Current Affairs Current Affairs - 27 March 2016 - Vikalp Education

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Current Affairs - 27 March 2016

General Affairs 

Ayurveda Is India's Gift To World: Union Minister Shripad Naik
  • Ayurveda Is India's Gift To World: Union Minister Shripad NaikPANAJI:  Ayurveda is India's gift to the world and it should be promoted across the globe, Union minister Shripad Naik said on Saturday while inaugurating the Arogya Fair.

    The four-day event is being organised by the Ministry of AYUSH (Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy) in association with the Goa government and the Confederation of Indian Industry (CII) at Goa University Campus at Bambolim near Panaji.

    "Ayurveda is India's gift to the globe. We have entered into an agreement with World Health Organization to popularise this traditional system of medicine across the world," Mr Naik said in his inaugural address.

    "We have also signed a Memorandum of Understanding with US for a joint research under AYUSH in the field of cancer," he added.

    The minister said that the central government is contemplating to open one AYUSH hospital in every district of the country.

    On the occasion, Mr Naik also released the yoga protocol for the second International Yoga Day falling on June 21 this year.

    The fair aims to create awareness among the members of the public about the efficiency of the AYUSH systems, their cost-effectiveness and the availability of herbs and plants used for prevention and treatment of common ailments, according to officials.

Pakistani Investigators Can Question Pathankot Attack Witnesses: Sources
  • Pakistani Investigators Can Question Pathankot Attack Witnesses: SourcesNEW DELHI:  For the first time ever Pakistani investigators will be allowed to question witnesses, though not security personnel, sources have said. A joint investigative team from Pakistan comprising representatives from the powerful Inter Service Intelligence or ISI, Military Intelligence and Police will arrive in Delhi tomorrow

    "The Pakistan team can question witnesses, but not personnel from the NSG, Garud or BSF," sources said. The elite commando units - National Security Guard or NSG and the Airforce commando unit Garud - along with the Border Security Force or BSF, that mans the India-Pakistan border in Punjab, were involved in the operation to eliminate terrorists who struck at the Pathankot air base on January 2.

    Sources said the area of attack has been barricaded to prevent any view of the technical area where military assets are located and other sensitive areas. The team from Pakistan - formed on instructions of Pakistan Prime Minister Nawaz Sharif - will be allowed limited access to the site of the terror strike. Six Pakistani terrorists who had crossed over into Punjab were killed in the attack. The National Investigation Agency says it has established the identities of those six but also those who regulated their actions from Pakistani soil.

    Sources said the NIA will share those details with the Pakistani team in their meeting on Monday. When the Pakistani investigators visit Pathankot on Tuesday they will also be taken to visit the point of breach on the Indo-Pak border in the Pathankot sector.

    India is allowing this degree of access to Pakistani investigators for the first time hoping Pakistan will reciprocate the gesture.  It is in the "spirit of goodwill and cooperation" that the access is being extended, sources said. At a later date, India may ask Pakistan to permit a team of Indian investigators to visit Pakistan.

    India will also ask Pakistan to share the details of the investigations so far in Pakistan. "Much of the evidence lies in Pakistan, till now we have no details, we hope Pakistan will also be sharing details of their investigations with us," top sources told .

Poor Are Still Unable To Get Quality Health Services: Venkaiah Naidu
  • Poor Are Still Unable To Get Quality Health Services: Venkaiah NaiduVIJAYAWADA:  The poor are deprived of quality medical services despite the Centre allocating 4 per cent of the GDP towards the health sector in the country which faces a "deficit" of 4 lakh medical professionals, Union Minister M Venkaiah Naidu said today.

    "Though the Union Government allocated funds to the extent of 4 per cent of the GDP towards health services, the poor are still unable to get quality health services," he said.

    In view of this, he said, the Government will consider to allocate more funds for health services in the future.

    The country faces a huge deficit of 4 lakh medical professionals, the Urban Development Minister said while inaugurating a health camp organised by Swarna Bharat Trust at Atkur village near Vijayawada.

    The Trust is run by Deepa Venkat, Mr Naidu's daughter.

    "We have just one medical professional (doctor) per 1,700 people as against a minimum ratio of 1:1,000 (stipulated  by WHO)," the Minister said.

    The NDA Government will launch a new health insurance policy for the poor on April 1 for which a sum of Rs. 1,500 crore has been allocated in the 2016-17 Budget, he said.

Avalanche Warning Issued For Jammu And Kashmir For Next 48 Hours
  • Avalanche Warning Issued For Jammu And Kashmir For Next 48 HoursCHANDIGARH:  An avalanche warning has been issued today for higher areas of Jammu and Kashmir, advising people not to venture in to these areas over the next 48 hours.

    An advisory was issued by Chandigarh-based Snow and Avalanche Study Establishment (SASE), which comes under the Ministry of Defence.

    'Medium danger' avalanche warning exists for avalanche prone areas above 3,000 metres in Kupwara, Baramula, Bandipur, Kargil and Gandarbal districts of Jammu and Kashmir, the advisory said.

    Pharkian, Z-Gali, Kanzalwan and Neelam areas of Jammu and Kashmir received fresh snowfall of 37 cm, 23 cm, 4 cm and 5 cm, respectively while Banihal Top and Gulmarg received rainfall of 17 mm and 36 mm during last 24 hours.

    In Himachal Pradesh, Dhundi, Bahang and Solang Nala witnessed rainfall of 8 mm, 1.8 mm, and 11 mm, respectively, it said.

Mehbooba Mufti, BJP Stake Claim To Form Government In Jammu And Kashmir
  • Mehbooba Mufti, BJP Stake Claim To Form Government In Jammu And KashmirShrinagar:  The PDP and the BJP today called on Jammu and Kashmir Governor NN Vohra and staked claim to form the new government under Mehbooba Mufti. The date for the swearing in has not been decided yet, sources said.

    Ms Mufti, who will be the first woman Chief Minister of the state, said, "Jammu and Kashmir is not like any other state, it has social, political and economic needs. The PM has reassured us, I am very satisfied with it."

    It was Ms Mufti's meeting with Prime Minister Narendra Modi on Wednesday that broke the deadlock that had persisted for well over two months.

    Two days ago, the PDP legislature party had elected her its leader and named her the party chief ministerial candidate. BJP legislators in Jammu yesterday elected Nirmal Singh as its leader. He will again be the Deputy Chief Minister in the new cabinet, a post he had under Mufti Mohammed Sayeed who died in January.

    At the meeting, the BJP had announced its backing for a PDP-BJP government led by Ms Mufti. Mr Singh handed over the letter of BJP's support to Governor Vohra today.

    The state has been under Governor's Rule since early January after the death of former chief minister Mufti Mohammed Sayeed.

    The PDP chief had refused to succeed her father as the chief minister, demanding that the BJP honour the conditions laid down in the Agenda of Alliance, a blueprint crafted when the two parties decided on co-governing the state.

Business Affairs 

Efforts to track down tax evaders bear fruit as the government adds 40 lakh new taxpayers
  • Tax Noose TightensRecently, the government announced that it managed to add 40 lakh new taxpayers in the current financial year - the result of the tax department adopting different ways of tracking people who have taxable incomes, but do not pay taxes or file returns. Experts say that the government cannot expect to increase tax base by relying only on voluntary compliance. It also needs to devise 'creative' ways to track down tax evaders.
    The government, it seems, is on the job. According to the tax department, most new taxpayers have been added by tracking prospects through Permanent Account Number (PAN) and other presumptive measures.
    Atulesh Jindal, Chairman of Central Board of Direct Taxes, recently told the media that the addition of taxpayers has happened through two major initiatives undertaken by the tax department over the past year - the Non-Filers Management System (NMS) and a special drive to add one crore new assessees in the current financial year.
    Under NMS, data available through sources like Annual Information Return (AIR), Tax Deducted at Source (TDS) statements, etc, are analysed, and based on this analysis, people with likely taxable incomes who do not file returns are identified. Under AIR, high-value transactions like cash deposits worth Rs 10 lakh or more in a year, in any savings account, credit card spends of Rs 2 lakh a year or annual mutual fund investment of Rs 2 lakh or more are tracked through banks, mutual fund houses, etc. Those involved in such transactions, if found to have not filed income tax returns, are asked by the department to file them even if they do not owe tax to the department.
    Ajit Ranade, Chief Economist, Aditya Birla Group, says that the government has to keep coming out with innovative methods to widen the tax net, given that only 3.5 per cent of the Indian population are taxpayers as compared to 8 per cent in China. He says that besides tracking high-value transactions and presumptive taxation methods, the government should encourage electronic payments, which are easier to track.
    Other efforts such as exchanging information with countries where Indian residents have undisclosed assets may also help the government bring more people into the tax net. However, over the long term, the government must ensure that it makes tax rules and administration simpler, so that compliances of tax laws also increase. The government intends to do so.
    In this year's Budget, the government extended the presumptive taxation scheme to professionals - lawyers, doctors, engineers, architects, CAs, interior decorators, etc, with annual incomes of up to Rs 50 lakh. Under this scheme, 50 per cent of the income would be treated as profit and taxed at 8 per cent. Those opting for the scheme are not required to maintain books of accounts and get the accounts audited. 

    The new oil policy looks promising. But the question is: will investors bite?
    • In far-reaching changes to its policy for oil & gas exploration, India has, to a large extent, freed up the price of gas from both new blocks and discoveries from where production is yet to start. Also, to reduce disputes, it has changed the way it will collect revenue from oil producers by moving from profit to revenue sharing. The icing on the cake is its commitment to faster decision-making and minimum intervention in day-to-day operations of the blocks.
      While the decisions may not increase investor interest in oil exploration, pricing freedom has the potential to significantly boost gas exploration. The changes have been wrought under the Hydrocarbon Exploration License Policy, or HELP, that replaces the New Exploration Licensing Policy, or NELP, introduced two decades ago.
      Experts say giving explorers freedom to price gas gives India a chance to exploit the current low global prices of services for exploring 28 basins with 260 trillion cubic feet (tcf) recoverable shale gas, 20 tcf natural gas, and other resources. Oil, though, is a different story, as India was never a lucrative market for oil explorers. Vandana Hari, Editorial Director, Asia Pacific chapter of Platts, says while the global majors are looking for ways to survive due to pricing pressures, India can use the time to make the life of domestic players easier.
      These changes have not come a day too soon. NELP, in spite of several avatars, has been a failure in attracting investor interest, due to which India has to depend on imports to meet close to 80 per cent of its fuel requirement. Out of the 254 blocks offered under NELP, only 84 are active. The biggest complaint against the government is interference in exploration, marketing as well as pricing. In December 2013, and then in October 2014, it tried to fix the formula for gas pricing by taking the weighted average of prices at various global gas hubs. But this policy, too, was criticised on the grounds that gas consumption is local and so linking prices to global benchmarks is not fair. The allocation of gas to various industries also remained the government's prerogative.
      The new policy aims to change all this. It, for one, allows operators to fix prices, subject to a cap, which will be the least of the following - import price of gas, weighted average prices of alternative fuel and import price of fuel oil. But the best aspect of the policy, say experts, is non-interference in day-to-day functioning of the blocks and freedom to companies to plan exploration. Also, the government will take its share from revenues and not profits. This replaces the current system under which producers first recover most of their costs before sharing revenue with the government. This encourages companies to frontload spending so that they can delay payments to the government.
      However, before investors bite the bait, there are a few more things that oil minister Dharmendra Pradhan must do. First, he must make the Directorate General of Hydrocarbons, or DGH, an independent regulator. Right now, it is a technical arm of the ministry. A good regulator will give confidence to investors. Also crucial is the national data repository, an IT-enabled database of oil and gas blocks, for which trials will start from the first week of April. This is critical if the government wants the companies to choose own blocks. R.S. Sharma, former CMD of ONGC, says the reforms must be fast-tracked.
      The government may start with auction of 69 marginal fields with proven reserves of 89 million tonnes oil equivalent in the first quarter of 2016/17. The policy document for this is already out.
      Impact on Companies
      The new policy means ONGC, RIL and GSPC can immediately put life in 10 of their blocks that are ready for production and can contribute 6.75 tcf gas and equivalent reserves. They can easily produce an additional 35 mmscm gas a day. India is currently producing 90 mmscm gas daily, 8 per cent of the country's total energy consumption. Globally, gas accounts for 24 per cent energy consumption.
      However, Reliance Industries (RIL) and Vendanta Resources might have to wait to gain from the changes. RIL is ready with eight discoveries in two blocks but the Cabinet Committee on Economic Affairs says the new price will apply only if RIL withdraws the arbitration proceedings it has initiated for delay in revision of gas prices. RIL is also contesting disallowance of $2.3-billion cost by the government due to failure to meet output targets for the KG D6 field. RIL has also challenged the petroleum ministry's decision to take away 814 sq. km of the block's area that had five gas discoveries.
      RIL's four satellite gas discoveries, D-2, 6, 19 and 22, as well as R-Series gas finds in the KG D6 block, are ready for commercial production. The new reforms will also apply to the 1.4-tcf MJ-1 discovery. Senior officials of RIL and its partner BP Plc told BT they are contemplating all options and a resolution is possible soon. They said the recent decisions of the government provide clarity for ending the pending gas pricing dispute.
      "We haven't asked RIL to withdraw all arbitration proceedings, but they will have to decide on the one about pricing," says a senior official in the oil ministry.
      But one man who is in a hurry is ONGC CMD Dinesh K. Sarraf. ONGC is keen to exploit 14 discoveries with 3.2 tcf gas. Sarraf has already deployed staff to finalise the development plan for its prized deep water asset, KG-DWN-98/2 block, in the KG basin. The plan is to produce 17.5 million cubic metres gas and 75,000 barrels oil a day. Sarraf's excitement is understandable as ONGC's oil margins are shrinking due to the global glut. The new gas will give his company big relief. Other than this, GSPC's six discoveries will also become more profitable.
      Meanwhile, all pre-NELP contracts have been extended, except for Cairn India's Barmer block. The government is pushing Cairn for a higher profit share. Cairn's other gas field, Ravva, though, has got the extension.
      Whether the latest changes can breathe life into India's camatose oil & gas sector, only time will tell.

      Microsoft meets with private equity over Yahoo deal
      • Microsoft Corp executives are in early talks with potential Yahoo Inc investors about contributing to financing to buy the troubled Internet company, a person familiar with the situation said.
        The talks are preliminary, the person added, and Microsoft is focused on preserving the relationship between the two companies. Microsoft and Yahoo have longstanding search and advertising agreements.

        Private equity firms interested in Yahoo approached Microsoft, the person added. Microsoft declined to comment.
        Yahoo is auctioning its core Internet business, which includes search, mail and news sites. The faded Internet pioneer has been struggling to keep up with Alphabet Inc's Google and Facebook Inc in the battle for online advertisers.
        Verizon's Chief Financial Officer Fran Shammo said in December that the US wireless carrier could look at buying Yahoo's core business if it was a good fit.
        Activist hedge fund Starboard Value LP moved on Thursday to overthrow the entire board of Yahoo, including Chief Executive Marissa Mayer, who has struggled to turn the company around in her nearly four years at the helm.
        Microsoft's interest in Yahoo comes nearly a decade after another approach. In 2008, then-CEO Steve Ballmer tried unsuccessfully to buy Yahoo for about $45 billion.
        Website Re/code previously reported meetings between Microsoft and investors.

      OVL gets Russian govt nod for $1.268 bn Vankor deal
      • Russian government has approved ONGC Videsh Ltd's deal to buy 15 per cent in the country's second biggest oil field of Vankor from Rosneft for $1.268 billion.
        OVL, the overseas arm of the state explorer Oil and Natural Gas Corp (ONGC), had in September last year signed an agreement to buy 15 per cent stake in Vankorneft, the developer of the Vankor oil and gas condensate field in Turukhansky district of Krasnoyak Territory in Russia.
        "We have received approval of the Federal Antimonopoly Service (FAS) for the deal," OVL Managing Director Narendra K Verma said.
        With this, all approvals for the deal are in place and Rosneft now has to restructure Vankorneft by giving OVL board positions and carving out the Vankor fields into a separate company, all of which is expected to be completed by June.
        This month, OVL signed an initial agreement to raise its stake in Vankor to 26 per cent from 15 per cent, while three other state companies-Indian Oil Corp (IOC), Oil India Ltd (OIL) and Bharat Petroleum Corp Ltd (BPCL) would together pick up 23.9 per cent.
        "We are not very clear if the additional stake would also need FAS approval," he said adding the price for the additional stake is yet to be finalised.
        Vankor is OVL's fourth biggest acquisition ever.
        Vankorneft, a subsidiary of Rosneft, was founded in 2004 to carry out the project of the Vankor field development, the largest field to have been discovered and brought into production in Russia in the last 25 years.
        It is located in the northern part of Eastern Siberia, in Turukhansky District of Krasnoyarsk Territory, 142 km from Igarka.
        As of January 1, 2015, the initial recoverable reserves in the Vankor field are estimated at 476 million tonnes of oil and condensate, and 173 billion cubic meters of gas. The area of the Vankor field is 447 square kilometers. Oil and gas condensate production in 2015 was 22 million tons.
        The 15 per cent stake will give OVL 3.3 million tonnes per annum of oil production.
        Prior to the deal, Rosneft, Russia's national oil company, held 100 per cent stake in Vankorneft.
        This will be the fourth biggest acquisition by OVL. It had in 2013 paid $4.125 billion for a 16 per cent stake in Mozambique's offshore Rovuma Area 1, which holds as much as 75 Trillion cubic feet of gas reserves.
        In 2009, it had bought Russia-focused Imperial Energy for $2.1 billion. Prior to that, it had in 2001 paid $1.7 billion for a 20 per cent interest in the Sakhalin-1 oil and gas field off Russia's far eastern coast.
        Vankor is Rosneft's (and Russia's) second largest field by production and accounts for 4 per cent of Russian production.
        The daily production from the field is around 442,000 barrels per day of crude oil on an average with OVL's share of daily oil production at about 66,000.
        Upon completion of the deal, OVL will have two seats on the board of Vankorneft, Rosneft said.

        Re-imagining Infosys
        • If you have been to the Bangalore-based Electronics City headquarters of Infosys over years, there's something reflective about this visit. The corner room from where you half expect founder and former chairman N.R. Narayana Murthy to walk out, is now occupied by the company's first non-founder CEO, 48-year old Vishal Sikka. Nandan Nilekani's - and later Kris Gopalakrishnan and S.D. Shibulal's - room next door now has the Buddhaesque calmness of COO U.V. Pravin Rao.
          Neither the interiors nor the rust-coloured upholstery in these haloed corridors has changed in more than a decade, but the $8.7 billion Infosys is being forced to change - rather RAPIDLY. First, by the widespread disruption of the IT services model by digital, cloud and Internet of Things that is debilitating Indian majors; and second, by the burly CEO & MD of 19 months, Vishal Sikka himself.
          Splitting his time between San Francisco (where he continues to live), Bangalore and the rest of the world, Sikka has given Infosys a new 2020 goal and introduced fundamental changes to the company's structure, its work culture and its performance. Freshly promoted executive vice presidents have infused a new sense of urgency and informality. For a change, you can wear jeans on the campus, though only on Fridays. For the first time in five years, Infosys may have a realistic shot at regaining its bellwether status in the Indian IT services industry. And the stock market values Infosys 46 per cent higher than it did on the day Sikka's appointment was announced.

          Shaking Up Infosys
          One of Sikka's earliest moves was to overhaul the organisational structure. Instead of the industry-oriented SBU structure (where verticals are independently responsible for sales and delivery) that the Indian IT services industry now swears by, he consolidated delivery for greater economies of scale and then federated it to industry verticals. In a way, Infosys reverted to the age-old model that the industry followed up until five-seven years ago (the jury's still out on this move).
          Then, he gave Infosys a purpose-a 2020 goal to achieve $20 billion ($8.7 billion currently) in revenue at 30 per cent net margin (23 per cent) and revenue per employee of $80,000 ($49,000). To achieve that, he showed them direction: automate and make software do what humans did before; embrace Design Thinking to find solutions to clients' ticklish problems; build artificial intelligence tools for revenue productivity; understand and work closely with clients so as to maintain 'zero distance'; and, among others, an unheard of concept of 'zero bench' by deploying the bench on short or internal projects for productive utilisation of employee skills.

          The skills that he thought Infosys lacked were plugged by a spate of four specialist investments/acquisitions totaling $392 million since August 2014. "There was no Infosys story till about a year and a half back. At an extreme, you can say it's a marketing gimmick, but Sikka has given Infosys a story to take to the market," says Pankaj Kapoor, Director, JM Financial Institutional Equities.
          The Booster Dose
          The results have been instantaneous. In the past few quarters, while industry leader TCS's quarterly YoY revenue growth has slowed from 11 per cent in March, 2015 to 5.5 per cent in December, 2015, Infosys's has shot up from 3.2 to 8.5 per cent, next only to Cognizant's 20-odd.
          In the N.R. Narayana Murthy era, and thereafter, Infosys developed a reputation for being stubborn on pricing and margins. Not any more. Rivals now bitterly complain that Infosys is aggressively undercutting. (Photo: Vivan Mehra)
          Analysts, however, don't believe all of this is Sikka's doing. Some point to the uncanny similarities between Sikka's moves and the 'Infosys 3.0' strategy articulated by predecessor S.D. Shibulal who ran Infosys as CEO between May 2011 and July 2014. But given the pace of digital disruption during his tenure, Shibulal may have been the right man in the right place at the wrong time. Infosys 3.0 focused on emerging technologies such as software products and platforms, cloud computing and mobility to garner one-third of Infosys revenues in three to five years but failed in its objectives.
          Some of the improvement may have been due to the initiatives taken under Mr Murthy's management, says Pankaj Kapoor of JM Financial Institutional Equities.
          "Over six-eight quarters, you would notice that the improvement is almost immediately after Vishal Sikka took over. Obviously, you can't conclude that he was the cause of that because he was barely there for a few months," says the director of a Mumbai-based equity research firm. "There was a momentum anyway in Infosys's favour for whatever reason?for something the previous management did or the environment was changing or some client dynamics changed," he adds.

          What nobody disputes, though, is that Sikka has put his stamp on Infosys. Infosys had three main issues before Vishal Sikka. First, it had lost the sales focus after it lost a few key people; two, it was in a vicious cycle with deteriorating employee morale; three, it became too conservative and worked as if technology hadn't changed. "Vishal has achieved some progress, more on one and two. Three is debatable. He has changed the thinking internally, but taken it to the other extreme," says the director of an euity research firm. "His view is that technology, artificial intelligence and automation can solve all problems, which I am a bit sceptical about but the jury is out on that."
          According to Arvind Ramnani, Managing Director at US-based Gordon Haskett Research Advisors, who spoke with several current and former executives of Infosys: "(It) has newfound respect in the market. Before Sikka came in, there was a lot of confusion. Infosys had lost its direction. Now, everyone is clear where the company is headed. Some don't necessarily like (it), they've had differences and there have been exits."

          Even before Sikka joined, 13 from senior management had quit. Since he joined, some five vice presidents and above have quit. They have been replaced by 18 executives from SAP, the previous employer with whom Sikka built his reputation as a can-do executive by building SAP HANA, a real-time analytics platform. Such inflow of SAP executives has observers alleging a 'clanish' style. "There could be friction. After exits, a lot of people got elevated to the EVP roles. Their elevation has been accelerated and they may not have the experience. These are some of the flashpoints," says an analyst. Mohandas Pai, an Infosys veteran of 17 years and its former CFO says, "A lot of good people have left. He has to carry the whole team together."
          The Statis Years
          R. Seshasayee, Chairman, Infosys

          Where Infosys stands today is a far cry from its golden era when it was the industry bellwether with a spunky growth and a fat margin. Just a decade ago, in 2006/07, Infosys's topline was growing at an industry leading 45.9 per cent against Wipro's 41.7 and TCS's 40.9 (see graphic on page 54). In 2014/15, it was a laggard at 6.4, 8.1 and 15.7 per cent respectively. In 2006/07, its net profit was growing at an unbelievable 55.7 per cent versus just 16 per cent last fiscal (see graphic given above).
          But sometime after the US-led economic meltdown of 2008, in the last two years of Kris Gopalakrishnan's tenure as CEO, Infosys's growth plummeted from 30 per cent in 2008/09 to 4.8 per cent in 2009/10. TCS too dropped from 23 to 8 per cent but recovered to 24 per cent the following year. Infosys could only get back to 20 per cent.
          The IT industry was faced with the precarious transition to digital, automation, cloud, analytics, social media, IoT and robotics. Its sweeping changes caught every Indian IT services firm off-guard.

          During S.D. Shibulal's tenure as CEO (2011-14), the role of IT services firms had pivoted from cost saving to revenue driver. The Indian model of labour cost arbitrage went through a nightmarish price erosion. Particularly, the legacy business of software implementation as businesses moved from the premises model to the cloud. Infosys and all its peers faced an existential dilemma. "Most Indian IT majors had modest penetration of tech in their own organisations, even if they were handling technology for global majors," says Abhishek Shindadkar, IT Analyst, ICICI Securities.
          "Indian IT services firms are bottom (of the market) leaders. It's very difficult for companies at the bottom to change track. One is a body shop, one is a very low-cost player, another hasn't been able to make any major change to its business model," says Mohandas Pai, former CFO and board member of Infosys.

          Recollecting his first brush with Infosys executives in the midst of this disintermediation, Sikka says, "I noticed both in Infosys and in the industry the lack of confidence. Primary feedback from clients used to be that (Infosys was not) being pro-active, innovative, coming up with own ideas".
          Infosys was suddenly on the wrong side of history. By 2014, it was growing at barely one-seventh its peak rate of the past decade; profits at less than half. Between October 2014 and September 2015, TCS and Cognizant added $1.5 billion and $2 billion to topline, more than twice that added by Infosys and Wipro. In the past 12 months, Cognizant has overtaken both Infosys and Wipro in quarterly revenue. Its annual revenue is $3 billion more than Infosys's. Perhaps, this stasis was self-inflicted. "The board is to be blamed for prolonging the CEO merry-go-round. The joint CEO strategy also failed - as it did in the case of Wipro," says an IT analyst who didn't want to be named.
          The Infosys Moonshot
          Sikka is hungry. Very hungry. Events during the week-long stopover at Bangalore are running late as he arrives an hour behind schedule for our lunch meeting in his trademark round neck T-shirt. "I eat local cuisine wherever I am," says Sikka, as he digs into chicken, rice and dal while laying down his strategy.
          In the midst of gloom and doom, he needed to focus the organisation towards a goal. So he came up with the target to achieve $20 billion ($8.7 billion in 2014/15) in revenue by 2020 at $80,000 per employee and a net margin of 30 per cent (by all accounts more than half of IT firms in India have net margins of less than 5 per cent). "It's very challenging to increase all these three components simultaneously: a) revenue growth rates; b) margins, and c) utilisation," says Ramnani. "There is an assumption of 50 per cent revenue productivity. It is unclear how Infosys can see such a significant lift." Infosys's revenue per employee stood at Rs 49,442 at the end of 2014/15. In comparison, TCS was at Rs 48,346, Cognizant at Rs 56,094 and Wipro at Rs 47,631.

          A former Infosys board member believes it's an impossible task. However, Infosys chairman R.Seshasayee is convinced these are achievable targets. "If you look at the history of this company and the CAGR that has been achieved till 2010, and relay that to the target CAGR, it is well within reach," says Seshasayee.
          On his part, Sikka says he's not married to the targets. "I'll be delighted if we achieve those. But I will be happy if we get close to those." Pravin Rao says, "$20 billion is most critical, but if it's Rs 60-65,000 per employee revenue we are happy." Surely, it's not headed that way. Quarterly revenue per employee has fallen from $13,306 in his first quarter as CEO to $12,446 today. Over a 10-year period, the IT services industry's revenue per employee has fallen 10 per cent (largely because the revenue mix has shifted from onsite to offshore).
          Seshasayee outlines the three goals set by Sikka and the board: to get back to industry-leading growth; to recalibrate the pace of growth to be able to achieve that; and, to ensure that such growth is sustainable on a long-term basis. "30 per cent net margin is an aspirational target. You have to give something internally to aspire to," says Kapoor of JM Financial.

          The biggest thrust is on revenue productivity, says Pravin Rao. "If we are able to hit our aspirational $80,000 per employee, the margin will automatically happen. Automation is the biggest lever and we can do it over 2-5 years but if we are able to operate at 85 instead of 82 per cent that itself will improve revenue productivity to $60000. If we do more in consulting and some of the newer technologies...," says Rao.
          Heterogeneity in Homogeneity
          Before you consider this the apotheosis of Vishal Sikka, consider the ground reality. The widespread scepticism around Infosys's targets emanates from the homogeneous narrative running through the industry, including Infosys: automation; artificial intelligence; robotics, IoT, social, cloud or analytics.

          Change the nomenclature here and there, but the overarching narrative isn't vastly different. If Infosys's AI offering is deliberately Japanese-sounding AiKiDo, Wipro has Holmes and TCS has Ignio. If Infosys has an innovation fund to fund start-ups, so do TCS, Cognizant and Wipro in some form or the other. "All IT services companies are trying to do the same thing. If everybody is doing the same thing you (don't have) 30 per cent margins left on the table," says an equity research firms director.
          Nasscom President R Chandrashekhar believes that 80 per cent of industry's growth in the next decade will come from digital. (Photo: A. Prabhakar Rao)
          Conceptually, the Sikka strategy is not vastly different from Shibulal's, though he may have articulated it better. Nor is Infosys aiming to be a software products company. His 'services-only' model is aimed at embracing today's buzzing technologies rapidly, enhancing employee productivity and training employees to innovate harder. And that's worrying analysts who cannot fathom how this model differentiates from peers. "He's provided the market a very ambitious 2020 target but he has not provided the operational roadmap to see the aggressive growth required to realise those targets," says Ramnani. "From the investor perspective it's not a believable number, particularly with the US and Europe investor base. Infosys is unlikely to deliver $20 billion in annual revenue by 2020."
          You could argue that the IT services firms offered little differentiation anyways. But Sikka explains that the narrative is homogeneous because his peer set has begun talking the 'Infy' language. "Before Vishal joined I don't think the IT industry in India was talking about AI, collaboration technologies, the way it's been talked," says Ritika Suri, Global Head of Corporate Development at Infosys.
          Mohandas Pai contends that the real differentiator will be the execution. Seshasayee couldn't agree more: "Everybody will have the same narrative but the quality of execution and the differentiation that you can bring to the table as a result of the capacity you build internally is going to be far more telling to the client."
          That hasn't doused the analyst scepticism. "Almost every company is talking digital but we know digital revenue is only about 6 per cent," says ICICI Securities' Abhishek Shindadkar. So how much of what is being talked about is for effect and how much is reality? "The discussion of artificial intelligence and automation is more for clients than anything for the markets or material impact on commercials," says JM Financials' Kapoor. "These companies are the same about 80-90 per cent. There is no uniqueness," says Kapoor.
          "Though the narrative is the same across companies, probably, the belief in the narrative is a bit higher for Vishal Sikka," says the director of Mumbai equity research firm. He appears to be succeeding where Shibulal didn't because Sikka doesn't have to contend with Murthy's towering presence as 'executive chairman'. He is, perhaps, the first CEO to get a free hand other than Murthy himself. Also, as an outsider he could make drastic changes more dispassionately than an insider.

          Don't forget he's leveraging his experience of products and innovation at SAP where, besides HANA, he was responsible for all of SAP's applications, cloud and technology solutions as the executive member of its board. Sikka also propounded the concept of 'timeless software' (reinventing products without customer disruption).
          Discounting Offerings or Aggressive Pricing?
          But what explains the current round of growth? In the Murthy era, and thereafter, Infosys developed a reputation for being stubborn on pricing and margins (around 30 per cent). Not any more. Rivals now bitterly complain that Infosys is aggressively undercutting. "Infosys has been aggressive on pricing. However, others in the industry (Accenture, Cognizant, TCS) are maintaining price discipline (i.e. not discounting aggressively)," says Ramnani of Gordon Haskett.
          Whether that means Infosys is discounting offerings or resorting to "aggressive pricing" is anybody's guess. But Infosys pricing in Q3 shrank 1.5 per cent. Blended per capita revenue was down 2.5 per cent due to lower price realisation. As a result, the operating margins during the quarter fell from 25.5 per cent in Q2 to 24.9 per cent in Q3. "Margins were impacted due to the seasonality of price realisation that is typical of the third quarter," says Sikka in the Q3 results analyst call.
          T.V.Mohandas Pai, Former CFO, Infosys (Photo: Chandradeep Kumar)

          That suggests it was a quarter-specific phenomenon. But Infosys watchers do not agree. Based on the trend of the past few quarters, analysts believe that Infosys has taken a call to trade margin for growth. "In the last few years we were not aggressive enough on large deals. We were not flexible enough. We took the philosophy to price to win and then figure out how to make the margins we want over three to five years. In the past we were reluctant to do that," says Rao.
          And that is THE biggest change in sales/marketing under Sikka. Perhaps, Sikka realises that he will be measured by the acceleration in revenue and how soon it's back to industry leading status. In the short to near term, though, Infosys will report compression in margins.
          The Growth Drivers
          If discounting is one trigger for growth, yet another trigger is Infosys doing the kind of business it hasn't done before. Recently, it signed a deal for predictive maintenance of turbines for GE. "We could do this because open source technologies have made it possible to do dramatically larger amounts of computing at cheap prices. The unit cost, the per project cost and the software costs have all dropped dramatically but the number of projects in this area is huge," explains Sikka.
          Nasscom President R. Chandrashekhar believes 80 per cent of industry's growth in the next decade will come from digital. "Infosys was a people company. We will evolve into a software-plus-people company," says Ravi Kumar, the Gobal Head of Delivery. "We traded human effort. Now we are trading human effort without humans." Sikka says in the past quarter, Infosys saved 1,000 people worth of work through automation: "We have a simple objective: If a human has done something once, he should not have to do that again."
          Then, there is a renewed focus on large deals. While Infosys's average win rate on large deals over 7-8 quarters was $500 million, in the past two quarters it was $800 million and nearly $1 billion, respectively.
          Most large accounts stagnate because clients adopt a multi-vendor strategy to de-risk. Infosys has begun mining those by adding more sales people. "In zero distance, we come up with 30-40 new ideas. Even if five ideas get monetised, that's incremental revenue," says Rao. That's something Sikka calls the 'Renew' strategy. At one of the world's largest companies, the Infosys project manager had been deployed for 15 years. He reluctantly approached the client with a couple of ideas to improve productivity, which were accepted. "He said I never thought I could take an idea to the customer," says Rao.
          'Renew', says Ritika Suri, is an "existing technology that can help us bring better operational efficiency, productivity through automation, artificial intelligence, natural language processing technologies". It began in a small way but may be gaining momentum. Not all ideas are breakthroughs. There is a value in incremental ideas.
          Even Design Thinking workshops have been integrated into Infosys's Mysuru training campus. "We have the world's largest embrace of design thinking: 62,000 employees since October 30, 2014. Other companies talk about a thousad or so. Not just that, they watch a video. This is deeply experiential class where people make prototypes," says Sikka.
          Conceptually, it's a workshop for unstructured innovation in identifying unknown problems. "Problem finding will be the next big opportunity rather than problem solving. We are ingraining that at the grassroot level," says Ravi Kumar.

          The holy grail of services industry has always been to delink revenue growth from headcount. That's where automation - the other pillar of Sikka strategy - counts. But it's early days. Rao admits the benefits of automation may be visible only after two to five years. "Even in projects with 20-30 per cent productivity improvement, the number of people we may have released would be 15-20 per cent, not 30".

          As Infosys moves towards what is paradoxically-named 'zero bench', attrition for 1.93 lakh employees fell further from 20 per cent in Q3, 2014/15 to 13.4 per cent in the past quarter. Utilisation including trainees was 74.2 per cent and 80.6 excluding trainees. Most IT services firms work at an employee utilisation of 78-82 per cent. Around 6-7 per cent are on leave or on training. The rest 8-12 per cent is bench, waiting for projects or transitioning between projects.

          The Acquisition Binge
          Investors in Indian IT firms have forever complained that they were hoarding cash on their balance sheets by neither rewarding the shareholders nor utilising it for inorganic growth. Infosys, with nearly Rs 30,367 crore in cash and bank balance, too, has been questioned. More so, after growth slowed down.
          But that's changing. Even though Sikka says he has no interest in acquiring for size. Because, most firms espouse 'yesterday's technologies'. But what's that? "You know one, when you see one. Anything that continues with the previous generation way of doing things would classify as a past thing," explains Sikka.
          For the first time, Infosys has a 'strategy' for acquisitions: niche technologies to plug gaps in portfolio. In February 2015, Infosys bought San Francisco-based Panaya, Inc. for $200 million to strengthen its automation offering. Two months later, its $500-million Innovation Fund took a $2-million minority stake in Airviz, a Carnegie Mellon University spinoff specialising in air quality monitoring over the cloud. That month, it also bought digital commerce firm Kallidus (which owns Skava, a mobile and digital commerce platform) for $120 million. In October, it bought Noah Consulting, an oil & gas information management consulting firm, for $70 million in cash.
          That's a bill of $392 million. Yet, less than $60 million of the $500-million fund has been deployed as yet. What gives comfort to analysts is that Sikkas acquisitions are not at variance with his narrative.
          The winds of change at Infosys may not be to everybody's liking. Infosys is growing faster, but less profitably. It is embracing new technology, but slowly. It is transforming employee morale, but in pockets. As Sikka quotes from one of his favourite books, Siddhartha by Hermann Hesse, knowledge can be communicated, not wisdom. At Infosys, the quest for that 'wisdom' is on.

        General Awareness

        Union Government notified E-Waste Management Rules, 2016

          • Union environment ministry has notified new plastic waste management rules, The Plastic Waste Management (PWM) Rules 2016, issued will replace the Plastic Waste (Management and Handling) Rules 2011.The ministry also increased the minimum thickness of plastic carry bags from 40 microns to 50 microns.
            • The new rules also focus on phasing out of non-recyclable multi layered plastic and increasing reuse of plastic waste especially in applications like road construction and waste to energy.
            • The move will help in achieving our Prime Minister Narendra Modi’s vision of Swachh Bharat bringing the country’s gram panchayats into the picture and introducing the concept of extended producer Responsibility (EPR).E waste Management Rule 2016
            • Every day Staggering 15,000 tonnes of plastic waste is generated but of that, only 9,000 tonnes is collected and processed.
            Key Guidelines by the Ministry:
            • Collection mechanism based methodology has been adopted under Extended Producer Responsibility and Producer Responsibility Organization (PRO) have been introduced for manufacturer, dealer, and refurbishers.
            • Compact Fluorescent Lamp (CFL) and other mercury containing lamp were brought under the purview of rules for the first time.
            • Provision for Pan India EPR Authorization by Central Pollution Control Board has been introduced replacing the State wise EPR authorization.
            • Deposit Refund Scheme was bring together as an additional economic instrument wherein the producer charges an additional amount as a deposit at the time of sale of the electrical and electronic equipment.
            • The amount will be reimbursed to the consumer along with interest when the end-of life electrical and electronic equipment is returned.
            India’s Plastic Waste:
            India is 12th in the list of top 20 countries notorious for disbursing the maximum amount of plastic waste into the high seas from their respective coastlines topped by China.

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