Cost of coal must come down

This will reduce discoms’ purchase costs

PRAVEER SINHA, CEO and MD, TPDDL

Tata Power Delhi Distribution (TPDDL) is one of the private power distribution companies serving Delhi. It is a joint venture between Tata Power and the Delhi Government and supplies electricity to 7 million people in North and North-West Delhi. Business Line spoke with Praveer Sinha, CEO and MD, TPDDL, on issues such as UDAY, the Centre’s scheme for financial restructuring of state power distribution utilities and on ways of bringing down the cost of electricity.

Do you think the results of UDAY (Ujwal DISCOM Assurance Yojana) have begun impacting the power sector? What are the benefitsthat private power distribution utilities (discoms) can derive if the scheme is extended to them too?

UDAY is a very innovative scheme which primarily provides an incentive to the State discoms to improve their operations. The main feature is that their debt has been taken over by their respective state governments which in turn have issued UDAY bonds. To that extent, the discoms’ financing cost has come down.

They were earlier spending 12-15 per cent on debt financing which has now come down to 8 -10 per cent. It was expected that this benefit would enable the discoms to purchase more power.

Unfortunately, that has not happened because many State discom have only recently, in the last six months gone through the UDAY process.

This summer too the peak power supply was less than 150 million units, though people’s actual power demand must have been much higher.

Hence, my feeling is that the benefit that should have come by way of more power being purchased by the state discoms to meet the requirement of consumers has not happened fully.

Nearly 40,000 MW of generation capacity continues to remain stranded and the average plant load factor on an All India basis continues at less than 60 per cent. So, this demonstrates that demand has not gone up at the expected pace.

In the case of private discoms, instead of the respective states governments, the banks or entities such as PFC and REC can come out with bond issues.

Suppose a discom has an existing loan of ₹1000 crore at 15 per cent interest rate.

It can now take the same loan from the bond-issuing entity at 8 -10 per cent,.

This amount can be put in an escrow account and be used for repaying the original loan/ bond amount.

So, the cost of capital will go down drastically and some of that benefit can be passed on to consumers by way of lower tariffs.

NTPC’s generation costs eased in the June 2016 quarter. Have you benefited from this in the form of lower cost of power purchases?

In the last six months, there have been three increases in the cost of coal. The first is the increase in the Clean Environment Cess from ₹200 to ₹400 a tonne.

The second has been the hike in prices by Coal India by 9-19 per cent (for coal grades G6-G13) and the third has been the increase in railway freight charges.

So, the tariff (charged by the generating company to the distribution utility) has gone up by about 10 per cent on an average. The cost of power from the plants from which NTPC is supplying to us has actually gone up as per the invoices received by us in June and July 2016 vis-a-vis the invoices for January/February 2016. So, the cumulative impact on the cost of coal will get reflected in higher tariffs in the coming year.

Power purchase cost constitutes the single biggest expense item for a discom. What according to you are some of the best ways of controlling this cost?

The main source of power supply in India continues to be coal-based. So, the cost of coal has to come down. Coal India being a monopolistic supplier fixes the prices of coal on an arbitrary basis.

There is no regulator for coal while there is a regulator for power. So, there is need for some control. Secondly, there is lot of grade slippages in the quality of coal that is being supplied. Power companies are being billed for a higher quality of coal than what is being supplied.

So, until and unless grade slippages are sorted out and there is a third party to check coal quality, both at the loading end and unloading end, this challenge will continue.

From what I understand, third party sampling is being done at the coal loading end but not at the receiving (unloading) end.

Earlier grade slippages used to be in the range of 7-8 grades (each grade slippage implies a reduction of 300 kilo calories). It has come down to 5 grade slippages.

So, if the way in which coal is being supplied from the mine to the power plant is corrected, I think there can be tariff reduction by nearly 10-15 per cent. Also, there are a large number of old power plants — 30,000 MW in the state sector and 13000 MW in the central sector. They consume huge amounts of coal. So, if they are shut down and instead the high efficiency plants are allowed to operate, then that too will lead to reduction in tariff.

The discoms in Eastern and North- Eastern India are the worst performers. Why is it so?

Some of the States in Eastern and North-Eastern India have not been able to improve their collection and billing efficiency and also reduce their AT&C (aggregate technical and commercial) losses because their network is in a very dilapidated condition, there have been no technology interventions and there are issues relating to capacity building and training of manpower.

There have also been issues of general lack of governance in many of these discoms.

Apart from that, there are problems of tariff revision. Many States do not revise tariffs every year and even if revisions take place, they are not cost reflective.

Have the Delhi discoms begun compensating consumers for unscheduled power cuts as provided under the amendment to the Delhi Electricity Supply Code and Performance Standards Regulations?

The Delhi High Court in its order has said that the basis on which this order was issued was not legally correct and therefore it is being re-examined by the government and the Delhi Electricity Regulatory Commission. So, till such time nothing can be done.

How public capex can boost GDP

It can lift India’s medium-term growth potential and add to productivity

There are a number of reasons why India needs more public capex. The latest growth figures show that the economic recovery is going through a soft patch — fixed investment growth continues to fall and with ample spare capacity, high leverage and a weak global growth outlook, a recovery in private sector investments seems elusive. It is in this context that all eyes have turned to public capex to fill the void.

Big push

The government is aware of the urgency. It has made regulatory modifications to remove existing bottlenecks, such as the one-time fund infusion into stalled road projects, the revised hybrid annuity model for roads and easier exit policies for road developers, among others. Additionally, boosting public investment in new infrastructure projects is one of its key reform agendas. The focus is on various sectors, including railways, roads, renewable energy, inland waterways, ports and smart cities.

In the FY17 Budget, the Centre announced a 17 per cent increase in public capex, equating to 3.7 per cent of GDP. The government plans to more than double the pace of road construction over the next five years, raise rail investment to 5.7 per cent of GDP over FY16-20 from 2.4 per cent over the last five years, and implement port-led development projects worth ₹2.45 trillion (1.6 per cent of GDP). The total planned spending is substantial.

PSU funds

Given the size of the capex requirement, the obvious question is where the funding will come from. Historically, the majority of public capex has been funded by public sector units (PSUs), rather than the Centre. For instance, in FY15, of the 7.4 per cent of GDP in public investment, PSUs contributed 3.2 per cent and States another 2.6 per cent while the Centre’s was only 1.6 per cent. Even this year, two-thirds of envisioned infrastructure investment is to be funded off the Centre’s balance sheet via loans, equity and PSU profits. This implies that funding capacity critically relies on PSUs, rather than the Central government.

The good news here is that except the telecom and power sectors, where PSUs have high debt levels, other PSUs like those in the capital goods and infrastructure sectors have strong balance sheets and negative net debt-to-equity, which indicates that PSUs have the funding capacity. There are other sources of funding as well. The railways, for instance, have secured loans from the Life Insurance Corporation of India against a portfolio of 24 project corridors. Multilateral agencies and market borrowings are also partly funding the capex plan. As such, funding should not be a constraint.

Execution challenges

More than funding, execution has historically been a bigger challenge. Between FY08 and FY13, actual capex through internal and extra budgetary resources of PSUs was on average 17 per cent short of budgeted levels. In April-July FY17, the Central government has spent only 28.9 per cent of its budgeted capex compared with 35.6 per cent over the same period in FY16.

That said, the government did exceed its off-balance sheet capex target in FY16, which itself was 40 per cent higher than a year ago. Last year, the port sector added 94 million tonnes of capacity — the most in a single year – suggesting that execution under the current government is improving. In railways, electrical and civil contracts awarded for the dedicated freight corridor are around 80 per cent complete.

Data on road construction and awarding paints a similar story. The pick-up in project-awarding activity suggests that actual construction should gain traction in the coming quarters.

The economic impact of public capex depends on its efficiency, the quality of investment projects and the state of private capex.

A 2015 IMF study noted that about 27 per cent of the potential benefits of public investment in emerging markets are lost due to process inefficiencies. The government’s recent execution track record, curbs on corruption and strict timelines suggest that it is focused on improving efficiency.

The quality of spending is also high. Of the budgeted ₹5.6 trillion in Central government public capex, more than 50 per cent (₹3.1 trillion) is focused on building transportation infrastructure, which should help reduce logistics costs for private sector manufacturing firms. This could ‘crowd in’, rather than ‘crowd out’ private investment.

According to a 2013 RBI study, public capex (Centre) can have significant multiplier effects on GDP: 2.1x in the same year, rising to 3.84x in three years. Using this, we estimate that the budgeted public capex by the Centre and PSUs could add 0.9 percentage points to FY17 GDP growth. This may not seem huge given the focus on public capex, but with most of the spending focused on infrastructure where gestation periods are long, the full benefits will accrue only over the next two to three years.

In all, a successful launch of public capex would not only drive near-term growth, but it would also boost India’s medium-term growth potential by adding to the capital stock and productivity. Hence, even though public capex is off to a slow start, it is moving in the right direction and will build a solid foundation for sustainable growth.

Why the Paperless Office Is Finally on Its Way

The shift comes amid a steady decline in paper usage coupled with rise in tablets, mobile devices

Every year, America’s office workers print out or photocopy approximately one trillion pieces of paper. If you add in all the other paper businesses produce, the utility bills and invoices and bank statements and the like, the figure rises to 1.6 trillion. If you stacked all that paper up, it would be 18,000 times as high as Mount Everest. It would reach nearly halfway to the moon.

This is why HP Inc.’s acquisition of Samsung Electronics Co.’s printing and copying business last week makes sense. HP, says a company spokesman, has less than 5% of the market for big, high-throughput office copying machines. The company says the acquisition will incorporate Samsung’s technology in new devices, creating a big opportunity for growth.

Yet by all rights, this business shouldn’t exist. Forty years ago, at least, we were promised the paperless office. In a 1975 article in BusinessWeek, an analyst at Arthur D. Little Inc., predicted paper would be on its way out by 1980, and nearly dead by 1990.

The reality is the high-water mark for the total number of pages printed in offices was in 2007, just before the recession, says John Shane, an analyst at InfoTrends, which has tracked the printing and document creation industries for the past 25 years and who compiled the eye-popping figures cited above.

MORE FROM TECH

To say we haven’t gotten the paperless office so far isn’t to say we won’t. It is always dangerous to say “this time it’s different,” but this time it just might be. For the first time in history, there is a steady decline of about 1% to 2% a year in office use of paper. Add in the dip in use during the most recent recession, and as of 2016, we are already 10% below the peak of the number of pages produced by office printing and copying in 2007.

This trend represents inroads made by everything from tech unicorns such as DocuSign Inc., the biggest player in electronic signatures, to the rise of tablets and mobile devices. More important, it represents a change that took much longer than anyone anticipated. It was delayed by the fact that business gets done in vastly more ad hoc and complicated ways than anyone appreciated.

The persistence of paper in the workplace—60% of which isn’t optional printing, says Mr. Shane—represents business processes that change slowly, if at all. It is the small- and medium-size businesses that have been the slowest to get rid of paper—in other words, to fully digitize their workflows.

There is also the fact that paper is awesome. It is the only input and display technology we have that weighs almost nothing, costs pennies, is readable in almost any light, and doesn’t require an internet connection. It is the epitome of portability and durability.

Xerox Corp. employs a team of ethnographers to study why people print, says its head of workflow automation, Andy Jones. Their research reveals “There are so many work practices and attitudes that are ingrained in how companies work,” making it surprisingly difficult for older, larger companies to change. And when Mr. Shane asked respondents why they did the 40% of printing that wasn’t absolutely necessary for their job, the most common answer was simply that they “liked paper.”

Still, companies are making genuine progress. Take Bahrns Equipment Inc., of Effingham, Ill. Tara Funneman, who has worked for 27 years in the office of the company, which sells and distributes forklifts and lawn-and-garden equipment, says when she started in 1987, they had only one “really large” computer they used once a month for five to 10 minutes. “We printed one report from Lotus 1-2-3, turned it back off and everything else was done by hand,” she says.

Nowadays, every one of Bahrns’s service technicians carries an iPad or a mobile phone, and uses software made by Reston, Va.-based Canvas Solutions Inc. The device and software together replace what used to be three-part forms filled out with pen on a clipboard, which were often incomplete, inaccurate, or illegible, and were a nightmare to input into the company’s back-office systems. Switching to Canvas three years ago has already eliminated one clerical position at the company, says Ms. Funneman.

Knowledge workers also still print out documents to mark up, edit, learn from, and collaborate on them. But, at least in part, this may be generational. One reason we are closer to the paperless office is new, digital native organizations tend not to use the stuff.

And as cloud-based collaboration tools like Microsoft Office 365 and Google Docs become the norm, the rest of us may find ourselves simply accomplishing these tasks in ways that don’t perfectly map to the way we accomplished them on paper.

History has shown the demise of paper will be gradual. The amount people print in offices may be declining 1% to 2% a year, but it is still a mind-bogglingly large market.

“I think it will take 15-20 years, when the millennials who grew up with digital photos and smartphones take over senior positions in companies, to see the transition to a paperless office,” says Loo Wee Teck, head of consumer electronics at market research firm Euromonitor. “We, the Gen Xers, are the dinosaurs hindering evolution.”

There is no industry that isn’t getting disrupted by technology: Shantanu Narayen/Adobe Systems

Shantanu Narayen, CEO of Adobe Systems

Shantanu Narayen, CEO of Adobe Systems, says that the Indian IT industry is entering a phase of enterprise software where companies must have the stomach to embrace change. He feels that the current digital push by the government has ensured tremendous opportunities for all the players and it is only a matter of picking the right bets. Edited excerpts of an interview:

Q: Your new office in Noida is an indication of your confidence in India as well as your growth plans for India. So, we have always talked about how bullish you are about the India story and how strategic a role India plays in Adobe’s growth plans. But from where you sit today, what does India look like?

You are right. Whenever I come here, we actually wear two hats. The first one is India as a market in itself and how that is growing and we can talk about Digital India and all of the opportunities that is going to afford.

And second is the role that the Adobe India centre plays in our global aspirations. We have been growing really well as a company and India has always had a disproportionate part of that growth. So yes, we continue to be excited. We are always ranked one of the best places to work here and employees are doing some amazing stuff.

Q:Your results are out on 28 September, so you cannot give us any forward-looking statements or talk about numbers, but I can talk to you about the kind of growth that we have seen for Adobe in your previous quarter and once again record revenues that you have announced in Q2 and lastly on the back of the kind of growth that you have seen as far as your cloud businesses are concerned. On the back of that,how do you manage expectations at this point in time? People are expecting after nine quarters that you are going to be able to deliver on this kind of growth. I do not want to talk to you about numbers, but how do you manage expectations and what is the dilemma and the challenge of being able to do that?

We look at opportunity and at the end of the day, if we can demonstrate, especially to financial investors, how large the opportunity is and if you can demonstrate a cadence for execution, then you think expectations will take care of it.

So, I like to focus a lot more on the opportunities, both the opportunities we have talked about, namely the entire creative economy and how design is becoming more important and aesthetics and how the creative cloud is clearly pioneered, how you can transform an existing desktop business into a cloud subscription-based business.

The second is the marketing cloud and everything to do with digital disruption. There is not an industry in the world that is not getting disrupted by technology; we are enabling them to use technology to do that. And so, two massive opportunities and as long as we continue to execute, the financial expectation takes care of itself.

Q: Let me talk to you about dealing with government and specifically in India, the Prime Minister has this big Digital India vision and you have of course met him in the Valley. In India as well, a lot of people are betting on that opportunity. We were talking to Linkedin. They have launched three products specifically for India, developed in India, made for and made by India. How are you seeing this play out? It has been about two-and-a-half years since the Digital India vision in that sense was unveiled.

There are a couple of things that make India a really unique opportunity as they relate to Digital India. The first is mobile.

India has the opportunity to leapfrog generations of technology and in this mobile-first or, in many cases, mobile only environment, any company like Adobe or others in the Valley who use India as an opportunity to innovate around mobile first, it is going to pay off not just in India as an opportunity, but also everywhere else, in all of the other markets. So, that is one big opportunity.

However, when you look at what has happened here with the Aadhaar card and everything to do with how people are moving inefficient paper based processes to digital, the Adobe Sign product has a very unique opportunity.

Think about identity on the web and how if you can digitally complete a transaction. So, Adobe Sign and what the government is doing with respect to what is happening on Aadhaar or companies like e-mudhra are actually able to now do digital transactions, I think that is just a massive opportunity. And last but not least the cost of transactions in India, whether it is financial services or automotive, are much lower.

And so, targeting how you can look at efficiencies in your business and then translate that across the world, we are actually continuing to see growth. When you see companies like Interglobe Aviation (Indigo), they are among the most successful in the world, or what is happening with companies that in some cases are emulating Us-based business models in travel or automotive or transportation, just a big opportunity for us in India.

Q:I will get to the enterprise opportunity in just a second, but let me continue to talk to you about the government opportunity. One of the concerns specifically that we saw in at least as far as the domestic technology companies when dealing with government was that revenues are inconsistent. They are patchy and lumpy. I know you do not like any of those words. So, what is your India team telling you in terms of being able to transact and deal with government? Has it got significantly better and easier?

We look at it as a little bit of a do you have the right bowling pins and if you have the bowling pins strategy—maybe we are a little bit more fortunate than local companies in that given the magnitude of our business, we can take a much longer-range approach to some of these businesses.

And for us, maybe the only metric is not revenue. In other words, if we can find that we are actually serving customers well and you are getting government agencies to adopt these technologies, you believe that as the number of transactions increase, the revenue will follow. In the commercial space for example, a similar opportunity might be in video whereas the amount of video that is being consumed, and the Olympics were certainly an example of that, is happening more on digital.

If you price your model where you are getting revenue as digital streams increase, it will take care of itself. So, our approach at Adobe has always been let us go find some key customers in government who have this vision of digital transformation and as long as you get them signed up and you build a great product and the business model allows you to grow as the business grows, that is a luxury that we have over the smaller companies.

Industrial IoT will score over consumer IoT

In 2015 industrial and enterprise IoT solutions attracted over 75% of funding as compared to consumer IoT companies; this trend is expected to continue in 2016

A file photo of the EHang 184 passenger-carrying drone at Consumer Electronics Show (CES) in Las Vegas, Nevada, US.

With over $20 billion in merger and acquisition (M&A) deals and close to $2 billion in funding, the Internet of Things (IoT) witnessed significant traction in 2015.

Between 2010 and 2015, over $7.5 billion has been invested in IoT companies globally in over 900 deals. While until 2014, consumer-focused IoT solutions (primarily in Wearables and Quantified Self) garnered a slightly higher share of total IoT investments, industrial and enterprise IoT solutions attracted over 75% of funding in 2015 as compared to consumer IoT companies.

This trend is expected to continue in 2016 by a larger order of magnitude—2-3 times more than consumer IoT.

IoT is defined as a worldwide network of “things” that include identifiable devices, appliances, equipment, machinery of all forms and sizes with the intelligence to seamlessly connect, communicate and control or manage each other to perform a set of tasks with minimum intervention. The goal of IoT is to enable things to be connected anytime, anyplace, and with anything or anyone.

Industrial and enterprise IoT solutions are primarily in the verticals of smart manufacturing, Industry 4.0, smart grids, oil rigs and refineries, wind farms, retail and logistics. Most of these industries have had sensors and been experimenting with sensor-enabled automation for a long time. Now with IoT, the focus is on artificial intelligence and machine learning, security and sensor computing.

Consumer IoT solutions are being developed in segments like home automation, health care, quantified self (gaining self-knowledge by using technology such as sensors on your smartphones or wearables to track your own data such as heart rate, stress levels, etc.), sports, automotives, and entertainment. And, the focus of consumer IoT extends much beyond the three areas of industrial IoT, to include miniaturization, power management, mesh networks, better connectivity protocols, interoperability and convergence platforms.

We are witnessing disruptive innovation in the consumer IoT space across verticals. These include charging pods mounted on street-light poles wirelessly charging electric cars on the move; transparent, non-intrusive heads-up display (HUD) for cars that can handle voice calls, text and e-mail messages, music, radio, and map-based navigation; network-enabled, cloud-powered, AI-driven dolls that can converse with kids and double up as security devices; miniaturized and portable ambulatory/holter and stress analysis ECG (electro cardiogram) machines that one can carry on person, avoiding a visit to the big hospital; smart pots that allow users to remotely monitor soil and light conditions and even water their plants through a mobile application; and smart insoles that measure impact stress on a runner’s feet and knees and provide intelligent analysis and guidance to improve one’s body dynamics and performance.

Comparatively, in industrial IoT, innovation is incremental. Many large technology companies are cautiously participating in the consumer IoT innovation through corporate venture funds and accelerator programmes. But this does not amount to a true open support of the innovation ecosystem.

From a professional venture capital investor’s point of view, industrial IoT has short-term adoption and business potential, hence most consumer IoT products are perceived as point solutions. And, this sentiment is currently driving the investment decisions of professional venture capitalists in the IoT space.

However, one key trend that we are observing in the consumer IoT funding space is the rise of crowd-funding. Many consumer IoT companies, in their early stages are using crowd-funding platforms to raise seed funds.

These companies seek professional venture capital funding only once their idea is validated, the product developed and early adopters garnered, and the solution and the company are ready to scale. This model of democratizing the venture capital through crowd-funding (in the early stages) is the most sustainable and scalable framework for consumer IoT ecosystem growth, and is expected to continue for the next few years.

The recent regulatory breather—JOBS Act (in the US)—that allows investors to buy securities through crowd-funding is effectively a welcome step for the young IoT companies.

Currently, in the IoT evolution timeline, we are at a stage where we were during the early 1990s of the internet era. The Google(s) and Facebook(s) of the IoT are yet to be born and/or yet to come to the fore.

For IoT to evolve as a web of platforms for connected smart objects, the biggest challenge will be to overcome the fragmentation of vertically oriented closed systems and architectures and application areas towards open systems and integrated environments and platforms.

For IoT to go mainstream, the industry needs to solve remaining technological barriers (interoperability, security, etc.), explore integration models, validate user acceptability, promote innovation on sensor/object platforms, and demonstrate cross use-case issues. Moreover, industrial and consumer IoT solutions need to be duly supported and evolve together.

Asset management companies take NBFC route to fund realty projects

More than half a dozen institutional investors are in the process of procuring a licence to set up NBFC, buying out existing NBFC or reviving existing but dormant entity

Asset management firms are setting up non-banking financial companies (NBFC) to bridge the capital deficit in the real estate sector.

More than half a dozen institutional investors are in the process of procuring a licence to set up a new NBFC, buying out an existing NBFC or reviving an existing but dormant entity to start lending.

Real estate NBFCs have steadily become key capital providers to developers, particularly those who don’t have easy access to banks and large private equity (PE) funds.

Asset management firm Rising Straits Capital, founded by Subhash Bedi, who also co-founded Red Fort Capital, is in the process of acquiring an NBFC. Once it’s done, Rising Straits will infuse equity capital into it and capitalize it before it starts lending.

“It makes logical sense for us to progress in this direction because we have the required skill and mindset,” said Kalyan Chakrabarti, managing director, Rising Straits Capital.

It plans to lend to different real estate asset classes including residential, office, hospitality, warehousing and education, where the initial focus will be to give small to medium sized loans for 3-5 years.

This year, Red Fort Capital’s NBFC Red Fort Capital Finance Pvt. Ltd has started actively investing from its lending book in residential and commercial projects.

“There is no better time to be in the NBFC business than in a slowdown scenario when developers need capital. We provide speed capital that is flexible and tailor-made to meet a developer’s needs and we do anything from land acquisition financing to deficit financing to last-mile funding to inventory funding to special situation funding,” said Abhiram Himanshu, director, Red Fort Capital. It will invest between Rs.35-60 crore across 5-7 transactions before it goes on to do larger deals and is focusing on funding developers in Bengaluru and Hyderabad.

Following a separation between Red Fort Capital co-founders Bedi and Parry Singh, the former set up Rising Straits Capital.

The NBFC lending space is a crowded one, with tough competition among peers and from private equity funds, which have transitioned from being equity-givers to debt lenders. Yet, the opportunities are many and the possibility to make decent returns remains substantial.

Canada’s Brookfield Asset Management Inc. has applied to the Reserve Bank of India for an NBFC licence, said a person familiar with the development. “The plan is to fund residential project lending in relatively large ticket deals of Rs.200-400 crore,” said the person, who did not wish to be named.

Financial services firm ASK Group, which has also applied for a licence earlier this year, will set up an NBFC that will do both real estate and non-real estate funding.

Sunil Rohokale, chief executive and managing director of ASK Group, said an NBFC is a “strategic fit” in the company, which currently has a real estate fund business along with wealth management and private equity funding. It is tough to estimate how much money NBFCs have pumped into real estate in the last few years, but to put things in perspective, Piramal Fund Management Pvt. Ltd (PFM) is an apt example.

Of the Rs.32,000 crore of PFM’s assets under management, including equity investments and commitments made but not yet disbursed, around Rs.28,000 crore is from its NBFC, including construction finance. From Rs.1,600 crore in early 2014, PFM has scaled it up to Rs.28,000 crore, building a successful business in India’s worst slowdown.

“The market needed a one-stop shop for capital and we provided that,” said Khushru Jijina, managing director, Piramal Fund Management.

Milestone Capital Advisors Ltd has recently revived its NBFC Milestone Finvest, and plans to deploy both debt and equity from its fund business, said a person familiar with the development, who didn’t wish to be named. Financial services firm Lodha Ventures has hired an agency to decide a name for its NBFC, said founder Abhinandan Lodha.

“From the NBFC, we want to offer debt to less-known developers, who are specialized in certain micro-markets. Growth capital has to be provided to them, as they may not have the ability to approach large NBFCs,” Lodha said.

To be sure, loans from NBFCs are more expensive than bank finance, but they are more flexible and offer customized solutions to developers.

“NBFCs offer both early-stage land financing and last-mile funding crucial to developers. The challenge is to find the right investments under deployment pressure. Smaller NBFCs with limited pools of capital may find it tougher than large NBFCs, who have a large platform which balances out the risk. So, the key is to attain scale,” said Nikhil Bhatia, managing director-capital markets India at property advisory CBRE Asia Pvt. Ltd.

Crowdfunding platforms under regulatory glare

Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture

The Securities and Exchange Board of India (Sebi) is planning a crackdown on unauthorised crowdfunding platforms, which are gaining popularity in the country as alternative capital-raising facilitators.

Sebi has sent notices to as many as 10 crowdfunding platforms, which  predominantly operate through their websites. The market regulator has quizzed them on their business models and asked them how they are not in violation of the securities law, said sources in the know.

Similar to a stock exchange platform, crowdfunding websites act as a link between investors and companies, typically start-ups. Most of these entities are operating without any authorisation or registration with Sebi and, as a result, are not being governed under any law, said a source.

WHAT IS CROWDFUNDING?

Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture.   It makes use of easy accessibility of vast networks of people through social media and crowdfunding sites to bring investors and entrepreneurs together   Information on prior investments in crowdfunded markets includes a time stamp and the specific amount contributed

Grex, Kickstarter, Indiegogo, Ketto, LetsVenture, Milaap, Wishberry, Fueladream, BitGiving, Catapooolt, DreamWallets, Start51, and Fundlines are among the active crowdfunding platforms in the country catering to various kinds of projects.

The exact amount mobilised by these players isn’t known. However, these platforms claim to have empanelled hundreds of investors and start-ups. It could not be ascertained which of the platforms have received Sebi notice.

However, crowdfunding operators claim their business doesn’t fall under Sebi’s ambit. “We are just providing a platform to fund certain projects by facilitating monetary contribution from a large number of people,” said the founder of one of the crowd-funding websites, requesting anonymity.

Last month, Sebi had cautioned investors against participating against dealing with digital fundraising platforms operating on the lines of stock exchanges without regulatory approval. Sebi has a view that these electronic platforms might be facilitating investment in the form of private placement with companies, as the offer is open to all investors registered with the platform, which would be a contravention of the provisions of the Securities Contract (Regulation) Act, 1956 (SCRA) and the Companies Act, 2013.

According to Sebi, only recognised stock exchanges can provide a platform where equity and other securities issued by companies are listed and traded in accordance with the provisions of the SCRA.

Not only electronic platforms, unauthorised prize money schemes and apps linked to the securities market, too, have come under the Sebi glare.

“Each gaming site and fact scenario would require a review and analysis as to whether it has invoked the prescribed provisions and has complied with such laws. No doubt, in the coming times, fantasy trading games, apps or websites and their promoters will face increasing scrutiny,” said or Sumit Agrawal, former Sebi official and founder of Suvan Law Advisors, a Mumbai-based law firm.

Sebi may consider these apps or websites as engaging in “any act, practice, course of business which operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing in securities, which are listed or proposed to be listed on a recognised stock exchange as prescribed under Section 12A of Sebi Act, 1992, he added.

Sebi had floated a discussion paper two years ago, when it had proposed a framework to enable domestic start-ups and small and medium enterprises to raise capital from multiple investors through crowdfunding. It had defined crowdfunding as “solicitation of funds (small amount) from multiple investors through a web-based platform or social networking site for a specific project, business venture or social cause”. The regulator, however, is yet come up with final regulations on crowdfunding.