Infosys appoints D. Sundaram as Independent Director


Bangalore: Infosys on Saturday announced the appointment of D. Sundaram as an Independent Director of the Company, effective July 14, based on the recommendations of the Nomination and Remuneration Committee of the Board. Sundaram is currently the Vice Chairman and Managing Director of TVS Capital Funds Ltd.

He joined Unilever Group in 1975 and served in various leadership capacities in Unilever Group in a career spanning over 34 years, including Director of Finance and IT, and Vice Chairman of Hindustan Unilever Limited. Sundaram is a fellow of the Institute of Cost and Management Accountants, India and a Post Graduate in Management Studies.

Welcoming him to the Board, Chairman of the Infosys Board Seshasayee said, “We are delighted to welcome Mr. Sundaram to the Board of Infosys. He brings extensive experience in the field of finance and strategy execution. I am sure that the Board will immensely benefit from his expertise.”




GST rollout to be very smooth, assures FM


“We will be very  liberal in the first two months. For two months we have given a lot of laxity since we are getting into a new order,”Arun Jaitley/ Finance Minister.

New Delhi : Finance Minister Arun Jaitley on Friday held out the assurance of a “very smooth” transition into the Goods and Services Tax (GST) regime, promising that the administration will be very liberal and not implement it “very strictly” in the first two months.

Acknowledging that there will be some minor problems when a massive change takes place, he said that things will smoothen out in the times to come.

“I think the roll-out will be very smooth, as smooth as possible. All systems are in place. When massive change takes place there is an element of uncertainty of the unknown and when there is unknown there is fear. The whole process will change. There will be some minor problems…I think that will be a matter of days,” he said.

He was replying to a question at the Aaj Tak GST Conclave on how smooth he expected the transition into the new indirect tax regime. Asked if he would give a time-frame by when things will smoothen out, he said the process of registration is on. People will get attuned to the system, reports IANS.

“We will be very liberal in the first two months. For two months we have given a lot of laxity since we are getting into a new order,” he said.”There may be glitches because of lack of awareness. In any technology, glitches are possible. But glitches are rectifiable almost immediately,” Jaitley said. This is a formal launch, because the switch over will be from 12 midnight. It’s an idea of the government, he said when asked why the midnight hour was chosen for the launch. Jaitley said that the July 1 roll-out date was not his decision. It was the GST Council’s decision.

“Last year’s constitutional amendment was valid till September 15. After September 15, we would have been a tax-less society. The Constitution does not allow this. There would be anarchy if we postponed it by six months,” he said.

On the whole, he said, the new law will bring in the principle of equivalence and equity in the indirect tax regime.

“Indirect tax is regressive. For a product, rich or poor has to pay same tax. To bring equity in indirect tax, the product being used by common man is being taxed at lesser rate. Single slab tax not possible in India. It may be possible in a developed country,” he said.

“There is a need to bring equity in indirect taxation, otherwise rich and poor will be paying the same tax.” The Finance Minister said that the multiple tax slabs were chosen to keep a tab on inflation.

“Multiple tax rates necessary to check inflation. To prevent inflationary impact, 12, 18 per cent tax rate was necessary. At some later stage, they may be converged into 15 per cent.

“If you see the overall tax rate and the goods basket, the revenue will go up but the burden will come down,” he said.




New regime will end Inspector Raj, weed out blackmoney: Nitin Gadkari


New Delhi : The rollout of much-awaited GST regime will end ‘Inspector Raj’, weed out black money from the system and end corruption, Union Minister Nitin Gadkari said today.

“The implementation of Goods and Services Tax (GST) will hugely benefit the country’s economy by weeding out black money and introducing transparency,” Road Transport, Highways and Shipping Minister Gadkari said today.     Addressing the India Today Midnight Conclave – Tryst with Tax, Gadkari said it will end the prevalent ‘Inspector Raj’ and red-tapism, and bolster economic growth.   GST will increase revenue of the state governments and the Centre, and had petrol and diesel included in it, states would have benefitted tremendously, he said.

“Overall, the GST will benefit the economy. Flow of black money will be stifled. Seventeen taxes and 22 other cess will be abolished after the GST comes into effect,” Gadkari said. Gadkari said, of course, there will be teething trouble in GST launch, but the government is ready to tackle the challenges. He said even the US President Donald Trump has praised GST. “To say that GST is being hurried upon is absolutely wrong. The process started long back. The Congress governments in the past have also been part of it,” he said in reply to a query. He said, “Congress is opposing the midnight GST launch event at Parliament just for the sake of it. They are just doing politics”. Asserting that the lower middle class will not be affected by the GST on packed food products, he said, “We are working for the benefit of the people. We need to take some harsh steps. There will be some hiccups initially, but they will be sorted out”. “I don’t claim people will not face trouble, but things will improve in two-three months of GST launch. Some hard steps are needed to be taken but it will ultimately have a positive impact,” Gadkari said.




Fin Min for extending RBI’s deadline on Basel III norms


As per the directives, banks have to maintain a minimum common equity ratio of 8 per cent and total capital ratio of 11.5 per cent by March 2019.

New Delhi : The finance ministry has made a case for pushing back the Reserve Bank’s deadline for implementing Basel III banking norms in view of higher capital requirement to deal with bad loans which have reached unacceptable levels.

In a recent meeting with RBI, senior officials from the ministry pitched for deferring the implementation beyond March 2019, saying it will help banks meet the capital needs and increase credit flow to productive sectors along with balance sheet clean-up.

These global capital to risk norms, called Basel III capital regulation, are being implemented in phased manner by Reserve Bank of India since April 1, 2013. They are to be fully implemented as on March 31, 2019.

As per the norms, banks have to maintain a minimum common equity ratio of 8 per cent and total capital ratio of 11.5 per cent by March 2019.

Most of the 21 state-owned banks are already above the average prescribed by RBI but there are 6 PSU banks including IDBI Bank, Bank of Maharashtra and Central Bank of India, which have been put under prompt corrective action (PCA) requiring course correction and higher capital to come out of poor financial health.

However, provisioning levels for the Indian banking sector have risen sharply over the last few quarters in response to rising bad loans, with the RBI’s asset quality review initiated in December 2015 pushing the bottomline of several public sector banks (PSBs) into the red.

Their toxic loans rose by over Rs 1 lakh crore to Rs 6.06 lakh crore during April-December of 2016-17, the bulk of which came from power, steel, road infrastructure and textile sectors.

Gross NPAs of PSBs nearly doubled to Rs 5.02 lakh crore at the end of March 2016, from Rs 2.67 lakh crore at the end of March 2015. Finance Minister Arun Jaitley has announced capital infusion of Rs 10,000 crore for PSBs in the current fiscal in line with the Indradhanush scheme.

This will be over the Rs 70,000 crore that banks will get as capital support from the government. Of this, the government has already infused Rs 50,000 crore in the past two fiscals and the remaining will be pumped in by the end of 2018-19.

As per the scheme, PSBs need to raise Rs 1.10 lakh crore from markets, including follow-on public offer, to meet Basel III requirements, which kick in from March 2019.

Discussions are ongoing with RBI and the ministry made the point of deferring Basel III norms given the circumstances, sources said.

The question is what works the best for Indian banks taking into consideration financial stability, NPA resolution and provisioning requirement, sources said.

“The RBI team is very receptive and there is professional respect. We may not agree. Where RBI has power to take a call they will decide,” an official said.

RBI had already extended the deadline from March 2018 to March 2019 in 2014 after getting representation from various quarters.




Note ban has and may result in a slowdown: SBI report


Country’s largest lender, the State Bank of India,  assesses the long-term impact of demonetisation on the economy and on the banking sector.

New Delhi : Country’s largest lender the State Bank of India (SBI) has expressed apprehensions that demonetisation may continue to result in slowing down of the economy, and adversely affect its business.

The government had discontinued Rs 500 and Rs 1,000 banknotes from November 9, 2016 and issued new Rs 500 and Rs 2,000 currency notes in exchange for the discontinued ones.

The long-term impact of this move on the Indian economy and the banking sector is uncertain, SBI told institutional investors prior to its Rs 15,000 crore share sale through private placement.

The effects of India’s recent demonetisation decision are uncertain, which may adversely affect the bank’s business, results of operations and financial condition, the bank said in the Preliminary Placement Document to investors while flagging the ‘risk factors’.

“The demonetisation has and may continue to result in a slowing down of the Indian economy, which may adversely affect the Bank’s business,” it said. The document, SBI had said contains forward-looking statements that involve risks and uncertainties. Further, the financial performance may differ from “such forward-looking” statements as a result of certain factors, reports PTI.

Post-demonetisation, there has been a surge in the CASA deposits of banks. As per a RBI report, the sharp increase in the share of CASA deposits in aggregate deposits by 4.10 per cent to 39.30 per cent (as of February 17, 2017) resulted in a reduction in the cost of aggregate deposits, and banks have correspondingly lowered their term deposit rates.

 As a result, the bank may face increased competition from commercial banks and other lending institutions, it said while highlighting the risks associated with demonetisation.

SBI said increased competition may have an adverse effect on the net interest margin and other income and if the bank is unable to compete successfully, its profitability may decline.

“The move could also result in an increase in compliance costs and higher incidents of fraud. Any one or more of these events, if and when they occur, could have a material effect on the bank’s business, results of operations, financial conditions as well as reputation,” the document said. Post merger of five associate banks and Bharatiya Mahila Bank effective April 1, SBI catapulted into one of the top 50 global banks (up from 55th position in 2016). Its balance sheet size is Rs 33 lakh crore and has 24,017 branches and 59,263 ATMs servicing over 42 crore customers.




RBI keeps key rate unchanged, cuts SLR, lowers GDP projection


The risk of fiscal slippages, which, by and large, can entail inflationary spillovers, has risen with the announcements of large farm loan waivers, says the Central Bank

New Delhi : The Reserve Bank on Wednesday left lending rates unchanged citing risks to inflation due to spurt in farm loan waivers by states but raised lending capacity of banks to support economic growth.

The government has been pressing for a cut in interest rates to increase private investment and had sought a meeting with the members of the Monetary Policy Committee, but RBI Governor Urjit Patel said that all of them declined to meet.

Senior officials of the Finance Ministry were scheduled to meet MPC members on June 1 and 2 but all six members decided against the meeting.

Headed by Patel, MPC for the fourth straight time kept the repo rate unchanged, at which it lends to the banks, at 6.25 per cent. The reverse repo, at which RBI borrows, will be 6 per cent.

“The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth,” RBI said in its second bi-monthly monetary policy review for 2017-18. Five members were in favour of the monetary policy decision of maintaining the status quo, while Ravindra H Dholakia was not, it said.

 The central bank has however slashed the Statutory Liquidity Ratio (SLR) or the percentage of deposits that banks have to park in government securities, by 0.5 per cent to 20 per cent. The move is expected to raise buoyancy in the loans market as banks would have slightly higher funds for lending.

“The current state of the economy underscores the need to revive private investment, restore banking sector health and remove infrastructural bottlenecks. Monetary policy can play a more effective role only when these factors are in place,” it said.

RBI raised concerns over the possibility of fiscal slippages due to the farm loan waivers. “The risk of fiscal slippages, which, by and large, can entail inflationary spillovers, has risen with the announcements of large farm loan waivers,” it said. On the Gross Domestic project (GDP), the central bank lowered economic growth projection to 7.3 per cent for the current fiscal from 7.4 per cent earlier.  The headline inflation has come down to 3 per cent for in April 2017, while demonetisation continues to impact GDP growth which dipped to 6.1 per cent in the last quarter of the last fiscal. There is also greater clarity on the rainfall, with the IMD predicting for a normal monsoons this season which can help the food inflation situation.

 The BSE benchmark Sensex slipped into negative territory for a brief period after the RBI kept key policy rates unchanged today, but re-entered the green zone towards the fag-end of the session. It closed with a gain of 80.72 points at 31,271.28.




SBI Q4 profit doubles to Rs 2,815 cr as NPA situation eases


 Net profit of country’s largest lender State Bank of India (SBI) more than doubled to Rs 2,814.82 crore for the March quarter as its net NPAs or bad loans narrowed to 3.7 per cent of total advances.

The state-owned bank had in contrast registered standalone net profit of Rs 1,263.81 crore in the fourth quarter of the previous fiscal, 2015-16.

The standalone net profit of the bank in 2016-17 increased by 5.36 per cent to Rs 10,484 crore from Rs 9,951 crore in the previous financial year.

However, for the year ended March 2017, SBI’s consolidated net profit declined by about 98 per cent to Rs 241.23 crore from Rs 12,224.59 crore at the end of 2015-16 as the banks provisioning for the entire year had increased significantly.

Gross Non Performing Assets for SBI Group increased to 9.04 per cent from 6.40 per cent while net NPAs rose to 5.15 per cent as against 3.73 per cent at the end of March 2016.

On standalone basis, gross NPAs rose from 6.5 per cent to 6.9 per cent for the quarter ended March.

Net NPAs declined however from 3.81 per cent to 3.71 per cent during the same period.

According to SBI statement, ‘loan loss provisions’ were lowered to Rs 10,993 crore during the fourth quarter of last fiscal as against Rs 12,139 crore in the year-ago period.

It further said that in absolute terms the gross NPAs increased to Rs 1,12,343 crore on March 2017 from Rs 98,173 crore in the same period last year.

The operating profit of the bank for the fourth quarter increased by 12.93 per cent, from Rs 14,192 crore in the year-ago period, to Rs 16,026 crore.

Net interest income increased by 17.33 per cent from Rs 15,401 crore in the last quarter of 2015-16 to Rs 18,071 crore for the fourth quarter of last fiscal.

Total interest income increased by 10.36 per cent from Rs 42,942 crore in the fourth quarter of 2015-16 to Rs 47,393 crore in same period of 2016-17.

Net Interest Margin (Domestic) declined by 0.16 per cent to 3.11 per cent as on March 2017 from 3.27 per cent at the end of previous fiscal.

The fourth quarter result does not take into account acquisition of its five associates State Bank of Bikaner & Jaipur, State Bank of Mysore, State Bank of Travancore, State Bank of Patiala, and State Bank of Hyderabad and Bharatiya Mahila Bank (BMB) as the merger came into effect from April 1.

SBI stock was trading nearly 2 per cent up at Rs 308.70 on BSE shortly before close of the session.




No impact of GST on renewables, no need for lower taxes: Piyush Goyal


With renewables tariff already touching new lows, Power Minister Piyush Goyal on Friday  said there was no need for lower taxes to encourage clean energy and the GST regime will have no impact on power rates.

However, the minister is hopeful that lower GST rate of 5 per cent on coal, compared to existing 11.69 per cent, would help discoms provide power at affordable rates.

“We don’t need support of lower taxes to encourage renewable energy. By itself, it is good for the nation. It reduces pollution. It give discoms 25-year long affordable power at prices which are even below grid (parity price),” Goyal told reporters when asked if the new Goods and Services Tax rates would impact clean energy in India.

On Thursday, the GST Council had finalised the rates on various products including renewable energy equipment which has been kept in the 5 per cent slab.

Solar power tariff dropped to all-time low of Rs 2.44 per unit which is below the grid parity price. Similarly under the wind power auction for 1GW, the tariff dipped to Rs 3.46 per unit.

The new rates of solar power discovered in the auctions are even below the average rate of coal-based power produced by NTPC at Rs 3.20 per unit.

The minister said, “Solar power prices have gone below grid parity. Wind power prices are also almost at grid parity despite only one bid (auction for 1GW).” He added that the situation today is very different from the past as “We can stand on our feet”.

Goyal said, “Twenty-five years later, other forms of power would be 3-4 times higher. Solar, wind and hydro would be affordable forms of power. I don’t think GST rates will impact my sector’s tariff.” Explaining further he said, “The GST regime is designed to help bring down costs. As we have seen on Thursday, we are little more encouraged that the GST will help bring one nation one tax and help the nation to reduce corruption and difficulties in operation and also bring simpler tax regime.”

About lower rates on coal under GST, he said, “The coal sector will also benefit (due to GST) with straight away benefits to consumers because (higher) taxes used to be a burden on consumer of India. I am delighted that the GST council has chosen to keep coal at 5 per cent slab. I am sure that this will help discoms serve the poor and rural consumers with more affordable rates.”

About keeping UPS and inverters in higher tax bracket, he said, “UPS and Inverters are the thing of past. Please don’t go back to past. We don’t need UPS/Inverters and Converters anymore.” About taxes on power equipment he said, “As far as power equipment is concerned, this government has been able to maintain the power prices at affordable levels and in fact, reduced it in most cases. NTPC has been able to bring down their variable cost by 20 per cent.”




Patanjali eyes 2-fold rise in revenue at Rs 20,000 crore in FY18


New Delhi: Baba Ramdev-led Patanjali is looking at a two-fold jump in sales at over Rs 20,000 crore this fiscal as it plans to double its distribution network to 12,000 across the country.

Besides, the company is aspiring to further strengthen its presence and lead in most of the product categories.

The Haridwar-based FMCG firm had clocked a turnover of Rs 10,561 crore in the financial year ended March 31, 2017.

“We would grow more than double this year… By next year, Patanjali would be in the leading position and in most of the product categories, it would be number one,” yoga guru Ramdev said.

The company is in the process of setting up mega production units at several places, including Noida, Nagpur, and Indore, which would take its production capacity to Rs 60,000 crore from the existing Rs 35,000 crore.

“Our Noida facility would have a production capacity of Rs 20,000 crore, Nagpur 15,000 crore to Rs 20,000 crore and Indore Rs 5,000 crore,” he added.

The company is also strengthening its distribution network to reach more consumers across the country.

“We would double our distributors’ network to 12,000 from the present 6,000,” Ramdev said.

This fiscal, the company is looking to enhance its focus on categories such as spices, pulses, vegetable oil, biscuits, confectionery and juices and add more products into these segments.

In FY 2016-17, Patanjali Ayurved contributed Rs 9,634 crore to its turnover, while Divya Pharmacy that manufactures ayurvedic medicine had clocked Rs 870 crore sales.

During the fiscal, Patanjali ghee had a business of Rs 1,467 crore and oral care brand Dant Kanti Rs 940 crore. Its personal care brand Keshkanti had sales of Rs 825 crore and herbal soap Rs 574 crore.

“Dankanti has now 14 per cent market share in the segment. Honey is around Rs 350 crore and would grow to Rs 500-600 crore this year. Our kacchi ghani mustard oil is around Rs 522 crore and would grow up to Rs 1,000 crore,” he added.

According to the company, it has now 15 per cent market share in shampoo, 14 per cent in face wash, 35 per cent in dishwasher and 50 per cent in Honey.




Taking on forex challenge in the online world


Over the past decade, the Indian travel industry saw a gradual shift in their transaction needs—shift to online. This raised a question in my mind—why couldn’t the forex transactions be done online? That was the genesis of our business which started four years ago, funded in a small way by family and friends, and this time with proper awareness of RBI regulations.

Forex needs of travellers can be segmented into either corporate or leisure travel. Most organised players focus on corporate travel, which is low-hanging fruit and gives steady volumes. The leisure travel segment – where client acquisition is more difficult and transactions are geographically widespread – has traditionally been served by the cash-based grey market. The attraction of the leisure travel segment is that payments are upfront and there is no credit period.

Our product suite consists of the prepaid forex card, which is absolutely comparable to a debit card, including usage at overseas ATMs and the cancellation facility in case of theft or damage. We also deal in physical currency which is only around 10 per cent of our total volumes. We encourage travellers to keep physical currency only for minor needs and emphasise the utility of the card. Our average transaction value is USD 1,500 and over. In our four-year operations, we have had 60 per cent repeat business.

What are the industry characteristics and how have you evolved in that context?

Post-demonetisation, there were two major shifts in the industry. Firstly, we saw an increase in demand for forex which was seen as a new avenue for parking funds and an alternative to gold and real estate. This saw the rates rise for physical currency, and hence made our product comparatively attractive for genuine travellers. The second development was a greater willingness to transact from bank accounts, which benefited organised players.

For India, the forex currency requirements for travel (excluding trade) are currently USD 10 billion, in which leisure travel requirements are USD 6 billion. Of this, 70 per cent is currently serviced by the unorganised grey market and online overall would hardly be 2-3 per cent.

A major pain point presently for the industry is the duration of a transaction and the difficulty in holding a rate till then. The process of a prospective buyer getting a quote, getting a payment instrument (say demand draft) and making payment to forex seller sometimes entails more than a day. In that time, rate can fluctuate by maybe 1 per cent or more. This has been the reason that margins are traditionally kept high. Anyone who is willing to close the loop immediately through online digital transactions can enjoy competitive rates. This is one more reason for our type of model to grow.

To give some perspective, if one buys currency at the airport, the extra charge is 18-20 per cent. If it were done on a credit card, the charge would be between 8-11 per cent and at a bank it would be 3-3.5 per cent. The organised sector players take 2-2.25 per cent and grey market operates at 1.5 per cent. Online transactions have a 1 per cent load. You can see the value proposition here.

On regulations front, Reserve Bank of India (RBI) has specified that anyone operating in any region needs physical presence. Hence, we have a tie up with Paul Merchant on a revenue-sharing basis. This association takes care of the order fulfilment part and we look at the front-end. The physical inventory in their basket is typically 15-20 per cent of our daily transaction volumes, which currently stands at Rs 20 lakh across 5,000-8,000 transactions.

The actual card we provide is issued by private banks – ICICI, Axis and HDFC – in their name, for which we get an incentive and do not charge the customer. The customer gets the card at a very small surcharge over the interbank rate. The bank name on the card is part of our trust creation initiative. We also have a 24-hour call centre and a welcome call system. The challenge is to create awareness and reach, to make the customer realise the efforts done by us in the direction of transparency and trust creation. We aim to change the mind set of clients so as to accept account-based transactions. We believe the non-digital segment of population is shrinking fast. Even now, 98 per cent of customer payments we get are online-based. The total cards issued in FY2017 were close to 7,000. The aggregate transactions done by us stand at around 15,000-16,000. (The aggregate transactions represent the cards the company has sold/ refilled in its four-year history.)

For immediate expansion of our basket, we are looking at a B2B channel and tie-ups with small and medium providers of international travel packages. They give an additional service to their customers and they get a commission whenever the card is used. Our USP is to bring transparency which will create trust.

What are the triggers and stumbling blocks for market expansion?

For our own expansion, we have agent acquisition teams in five cities, but much is still left. The quantum of leisure travellers in tier-II cities and below is massive.

One big B2B channel for the industry as a whole is forex requirements related to outward remittances for students. When you tally the fee payment and living cost, plus any medical treatment abroad, it is close to USD 10 billion. The film industry requirement is part of the USD 10 billion industry figure. Right now our revenue contribution from this channel is a mere 10 per cent, but we are talking to consultants in educational sector and we see a clear growth path for ourselves there.  If we talk of inbound remittances of USD 72 billion, that part is more or less sewn up between bank to bank transactions and then players like Western Union and Moneygram. So, there is very little space for the online players.

Leisure travel itself is huge in potential. Industry estimates 50 million international travel transactions from India in 2020 and onwards, which means around 15 million related forex transactions which would aggregate USD 22-25 billion just as money-in-hand.

At industry level, once digital payments and Aadhaar usage become prevalent, the security matters will get sorted. Payments moving to mobile devices and tightening of regulatory measures are good signals. The current account convertibility which is being discussed will also be a massive trigger. As far as multi-currency wallets are concerned, technical requirements have been largely sorted out but regulatory structures are needed. The inter-country dependence for regulation means that all parties need to go slow.

Over the past decade, the Indian travel industry saw a gradual shift in their transaction needs—shift to online. This raised a question in my mind—why couldn’t the forex transactions be done online? That was the genesis of our business which started four years ago, funded in a small way by family and friends, and this time with proper awareness of RBI regulations.

Forex needs of travellers can be segmented into either corporate or leisure travel. Most organised players focus on corporate travel, which is low-hanging fruit and gives steady volumes. The leisure travel segment – where client acquisition is more difficult and transactions are geographically widespread – has traditionally been served by the cash-based grey market. The attraction of the leisure travel segment is that payments are upfront and there is no credit period.

Our product suite consists of the prepaid forex card, which is absolutely comparable to a debit card, including usage at overseas ATMs and the cancellation facility in case of theft or damage. We also deal in physical currency which is only around 10 per cent of our total volumes. We encourage travellers to keep physical currency only for minor needs and emphasise the utility of the card. Our average transaction value is USD 1,500 and over. In our four-year operations, we have had 60 per cent repeat business.

What are the industry characteristics and how have you evolved in that context?

Post-demonetisation, there were two major shifts in the industry. Firstly, we saw an increase in demand for forex which was seen as a new avenue for parking funds and an alternative to gold and real estate. This saw the rates rise for physical currency, and hence made our product comparatively attractive for genuine travellers. The second development was a greater willingness to transact from bank accounts, which benefited organised players.

For India, the forex currency requirements for travel (excluding trade) are currently USD 10 billion, in which leisure travel requirements are USD 6 billion. Of this, 70 per cent is currently serviced by the unorganised grey market and online overall would hardly be 2-3 per cent.

A major pain point presently for the industry is the duration of a transaction and the difficulty in holding a rate till then. The process of a prospective buyer getting a quote, getting a payment instrument (say demand draft) and making payment to forex seller sometimes entails more than a day. In that time, rate can fluctuate by maybe 1 per cent or more. This has been the reason that margins are traditionally kept high. Anyone who is willing to close the loop immediately through online digital transactions can enjoy competitive rates. This is one more reason for our type of model to grow.

To give some perspective, if one buys currency at the airport, the extra charge is 18-20 per cent. If it were done on a credit card, the charge would be between 8-11 per cent and at a bank it would be 3-3.5 per cent. The organised sector players take 2-2.25 per cent and grey market operates at 1.5 per cent. Online transactions have a 1 per cent load. You can see the value proposition here.

On regulations front, Reserve Bank of India (RBI) has specified that anyone operating in any region needs physical presence. Hence, we have a tie up with Paul Merchant on a revenue-sharing basis. This association takes care of the order fulfilment part and we look at the front-end. The physical inventory in their basket is typically 15-20 per cent of our daily transaction volumes, which currently stands at Rs 20 lakh across 5,000-8,000 transactions.

The actual card we provide is issued by private banks – ICICI, Axis and HDFC – in their name, for which we get an incentive and do not charge the customer. The customer gets the card at a very small surcharge over the interbank rate. The bank name on the card is part of our trust creation initiative. We also have a 24-hour call centre and a welcome call system. The challenge is to create awareness and reach, to make the customer realise the efforts done by us in the direction of transparency and trust creation. We aim to change the mind set of clients so as to accept account-based transactions. We believe the non-digital segment of population is shrinking fast. Even now, 98 per cent of customer payments we get are online-based. The total cards issued in FY2017 were close to 7,000. The aggregate transactions done by us stand at around 15,000-16,000. (The aggregate transactions represent the cards the company has sold/ refilled in its four-year history.)

For immediate expansion of our basket, we are looking at a B2B channel and tie-ups with small and medium providers of international travel packages. They give an additional service to their customers and they get a commission whenever the card is used. Our USP is to bring transparency which will create trust.

What are the triggers and stumbling blocks for market expansion?

For our own expansion, we have agent acquisition teams in five cities, but much is still left. The quantum of leisure travellers in tier-II cities and below is massive.

One big B2B channel for the industry as a whole is forex requirements related to outward remittances for students. When you tally the fee payment and living cost, plus any medical treatment abroad, it is close to USD 10 billion. The film industry requirement is part of the USD 10 billion industry figure. Right now our revenue contribution from this channel is a mere 10 per cent, but we are talking to consultants in educational sector and we see a clear growth path for ourselves there.  If we talk of inbound remittances of USD 72 billion, that part is more or less sewn up between bank to bank transactions and then players like Western Union and Moneygram. So, there is very little space for the online players.

Leisure travel itself is huge in potential. Industry estimates 50 million international travel transactions from India in 2020 and onwards, which means around 15 million related forex transactions which would aggregate USD 22-25 billion just as money-in-hand.

At industry level, once digital payments and Aadhaar usage become prevalent, the security matters will get sorted. Payments moving to mobile devices and tightening of regulatory measures are good signals. The current account convertibility which is being discussed will also be a massive trigger. As far as multi-currency wallets are concerned, technical requirements have been largely sorted out but regulatory structures are needed. The inter-country dependence for regulation means that all parties need to go slow.




58 Total
Top