8/10/2019 Tues 30th Dec Global Trends

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Arun. Kumar 17@timesgroup.com

New Delhi: In an unusual move, thegovernment has asked investmentbankers managing stake sales in CoalIndia and ONGC to provide the namesof potential buyers and indicate howmuch theyre likely to bidknown inthe trade as the shadow bookbeforekicking off its asset-sale programme.

The government is looking to raise. 38,000 crore or 87% of the amountbudgeted from disinvestment in theperiod between early to mid-Decem-ber, before the year-end holiday sea-son, and the first week of January, ac-cording to people aware ofdevelopments. Coal India is the coun-trys largest coal miner and ONGC isthe largest hydrocarbons explorer.

The department of disinvestmenthas made this unusual demand tohave more clarity on the demand sidefrom institutional investors as theyare planning to complete these twotransactions in December itself, saidatop banker.

The government hasnt raised anymoney from share sales this fiscalyear and doesnt want to leave it until

the very end of the year.Bankers are confident to complete

one transaction, most probably CoalIndia, in Decemberthat will bolsterthe mood, said another banker withknowledge of developments. The sec-ond transaction of ONGC may happenin December or spil l over to January.

Investment bankers have met likelybuyers during roadshows to gauge their ap-petite.

Overseas investorsare extremely positivetoward India and haveexpressed their willing-ness to participate inthe forthcoming big-ticket government div-estment programme, athird banker said.However, none of themhave put their demandin writing as it is not theconvention.

The governments di-rective has confused the investmentbankers as bids are a function of themarket price on the previous day. Typi-cally, investors never confirm their or-ders in advance. Besides, local inves-

tors usually submit their applicationsjust before the issue closes.

Bankers are worried that if bids arevastly different from the shadow book,they could be blamed for giving mis-leading information.

Conventionally, bankers give thefeedback from the road show in termsof expected demand at a certain pricerange, which is subject to the marketprice and on top of discounts offeredby the government, said a third bank-er. As of now, no one knows the mar-ket price just before the day of divest-ment and the discount.

The government has appointed sev-en investment bankers to sell its 10%stake in Coal India. The foreign onesare Bank of America-Merrill Lynch,Goldman Sachs, Credit Suisse andDeutsche Bank. The local banks areSBI Capital Markets, Kotak MahindraCapital and JM Financial.

At the . 347.80 Tuesday close level, thegovernment can raise . 21,968 crore byselling a 10% stake in Coal India and. 16,500 crore by selling 5% of ONGC,which ended at . 385.80. However, 10%of the issue size will be reserved for re-tail investors, who could be offered asmall discount.

Govt Seeks List of Potential Biddersahead of CIL, ONGC Stake Sale

The govtsdirective hasconfusedinvestmentbankers asbids are afunction ofthe marketprice on theprevious day

8 THE ECONOMIC TIMES | NEW DELHI | WEDNESDAY | 26 NOVEMBER 2014Companies

Despite running a hectic schedule that in-

volves travelling 300 days a year, McKinsey

CEO Dominic Barton tries to meet two CEOs a

day in whichever country he happens to be in.

And these meetings give Barton a unique in-

sight into whats going on in the boardrooms

of globocorps. So, when Barton says thatPrime Minister Narendra Modi is creating a

positive buzz about India among global CEOs,

it has to be taken seriously. In a chat with ETs

Vinod Mahanta, the chief executive of the

worlds top consulting firm talks about the

Modi effect, the sweet spot India is in and the

changing roles of strategists. Edited excerpts:

You meet CEOs across the world. Do you

see the perception about India as an

investment destination changing after PM

Narendra Modi took charge in New Delhi?

Yes, Idefinitely think so. I travel about 300

nights in a year and I see two CEOs every day.

There is optimism on India. People had given

up on India, saying it was too complicated,

could not get anything done. It had dropped

from peoples priority (list) in last five years. I

think it has gone right back up; (now) people

are interested. Obviously, people are going to

want to see action, but I think the feeling is

they will see action because this government

seems serious. I met the minister of finance

two nights ago. They (the government) know

what needs to be done and the y do not need asuper-brain saying (what) we need to do. They

know, and I think they want to get i t done. I

think the people around the world look at this

and we need it. It is also a bit of desperation

for the world 40% of the worlds growth just

last year came from China. We need more bal-

ance and India is the place that could do it. So,

if India unleashes (itself), it is going to help not

only India but the world. So, I think there is a

lot of optimism, people are putting India back

on the top of priority list to say, okay, let us

pay attention and see what happens. But that

it is not going to happen overnight. There are

things that have to change.

Do you get a sense from the American

business community, one of the largest

investors in India, that it is time to bet on

India again?

Yes, I do. I mean, I was there actually when he

(Modi) spoke at Madison Square Gardens. I did

not go there but I was in Manhattan when he

did, saw the newspapers. I hear people say he

seems very determined, that is the kind ofsense that people get that this guy is deter-

mined. We know it is unbelievably complicated,

but he is going to get it done. I see it in pharma-

ceuticals, industrial companies and pension

funds. The pension funds are interested and

that is a big opportunity and so we are in-

terested in getting more investment here, too,

because of infrastructure players, all those

things that can be done. So there is a lot of in-

terest because people are searching for growth.

Are you still advising clients that India is

still the place to be vis--vis other BRI C

nations?

Yes, especially now. I was not two years ago

because it was complicated; it was very diffi-

cult and companies and clients were deeply

frustrated with the bureaucracy; no decisions

were getting made. Companies were like we

do not have time for that, let us go to Africa,

let us go to Nigeria, let us go to Indonesia, let

us just go to the US, but that has changed. I

think because if you look at the trends that

are going on in the world, India is right at the

centre; like ag-food is going to be one of thebiggest businesses in the world right here,

healthcare boom, education boom, advanced

analytics. McKinsey continues to bet big on

India. McKinsey has three-and-a-half thou-

sand people in India; this is the biggest pro-

portion of McKinsey people in the world.

What I am particularly excited about is what

we call MCKC, which was invented by our of-

fice here, which is a lot of advanced analytics.

So, a lot of global companies are getting some

absolutely critical capabilities, risk manage-

ment, market assessments done here in Delhi,

Gurgaon and in Chennai. The talent pool here

is phenomenal and we are going to make this

more of a centre for advanced analytics.

McKinsey seems to be leveraging Indias

strengths to the core...

Yes, people ask me where the headquarters of

McKinsey is. First of all, there is no one head-

quarter because we are partnership, but if

you look at the concentration where our peo-

ple are, again I would have to say it is India,

because that is where the core is and then

New York and then probably London and then

Frankfurt. So, I think that this is a talent pool

and leadership, even MLI. That is how we

want to leverage that in other parts of the

world. What these guys are doing in our

which is booming and coming along; you have

got China, everyone whacks China, but they

are going to keep powering ahead, I am very

confident about that. They are only 53% ur-

banised, they have got the wherewithal to deal

with the challenges. So, you go t the US, you got

China, you have Indonesia, which is picking up.

Russia is one that is going to have difficulty,

but Russia is not significant it does no t

change global economies. China accounted for

40% of the worlds GDP growth this year. So

(in) Africa, I am very bullish on Nigeria, Ethi o-

pia; these are places that are moving. Brazil

cannot get any worse, so I hope it will improve ,

but I am more worried about the governme nt

there, so if you look at the kind of drivers, we

feel good, and the worry I have, the only thing I

worry most about is geo-politics, which you

cannot forecast. So, (you have) Ukraine and

Russia, China and Japan, in general, relations

in Asia-Pacific are not that strong. So it is

more geo-political catastrophe type stuff that

you worry about, which you certainly cannot

ignore because they are happening. We are

bullish and we see it with our clients, they are

investing more, that is why we are busy.

How is the role of the strategist changing

in a VUCA world?

I would say a couple of things about it. One is I

think the idea that you have a five-year strate-

gy is old, it does not work anymore. I think you

need to have a telescope in one eye and a mi-

croscope in the other, you have to have both a

long view and a short view and you have to

keep updating both and that is tough because

most businesses were built for a five-year

window of how you drive it. So, you need to

have a long-term view, because there are big

trends that are out there and you need to

make sure you are on them or you know howthey come together to affect businesses or

identify new opportunities, so you need to

have that and we have done that but that is,

let us say, quite important because that ac-

counts for a lot of performance. It is like you

are on the right trends. Then in the short-

term you need to be agile, because the world

does change quickly and you need to real-

locate resources. So, I think that having a tel-

escope, microscope versus a five-year view

is one dimension of change. The other one is Ido not think strategy is that hard or that is

where the premium is, that is not anywhere

near the bulk of our work.What is more im-

portant is how you implement your strategy

and the hardest thing there is reallocati ng re-

sources to back your strategy.

In a situation where businesses are being

disrupted routinely, how do CEOs scan the

environment for possible game-

changers?

Technology isone of the biggest trends and

most CEOs would say it moves five times fas-

ter than management. It is hard to keep up

because it is changing so quickly. We have

found that high growth companies it is a

very basic thing the people leading those

companies are very aware of what is going

on and very connected and open. They spend

a lot of time outside their business exploring

what people are doing. Les Wexner from Vic-

torias Secret gets his management team ev-

ery year to travel for about a week. He does

not care where they go, but he tells them

come back and tell me what you have learnt. Iwill give you an example. If you are a heart

surgeon in the US today, you better be wor-

ried about driverless cars. People would ask

why. Well because most of the heart trans-

plants come from car accidents and car acci-

dents are going to drop dramatically with

driverless cars. So in a strange way, you even

know that has nothing to do with being a

heart surgeon, you have to think about that.

So I think just being aware of what is going on

in industries outside your own areas is going

to be very important and I think a lot of lead-

ers are spending time trying to learn. I think

the other part is not being overconfident. It is

amazing how people, when they are in their

prime of what they are doing, think they are

god-like or something.

The one company where I do not find that is

Samsung. A year before they hit their peak

earnings from cellphones, you had the chair-

man saying it is over. Publicly he said we

are done, we are toast, and I am not believ-

ing this, I said this guy is crazy. What he was

trying to do is get the paranoia up in the

organisation. He says things like be pre-pared to change everything except your

spouse and your children next year. That is

leadership to not be overconfident, if you

know what I mean, like some companies are.

MCKC, they have developed a capability, say,

for example, a pen, so, you can break down

the cost of this pen. Normally, that would take

two weeks, you got to figure out how they can

do it in 60 seconds and there are some coders

and some experts who have done procure-

ment, who have developed this capability and

as a software. So, I am excited by that and that

is why I am going t o be spending more time

here because of what I am learning, to take to

other places what is going on here.

There are a lot of mixed signals on global

recovery. How do you read the signals?

You are right, it is sort of that signal ve rsus

noise. I am actually bullish and I will tell you

why. If I look at some of the big engines in the

world, the US continues to power ahead almost

in spite of the government. You have got just

underlying stronger and stronger economies; it

has got the demographics. Actually it is a high

growth market, and the fastest growing office

in McKinsey right now is in the United States.

The US continues to power ahead, you havegot energy cost, which is decreasing, which al-

lows more manufacturing, and you have got a

very large market and immigration, you got a

young demographic. You have got Mexico,

India at the Centre of Global Trends

Q&AEXCLUSIVE DOMINIC BARTONCEO, MCKINSEY

ON INDIA

40% of the worlds

growth last yearcame from China.We need morebalance and Indiais the place thatcould do it. If Indiaunleashes (itself),it is going tohelp not onlyIndia but theworld

People had given up on India, saying it was too complicated. It had dropped from peoples priority list. But it h asgone right back up, (now) people are interested. The feeling is they will see action because this govt seems serious

ON GLOBAL RECOVERY

If you look at growth driversfor global economy, we feelgood. The only thing I worrymost about is geo-politics,which you cannot forecast

NITINSONAWANE

ON CEO QUALITIES

Being aware of what is goingon in industries outside yourown areas will be important.

Many leaders are spendingtime trying to learn. The otherpart is not being overconfident

Madhav Chanchani & Snigdha Sengupta

Mumbai: Several new-economy venturesare amassing capital as a frenzy of fund-raising gains hold in Indias booming star-tup sector where there is a lurking fear thatthe flood of money from deep-pocketed in-vestors may become a trickle soon.

These startups, many of which are bat-tling competitors in the fast-growing con-sumer Internet space, are building upcash reserves that have resulted in ashortening of fund-raising cycles froman average of 10 months even a year ago toa mere three months now.

The frenzy is being led by consumer In-ternet startups. But other emerging sec-tors are also tapping in.

Multiple factors are driving the fund-ing surge. The market is getting morecompetitive, companies are scaling upfaster and there is a lot of capital availa-ble, Freecharge CEO Alok Goel said,while declining comment on the specificsof his own companys fund-raising.

Bangalore-based Freecharge, a mobilerecharge and couponing platform, is intalks with investors to ra ise money.

Sources with direct knowledge of the de-velopment said the round could be any-where between $50 million and $100 mil-lion (. 300 crore and . 600 crore). Thecompany raised $33 million in Septemberfrom Sequoia Capital, Belgian investmentfirm Sofina and Russian Internet andtechnology investor ru-Net.

In Mumbai, Pepperf ry, an online market-place for furniture and home products, isalso in the market to raise a $50-millionround, said sources with direct knowl-edge of the development. It last raised $15million in May from Norwest VenturePartners and Bertelsmann India Invest-ments. Pepperfry founder and CEO Am-

bareesh Murty did not respond to emailedqueries fromET.

Freecharge and Pepperfry are part ofthe posse of venture capital-backed star-tups racing to tank up on capital reserveswhile the going is good. Taking their cuesfrom the US Silicon Valley, the worldslargest venture capital market, there aregrowing concerns, both within the inves-tor and entrepreneur communities, of animminent investment slowdown.

US venture capitalists invested $9.9 bil-lion across 1,023 deals in the third quarterof 2014, down 27% from $13.5 billionacross 1,129 deals in the second quarter,according to the National Venture CapitalAssociation. Investors have turned cau-tious with fresh capital commitments onfears of an imminent bubble.

While no one knows when the fundrais-

ing cycle will become tougher, the percep-tion is that at some time it will. We adviseour portfolio companies that if they aregetting interest from good investors thenraise capital, said Rahul Chowdhri, part-ner at Helion Venture Partners, an inves-tor in companies such as MakeMyTrip,Babyoye and TaxiForSure.

The frenzy underway in the Indian mar-ket is borne out by the numbers. Ecom-merce startups alone raised $2.96 billionin the first 10 months of 2014, a five-fold

jump from $602 million raised in all of2013, according to data from consultingfirm Ernst & Young. Overall, the ecom-merce and technology sectors raised $3.97billion between January and October,more than double of the $1.83 billionraised in 2013.

Over three-fourths of the capital raisedin this sector has gone to only three com-panies online retailers Snapdeal andFlipkart and taxi services aggregator Ola.

In digital platforms you get strong re-

wards if you grow fast and the bigger youare. For those with a longer-term v iew, it isbetter to invest in growth now in a fast-growing market like India against waitingfor profitability, said Pranay Chulet, foun-der CEO of Mumbai-based online classi-fieds platform Quikr, which has raised$150 million across two rounds of financ-ing this year. Cab rental services providersOla and TaxiForSure, property search andlistings platforms CommonFloor andHousing, and restaurant listings andsearch site Zomato also raised funds inmultiple rounds in the last 12 months.

Global slowdown concern apart, anoth-er factor that is driving the frenzy is theavailability of more capital. The availa-ble capital pool has swelled and diversi-fied. There is a lot of incoming interestfrom global investors, both financial and

strategic, said Mukul Singhal, principalat early-to-growth stage investor SAIFPartners, which has backed companiessuch as Justdial, Bookmyshow, UrbanLadder and Zovi.

The pool of incoming global investors in-cludes hedge funds and corporate entitieskeen on a foothold in the worlds fastestgrowing consumer Internet market. Indiahas 278 million Internet subscribers, in-cluding mobile Internet subscribers, andthe online shopper base has grown from 8million in 2012 to 35 million in 2014. Theonline product retail is estimated to grow11 times from $2 billion (. 12,000 crore) in2013 to $23 billion ( . 1.39 lakh crore) by

2018, according to a Nomura report.We are seeing large global investors

wanting to bet big on India. They are gravi-tating towards what they believe are largespaces and a few great entrepreneurs whocan give them billion dollar outcomes,said Suvir Sujan, found ing partner at Nex-us Venture Partners. The Mumbai basedearly-stage investor has bets on startupssuch as Snapdeal, Housing and Shopclues.

SAIF Partners, Helion and Nexus arepart of a breed of investors that bet earlyon Indian startups here. These investorsare now keen to see their investees scalefaster as the market becomes intenselycompetitive. Most Indian startups, espe-cially those in the consumer Internet sec-tor, mimic global business models andmany now find themselves competingwith global players on home turf.

Startups Hoard Funds Fearing a Cash Drought

Frome-tailersFlipkart andSnapdeal to cabbooking sites Olaand TaxiForSure,all have raisedfunding multipletimes this year

Ca

pital i

sb

ecomin

ga big differentiatoras these companies raise mega rounds

Others suchasmobile rechargerm Freecharge &furniture e-tailersUrbanLadder andPepperfry arealso tapping themarket again

Race to buildmarket leadershipand risingcompetition withentry of foreignplayers is resultingin these cosbuilding war chests

Others factorsdrivinginvestments areentry of largeforeign investorsand expectation ofa global slowdownin capital ows

Chasing Cash

Our Bureau

New Delhi: The government maysplit the proposed 10% stake salein Coal India (CIL) into two equaltranches, said a senior financeministry official, after a meetingwas held on Tuesday with financeminister Arun Jaitley on the dis-investment road map.

The government is of the viewthat the share price of Coal India isundervalued. The stock shouldsell at a further mark-up of . 100per share, said the above quotedofficial, adding that investors dur-ing the road show have sought clar-ity on the allocation of coal blocks.

Coal India closed at . 347.80 onthe Bombay Stock Exchange(BSE) on Tuesday. The stock hit a52-week high of . 423.85 in June.

The governmentholds an 89.65%stake in the firm.

We have re-ceived a lot of feed-back on the ONGCissue as well. How-ever, no decisionhas been taken on

the issue date ofboth Coal Indiaand ONGC, theofficial said, add-ing that the gov-ernment is closely

watching the market scenario.The government also intends to

divest a 5% stake in ONGC. At cur-rent market prices, the proposed dis-investment in Coal India and ONGCmay fetch the government around. 38,500 crore. The government hasalso lined up other firms, includingSAIL and NHPC for disinvestment.

The finance minister had in hismaiden budget in July proposed arecord target of . 58,425 crorefrom the sale of the governmentsstakes in companies. Of the total,. 43,425 crore was expected fromstake sales in government-con-trolled companies and . 15,000crore from firms in which thegovernment has a minority stake.

The finance ministry officialsaid that the government is close-ly watching the OPEC meet slatedto be held at the end of this monthbefore it decides to go ahead withthe stake sale in the oil firm.

GovtFeels CILUndervalued,May Sell Stakein two Tranches

The govt iscloselywatching theOPEC meetslated to be

held at theend of this

month beforeit decides togo aheadwith ONGC

stake sale

As cos build up war chest,

fund-raising cycles have

shrunk to just 3 months