Solar Energy Growth Drivers in India

In the era of Corona, we had bitter lessons due to our injustice done with mother-nature in various aspects and one of them is Pollution. Electricity generation from conventional sources is most polluting; wherein government has taken required steps and promoting Solar Power since year 2007. At present, India is one of the largest producers of electricity from renewable energy sources. As on 31^st March 2020, out of total electricity installed capacity in India; 35.86% is share of renewable energy generation capacity. In last year, out of total electricity generated in India, 21.27% was thru renewable energy projects.

The Government of India thru Ministry of New and Renewable Energy is playing very proactive role in promoting the adoption of Solar energy generation by offering various incentives and subsidies for Industrial, commercial, institutional, residential, farmers, village installation. These includes Capital Subsidies, Operating Subsidies in Generation based incentives, Interest subsidies, Viability gap funding, preferred funding, fiscal incentives, captive consumption permissions etc.

Government had launched National Solar Mission to promote Solar Power Generation and usage by industries and consumers, with the ultimate objective of bringing solar power in parity with fossil fuel based conventional energy.  The core objective of Solar Mission is to reduce cost of per unit solar power in India in long term, aggressive research & development to bring better efficiency equipment, large scale manufacturing goals, domestic production of critical raw materials, products, components and allied products.

The government has created a positive environment for foreign investors thru FDI route for investment in Indian solar projects, in-turn achieving lowest cost of per unit solar power generation benefited Indian consumers and power discom. The establishment of best regulatory practices thru dedicated financial institution and nodal agencies to bring lowest cost of funds into solar power generation projects has made India gain its climate control mechanism on very higher levels. This has created wider brand equity of Indian Solar energy policies across the global investor forums. Solar power in India is becoming increasingly cost-competitive as compared to fossil fuel based generation, since the prices of solar panels have declined by almost 82% since year 2007.

RBI has advised for all scheduled commercial banks including solar power projects in the categories priority sector, in addition to existing categories, making significant inroads for solar energy projects for priority sector lending. Domestic funding made easy for industrial solar projects, solar rooftop projects, residential rooftop solar projects and large scale power generation projects.

Industrialists, Entrepreneurs, Investors and Residents shall make it a habit to use solar electricity, since generation of solar power is best solution to save carbon emission. Solar is on technological advancement stage with better efficiency panels available on lower cost. We shall focus on taking benefits of government solar priority funding, subsidies, incentives, equipment funding mechanism, rooftop installation with priority etc to make India self sustainable solar power generation destination.

Written by :

CA Yogesh Birla

Director
Birla WP Management
visit us at : www.YogeshBirlaCA.Blogspot.com

Industrial growth with support of Government and Banks……..during Corona times

Covid virus is no more a fear, but a reality already attacked GDP of our country. Time is warning us to work towards safeguarding our living and businesses from Corona after-effects. Creators of businesses have to fight corona as an economic war, within and outside of India for a longer duration. Industries, Trade and general public shall study corona impact individually and collectively and bring visionary changes in lifestyle and business strategies. At the same time Government and Banks shall work for long term outlook, considering macroeconomic factors and risks, during Corona times :

• World is expecting more de-globalisation; wherein European countries have already made it mandatory to have Government approval for all acquisition by foreign investors, as companies are available at cheaper acquisition prices and there is a fear that China may be eager to take over companies in Europe. Learning from its impact on emerging India, during April 2020, government of India has already announced for prior approval of government, for any direct foreign investment in India, by investors from countries direct neighboring to geographical boundaries of India. It’s an appreciable step taken by India to protect domestic valued companies from corona trade war impact.

• Central Government shall agree for increased funding to fiscal deficit with more support to state government thru overdraft facilities from central government. It will fuel public expenditures by state governments during corona times.

• India is at rating of BBB (lowest investment grade) and 10 years India bond yield 5.94%, wherein USA 10 year paper yield 0.77%. If our rating get further down-graded we will become a Junk Bond and this will crash the economy; hence it will be difficult to print more money.

• Interest rates will go further down, but Banks must pass it on to the borrowers. RBI lends only to the Banks in India and Banks are concerned more about betterment of their own Balance Sheets, than thinking on national and industrial interest. To safeguard of businesses post-covid times, RBI shall start buying Company Bonds.

• Indian economy is lucky to have lower Consumer credits of 13% of total GDP; wherein China has 41% and USA has 79%, this has kept consumers remain stand in difficult corona times.

• Public savings portion in India is just 17% (earlier it was 30%). Out of this, 10% is invested in Real Estate & Gold etc, hence Liquid instrument savings is only 7%. Indian mentality is getting inclined towards consumption economy, rather than saving economy; so there will be no stress in domestic consumption industries in India. It will protect our industries, after corona.

• Economy of Middle-East will be in big trouble, since crude-oil will not go back to 60-70 $ and will remain range bound around $40-45. Indian economy will have positive impacts with lower crude prices during corona times.

• It is expected that by year 2023, approx 39 crore population will come into the middle class earning. Presently only 2% of Indians are investing in Equity shares, with more corporate governance and increase in middle class population, ration of equity investors will increase. The same incremental ratio is expected in mutual fund investments, which is 60% in Mexico, 94% in USA and its only 12% in India. Rising middle class will lead to more investment in equity markets and affordable real estates in long term, to neutralize corona impact.

• If we talk about Indian Rupee, it is under pressure; still India is doing much better with comparison to other European and surrounding countries. India shall ensure that our bond rating shall not go to Junk. It’s evident from history that during our best years of 8% growth, rating of our bonds were not upgraded. So how our fiscal policy will be designed to save india from corona impacts.

In corona scenario, all individual and industries shall conserve cash and be ready for any need occurs for unforeseen circumstances or extended lockdown or longer gestation period for re-start of business. Keep your teams motivated to work in two timelines, what is to be done in current situation and what is target to be achieved in two years. But in any case, companies shall focus to increase equity capital and reduce loans to safeguard in interest payouts in corona times. Its better to get over capitalized, rather than getting disastrous over leveraged balance sheet. The author may be contacted for any strategic advice on case study basis.

Written by :

CA Yogesh Birla

Director
Birla WP Management
visit us at : www.YogeshBirlaCA.Blogspot.com

उद्योग एवं व्यापार ; लोकल से ग्लोबल प्रतिस्पर्धा..... कोरोना परिदृश्य

हम बात कर रहे है विश्व की सबसे भीषण चुनौती कोरोना महामारी के इस परिदृश्य में; कोरोना सिर्फ एक चिकित्सकीय बीमारी ही नही है, परंतु वैश्विक अर्थव्यवस्था को कई दशक पीछे ले जाने वाली भयानक आर्थिक बीमारी है । हम इसको राजनीतिक या अन्य पहलू नही दे कर, सिर्फ उद्योगपति एवं व्यवसायी के हितों के अनुसार ही विवेचन करेंगे ।

कोरोना महामारी से पहले भी भारतीय व्यापार एवं उद्योग मंदी के दौर से गुजर रहा था । यह मंदी सिर्फ हमारे देश की व्यवस्थाओं से नही, बल्कि वैश्विक व्यावसाईक वातावरण से ज्यादा प्रभावित थी । बदलते समय के साथ भारत भी बदलता गया, वैश्विक व्यापार के माध्यम बदलते गए, परंतु नही बदला तो वो मध्यमवर्गीय व्यापारी एवं उद्योगपति, जो इस बदलाव की अनिवार्यता को समझ ही नही पाया । दशकों से व्यापार करने वाले व्यवसायी ने सोचा कि उसकी व्यक्तिगत कुशलता ही उसके व्यापार संचालन का गूढ़ तत्व है, एवं उसने बदलती तकनीक, ऑनलाइन संचार साधनों आदि को अपनाना जरूरी नही समझा, एवं ट्रेडिशनल व्यापारी एवं उद्योगपति पिछड़ता गया ।

समय के साथ आगे बढ़ने हेतु उद्योगपतियों एवं व्यवसायियो को क्या करना पड़ेगा  :-

1.  उद्योगों के वैश्विक वातावरण का निरंतर अध्ययन जरूरी है

2.  अपने उत्पाद का कच्चा माल कहाँ सबसे सस्ता मिलता है, यदि विदेश से इम्पोर्ट जरूरी है तो प्रबंध करे

3.  श्रमिको के काम को मशीनों से कैसे करवाना है, इस हेतु चीन, जर्मनी आदि की तकनीकों का अध्ययन करें

4.  नवीनतम तकनीकों की मशीनों में निवेश करें

5.  गुणवत्ता पर सबसे अधिक ध्यान दे एवम रिसर्च का एक डिपार्टमेंट जरूर रखे

6.  नई पीढ़ी के बच्चो को यात्रा करने की आदत डलवाएं, उनको उद्योग मेलो में जा कर नई तकनीकों से अवगत होने को बाध्य करें

7.  ERP जैसे सॉफ्टवेयर्स द्वारा अपने उद्योगों को संचालित करें

8.  व्यवसाय को पारिवारिक वातावरण से निकल कर पेशेवर बनने हेतु फ्लेक्सिबल बने

9.  पुरातन आदतें छोड़ कर, अच्छे एडवाइजर, कंसलटेंट को उचित भुगतान कर उनकी राय को तवज्जो दीजिये, क्योंकि वह दुनिया भर के नए प्रयोगों को देखते है, एवम आपको सभी तरह से गाइड कर सकते है

10.  फाइनेंस मैनेजमेंट हेतु अच्छे निवेशकों एवं बैंको से सम्पर्क बनाये, एवम कम व्याज पर फण्ड लाने हेतु अच्छे फाइनेंसियल एडवाइजर अपॉइंट करें

11.  बैकवर्ड एवम फारवर्ड इंटीग्रेशन करके लागत को कम करें एवं वॉल्यूम को बढ़ाए

12.  अपनी टीम को समय समय पर ट्रेनिंग दे एवं स्किल को सुधारें

13.  व्यपारियो को अपना वितरण तंत्र सुधारना होगा, इसको ऑनलाइन मार्केटिंग कंपनियों जैसा बनाये

14.  फ़ास्ट डिलीवरी करने से वर्किंग कैपिटल पर ब्याज की बचत करे

15.  ग्राहकों की समस्याओं को सुनकर, तुरंत समाधान प्रदान करे, जैसा कि वैश्विक ऑनलाइन कंपनियां करती है

16.  क्लाउड सॉफ्टवेयर द्वारा माल की खरीद से वितरण तक कि परिधि बनाये

17.  अपना व्यापार एक ही जगह पर सीमित ना रखे, इसको अन्य जगहों पर भी फैलाये, एवं सॉफ्टवेयर द्वारा अपने मोबाइल से ही कंट्रोल करें

18.  अपने उत्पाद से संबंधित अन्य उत्पादों का भी व्यवसाय शुरू करे, जिससे बिक्री आसान होगी

19.  बैंको से वर्किंग कैपिटल लिमिट्स बनाते समय पेशेवर कंसल्टेंट्स की सहायता ले, जिससे लागत कम होगी, एवं फंड अधिक मिलेगा

20.  अधिक से अधिक डिजिटल माध्यमो का उपयोग करें

21.  रोज कुछ नया सीखने का प्रयास करें, एवम समयानुसार व्यावसायिक प्रैक्टिस को बदलें

22.  अन्य सुझाव उद्योग के अनुसार अलग अलग हो सकते हैं, इसकी केस स्टडी अच्छे बिज़नेस कंसलटेंट से करवाये

कोरोना एक त्रासदी है, परंतु कोरोना लॉकडाउन के इस समय को उपयोगी बनाये एवं नई सोच को जन्म दे । आने वाला समय, बहुत ही प्रतिस्पर्धी समय है, अतः पहले से ही बहुत अधिक तैयारी से व्यवसाय का संचालन करना होगा । अब आपकी प्रतिस्पर्धा बड़ी बड़ी ऑनलाइन कंपनियों, जैसे अमेज़न, फ्लिपकार्ट, अलीबाबा, ईबे एवम कई वैश्विक घरानों से है । आज 10 लाख के निवेश की फैक्ट्री में बनने वाले उत्पाद का सीधा कम्पटीशन 5 लाख करोड़ मार्किट वैल्यू की कंपनी से होता है, अतः उनके सिस्टम को निरंतर अध्ययन करें, अथवा उनको समझने वाले योग्य पेशेवर एडवाइजर को अपने व्यवसाय में साथ रखें, तो समय आपका है..... 

Written by :

CA Yogesh Birla

Director
Birla WP Management
visit us at : www.YogeshBirlaCA.blogspot.com

Effect on Industrial and House-hold earnings.....after Corona pandemic

These words shall be considered as people’s words, and not as an Economist words..... effect on Industry and house hold income, taking into account some very broad numbers, considering 3 months of India lockdown; (1.5 month complete lockdown, thereafter partial lockdown) and 1 or 2 months more before businesses and supply chains get back to its normal. God knows, what new normal operations will be after Corona, but let's say that it get back to 90% of the earlier capacity; not factoring any second wave of a pandemic in my analysis. If that happens, well the numbers below will be further disastrous.

Estimates to keep Indian GDP in positive % growth; this brings me to a subject of Tax collections :

--Direct Tax collections could he down by 25% (Lower corporate profits and Individual earnings)
--Indirect Tax collections could be down by 15% (complete supply chain disruption)
--State Tax collections eg. stamp duty, liquor levies, mining royalties etc. could be down by 15%

How the government will balance the book is again a big subject for another day, wherein today, I will try to estimate how people’s earnings and household incomes would be affected, will break it down in these categories :-

1. Farmers and farm laborers....could see 10 to 15% negative income and 5 to 10% job losses
2. Blue collar workers....5 to 15% job losses and zero incentives and wage increase. So 10% overall lower income for the year
3. White collar workers….. 5 to 10% job losses and reduction in some salaries and perks and almost no bonuses. So overall 10 to 15% lower earnings for the year.
4. Owners of small and medium businesses….Worst hit sector, most people I am speaking to are wondering If they will survive. Most estimated losses for the year, Some may do ok, but overall a 30 to 40% decline in income could be estimated.
5. Large corporation owners and shareholders….. If industry de-growth is at 15% minimum that may result in 20 to 40% lower profits in many segments, and losses in several other segments.
6. Individual service providers (Electricians, carpenters, 100s of other such providers) could also see a 20% lower income
7. Landlords lower earnings due to Residential rentals could drop by 10 to 20% and vacancy could rise by 10 to 15% due to lower number of people migrating within or outside their countries or home cities.
8. Commercial real estate rentals would decrease by 10% on average and vacancy rates could be higher by 10%. Retail rentals would be worst hit by about 15 to 25% and vacancy rates could be higher by 10 to 15%. Overall rental incomes of all segments point to 15 to 20% lower rental income for lease generating assets.
9. Savers would see lower returns on Fixed income products by about 15% with zero additional savings as a whole in the economy. Equity at best could be a flat year with no overall growth or at worst we could see a decline of 15% to 20% in the portfolios. Debt mutual funds would see increased defaults and hence at best give very poor returns.
10. Behavioral change going to happen in many sectors and People are understanding value of savings. People will save more and understand where those savings are getting deployed – mutual funds, insurance premiums, banks, bonds.

India is biggest hub of consumers and producers; with unique survival and balancing of economy, blessed with abundant natural resources, entrepreneurial skills, education level, talent, risk appetite, average working age of about 42 years and may more positive factors. 

India Emerging economy supported with so many strong fundamentals, still need increased flow of money in spending, to keep growth showing new higher numbers. COVID is pandemic, but after covid may have opportunities to grow faster. Entrepreneurs and people sitting at home in Lockdown, shall use this time to plan their positive contribution towards strong Indian economy, better utilization of available resources and develop best appetite for development risk, in pace with changing technology and consumer behavior. Indian businesses are known to change from worst to best……….. Lets prove it again in year 2020, with high hopes

by :

CA Yogesh Birla

Director
Birla WP Management
visit us at : www.YogeshBirlaCA.blogspot.com

Savior of Retail Investors in Stock Market…. Corona impact

Indian stock markets were following global recession signs and sudden eroding of investors wealth came as Corona pandemic. Every session of stock market became evident of falling shares, equity mutual funds, wealth management schemes and related products; what can be savior strategies:

• Investors shall understand performance of their invested stocks / mutual funds, vis-à-vis NIFTY; and justify over-performance / under-performance of their investments.

• Nifty has corrected by 35% due to Corona virus Impact, from Nifty 12,430 in January 2020 to 8,080 in April 2020; providing long term opportunity for Equity investors. Nifty (at level 12,430) was trading at PE/28 which was considered Over Valued by Historical average. Now at 8,080 Nifty PE/18, seems fairly Valued in terms of emerging Indian economy and long term Investors shall remain prepared to take entry at Current valuation levels.

• In stock market, it’s difficult to predict bottom fishing; hence STP option is recommended. Your money may remain parked in a Liquid fund. From Liquid fund every week/month Money is transferred to Equity funds. This way you get benefit of Rupee Cost Averaging and Equity exposure at every Market level uniformly over a period.

• Incase retail investors need tax savings on investments, then ULIPs are the only safe and steady return providing instruments in stock markets; rather than PMS or Mutual funds, direct entry; which is taxable in India context. After a period of 5 years, investors can earn tax free annual income from ULIPs every year by way of partial withdrawals till policy Term. Premiums paid in ULIP having benefit of income tax sec. 80-C and partial withdrawals are tax free. Maturity fund value is also tax free under income tax sec. 10. 

• Corona pandemic has shown abnormally high volatility index, and taught lessons to remain balanced investor; wherein we shall recommend investing in Balanced Fund (creator fund), composition of 65% Equity & 35% Debt allocation and Asset Allocation Fund which increases exposure to Equities in falling markets & books profits in equities in rising markets, which can secure 10% and above cagr on longer horizon. 

• Investors shall remain in touch with stock market so can switch from Equity to Debt funds, Equity to Liquid funds online. Investors can also avail option of investing 25% of total fund in 4 different fund schemes, instead of 100% in a single fund/ single scheme only. Watch shall also be kept for mutual fund charges and fund expenses, which may remain between 2.2% to 2.95% yearly on entire fund value.

by :

CA Yogesh Birla

Director
Birla WP Management
visit us at : www.YogeshBirlaCA.blogspot.com

Corona and Emerging Indian Econony :

We are entering into recession period globally and the exception is likely to be India and China with ~2% GDP growth in 2020 which is way below  ~5 - 8% in the past several years.

For the benefit of all, I am sharing my perspective on such scenario on few aspects as below:

What will change during the slow down:

1. Spend on luxury will come down drastically

2. Long-term / Capital expenditure such as construction, technology will be almost cut to nil

3. Lifestyle expenditure such as salary, rent, infrastructure, entertainment will be minimised

4. Working capital will be under tremendous pressure. Businesses will go out of business especially those who are riding on borrowed working capital

5. New innovative business models will evolve

What will NOT change during the slow down:

1. People consumption on essentials will continue

2. Rise in Investment on ideas / technology solutions that will improve efficiency

3. Short-term trading businesses with healthy cash flow practices will thrive

4. Rise in investment on spiritual / self-learning practices

5. Value for money products / services will shine

What you should do as an individual:

1. Hold back any luxury / high risk investments where visibility of returns is difficult to predict

2. Minimise expenditure on the routine stuff - keep a watch on your lifestyle spend - ask the question, is it really necessary!

3. Develop yourself on improving competency and developing skills to become more sharper and efficient

4. Share the financial situation with your family members and educate them on the family financial position and the plans to improve

5. Invest - yes invest on the right things. History repeats. Take risks based on thorough research. This is not the time to follow tips.

What you should do as an Entrepreneur:

1. Take care of your employees - communicate more than ever. Be reasonable and transparent with them

2. Use the slow down to improve your processes / people

3. Invest in technology / systems that will accelerate your reach in adding value to your customers

4. Be frugal in working capital decisions and operating expenditure

5. Capital expenditure to be on hold unless there is clear visibility on the associated returns

Let us get smarter by helping ourselves and economy to bounce back stronger. We can discuss / interact / improve upon on any of the aspects.  I would be Happy to receive your thoughts / suggestions / ideas.

by :

CA Yogesh Birla

Director
Birla WP Management
visit us at : www.YogeshBirlaCA.blogspot.com

SME expansion funding thru Venture Capital (VC)

SME expansion funding thru Venture Capital (VC)

The requirement of working funding depends on following factors:

1. Size of Business

2. Length of production cycle

3. Seasonal variations in working capital cycle

4. Business cycle with upside and downside turnings

Factors Considered by VC before investing in a Venture:

1. An innovative project is essential but within realistic and logical area, venture capitalists seek any project which promises immense growth potential and competitive ability to succeed and sustain in the market.

2. Entrepreneurial personality, experience and his management team contribute towards the execution and success of the project, since they utilize the VC’s fund the venture capitalist make sure of their major role with managing, working, guiding, and co-coordinating the team towards the right path.

3. Good team work, the mantra for modern success stories in the market, holds good for venture capital funding too.

Market characteristics covers the marketability for the product and the competition it faces from other competitors. Returns in the short period depend on the market characteristics of the project hence it is criterion in decision making for capital funding.

Decision Matrix for funding:

1. Venture capital has become a part of the popular business in India. Venture capital has also become synonymous with investing in high risk technology businesses, that could be majorly IT and can spread across further domains like healthcare, agriculture etc.

2. The VC’s final decision on a proposed venture is based on many criteria and also it differs from one to other. All seek one common thing the right and proper way of documentation for them to analyse the projects faster and easily.

3. if the project is new, promising and has innovative features then VC’s seek to have more interest and are ready to help with more amounts because of its wide market characteristics and its ability to capture the market.

4. Many SME’s usually lack the right method and technique to approach the suitable VC and thereby they seek consultants to seek funds in the startup stage through financial institution.

5. SME firms in India believe that ownership of the company is compromised with the price paid for VC funds.

6. The preference for investing entire capital is given to start-up stage may be because of innovativeness of the project and a good team. It is found that less preferences is given for expansion and turnaround stage of the venture.

7. due to the formal structure of the VC operation and more stringent evaluation process, complete business plans are compulsory.

Thus it can be concluded that even though obtaining finance from Venture Capital is rigid, but the with kind of experts and resources available with the Venture Capitalist, success of the business in which Venture Capital has invested money is ensured.

by :

CA Yogesh Birla

Director
Birla WP Mgm
visit us at : www.YogeshBirlaCA.blogspot.com

SME in India…..Risk Funding Opportunities & Challenges

SME in India…..Risk Funding Opportunities & Challenges

SME (Small & Medium Enterprises) entrepreneurs and their small enterprises are responsible for almost all the economic growth in India. Managing SME is less hierarchical and in most of the cases, the buck stops at you. It doesn’t let one hide behind the pillars. The 3Ps of a large corporate are Performance, Posturing and Politics; though the mix may differ from one organisaiton to the other.

Wherein the 3Ps of an SME are Performance, Performance and Performance. There is much lesser room for mistakes, but much bigger room for pending governance and compliances. There is much more cohesion within the team as either they all float or all sink. I feel attracting and retaining talent is the biggest challenge that an SME faces. An SME manager finds it tough to attract the risk-averse talent pool. The stock market adage, “fear is always bigger than greed”, also holds true for job market. An SME is like a high beta stock, wehre the investor and the job aspirant think alike- fear the downside more than the promise of the potential upside.

Key risk involved in Funding to SME equity:

SMEs need robust risk management as they may not have where withal to manage and control non-operational risks due to their very size and several limitations. Some of the key risks faced by SMEs are listed below:

1. Commodity Price Risk

2. Receivable Risk

3. Leverage Risk

4. Currency Risk

5. Key Man Risk

6. Cash flow Risk

Having discussed some of the prominent risk factors that contribute to failure of SMEs, many of the failures are preventable. Excessive risks taken by SMEs are usually the outcome of improper planning and it may prima facie appear that by hedging all these risks, the margins in the business reduce substantially. However, these margins are the sustainable margins in the business and hence, all efforts should be made to retain and grow this. All other profits are temporary in nature and can easily translate into losses. Calculated risks are part and parcel of any business. SMEs being more prone to failures should make sure that the risks are consciously taken with complete knowledge and clear understanding. Keeping an open minded approach and giving a close look at the common reason of failure will pave way for more sustainable future for SMEs and in-turn will create value for them.

by :

CA Yogesh Birla

Director
Birla WP Mgm
visit us at : www.YogeshBirlaCA.blogspot.com