the Oracle

Placement News Bulletin : 2019-20

August Edition | Edition 4
On this issue: Business Focus HR Digest
THE 42ND Annual General Meeting Of Reliance

The recent Annual General Meeting of Reliance on 12 August, brought in a slew of announcements that
promise to reshape the digital industry further as RIL enters into multiple digital services territories, whilst
fortifying its own position as a leading private sector firm in the industry. The announcements both strategic
and financial in nature promise to put Reliance on strong footing amongst the Indian Conglomerates. Some
Key highlights and announcements made during the AGM were:
Financial
• RIL became India's largest and most profitable company among private and public sector companies in
FY 2019
• RIL to target towards becoming a zero net-debt company in next 18 months
• Consumer businesses contribute 32 percent to Reliance's earnings before interest, tax, depreciation and
amortisation (EBITDA).
• Reliance Retail crossed the turnover of Rs 1.3 lakh crore, to be the largest retail company
• Jio & Reliance Retail to move towards listing within next 5 years
Strategic
• Saudi Aramco & RIL agree to form long-term partnership. Aramco will acquire 20 percent stake in RILs oil
-to-chemical business with an enterprise value of $75 billion
• BP has acquired 49% stake in the company's Petro-Retail business, the transaction would fetch Rs. 7000
Crore to the company
• JV with BP will invest Rs 35,000 crore in KG-D6. The JV will focus on augmenting the production of me-
thane
• The investment cycle of Jio is now complete with about Rs. 3.5 lakh crore has been invested in high-
speed 4G Network
Digital
Jio to start 4 more growth engines to generate revenue:
• Internet of Things all over India
• Home Broadband
• Enterprise broadband
• Broadband for small and medium business
Jio with a current subscriber base of 340 million customers has been signing 10 million new customers every
month making it the second-largest operator in the world. Mukesh Ambani stated that 500 million subscrib-
ers are now well within reach of Jio. Jio's IoT platform to be available from January 1, 2020. It aims to con-
nect 1 billion homes on Jio IoT platform. Annual revenue opportunity for Jio at Rs 20,000 crore from IoT. Jio
will complete the Jio Fiber rollout in the next 12 months. Jio plans to provide blockchain technology all over
India in next 12 months. Jio & Microsoft in long-term agreement to accelerate digital transformation. The
aim is to make cloud investment free for all start-ups in India.
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 the Oracle
Placement News Bulletin : 2019-20
August Edition | Edition 4
On this issue: Business Focus HR Digest

Inverted yield curve

What has happened?

At the close on Friday, the 10-year US govt bond was yielding 32 basis points less than three-month T- bills.
The That relationship first inverted in March, meaning the three-month offered a higher rate of interest, and
has been consistently and ever more deeply negative since May.
The yield curve describes the yields on different maturities of US government debt, and its inversion — when
rates on long-term bonds fall below those on short-term debt — has been a reliable indicator of recessions
in the past. The inversion of the yield curve — the market indicator that has rattled Wall Street — has had a
particularly pronounced effect on US regional banks, whose shares are among the worst performers of the
past few weeks.

Effect of inversion
Among small banks which are asset sensitive mainly, weighted towards floating rate loan are largely affect-
ed. In some cases, the shares are trading in lock-step with changes in the yield curve.
Reason: It is suspected that machines are trading it due to violent and quick movements which won’t be
caused by traditional asset managers.

34% of economists surveyed by the National Association for business economist expect a US recession in
2021. The concern is due to higher budget deficit and other tariffs in US.

Debenture redemption norms removed for listed firms, NBFCs, HFCs eased for Unlisted Cos
(Part of ‘Ease of doing business 100-day Action Plan’ by the government)

What is Debenture Redemption reserve?

A debenture redemption reserve (DRR) is a provision stating that any Indian corporation that issues deben-
tures must create a debenture redemption service in an effort to protect investors from the possibility of a
company defaulting.
What has happened?
Companies are now exempted from creating a DRR for both public and private placement of debentures for
listed entities. DDR has also been reduced from 25% to 10% from unlisted entities.
What is the rationale?
Move to create a level – playing field and bring down the cost of capital.
This is done to alleviate liquidity crunch that NBFCs had been facing and increase access to capital for all cor-
porates. The relief would bring down the cost of borrowing capital for companies and deepen the bond mar-
ket.

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 the Oracle
Placement News Bulletin : 2019-20
August Edition | Edition 4
On this issue: Business Focus Focus
Business HR Digest
MDR regulation scrapped by Indian Government to impact MasterCard & Visa

MDR or Merchant Discount Rate is a commission of up to 2% paid by a merchant establishment to banks

which put up the POS machines when she accepts the payment through debit/credit cards from a customer.
The Finance Minister in her maiden budget speech said that business establishments with annual turnover of
more than ₹50 crore shall offer low-cost digital modes of payments to customers and no charges or mer-
chant discount rate (MDR) shall be levied on either the customers or the merchants. The rationale behind
the move was that the rate acts as a disincentive for popularising digital payments.
However, Companies like Visa and Mastercard find this logic fallacious as MDR is a lifeline for their business.
According to them, card payments save lots of money both for the government and the merchants by way
avoiding or reducing cash handling cost and pointed out that the Reserve Bank alone incurs a whopping
₹26,000 crore in handling cash charges annually. Since they are providing a service to the system , they
should be compensated for establishing the infrastructure required for it. This supports the basic tents of
economics and even RBI agrees that cost of setting up infrastructure is not fee and isn’t favourable to im-
provement in technology since removing MDR might remove incentive to improve it. Further there is going
to be no skin in the game, deploying these terminals and ensuring that they reach the small towns will not
be in their economic interest too. The proposal has since been passed by Parliament along with the Finance
Bill and the general budget.

Amendments proposed in CSR under Company Act and how it will impact firms

According to report by KPMG, growth in the Indian media and entertainment (M&E) industry in 2019 was driven
by the digital segment riding on regional language consumption. The digital sector is expected to grow at a com-
pounded annual growth rate (CAGR) of 29.1% between FY19 and FY24 to reach ₹621 billion by 2024. About 70%
of total TV channels launched during the year were regional channels while growth in the print industry is also on
account of the increasing readership in regional languages, with English seeing a decline. As digital behaviour in
the country evolves, the gaming segment is unsurprisingly another outperformer over the year, growing at a rate
of 41.6% to reach a size of ₹62 billion with robust growth in both ARPUs (average revenue per user) and the num-
ber of gamers in India (estimated at 300 million by FY19), mainly driven by rapid and significant digital adoption.
Television revenues grew at a rate of around 9.5% to take the segment to a size of ₹714 billion. Disruption came
on the back of the long-drawn process of implementing the new tariff order brought in by the Telecom Regulato-
ry Authority of India, as part of which users can now choose and pay for individual channels, as opposed to stipu-
lated bouquets.
The segmentation of market will see major shift in coming years since consumers will shift from traditional to dig-
ital media in long run Segments like digital sophisticates (who will consume global content), digital enthusiasts
(who will watch mainly Indian narratives in Hindi and regional languages and some pockets of English ), digital
mainstream (looking for free content available online or bundled plans through telcos and other distribution
platforms) and fringe users (who will have sporadic digital access on account of either poor connectivity or irregu-
lar income) will play major role in driving digital content creation.

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Placement News Bulletin : 2019-20
August Edition | Edition 4
On this issue: Business Focus Focus
Business HR Digest

Telecom Sector in India

In the last 2 years, Telecom sector lost over 100,000 employees because of financial turmoil and consolida-
tion of various telecom companies. Industry revenue is expected to rise in FY20 and recruiters say that hiring
will happen across levels like digital marketing, machine-to-machine (M2M), internet of things (IoT), artificial
intelligence (AI), etc. There is a cumulative debt of around Rs.5 lakh crore in the telecom sector.

Current Scenario of Telecom Industry in India

India: 2nd largest telecom market in the world with 1.2 billion subscriptions, 6% of GDP contributions. Indian
telecom industry: a paradigm shift from a voice-centric market to a data-centric market.
Jio, Airtel & Vodafone Idea account for more than 90% of revenue & 80% of spectrum holding. Govern-
ment's ambitious plans like Digital India and Smart-cities are dependent on this sector. Telecom service pro-
viders pay as much as 30 % of their revenues in taxes and levies for spectrum and operating licenses. 18%
GST regime has made the services more expensive.

Key Challenges Faced by the Telecom Industry in India

Huge initial fixed cost to enter semi-rural and rural areas. Key reasons behind these costs are lack of basic
infrastructure like power and roads, resulting in delays in rolling out the infrastructure. Only around 25% of
Towers in India are connected with fibre networks, whereas in developed nations, it is in excess of 70%. 5G
Network requires towers to be connected to with very high-speed systems. Those high speeds are not possi-
ble on the present radio systems. But are possible on fibre system.
High Right-of-Way (ROW) cost
• States governments at time charge a huge amount for permitting the laying of fibre etc. (A right of way is
a type of easement that allows a person to pass through another's land)
• It takes a long time to get right-of-way permissions.

Threats
Interconnection charges: Interconnection charges will be zero effective Jan 1, 2020, from the current rate of
6 paise/min. This would impact revenues.
Spectrum auctions: Government of India has kept a high reserve price for spectrum auction. Given the ongo-
ing pressure on ARPU (Average Revenue per User) and margins, purchasing the spectrum at a high price (in
circles like Mumbai) put further stress on the balance sheet.

Way Forward
• Future of Telecom Sector is very bright as its role will be seen in almost everything, from the networking
of CCTV Cameras to the safety and security of people to providing education in remote places. A long-
term vision plan should be made accordingly.
• The government needs to provide an easy and soothing environment for telecom operators.
• The government should increase the network area through optical fibre instead of copper which is ex-
pensive. This is necessary to ensure last-mile connectivity.

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 the Oracle
Placement News Bulletin : 2019-20
August Edition | Edition 4
On this issue: Business Focus HR Digest
Cultural Integration Takes Lead in M&As

Financial, strategic investors feel a significant value erosion takes place if people fit isn’t right. Financial and
strategic investors are increasingly laying more stress on cultural and people integration in a deal because a
significant amount of value erosion takes place if the people fit isn’t right. If you don’t address that, it could
derail the synergy. Cultural integration could sometimes be a challenge because people find it to be a fluffy,
ambiguous topic.

According to a 2018 study by global HR Consulting Firm Mercer on “Mitigating Culture Risk to Drive Deal Val-
ue,” 30% of transactions fail to meet financial targets due to cultural issues; 67% experience synergy delays,
and 43% face delayed close, no close or an impact on the purchase price.

While historically, culture was categorised as a non-financial risk, the study showed that it can cause signifi-
cant financial risk in four primary ways: productivity loss, customer disruption, flight of key talent and de-
layed synergies. One of the biggest people and culture-related factors that companies grapple with is em-
ployee retention - including roles, pay packages and continuity between announcing and closing a deal. Oth-
er factors include leadership fitment – quality of leadership and the position in the new set-up. There are
also issues of compensation, benefits and harmonisation.

HR and payroll startup Gusto doubles its valuation to 3.8 Bn USD on impressive data trends

San Francisco-based HR and payroll startup Gusto has nearly doubled its valuation thanks to a nine-digit
funding round that brought its total investment capital pool to more than a half-billion dollars. Gusto –
which calls itself a “people platform” focuses on the HR needs of 6 million small businesses in the US, has
attracted more than $500 million from A-list investors, including T. Rowe Price, Fidelity, and Al Gore's Gener-
ation Investment Management. Job postings have also been on the rise at Gusto. The company added about
34% more new postings so far this year.

According to Forbes, Gusto has been talking to more than 100,000 businesses across the United States, as
digital disruptors continue to invade the HR and management space worldwide.
Gusto is now valued at $3.8 billion after its latest fundraising round. It is a cloud HR platform for small busi-
ness, the company aspires to build a powerful, easy-to-use “Software as a Service (SAAS)” platform.