Nawabs of IPMX

 

Prof. Archana, Chairperson IPMX

Nawabs of Lucknow and Nizams of Hyderabad are long gone but they have left behind a legacy which still throbs in many parts of India. One living and soaring example of this legacy is ‘Kite flying’. Historians believe that Kite-Flying was brought in India by Chinese and was popularized by the Nawabs and the Nizams (thanks to exponentially more idle time than they knew what to do with J).

Now, why I am talking about Kite-Flying and Nawabs is because it seems that students of IPMX batch have also got some traces of this hobby of Nawabs, lurking somewhere deep down in their hearts.

On the eve of Independence Day, the idea of kite-flying fidgeted, wriggled and kicked inside some of us and manifested itself in the decision that we would celebrate Independence Day by flying kites.

No sooner was the decision taken than helter-skelter kites, spools and maanjha were arranged and at 10 am a battalion of pseudo Nawabs, equipped with shades and cameras, marched towards basketball court. Those who were adept in the art of kite flying took to the strings and those who have tried everything from applying Bernoullie’s theorem to aerodynamic analysis in order to fly a kite but still cannot fathom the secret formula to get it up in the air contented themselves with just holding spools.

Those of you who have tried their hands at kite-flying would know that the real fun is in penchbaazi. My personal theory regarding penchbaazi is that it is an amicable transaction between two parties which follows the double entry system – at the end of the transaction the frustration on one side is exactly matched by the satisfaction on the other side. Oh boy, is it too much Corporate Finance doing some chemical locha in my brain?

After one and half hour of fierce battle among kites for domination of the sky, the Big J (Gaurav Jalote) emerged victorious with team of Santosh Rout and Saurabh close behind him. Batch topper Dushi couldn’t replicate his success story on the front of kite-flying and ended up losing again and again… and again and again …to anybody and everybody. Poor Dushi!

Well, that’s all I have for now.

Manish K

Power of Rural India- Talk by Mr Pradeep Kashyap- CEO and Founder, MART

Mr. Pradeep Kashyap, CEO and Founder, MART

We got amazing insights this Tuesday, when Mr. Pradeep Kashyap, CEO and Founder, MART, also considered father of rural India, delivered an informative lecture on the power of rural India and its role in the growth of Indian Economy. The Q&A session went on as long as the session itself, continuing well into the high tea whereby Mr Kashyap managed to evoke enthusiastic curiosity amongst a normally urban smitten audience. We were all taken by the sheer power of rural India and its role in the growth of Indian Economy over the last decade and the potential for future. Clearly, it is a BIG asset today as opposed to a liability that we had grown up thinking.

We are realizing the potential of the vast market that had been untapped so far. About 70% of the Indian population resides in our villages and they account for 60% of FMCG market, 57% consumer durables and 40% two-wheelers. As the transportation is improving, the villages are becoming electrified and the literacy rate is improving due to heavy investment and focus by the Indian Government, the scene of Rural India is undergoing an image transformation over past 7-10 years

One of the biggest advantages is that rural sector was instrumental in guarding India from the Global Economic meltdown. During the last 1-2 year recession period, there has been no growth in urban sector, but all the growth that occurred in Indian economy is solely due to rural sector. 600,000 villages saved the 5136 odd towns and cities that together make up our country. There was no wealth erosion simply because all the impacted sectors (IT, real estate and stock market) did not have a role to play in the rural market! People construct houses to live, not for investments and of course there are no IT companies or stock markets to bother here.

Going back to statistics, rural India accounts for 0.5 Trillion USD today (this has been the growth until now i.e. in 60 years) and it is expected to cross 1 Trillion USD in the next 10 years i.e. by 2020. This is the total economy for Canada.
In 50 years (1950-2000) we managed to have road connectivity to 50% villages. In the next 10 years (2000- 2010) another 30% villages have been connected! 21% teledensity with 0-> 180 million connections has been accomplished over last 5 years. On an average each family in rural India has a mobile phone today! Could we ever envisage this?

Everything's seem to be going well on rural marketing front whereby domestic as well as Multinationals have recognized the market potential due to sheer volume of population. The only jarring note is agriculture as the farmers are still the poorest with their per capita income less than half of those in any other sector. The service people are definitely the best off. Fortunately the Rain God and Government God ( yes, Mr Kashyap used these two terms ;)) have been very kind over last 10 years and we had 8 out of 10 good monsoon seasons as opposed to an average of 5 out of 10. Toda, the people in villages spend about 43% of their income on food as opposed to 58% back in 2000. This number is projected to further reduce to 33% by year 2020 that is the amount invested by urban man on food today! The needs to the village man are clearly becoming more and more urbanized giving cues to all the companies out there to reach out to this new market with customized products.

The growth rate of Rural India is at an all time high of 13.5% and some of the projections are as follows:
Healthcare: 24.4% today to 55.6% by 2020
Education: 24.4% today to 55.6% by 2020
Transportation: 44.4% today to 80% by 2020
Communication: 3.3% today to 8.9% by 2020

We can comfortably look up to Rural India for leading Indian Economic growth. The only factors that can possibly go wrong are failure of monsoons or a shift in the priority of Government. The latter is unlikely , therefore, we should gear up to a rural economy led growth and here's a message to all the companies out there....come and explore, rather explode the potential of our rural market to reap benefits for one and all !

Unfulfilled demand

In the growing telecom market, we are currently witnessing intense price war among leading operators. The competition in the telecom space initially was about access to large customer base and later on it switched to providing wide varieties of VAS. This was then followed by price war when new player pitched in to the battle. Some of these players timed their entry just before 3G/4G spectrum allocation. Giants like Bharti Airtel, reliance, Tata Tel and Vodafone focused heavily on winning spectrum in their planned network circle, while new players started eating up their market share in every possible way. These biggies in fact were in no mood to get into price war, however, they don’t have any option as they want to retain their market share. It is very much essential to retain customers since they want to launch 3G/ 4G services to this customer base first. They have paid huge license fee and are under high pressure to start earning from the first year itself. In fact, the spending on 3G/ 4G and impact of price war has made Vodafone group to cut the value of its Indian arm by $3.2 billion.

Once number portability starts then customers will find it easier to switch from one operator to another. Customer retention is very important for all of these operators. Under 3G/4G spectrum it is data service which is a major source of income to operators. Operators are crafting their strategy to roll out high end data based VAS to their customer base.
On the other hand the voice communication need of the consumers is not fully met by most of the operators. When we did a survey for our academic project, we found that still basic voice communication plays an important role because of huge potential rural market. According to Gartner India at present have more than 660 million subscribers and estimate that it should grow to 993 million by 2010 with penetration reaching 82%. So there is a clear gap in what people want and what firms in the industry perceive to be important for consumers.
But according to PricewaterhouseCoopers’ analysis aggregate EBITDA margin for core voice services is decreasing. It dropped from 33.3% in year 2003 to 29.5% in year 2009. It is largely because of drastic fall in the call services price due to tight competition. In spite of growing market in to rural area operators are still targeting some of the lucrative circles and making every effort to snatch the share from competitors through price cut.
So it is important for operators to equally focus on voice services even after commercial launch of 3G/4G specific services for three reasons. First it ensures a critical mass of consumer base to launch 3G/4G specific service in a cost effective way. Secondly, call service is the basic feature sought after by every individual so focus into growing part of the market is important. Last but not least, consumers are willing to switch to better serving operator once number portability is in place this helps operators to gain market with least effort.

Source: http://www.gartner.com, http://www.dot.gov.in/, http://www.pwc.com

The Government Business - Talk from Dr. Jaijit Bhattacharya, Director, Hewlett Packard

In the recent edition of Leadership Talk Series, we got opportunity to interact with Dr. Jaijit Bhattacharya, Director, Government Advisory at Hewlett Packard. We all found the session to be quite an eye opener in terms of opportunities that are available for private sector in doing business with government and also typical challenges that are there in this area. Businesses today definitely can’t afford to overlook tremendous potential that is there in providing goods and services to government given the fact that government is largest procurer in the country. 

Dr. Bhattacharya highlighted the need for businesses to be impartial and neutral towards political establishments so that change in government doesn’t put you out of business. Another interesting point that I noted was how can we factor in typical challenges like delayed payments, beaurocracy etc. in our business model itself so as to ensure a successful execution. 

Dr. Bhattacharya also shared his experiences regarding how Brazil chose to deliver cable TV through standardized CAS set top boxes and provided internet services as well through same boxes with the strategy to increase internet penetration as well as to deploy the resources efficiently within the country. He talked about open source revolution and how businesses today are leveraging it in government sector by providing services around open source solutions. He ended the session with food for thought for all of us: ‘Can India develop its own Microprocessor one day?’