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The Economic Times
Student Intern
2019
Airtel Vs Jio (Idea Ed.)
The strategy of Vodafone Idea’s top brass picking cash over stock options as a long-term incentive to insulate themselves from share price uncertainties may not be paying off, people familiar with the matter said.
The stock has crashed 83% since Vodafone India and Idea Cellular merged one year ago. However, the cash component may shrink, too, as the telco loses revenue market share and customers – key parameters to which the incentive is linked. And analysts expect a further decline in these benchmarks.
Executive salaries at the Kumar Mangalam Birla-led telco are split into a fixed component of 60% and a bonus of 40%. The cash incentive, over and above this, accounts for 30-35% of the overall compensation and is linked to revenue and customer market shares over four years, the people said.
“When compensation for top brass was decided, the management agreed to link their long-term incentives to parameters like revenue market share and customer market share. This call was taken despite erstwhile Idea Cellular and Vodafone India offering stock options to senior employees before the merger,” said one of the people. “It is not common in listed companies to give cash.”
Vodafone Idea said it will not comment on any speculation about compensation.
“As a practice and in line with industry norms, VIL offers Long Term Incentives to eligible employees basis performance against specific long term KPIs which focus on the company performance and value creation for shareholders,” Vodafone Idea said in an emailed statement.
“Giving cash instead of stocks when two companies are merging helps to bring top management from both firms on common ground. Also, while the merger is taking place, coming to a fair valuation of the new entity may not be easy and thus, cash for long-term incentives helps,” said a telecom analyst who did not want to be identified. The Mumbai-based analyst added that cash is considered more secure when future share values are uncertain, given industry conditions.
After the merger on August 31, 2018, Vodafone Idea started as India’s No. 1 telco by customer market share – over 40% – and revenue market share – over 35%.
Revenue share has now narrowed to 28.1% and the company has slipped to No. 3. Analysts said it’s not yet the bottom. The share price has fallen to Rs 5.31 from Rs 30.83 after the merger. In addition, Balesh Sharma quit as CEO 11 months into the job and was replaced by Ravinder Takkar, amid falling revenue and quarterly losses at almost Rs 5,000 crore.
Vodafone Idea’s revenue market share may stabilise at 20% in the medium term, said Rajiv Sharma, co-head of research at SBICap Securities. In July, SBICap Securities said the company could see a “70 million additional subscriber decline over the next six quarters” and its subscriber market share slipping to 23% by March 2020.
The operator, which had 422 million subscribers at the end of last September, ended this June quarter with 320 million, as per company data. Rival Airtel has curbed customer exits, while Reliance Jio has gained users every quarter and is targeting 500 million.
The stock has crashed 83% since Vodafone India and Idea Cellular merged one year ago. However, the cash component may shrink, too, as the telco loses revenue market share and customers – key parameters to which the incentive is linked. And analysts expect a further decline in these benchmarks.
Executive salaries at the Kumar Mangalam Birla-led telco are split into a fixed component of 60% and a bonus of 40%. The cash incentive, over and above this, accounts for 30-35% of the overall compensation and is linked to revenue and customer market shares over four years, the people said.
“When compensation for top brass was decided, the management agreed to link their long-term incentives to parameters like revenue market share and customer market share. This call was taken despite erstwhile Idea Cellular and Vodafone India offering stock options to senior employees before the merger,” said one of the people. “It is not common in listed companies to give cash.”
Vodafone Idea said it will not comment on any speculation about compensation.
“As a practice and in line with industry norms, VIL offers Long Term Incentives to eligible employees basis performance against specific long term KPIs which focus on the company performance and value creation for shareholders,” Vodafone Idea said in an emailed statement.
“Giving cash instead of stocks when two companies are merging helps to bring top management from both firms on common ground. Also, while the merger is taking place, coming to a fair valuation of the new entity may not be easy and thus, cash for long-term incentives helps,” said a telecom analyst who did not want to be identified. The Mumbai-based analyst added that cash is considered more secure when future share values are uncertain, given industry conditions.
After the merger on August 31, 2018, Vodafone Idea started as India’s No. 1 telco by customer market share – over 40% – and revenue market share – over 35%.
Revenue share has now narrowed to 28.1% and the company has slipped to No. 3. Analysts said it’s not yet the bottom. The share price has fallen to Rs 5.31 from Rs 30.83 after the merger. In addition, Balesh Sharma quit as CEO 11 months into the job and was replaced by Ravinder Takkar, amid falling revenue and quarterly losses at almost Rs 5,000 crore.
Vodafone Idea’s revenue market share may stabilise at 20% in the medium term, said Rajiv Sharma, co-head of research at SBICap Securities. In July, SBICap Securities said the company could see a “70 million additional subscriber decline over the next six quarters” and its subscriber market share slipping to 23% by March 2020.
The operator, which had 422 million subscribers at the end of last September, ended this June quarter with 320 million, as per company data. Rival Airtel has curbed customer exits, while Reliance Jio has gained users every quarter and is targeting 500 million.
Social Media Marries Aadhar in Tamil Nadu
The ministry of electronics and IT has written to the UIDAI to seek an opinion on the Tamil Nadu government's plea to link Aadhaar with social media. While the state government had made the plea, after the matter was transferred to the SC, the Apex Court had asked the Central government for a response on the matter. Officials in the know said that such a linkage seems difficult since as per the law, Aadhaar linkage can only be done for services such as subsidies which are paid out of the Consolidated Fund of India and not for anything else. Also, even if the Aadhaar number is linked to the social media account, it will serve no purpose. In case of a crime, if the Aadhaar number of say a Facebook user is revealed, the government will still need the mobile number linked to the UID number in the background for further investigation. The Aadhaar Act bars authorities from getting access to details such as address or mobile unless allowed by law.
What are Small Cap Funds?
What are small cap funds?
Small cap equity funds are those which invest in shares of companies which have smaller capitalization and invest in the 251st company onwards in terms of full market capitalization. In such a fund, the fund manager needs to have a minimum exposure of 65% to such companies. The balance 35% can be in mid, large or small cap companies depending on the view the fund manager has on the market.
Why are small cap funds getting popular amongst investors?
Many wealth managers believe small cap space is where a fund manager will be able to generate higher alpha in the years to come. This is post the SEBI norms on categorization of mutual funds. While only 100 stocks available in large-caps, 150 stocks are available in mid-caps and over 2,000 stocks available in small-caps. As many as 30-40 analysts cover a large cap stock, in the BSE Small cap index there is a dearth of analyst coverage. Many stocks are not covered by any analyst leaving a lot of scope for fund managers to generate alpha.
Since the small-cap universe is large, fund managers may incrementally look forward to invest in this space. Small-caps are relatively under researched leaving scope for fund managers to generate alpha.
Are small cap funds meant for every investor?
Small cap funds carry higher market risk when compared to other categories like large or mid cap funds. Investors with the ability to digest higher risk and having a longer time frame of 7-10 years, could look at investing here. Wealth managers suggest investors must have a small composition allocated in his/her portfolio towards small-cap funds. One of the best ways of investing in this segment of the market to reduce risk could be using systematic investment plan (SIP) as that would stagger your investments over a period of time. Small-cap Equity Funds can be ideal for investors who may have long-term goals like planning for your children’s education, saving for your retirement, Historically, these funds have delivered higher returns as compared to the benchmark.
Many small cap funds allow only SIPs and do not permit lumpsums?
All small cap funds do not permit lumpsum investment. Depending on the fund manager view on the market and the assets he can manage, once the fund reaches an particular size, the fund manager may close it temporarily for high ticket lumpsum investments and allow only SIPs.
Small cap equity funds are those which invest in shares of companies which have smaller capitalization and invest in the 251st company onwards in terms of full market capitalization. In such a fund, the fund manager needs to have a minimum exposure of 65% to such companies. The balance 35% can be in mid, large or small cap companies depending on the view the fund manager has on the market.
Why are small cap funds getting popular amongst investors?
Many wealth managers believe small cap space is where a fund manager will be able to generate higher alpha in the years to come. This is post the SEBI norms on categorization of mutual funds. While only 100 stocks available in large-caps, 150 stocks are available in mid-caps and over 2,000 stocks available in small-caps. As many as 30-40 analysts cover a large cap stock, in the BSE Small cap index there is a dearth of analyst coverage. Many stocks are not covered by any analyst leaving a lot of scope for fund managers to generate alpha.
Since the small-cap universe is large, fund managers may incrementally look forward to invest in this space. Small-caps are relatively under researched leaving scope for fund managers to generate alpha.
Are small cap funds meant for every investor?
Small cap funds carry higher market risk when compared to other categories like large or mid cap funds. Investors with the ability to digest higher risk and having a longer time frame of 7-10 years, could look at investing here. Wealth managers suggest investors must have a small composition allocated in his/her portfolio towards small-cap funds. One of the best ways of investing in this segment of the market to reduce risk could be using systematic investment plan (SIP) as that would stagger your investments over a period of time. Small-cap Equity Funds can be ideal for investors who may have long-term goals like planning for your children’s education, saving for your retirement, Historically, these funds have delivered higher returns as compared to the benchmark.
Many small cap funds allow only SIPs and do not permit lumpsums?
All small cap funds do not permit lumpsum investment. Depending on the fund manager view on the market and the assets he can manage, once the fund reaches an particular size, the fund manager may close it temporarily for high ticket lumpsum investments and allow only SIPs.
The PET in Pepsico
Beverage companies are worried about a possible ban on single-use plastic that could be imposed in a matter of weeks and are seeking clarity on whether this will have any impact on the polyethylene terephthalate (PET) bottles that they use. Prime Minister Narendra Modi, who is leading efforts to scrap such plastics by 2022, is expected to announce the launch of a campaign on October 2, three officials said. In his Independence Day speech on August 15, Modi had urged Indians and government agencies to “take the first big step” on Gandhi Jayanti toward eliminating single-use plastic.
Bisleri International chairman Ramesh Chauhan said existing laws only allow the use of PET and glass for packaging water.
“Almost all PET is recycled in India, so where is the problem? Instead, the authorities need to step up incentives for recycling,” Chauhan said. Bisleri International, the country’s largest packaged water maker, uses only PET bottles. “Where are the laws that we look for a substitute for PET bottles?”
For soft-drink makers Coca-Cola and PepsiCo, fast-moving pack sizes such as 250 ml, 400 ml and 600 ml PET bottles constitute about 50% of annual sales. “There is a lot of confusion about what is single-use plastic and clarity is required on the matter urgently,” said a top beverage industry executive, asking not to be named.
Pressure is mounting globally on the beverage industry to reduce its use of plastic. Coca-Cola said last month that it will sell Dasani water in aluminium cans in the US instead of plastic bottles, months after rival PepsiCo said it will do the same for its Aquafina water. Coca-Cola had also said it will experiment with hybrid bottles, or those made with a blend of recycled plastic and plant-based materials.
Coca-Cola and PepsiCo India officials said they recycle all their PET bottles and are leveraging technology to minimise the use of plastic.
“All our primary packaging is completely recyclable and does not consist of single use plastic,” said Coca-Cola India vice president for public affairs and communications Ishteyaque Amjad. “We are working on redesigning and lightweight packaging or reducing the quantum of plastic used in every pack.”
Beverage makers and industry representatives have come together to make representations to the government on PET and single-use plastic.
“Switching to glass or cans entirely is not an option because both involve higher costs, which could lead to hurting profitability in a scenario where consumption is already under pressure,” an executive said.
Airlines, hotels and other companies have begun moving to reduce the use of single-use plastic following Prime Minister Modi’s Independence Day speech. State-run Air India has said it will stop single-use plastic on most of its flights and replace single-serve 200 ml water bottles with larger 1,500 ml ones on all flights. Delhi International Airport Ltd has said it’s working on a single-use plastic free airport by the end of this year, including water, juice and soft drink bottles. The Airports Authority of India (AAI) has said that 55 Indian airports are single-use plastic free now.
“PET is not a single-use plastic, it has economic value and is extensively recyclable. Besides, size does not hamper recyclability,” said Vijay Habbu, technical advisor to PET industry associations such as the Packaging Association for Clean Environment (PACE).
The government is working on a national blueprint to eliminate the use of plastic bags, small bottles and straws, which is over and above the ban on single-use plastic such as polythene bags in states such as Tamil Nadu, Maharashtra and Himachal Pradesh, said one of the executives cited above. He added that the expected ban may specify penalties for violations.
A PepsiCo spokesperson said the company is aiming make its packaging 100% recyclable, compostable or biodegradable by 2025. “We are working on designing packaging to reduce the use of plastic across packaging, and makes our packs lighter in beverage PET bottles so as to use less plastic,” he said.
According to a Central Pollution Control Board (CPCB) estimate, India generates about 25,940 tonnes of plastic every year and 40% of plastic waste still goes to landfills. It added that 10,000 tonnes of plastic waste remains uncollected on a daily basis.
Bisleri International chairman Ramesh Chauhan said existing laws only allow the use of PET and glass for packaging water.
“Almost all PET is recycled in India, so where is the problem? Instead, the authorities need to step up incentives for recycling,” Chauhan said. Bisleri International, the country’s largest packaged water maker, uses only PET bottles. “Where are the laws that we look for a substitute for PET bottles?”
For soft-drink makers Coca-Cola and PepsiCo, fast-moving pack sizes such as 250 ml, 400 ml and 600 ml PET bottles constitute about 50% of annual sales. “There is a lot of confusion about what is single-use plastic and clarity is required on the matter urgently,” said a top beverage industry executive, asking not to be named.
Pressure is mounting globally on the beverage industry to reduce its use of plastic. Coca-Cola said last month that it will sell Dasani water in aluminium cans in the US instead of plastic bottles, months after rival PepsiCo said it will do the same for its Aquafina water. Coca-Cola had also said it will experiment with hybrid bottles, or those made with a blend of recycled plastic and plant-based materials.
Coca-Cola and PepsiCo India officials said they recycle all their PET bottles and are leveraging technology to minimise the use of plastic.
“All our primary packaging is completely recyclable and does not consist of single use plastic,” said Coca-Cola India vice president for public affairs and communications Ishteyaque Amjad. “We are working on redesigning and lightweight packaging or reducing the quantum of plastic used in every pack.”
Beverage makers and industry representatives have come together to make representations to the government on PET and single-use plastic.
“Switching to glass or cans entirely is not an option because both involve higher costs, which could lead to hurting profitability in a scenario where consumption is already under pressure,” an executive said.
Airlines, hotels and other companies have begun moving to reduce the use of single-use plastic following Prime Minister Modi’s Independence Day speech. State-run Air India has said it will stop single-use plastic on most of its flights and replace single-serve 200 ml water bottles with larger 1,500 ml ones on all flights. Delhi International Airport Ltd has said it’s working on a single-use plastic free airport by the end of this year, including water, juice and soft drink bottles. The Airports Authority of India (AAI) has said that 55 Indian airports are single-use plastic free now.
“PET is not a single-use plastic, it has economic value and is extensively recyclable. Besides, size does not hamper recyclability,” said Vijay Habbu, technical advisor to PET industry associations such as the Packaging Association for Clean Environment (PACE).
The government is working on a national blueprint to eliminate the use of plastic bags, small bottles and straws, which is over and above the ban on single-use plastic such as polythene bags in states such as Tamil Nadu, Maharashtra and Himachal Pradesh, said one of the executives cited above. He added that the expected ban may specify penalties for violations.
A PepsiCo spokesperson said the company is aiming make its packaging 100% recyclable, compostable or biodegradable by 2025. “We are working on designing packaging to reduce the use of plastic across packaging, and makes our packs lighter in beverage PET bottles so as to use less plastic,” he said.
According to a Central Pollution Control Board (CPCB) estimate, India generates about 25,940 tonnes of plastic every year and 40% of plastic waste still goes to landfills. It added that 10,000 tonnes of plastic waste remains uncollected on a daily basis.
ATM Hacks
While the dark web had earlier allowed anyone to learn the tricks to hack an ATM machine, cybersecurity startup CloudSek has now found out that individuals on the dark web also sell latest devices like malware cards, USB ATM Malware to hack these machines. Through these devices, an ATM machine can be hacked in 15-20 minutes by any amateur from any remote location. These transactions which happen in cryptocurrencies, start from the range of $50.
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