or weakness. Few companies have gone through the internal exercise of reclassifying expen-ditures or segregating benefits from spending on intangibles. And of course,

Valuation and Intangibles: Viewing the numbers differently

the valuation premium investors place

on digitized companies is clearer

when intangible assets are counted as

investments rather than expenses. We

define three pro-forma companies. com-

pany a, represents a baseline: a publicly

quoted enterprise that mirrors the us

economy across variables compiled by

researchers at nyu’s stern school of Busi-

ness. By early 2013, this pro-forma com-

pany was generating a return above its

cost of capital in the range of 4 percent.

Recently, earnings had grown by 3.8 per-

cent a year. although the market valued

the company at 2.1 times its book capital,

historical accounting data suggests that

the ratio of equity value to book capital

should be more like 1.5. Why the gap?

our thesis: intangible capital is now cre-

ating both additional capital and greater

growth rate for invested intangible capi-

tal. here we use estimates by carol cor-

rado and charles hulten. Recognizing the

intangible capital at work bridges much of

the valuation gap. that’s true even though

the return on total equity remains flat—

intangible-capital returns for company B

are roughly the same as those for tangible

capital—and intangible capital depreciates

at an accelerated rate, over seven rather

than 20 years. implicit in the multiple that

helps close the valuation gap is a higher

prospective growth rate: 4.3 percent a

year. Finally, we analyse a strong digi-

tal player, company c. its digital-capital

investment, using our research, is one-

third of its total capital; two-thirds of that

digital capital is intangible. due to fast-

changing digital competition, assets are

depreciated even more quickly, so compa-

Pro-forma analysis of a public enterprise that mirrors the US

economy across sever-al business variables1

yields.

1Based on research by Aswath Damodran. 2Based on US estimates by Carol Corrado and Charles Hulten. 3Numbers are approximated for simplicity of communication.

Source: Aswath Damodaran, “Valuing companies with intangible assets,” New York University Stern School of Business, Septem-ber 2009; Carol Corrado and Charles Hulten, “How do you measure a “technological revolution’?,” American Economic Review, 2010, Volume 100, Number 5, pp. 99-104; McKinsey analysis.

Company A1 Company A2 Company B Company C

Yet analysis based on historical data and

traditional accounting assumptions for tangi-ble capital suggests:

Differences in the price-to-book ratio for different mixes of tangible and intangible capital reflect growth assumptions associated with those capital forms

Mix of tangible and intangible

capital

Mix of tangible and digital capital

(2/3 of which is intangible

Adding either intangibles or digital capital to the valuation restates equity and implied growth rates,

explaining the difference.

marginal returns on it. efficient financial

markets recognize this and credit the com-

pany with improved growth prospects. We

explore this hypothesis through company

B, which matches our first one except

that we assume a different stock of and

ny c’s total net capital will be smaller than

company B’s. even with a smaller capital

base, the valuation gap is closed, since the

shift in the asset mix toward digital capi-

tal boosts the company’s earnings-growth

rate to 5.5 per cent.

Book value 59 59 82 71 of capital (tangible) (tangible) (tangible+intangible) (tangible+digital)

Price-to- x2.1 x1.5 x1.5 x1.7 book ratio

Market value 124 89 123 121

insight


digital capital is a growing contributor

to innovation, but other factors too

work. to understand the range and value

of innovation-related assets that contrib-

ute to productivity and economic growth,

we developed a measure of innovation

capital. it has three components:

physical capital refers to investments in

information and communication equip-

ment. across the 16 economies we ana-

lysed, physical capital represents 16 per

cent of innovation capital. these “hard”

assets are counted as investments and

thus elements of national gdp.

knowledge capital arises from invest-

ments that build a company’s intellectual

property and brand equity. this form of

innovation capital—including invest-

ments in computerized information, R&d

and marketing investments, and relevant

research spending in universities—repre-

sents 60 per cent of the total.

Innovation, Capital and Productivity Growth

companies can boast a high ROE thanks to strong legacy-product margins but may nonetheless have muted growth prospects as a result of underinvesting in digital capital. For a more effective digital course, leaders should consider the following ideas.

Take sTOCk OF asseTsSince identifying intangible assets is difficult, companies may be missing growth opportunities. Many have real-ized only recently that they can use social-media interactions with their best customers to leverage innovation efforts or that they may have unused data they could restructure into valu-able big-data assets to sharpen business strategy. Similarly, companies should take stock of how digital capital they don’t own may be relevant to the busi-ness. A retailer that doesn’t have access to digital behavioral data on consum-ers, for example, may be at a disadvan-tage. So could a bank whose customers access products through a third-party platform that limits the bank’s ability to capture information. Conversely, com-panies may wrongly assume that their growth results from conventional capi-tal spend and therefore compromise growth by underinvesting in digital competencies. One online company, for example, stuck to a subscriber pay model in hopes of boosting returns on tangible investments such as server farms. It wound up missing a mas-sive social-networking opportunity that would have yielded far greater returns on advertising revenues.

Our global research shows that the stock of intangible assets varies con-siderably by region. Some markets have larger numbers of strong digital contenders, others fewer. Companies could make those differences a factor in deciding which markets to enter and where to place digital bets.

FaCe up TO ThreaTsAssume that digital leaders in your

competitive zone are relentlessly expanding their intangible assets both to attack existing markets and to create new ones. Amazon.com, for instance, won share from brick-and-mortar retailers with its ease-of-pur-chase model and its ability to reach

long-tail customers. Now it’s launch-ing new business models (such as Amazon Prime) to further leverage its user base and logistics capabilities. It’s also using tangible server assets to offer cloud-based labor services (Mechanical Turk) that match free-

human capital is formed by invest-

ments in individual or organizational skills

that drive productivity growth. it includes

public and private investments in tertiary

stem education, employee-based train-

ing programs, and investments to develop

organizational efficiencies—for example,

the redesign of business processes or the

adoption of new business models. human

capital is 24 per cent of innovation capital.

the stock of innovation capital is sub-

stantial, totaling $14 trillion, or more than

40 percent of the gdp of the 16 nations

in our study. (the authors of the accompa-

nying article estimate digital capital repre-

sents just under 30 percent of innovation

capital.) over the period (1995–2008),

innovation capital grew at an annual rate

of 4.6 percent. We found a strong correla-

tion between levels of innovation capital

as a proportion of gross domestic product

and labor-productivity growth.

Innovation Capital, % of GDP, 2007

Labor Productivity Growth, CAGR,1 % (1995 - 2007)

0.550.500.450.400.350.300.250.200.150.100.05

00

0.5

italy spain

denmark

germany

France uk

usasweden

Finland

r2 = 52%

austria

Netherlands

1.0 1.5 2.0 2.5 3.0 3.5 4.0

r2 is the proportion of variance that is explained by a regression.

12005 real prices: CAGR = compund annual growth rate.

Source: Carol Corrado, Jonathan Haskel, Massimiliano lommi, and Cecilia Jona Lasinio, “Intangible capital and growth in advanced economies: Measurement and comprartive results, “Centre for Economic Policy Research working paper, Number DP9061, July 2012, McKinsey analysis

insight


lance workers with demand for their labor. A good first step is to identify which areas of your value chain are most vulnerable—for example, ser-vice delivery or weak digital brands. Competitors can slide vertically or horizontally into large gaps, so you’ll need to build digital assets quickly as a counterweight. Even companies that have a considerable stock of digi-tal assets should understand that cap-turing value from them isn’t a given. Instead, such companies must define business models that can be scaled up to match those assets.

One clue suggesting that a company might face emerging digital challenges is the existence of businesses that have unusually high levels of revenue per employee in adjacent market spaces. Amazon.com’s employee productivity, for example, is double that of tradition-

al retailers. Netflix, similarly, generates more revenue per employee than tradi-tional cable operators do, by leveraging intangibles such as its highly evolved recommendation algorithms. Unusual financial profiles are another warning sign. Since digital funding is counted as operating expenditure, digital lead-ers often have small capital-investment levels relative to their size and growth potential. They borrow less, both because they may not need to (some reap sizable market rents from, for example, search licensing fees or pat-ent income) and because banks may be less likely to lend against intangibles.

parTner wiTh CareMost companies rely on digital agen-cies for things like optimizing search marketing. In such cases, they may

be ceding digital capital, since they never develop a full understand-ing of consumer segments or what inspires a customer. Seeing such capability building as an investment may change the logic. Similarly, when companies look to established tech players for partnerships shoring up weaknesses, they should be cautious: some seemingly high performers may be on the wrong path and could burden you with outmoded standards and platforms. Alternatively, if you deal with strong players, you may be leaving yourself vulnerable by letting them lead. Viewing digital capabilities as assets rather than additional areas of spend-ing requires a new set of management and financial lenses. Embracing them is a major shift—but one worth mak-ing for companies.

leader’s world


DIFFICULT PEOPLE! One of the greatest challenges we face in concluding successful negotiations.

ABOUT THE AUTHORDavid Lim, Founder,

Everest Motivation Team, is

a leadership and negotiation

coach, best-selling author

and two-time Mt Everest

expedition leader. He can be

reached at his blog http://

theasiannegotiator.

wordpress.com, or

[email protected]

Handling

NegotiationsDifficult

AnswEr ThIs qUEsTIOn: Do you want to be sOFT or hArD in approaching your next negotiation? If you said “hard”, yes, I agree! Be hard on the problem and soft on the people. To do that we must:

1. SEPARATE THE PEOPLE FROM THE PROBLEMremember, a negotiator has two interests in any negotiation - the negotiation itself and the relationship with the other party. separate the two. Be firm on the problem and gentle on the people. Generally, concessions can be made on the process of the negotia-tion, the environment, the timetable, and other procedural details, while holding firm on the important items at stake.

2. BE REFLECTIVE One of the most effective techniques with someone who is upset is to simply reflect back to them what you think they said. For example, “let me see if I understand you, Kathy. what I hear you saying is...” This does not necessarily mean you agree with their ideas, only that you understand their feelings and thoughts.

3. GIVE POSITIVE, NON-VERBAL FEEDBACKwhen someone is upset, it’s amazing what you can accomplish with the effective use of body language. help the other party feel comfortable. Lean forward, nod occasionally, and use reflective facial expressions. Decreasing your eye contact, crossing arms and


leader’s world P

HO

TOS.

CO

M

“Fight fire with water. Good negotiators have trained themselves to avoid the trap of responding in a

like manner to the hostile environment.”

legs, and a lack of facial expression only cre-ates increased tension or hostility. honest, sincere motives will typically bring about appropriate non-verbal expressions. Make sure that your expres-sions are genuine! Care about the other party and show it.

4. TAKE NOTES AS A TECHNIQUEEspecially when people are upset or com-plaining, taking notes communicates interest and caring, and tends to reduce the other party’s concerns. Even on the telephone, saying something like, “excuse me, could you slow down just a bit, I’m jot-ting down your concerns so I can be sure I understand,” changes the situation com-pletely. what a difference! All of a sudden the person realizes you care, and down go the barriers previously erected.

5. RARELY RESPOND TO A HOSTILE REMARK WITH A HOSTILE REMARKA study of competitive negotiation sce-narios reveals less success when hostility is the response to hostility. Fight fire with water (not fire). Good negotiators have trained themselves to avoid the trap of responding in a like manner to the hos-tile environment. One of the most effec-tive approaches is to continue to probe to get to the core of the hostility, allowing the other party to keep venting hostility until none remains. notice I said “rarely” rather than “never”. In some cases it is useful and even necessary to respond aggressively. how-ever, be sure you are in control of your feelings and acting rationally, maintaining what you can of the relationship and, most importantly, your personal integrity.

2. RARELY ISSUE AN ULTIMATUMAn ultimatum may back you, or the other party, into a corner. It makes compromise and saving face for either party more difficult in the future. notice again I said “rarely”, rather than “never”, because there are certain situations where the risk of a “take it or leave it” or “walkout” strategy is worth it.

3. WHEN THE OTHER PARTY IS HOSTILE OR FEELS HURT, EXPRESS SORROW AND EMPATHY WITHOUT ACCEPTING RESPONSIBILITYFor example, “raghu, I’m so sorry you feel that way and are in this situation. It must be very difficult for you.” sorrow and empathy can be expressed without accepting responsibility for the problem. This, in itself, may reduce the anxiety of

the other party. A professor at Purdue University emphasised a primary business teaching based on “feelings first, then think.” he taught this principle to business people with great effectiveness. his philosophy—unless a person could rec-ognize and understand their own “feelings” they would be greatly hampered in their ability to “think” clearly. In any negotiation, be sure to recognize your own feelings, and help the other party to recognize their feelings.

4. BE CAREFUL OF THE WORDS, “BUT”, “FAIR”, AND “REASONABLE” The word “but” can usually be replaced with the word “and” without changing the meaning of the sentence. For exam-ple, “I like your proposal, but I would suggest...” can be more softly and effectively stated, “I like your proposal and I would suggest...”

Using “and” is less offensive than using “but”. The words “fair” and “reasonable” are full of emotion. They both can be easily replaced with the word “acceptable”. Instead of saying, “would it be fair if..?” or “would it be reasonable if...?” say “would it be acceptable if..?” After all, in a negotiation what we seek is an “acceptable” solution for all parties.

The best treasurers worldwide work hand-in-hand with their CFOs and boards to support and drive a long term vision for growth. All this while still bal-ancing the needs of the short term. It’s not an easy task. EuroFinance high-lights 10 actions top international treas-urers are taking now.

It’s not easy to take a long-term strategic view both of your company and of the world around it. But treasurers, who sit at the heart of the organisation, can and should be the ones who join the many dots between the different needs and ex-pectations of various business units, and help drive long term growth.

Peter van Rood, corporate director of treasury at Dutch paints and coatings multinational AkzoNobel, (and past winner of EuroFinance’s Treasurer of the Year award) says treasury has two strategic pillars that it has to offer the organisation it is part of. The fi rst of these concerns fi nancial risk manage-ment. “It requires partnering with other functions, such as insurance, pensions, M&A and taxation to optimise the gov-ernance and exposure management of the fi ve fi nancial risk categories for a company – capital risk, liquidity risk, interest rate risk, currency risk and credit risk. It’s only by working together with M&A and taxation on the fi rst two, with pensions on the third and with the business units on the fourth and fi fth risk category can this be realised.”

The second point relates to functional excellence. “An infrastructure that al-lows for maximum effi ciency in process-ing transactions, whether these are pay-ments, FX dealings, trade fi nance or short-term investment and/or borrow-ings, means treasury can support its businesses by taking out costs and im-proving adaptability,” says van Rood.

TOP TEN TREASURY TIPS TO TAKE THE LONG VIEW

Indeed, taking the long view in treasury management is about bringing clarity of thought to internal processes and opera-tions against the backdrop of an all-too-chaotic fi nancial world. The main chal-lenge to the long-view way of thinking comes from the post-2008 economic en-vironment. The world economy is global but it remains fragmented. “Everywhere that you look, you can see a different pic-ture,” says Stéphane Garelli, professor at

the Institute of Management Develop-ment (IMD), Lausanne. “Some countries are in recession, while others are doing reasonably well. Some are witnessing in-fl ation, yet some are seeing defl ation. You name it, we have it.”

With all the uncertainty in the fi nancial world, treasurers need to make clear stra-tegic decisions right now that can support business growth in the long term.

1Don’t be afraid to tackle big projects

“The long view is all about being courageous,”

is what Patricia Greenfield, head of treasury operations at AstraZeneca (a UK-domiciled pharmaceuticals com-pany) says. “Don’t live with processes or technology that is sub-standard, be brave and change it. There is enough information out there for people not to be scared of completely reconfiguring your treasury department.”

For example, you may have been in the situation where as soon as you imple-mented a new treasury management system (TMS) it was immediately in de-cline because you were not brave enough to put a budget in each year to make sure that you kept up at least with the current version. Courage to believe in what you actually can do will have dra-matic results.

2Create platforms that you can leverage

Having a harmonised pay-ments process and plat-

form with centralised controls and re-view can make a huge difference in terms of efficiency and lowering pro-cessing costs.

“In this particular environment, growth is very hard to come by, so the focus tends to be more on profitability,” says Ben Krajcir, assistant treasurer at US-based Brady Corporation. “Here it is important to have automated solutions that we are able to leverage based on the fluctuation of the yield curve. We have also worked to create a treasury func-tion that can easily integrate new acqui-sitions. This all comes back to our plat-forms and processes so we can integrate new functions as quickly as possible.”

3If you think you need funding, get it today

The low interest rate envi-ronment that exists inter-

nationally will not be around forever. Rick Martin, executive director of treasury and investor relations for UK-based Virgin Media, which recently

merged with US media giant Liberty Global, says: “Certainly, the current in-terest rate environment remains attrac-tive. However, Virgin Media and the Liberty Global group generally also take a proactive stance toward ensuring we are financing well ahead of actual need. In fact, the average tenor of Lib-erty Global’s debt exceeds seven years.” He adds: “That’s a great comfort to all stakeholders especially in a post-2008 environment, and a real testament to my colleagues across the company.”

4Align financial architecture with market outlook

Treasurers need to weigh up what possible impact any negative growth outlook in countries may have on their own company. “To manage for uncertainty, one needs to have a strong capital architecture and a lot of liquid funds,” says Ramaswamy Govindan,

vice president – corporate finance & risk management at Larsen & Toubro in Mumbai. “The second thing is that you need to be seriously long on market vol-atility. People that have been doing this for the past several months have an ad-vantage, but I think that even now if you find an instrument that gives you some flexibility, that will help a lot.” While premiums have gone up, they are still reasonable. “Even with the volatility we have seen in US Treasuries, the premi-ums are lower than they have been,” adds Govindan.

5Look to flexible instruments from a risk perspective

Risk management process-es are integrated with cash management in the treasury function more than ever before. Martin agrees with this, point-ing to the range of data and tools used by Virgin Media and Liberty Global generally to monitor risk. “Jointly with

“To manage for uncertainty, one needs to have a strong

capital architecture and a lot of liquid funds”

our Liberty Global group treasury col-leagues, substantially all of Virgin Me-dia’s debt has been matched to our un-derlying currency, and has been fixed on interest rates. This allows operating management to place its collective focus where it should be, on continuing to grow free cash flow.”

The need for dynamic risk management is evident in the rise in popularity of flexible risk instruments. These offer corporates the opportunity to develop long-term cash and foreign exchange planning while minimising their risk ex-posure. A good example of such an in-strument is foreign currency options. “We use options for this purpose and it seems to be working at this moment in time,” says Govindan.

6The right scenario

Being prepared for vary-ing degrees of volatility is critical, and carrying out

scenario planning is important so as to be ready for any eventuality. To be able to have a contingency plan for any ac-ceptable eventuality, scenario analysis is useful. “You really need to have five or six scenarios on any area where the company may experience volatility, and know what the company’s response to the scenario should be,” says Govindan. “You need to be alive to what has been happening, and to think through the implications for your organisation.”

Ramaswamy Govindan

7Prepare for taxation

A combination of govern-ment debt and corporate cash surpluses raise the real

concern that taxation will be used as a tool to boost government coffers. “Taxa-tion will become a very serious issue,” says Garelli. “You should not tax people too much, that is fair enough, but if you do not tax enough then you go into debt. To use the US as an example, in 2011, 24% of the US GDP was raised in taxes. This is the lowest level in 40 years.”

David K Waltz, an S&P 500 assistant treasurer, can see two infl uences from tax on corporate cash surpluses. “First, if growth investments are made in a coun-try where repatriation needs to occur, which triggers a tax event, this simply further increases the hurdle that needs to be cleared,” he says. “Second, investment analysis is performed on after-tax cash fl ows. If cash fl ows are lower due to high-er taxes, this again raises the return hur-dle that needs to be cleared.”

Garelli asserts: “The world of treasury will probably see much more change in the next three years than it has in the past 30 years.” Considered preparation for this ‘oncoming storm’ of taxation will stand treasury in good stead for the future.

8Be the glue in a cohesive organisation

The treasury department has a good exposure to the

fi nancial goings on in the outside world. Couple this with the rise of the role of the treasurer within the organisational structure of companies and the treasur-er is in the perfect strategic position to join the dots. Treasury can provide po-tentially lucrative information to the business – for example, as domestic de-mand grows in the US, it would make sense for an organisation to direct its sales at this market. Seeing the bigger picture can also allow treasurers to as-sist the board in its strategic decisions.

“As well as playing a key cash manage-ment role, treasury has become more strategic in nature,” says Govindan. “We are planning and adding value to the business. This will continue to grow.”

This sentiment is echoed by Virgin Media’s Martin. “Close coordination with operating colleagues whether pur-suing organic or inorganic activity is essential,” he says. “Look no further than our recent merger with Liberty Global, where fi nancing of the transac-tion required a deep knowledge of the business – not just as it stands, but as we expect it to be in future. On a personal level, the chance to learn from operat-ing colleagues, and to help them under-stand the dark arts of the capital mar-kets, is immensely rewarding – and most of the time, it’s a heck of a lot of fun as well.”

9Be clear about regulatory consequences

In the post-crisis world, the threatened regulatory bur-

den is working its way through the fi nan-cial system. It is only a matter of time before the twin dilemmas of additional compliance and increased costs are at the door of the treasury department.

“For the treasurers, it is a question of cost and also how time consuming it will be – management time and working time, for example,” says Garelli. “You can comply with everything and pro-duce an extraordinary amount of pa-perwork, but then you also have to ask yourself how the people that receive the paperwork will interpret it. There are all the ingredients for some monumental administrative work.”

10Seize the positives

With regulatory unintend-ed consequences looming, it can be forgotten that

compliance measures can provide treas-urers with the opportunity to re-evaluate all their processes. Take the Single Euro Payments Area (SEPA) as an example. “SEPA is a reality,” says Séverine Le Blévennec, director treasury Europe, Middle East & Africa for Honeywell. “Companies should be using SEPA as a

catalyst to revisit all of their banking re-lationships and the structure of their banking and their organisation.”

Le Blévennec has fi rsthand experience of doing exactly that, as the Honeywell treasury team found that the more it put into its SEPA project, the more value it was able to derive from it.

“When restructuring banking relation-ships, corporates can analyse results from Request for Proposals [RFPs] in a rationalised manner,” says Le Bléven-nec. “Set your criteria and rate the dif-ferent criteria so that you know exactly what you are looking for. Ask the bank for information that is relevant to you.

For example, if you have an RFP that is asking for the pricing of certain types of transactions, you should know which transactions are most important to you. These are the ones you have to negotiate the hardest on, because this is where you are spending. A whole process such as this can spring from a simple compli-ance project.”

Treasurers that have implemented these 10 actions are in the best possible posi-tion to steer their organisations to suc-cessful future growth. Have you checked them all off your ‘to do’ list?

An extended version of this article, written by Ben Poole, will be published in EuroFinance’s annual Treasury Perspectives publication.

www.treasuryperspectives.com

“Treasury will probably see much more change in the next three years than it has in

the past 30 years”

2013-2014

ChinaRMB for real

RiskTo infinity and beyond

M&aArt of integration

ChaMpionsTen of the best

sepaEnd of the beginning

Take the long viewChina

RMB for real



Take the long view

2013-2014

ChinaRMB for real





Take the long view

ChinaRMB for real

Art of integration

2013-2014



Take the long view

2013-2014

ChinaRMB for real



ChaMpions

Ten of the best


Take the long view

Q: What are the top challenges you see for corporate treasurers?

A: Treasurers worldwide have had an in-teresting time since the global fi nancial crisis. On one level, as the crisis evolved, they have had increasing visibility. After all, they are the people with the best sight of cash in and cash out – and knowing where your cash is at any given time has been key. That has given treasury much more airtime in front of their boards. But keeping their role in the limelight hasn’t always translated into extra funding, per-sonnel or technology.

For sure markets provide their back-ground noise, and managing market risk requires real strategic ability, but I’d argue that some of the main challenges treasurers face are those of communica-tion. That’s communicating what they do both internally within the organisa-tion at all levels and to a demanding set of stakeholders externally – whether it be regulators or banks, promoters and investors.

Q: How have you seen the concerns of Indian treasury professionals change over the years?

A: The role has certainly evolved in quite a few ways. EuroFinance has run conferences in India for the past 11 years, and the fi rst time I visited Mum-bai to meet with fi nance professionals was more than 20 years ago. For one thing treasurers don’t have to book in-ternational trunk calls anymore! That’s certainly helped with communication. Seriously, though, I’ve noticed a real rise in the role’s professional status in

Katharine Morton, Editorial Director of EuroFinance argues that treasurers in India need to take the long view. How should they do it? Communicate, communicate, communicate.

many companies. In the larger ones in particular, the treasurer takes on much more strategic thinking than before.

They’ve had to – growth, and rapid ex-pansion abroad has brought its own chal-lenges. Life certainly hasn’t got any easi-er for treasurers, any more than it has for CFOs and fi nance directors. I’d say the increased need for transparency – wheth-er that be with investors or regulators has really pushed the need for better commu-nication, and that’s no bad thing.

Q: How is technology modifying the treasury function?

A: That’s a big question that doesn’t have a single answer. It certainly de-pends on the type of company you are – and where you operate. Technology can be as basic as a spreadsheet, or as all-encompassing as enterprise resource planning systems (ERPs). At the cutting edge, we are seeing a big drive to streamlining and embracing electronic invoicing, bank account management, cloud-based solutions, etc. Internation-ally, there is a movement to what one treasurer called a ‘war on manual pro-cesses’. That’s not yet as widespread in Indian treasury, but with the call for good working capital management and decent capital structure, total visibility of cash, and the need for transparency and control, it will likely come.

Q: Have the treasuries of Indian companies globalised as much as their businesses have in this last decade?

A: Interesting. My gut feel is probably not. That’s not because Indian treasur-

ies aren’t very active abroad, it’s largely a result of what treasuries in India can’t actually yet do. Regulatory constraints on cross-border pooling and tax con-cerns have led to some Indian compa-nies managing their treasuries in a dif-ferent way to those in more open economies. When I talk to an Indian treasurer aggressively acquiring compa-nies abroad, they may be much less like-ly to be assimilating, more likely to be funding transactions locally, and less likely to be sweeping funds back to In-dia. That does have implications for vis-ibility and control.

Q: How can Indian treasurers take the long view?

A: I certainly think it’s important they do. Capital structures need to be aligned with long term strategy, and that’s not al-ways happened in Indian companies (a problem not India’s alone by any means). Corporate treasurers still have their reg-ular responsibilities from the very short term collecting and investing operating cash, but they are increasingly involved in longer term issues like funding strate-gies. Treasurers have been increasingly active in our events and networking com-munities – I fi nd them very collaborative. Treasurers and FDs at the cutting edge aren’t afraid to share ideas, benchmark and look at best practice.

Katharine Morton is Editorial Director of EuroFinance Conferences. She edits Treasury Perspectives and has researched and written fi nancial conferences worldwide for the company since 2003. She has been a consultant on capital markets, and has edited on risk, economics, environment and fi nance for Finance Asia and Euromoney, Dow Jones and Bloomberg. Katharine has a degree in economics from King’s College, Cambridge.

COMMUNICATING TREASURY

To fi nd out more attend EuroFinance’s 11th annual Cash, Treasury & Risk Management conference in India, taking place at the Taj Lands End Hotel, Mumbai on 12-13 November. For an exclusive 30% discount quote CFO/30 when registering online at:

www.eurofi nance.com/india

cfo lounge travel


If you wIll excuse me, I would like to start with a rant. Must Jaipur be called the Pink City? The last couple of trips I’ve made to it have led me to believe that Green City would be an equally apt name for it. In all the pictures that I have of my trip in July, there’s scarcely a square inch of desert sand: it’s all a forest of verdant green. It was the same case when I looked out of my window in March. There was a decided nip in the air. The low hills were covered with lush green scrub. After nightfall, we could hear the lions roaring seem-ingly from a few feet away and the next morning, the only pink we could spot was that of bougainvillea bushes. The centre of the city is a wondrous sight. It has been made on a grid pattern, is neatly laid out and contains the most perfect living arrangements that any ancient city could have had.

There are mithai shops, tailors, barbers, dyers and jewelers right by the vegetable vendors, temples and spice sellers. And all these swarm around houses of varying standards of grandeur, from humble dwell-ings to palatial havelis, all neatly arranged in rows. Add to that colourful handicrafts, king’s palaces and royal museums, and you have a dream city. If you are in the mood for a quiet break from the world, it is a good idea to book yourself at one of the hotels just outside Jaipur. lebua lodge was the one property that stole my heart away. It was as offbeat as a hotel can get. Being right in the green belt of Jaipur, in actual forest land, the

Within easy driving distance of the National Capital Region, there is much that Jaipur offersMarryam H. Reshii

hotel could not construct any concrete structure in the area. Hence, they built tented rooms for guests. loud parties, loud music, the serving of alcohol openly were all services that the hotel had to forgo in order to operate inside a forest, and it was a fair trade-off.

you could not tell that you were in a tent while you were inside it. It was only when you walked around the resort and saw only cube-shaped canvas structures without windows that

rajasthan

The Secrets of Jaipur


Left: rajasthani women in their traditionaL garb in the ancient city of jaipur

beLow: the green beLt of jaipur . it is a good idea to book a hoteL outside the city if you are Looking for a quiet break

confined to cages like the lions. It is these pachyderms that fa-mously go up to Amber fort all day long, with tourists on their backs. And then there are the peacocks. Get up before dawn breaks, drive to Nahargarh fort (together with Jaigarh and Amber) and the only sound you’ll hear is the cry of peacocks.

Inside the fort itself, is the finest restaurant in all of Jaipur. It is all of a piece with lebua lodge and fairmont Jaipur, which is to say, the owner saw an opportunity and built something magnificent on it that would embody the surroundings. Called AD 1135 after the year that Amber was built, it is a disused part of the fort next to the Sheela Devi Temple. Inside, craftsmen have been employed to create sheesh mahals and charming western-style drawing rooms that are actually parts of a restau-rant. In fine weather, couples can sit out on secluded terraces and be serenaded by Rajasthani musicians.

If the food was poor, you could have overlooked it, but the Rajasthani thali in AD 1135 has been put together by the cooks of the royal families of Jaipur, udaipur and Jodhpur, and include lesser-known dishes from the royal repertoire. with surroundings like those, I promise, you won’t miss the shops of the Pink City.

gave the game away. “The govern-ment has rehabilitated some lions nearby,” said the young lady who showed us to our tent. It was only when night fell and we sat in the stylish patio in front of our tent that we heard the roar.

or should that be roars. layla, our Iranian friend for whom the trip was being undertaken in the first place, blanched visibly. A quick call to reception elicited the information that the lions were safely caged. But the area around Amber fort (lebua lodge is approximately 2km from the fort and has an ancient wall running through it) teemed with wildlife. Amber Village, said to house the descen-dants of the workers and craftsmen who worked on the fort, has no fewer than 200 elephants. All tame of course, but not M

ARR

YAM

H. R

ESH

II

extreme Left: snapshot of fairmont, jaipur

Left: take an eLephant ride to amber fort. amber viLLage has around 200 eLephants

how to get there: Jaipur is well-connected to almost every corner of India through different means of transport including air, rail and road.

cLimate: Temperatures remain comparatively on the higher end all around the year. Best time to visit is between October and March.

cfo lounge travel

cfo lounge GIZMOS


new launches

LG Optimus G Pro

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ost Read

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The Extreme 3D Pro offers all requisites

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flawlessly out-of-the-box; most of the

games we tried managed to map the axes

without a hitch. The official price is a bit

high, but you can get it within ` 2.5k; well

worth it at that price. Price ` 3,399

To be brutal and blunt, Sony’s ‘af-fordable’ laptops, till now, felt just the part. There was too much compromise on build quality, specs and ultimately, performance. However, the updated FIT series seems to be doing a much better job of it. For starters, you don’t realize this machine costs around`35k, just by looking at it. Its matte black finish, with the typical VAIo rounded edges, gives the FIT a rather curvy look, intertwined with rather sharp lines, and it can easily pass off as a `45k laptop based on its build and looks. It isn’t the slimmest machine around, but does a good job over its weight and overall footprint.

The FIT 15e boots quick enough and apps will load without hiccups. It has a modest CPU and multi-tasking is lim-ited because of just 2Gb of RAM. This is a basic, budget consumer’s laptop after all. It offers good battery life as

Affordable laptop with unique build and good battery life Robert Sovereign-Smith

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Sony Vaio FIT 15ELenovo K900 smartphone

There is plenty to

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of software

features, an IR blaster and a powerful

battery. A large body and an

underperforming camera, however,

makes it a good buy only if you are

looking for a larger display than what

the flagships such as Samsung Galaxy

S4 and HTC One offer. Price ` 38,700

Just 6.9mm thick, the K900

is so flat that you notice it

straight away. The Full HD

IPS LCD panel feels more

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AMOLED displays. Media

playback is good and text

is crisp and clean. However, it heats up

under the slightest of load. For what is

Intel’s first serious attempt at the high-end

smartphone market, this is a rather good

beginning. Price Rs. ` 32,999

Logitech Extreme 3D PRO

well, lasting more than two hours on a single charge in our tests. Typically, for web browsing and document work, expect over 4 hours of usage.

What we really like is the display, which is crisp, bright and mostly non-reflective. The keyboard is very well spaced out, and the key size is ad-equate. However, key travel is a tad on the lesser side, and the key response isn’t ideal.

These are but minor nitpickings. Sony has an affordable notebook that is absolutely worth considering.

SPEcificatiOnS

Processor: Intel Core i3-3227U @ 1.9GHz; RAM: 2GB; Graphics: Intel HD 4000; Display: 15.5-inch (1366 x 768 pixels); Storage: 500GB HDD; OS: Windows 8 (64-bit)PRicE: 34,990


The illustrated cover for this issue of CFO India set me thinking – are we really dealing with a kati

patang? (I owe the credit for this anal-ogy to my senior colleague and partner at 9.9 Media, Kanak Ghosh). Politics, the economy, and corporate India, all seem a bit ‘up in the air’ and the situ-ation begs the question – can we do anything about it or must we just wait and watch?

It is widely acknowledged that our current reality is more about politics than the economy. We are entering an election year and the political outcome is more unpredictable than ever before. The economic indicators were robust and strong till 18 months ago. But as the political situation has become dire, so has the economy. And no current intervention in our control can help the situation, as I see it.

On the economic front, the last few weeks have brought a sigh of relief. And most of the sentiment is related to one development – the appointment of Raghuram Rajan as the Governor of the Reserve Bank of India. Many media square centimetres have trivialised the issue by an unending commentary on his charm and good looks. But the issue, as all of us readers of CFO India understand, is deep. We have at the helm of the central bank someone who

combines competence, integrity and courage. This is a rare combination at any time – but it is likely to deliver disproportionate positive impact in our current environment of extreme incompetence, lack of governance and ‘wimpishness’ on the part of political leaders and policy-makers. While there is a possible silver lining, even here, the multitude of uncontrollable vari-ables will ensure that one individual in one institution cannot change the shape of things with lasting impact in the near term. Can anyone, single-handedly, find and fix the method in the madness?

And then there is corporate India that can never quite decide whether the government is its adversary or ally. In the middle of this flux, where the government is unclear on its econom-ics – whether, what and when to reform – corporate planning and calculation

Anuradha Das Mathur, Editor, CFO India

is hazy. Whether to invest, expand, acquire, or hire – there are no unequiv-ocal answers, given the uncertainty and ambiguity around substantive issues of policy and reforms. Draconian laws and taxmen have worsened the angst. So corporate India is afloat too.

Resembles a kati patang? An attrac-tive asset – our economy – is up in the air for grabs. And we are hard-pressed to find someone who can rein it back on course. Is there anything we can do to make a difference – albeit in a small way?

Despite being ‘diseased with opti-mism’, I find it hard to pinpoint what that might be – other than hoping for change. Waiting for a new government and a new political configuration is our best bet. While people argue how one political party is different from anoth-er, I am reminded of a powerful line by Dewitt Jones, a photographer with National Geographic, who says ‘change is possibility’… the last 8 years of mis-rule have left me hankering for change and the potential of new possibilities.

I would pick possibility over the lack of it, any day. But what do you think?

Kati Patang: or can someone rein it in?

not just

the last word

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