Green Bonds - the Greener Way of Financing

By Drishti

There is a surge in the new financial instrument called a Green bond. A green bond is a tax-exempt bond issued by federally qualified organizations or by municipalities for the development of brownfield sites. Green bonds are short for qualified green building and sustainable design project bonds. These bonds are created to encourage sustainability and the development of brownfield sites. More specifically, green bonds finance projects aimed at energy efficiency, pollution prevention, sustainable agriculture, fishery and forestry, the protection of aquatic and terrestrial ecosystems, clean transportation, sustainable water management, and the cultivation of environmentally friendly technologies.

Since 2016, the issuance of these bonds soared to a record high, accounting for $93.4 billion worth of investment worldwide, according to the latest report from ratings agency Moody’s. The issuance is expected to surge to more than $200 billion in this year.

The World Bank is a major issuer of green bonds. The institution has been very active through 2016, especially in the United States, where its issuances total over $500 million in U.S. dollars, and in India, where its issuances total over $2.7 billion Indian rupees. World Bank green bonds finance projects around the world, such as India's Rampur Hydropower Project, which aims to provide low-carbon hydroelectric power to northern India's electricity grid.

Indian firms like Indian Renewable Energy Development Agency Limited and Greenko have issued bonds that have been used for financing renewable energy without the tag of green bonds. Recently, Hyderabad-based Greenko Group which raised $500 million by selling green bonds to overseas investors, marking India's first high-yield issuance of its kind.  The clean energy firm, backed by Singapore's sovereign wealth fund GIC and one of the shortlisted contenders to buy SunEdison's Indian assets, plans to use the proceeds to refinance debt and meet transaction or operating expenses.  Greenko Investment Company, backed by parent guarantor Greenko Energy Holdings, issued these securities, which will be listed on the Singapore Stock Exchange. 

“Sustainable investing strategies will likely continue to grow as demand rises,” The common aim is to generate long-term competitive financial returns while simultaneously achieving a positive social impact.” 

The Adani Group, IL&FS Energy, NYSE-listed Azure Power and even Continuum Energy are in various stages of issuing bonds with an aim to cumulatively raise $2 billion this fiscal alone, said industry watchers. Global capital is also drawn to the ambitious commitment of the Narendra Modi government — a signatory to the Paris climate accord —to expand renewable power capacity, and one that is keen to invest close to $150 billion to meet the 2022 targets of 175 GW output from the current capacity of 57 GW.

So, it’s time now to taste the success launching what are “green bonds”, a relatively new way to finance renewable energy projects.

More entrepreneurs going for management courses

By Rahul Chugh

Entrepreneurship courses have boomed in the past few years, alongside the growing interest in starting up. The IITs, IIMs and a host of educational institutions today teach entrepreneurship either as full-fledged programmes or as electives.  

Also, student’s intent of taking these programmes has changed. "While earlier they would take the elective to know more about entrepreneurship, they now take it with the purpose of starting something on their own," says Prof S Subramanian of IIM-Kozhikode. He says of the batch of about 60, at least 10 would end up starting a venture immediately.

The beauty of this programme is that it helps you find what you want to do, besides providing all the infrastructure and networking help.

An MBA helps an Entrepreneur learn the basics of management. The institute is also a place where he can seek ideas for his start-up.Kumar K, chairperson of academic programmes at IIM Bangalore's entrepreneurship learning centre NSRCEL, thinks that institutes help entrepreneurs reflect on and organise their prior learnings for a better performance, apart from identifying their own strengths and limitations as business managers.

Being away from their business for some time helps the entrepreneurs to question many of their assumptions and develop a more reasoned perspective on their own aspirations regarding their business. So if you are an entrepreneur, getting into a business school is an option worth considering.

ONGC merger with HPCL

By Shruti Barar

With the motive of becoming a mega oil company in the country that could compete with the likes of Aramco of Saudi Arabia and Petro China and Sinopec, India's largest oil producing company Oil and Natural Gas Corporation (ONGC) decided to acquire India's third largest fuel retailer HPCL in a deal estimated to be around Rs 44000 crore. The talks went to the ministerial level, on which the director, Ved Prakash Mahawar commented that ministry wants this to happen because if integration takes place there will be value creation. It was estimated that HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC's portfolio making it the third largest refiner in the country after IOC and Reliance Industries.

On July 12 , there was a spike in  oil stocks due to the reports regarding ONGC and HPCL merger by the end of this fiscal year. Also, the oil minister, Dharmendra Pradhan confirmed that it would be completed by 2017-18. 

The stocks rose by almost 3 percent for both ONGC and HPCL. ONGC stock advanced 2.96 percent to Rs 164.75 on BSE. It opened at Rs 296 and touched an intraday high and low of Rs 296 and Rs 290.50 respectively. Shares of HPCL gained 2.65 percent to Rs 351. Other stocks like IOC and BPCL also gained.

It was reported that Cabinet is likely to consider this month sale of government's 51 percent stake in HPCL to ONGC for over Rs 26000 crore in the month of July.

According to the report , DIPAM in Ministry of finance was moving a note of consideration of the cabinet for divesting government's entire 51.11 percent shareholding in HPCL to ONGC.

Since the entities are getting stronger by merging so there was a spike in the stock of the oil companies,making the oil industry more dominant than their likes in the world.

TATA Motors move towards a flatter Organisational Structure

By Rahul Chugh

TATA Motors has decided to scrap designations and create a flatter organisation as it looks to establish an environment in which teamwork-inspired creativity can flourish. The company told employees in a circular that the move will create a “mindset free of designations and hierarchy”.

Designations such as general manager, senior general manager, deputy general manager, vice-president and senior vice-president are among those that will be consigned to the scrapheap.  All managers with a team reporting to them will simply have the job title of ‘head,’ followed by the function or department after their names. Employees who are individual contributors, are largely at the front end and do not have any team member reporting to them will use just the function or department after their name.

People can now focus on work instead of their designations, Gajendra S Chandel, chief human resources officer at Tata Motors said. The move will enable the company to move away from routine promotions that an employee gets purely by virtue of time spent in harness.

Tata Motors hired Accenture to devise a strategy to prepare the company to face competition. Scania, Bharat Benz and Volvo are leaner and meaner in comparison. Market leader Tata Motors has been facing aggressive competition in the commercial vehicle space from these companies.

Though flatter organisational structure improves the coordination and speed of communication between employees, it may make employee retention difficult. Lack of future career opportunity and a lack of recognition is a major reason because of which workers leave their jobs. With no designation, there are fewer roles that enable employees to familiarise themselves with management responsibilities. It makes it much harder for people to see a clear path for their progress up the corporate ladder.

Removing the designations may not necessarily be the right thing to do. Indians generally place a lot of emphasis on hierarchy and designation, but how the company is going to balance the aspiration of its young workforce versus the need for a flatter organisation given the premium that Indians lay on social hierarchy needs to be seen.

Flipkart set to enter FinTech Industry

By Shruti Singla

Flipkart is planning to enter FinTech business sector by hiring employees from Silicon Valley. The idea is to target smaller cities and towns starting from middle India and subsequently expanding to rest of the country. The business will aim at providing affordable credit to smaller players who find it difficult to raise credit through offline channels. It will provide various financial products including insurance and pension products besides credit.

The company has an advantage of having access to large financial and customer data. They can therefore build proprietary credit scoring models and expand their reach to the new markets.

The company is planning to hire more tech experts and develop a more tech driven workforce. However it is going to be a risky venture for the company in the country like India where people are not yet comfortable in doing business transactions online and where there is limited internet connectivity in every part of country.

According to a report, around 24 FinTech startups have raised venture funding since the beginning of this year across various domains like online lending, financial advisory, wealth management and payment gateways. After the demonetization phase, many startups like Paytm etc. have successfully captured market and have been performing really well. It will be interesting to see how Flipkart is going to innovate in this field and develop its market.

Rising Sensex: Rise or Fall in Markets?

By Himani Gandhi

With Sensex been busy hitting new heights, expectations of rising markets increases. Is this true in the present scenario? Not completely! Since 16 May, when S&P BSE All-cap index peaked, nearly three-fourths of all stocks traded on BSE have fallen in value, and about half of all the stocks have fallen by over 5%. The only category of stocks that has risen during this period is the one with extremely high market capitalization. On the same note, flows from foreign portfolio investors have amounted to more than $850 million in past two weeks and mutual fund flows remain strong. The top category companies (leaving behind some outlines like ITC Ltd, Tata Consultancy Services Ltd, HDFC Bank Ltd and Hindustan Unilever Ltd) there is a decline of over 1% in the remaining. Most other large sectors such as energy, pharmaceuticals, metals and mining have also seen a correction. 

SBI may not need capital for One year post Rs 15,000 cr QIP

By Sanskriti Dadhich

After raising Rs 15,000 crore through the largest-ever equity issuance in the country, State Bank of India  will not seek any capital infusion from the government in the current fiscal.

The bank recently raised Rs 15,000 crore through qualified institutional placement (QIP). It issued around 52.21 crore new shares at a price of Rs 287.25. Bank will be focusing on listing its life insurance arm. According to Arundhati Bhattacharya  the bank is planning on listing the life insurance subsidiary so there will be some more capital and they will get through non-core divestments. It may also consider some stake sale in its non-core assets including CCIL, NSE and UTI MF.

SBI's QIP was over-subscribed and demand exceeded Rs 27,000 crore. There was a huge demand from DIIs, FIIs, sovereign wealth funds and many investors who have never investedin a public sector institution earlier. The issue received an overall FII demand in excess of Rs 11,000 crore. Domestic institutional investors' (DIIs) demand was of Rs 8,500 crore. LIC had asked for 38 per cent share in the total QIP but only 77 per cent of its total demand was allotted. LIC's stake after this investment would be 10.4 per cent, up from 8.6 per cent.

QIP was aimed at supporting growth. The bank expects a credit growth of 10-12 per cent in the current fiscal and 14 per cent in fiscal 2018-19.