Game Changer or Disruption!

EV is going to be new beast compared to todays cars!




I have been writing about Electric Vehicles; for updates I keep on talking to people in the industry, read on the net and am lucky enough to have someone in Tesla to update my understanding of EV’s. I am no technical expert in this field but I can feel that something big is definitely happening. Hope I am able to see some of these major changes in my lifetime. I was lucky to be part of two such events, Internet and Cell phone. These two disruptions have  changed the way our world has been operating! When Jaya was in the US for her MS, 1980-8;  talking to each other on phone, needed a lot of coordination. We did not have phone at home. So, she would write to me the timing when she would call, that too at someone else’s place. If we were lucky she could get through after ½ hour delay! By next year, I am told that cell phones can be used during the flights too!  That is game changer!

In IC engine cars, the Engine has been the heart for more than 100 years, and car performances have been defined by the quality of the engine! Then the quality of the overall car is said to be better when the exhaust system and engine jointly released least amount of pollutants. Of course, now exhaust parameters are mandatory world over. By 2023 these parameters will be so tough that company like Volvo has already declared that they have decided not to develop any new diesel engines post 2023, as development of the same will not be cost effective! Plus, cities and countries are slowly banning diesel cars to be driven within their boundaries.

The drive train today, is placed physically in between tyres, from front bumper to rear exhaust system! This whole drive train is being replaced in EV’s, (as shown in pictures above) so what will decide the quality of EV’s? What is the Engine for EV’s? The Motors, the electronic controllers, battery pack, inverter and  gear. So, the car which travels more distance per charge, which accelerates faster will be a better car, all are zero emission cars anyway! No, it is not that simple! This is just the beginning of the car revolution! The batteries will have better charge storage per unit area, they may cost lesser and lesser over a period of time but this becomes  commercial aspect. To me battery packs are petrol tanks! Better battery only increases the capacity of the “new petrol tank” and distance traveled per charge!

Major parts in the new drive train for cars are going to be the software and the sensors that are going to be there in a car, besides the battery pack, motors and ECU’s. Around 2010, some vehicles had software with about 10 million lines of codes! In 2016 it is supposed to have increased by 15 times to about 150 million lines of code! The software is related to car autonomy, safety and infotainment related codes. But this is going to change even more drastically over period. The whole system might become  a computer in the car! The car recalls will not be because of faulty clutch or a gear box it will be because of software glitches and sensors!

The cost of software currently in large cars can be about 10% of the Bill of Materials but is likely go up in next 10/12 years to 30%! So, this is going to be the first game changer. What happens to current vendors of engine parts? As the population of EV’s starts increasing, the population of new IC engine cars is going to come down! Instead of one set of vendors, who make drive train parts, new set of vendors from IT industry and electronic industry will take over! So, need for physical RM will start getting replaced by “products” which cannot be seen by naked eye! Players who are currently tier 2 or tier 3 vendors may start becoming tier 1 vendors. At the same time car manufacturers may stand on the toes of Operating system vendors so that they can control the distinct facilities they can offer. This cannibalization is already being observed in case of battery manufacture! Vehicle manufacturers themselves are producing battery packs now. In IC engine cars, batteries have a small functional role whereas in EV’s it is going to be the new “Petrol”! OPEC, I am sure is already having sleepless nights or nightmares!

It looks like software will follow the path of infotainment innovations, autonomous driving capabilities, intelligent safety devices which will be able to work even if some part of software fails! The software will integrate with hardware in the form of sensors! This my friends, is going to be future drive train! The whole system over a period will be of increasing complexity which will need newer and newer algorithms and will generate such a huge data that all the data generated from these cars will have to be stored to cloud! One important aspect of new drive train is temperatures; these are almost at room temperature compared to IC engine cars where exhaust temperatures can go upto 600 deg c! This normal temperature in “New Engine” will allow usage of lot of electronics, sensors, software and ECU’s.

What do we foresee? Basic car with body, trim, seats etc which will keep on changing as is happening now. But it is the “New Engine” in the form of sensors, software, ECU’s and cloud computing that will change the car and make it a different beast than what we see today!

First and foremost will be the infotainment area which will have full connectivity with our single “communicator” which is currently our cell phone! It will have all these functions plus, music, internet hookup, reverse drive screen, automatic parking capabilities. This will use cameras in place of mirrors and it will also be the GPS display screen! What new functionalities will be added is anybody’s guess! Next consolidation will be ECU’s. Currently, there are 8 to 10 of them per car. These will be consolidated over a period, to one or two ECU’s which will handle all functionalities . The “real engine” will be controlled through these ECU’s along with other systems like wipers, window regulators, AC’s and so on. Next important aspect is, each vehicle will generate so much data that storing the same can be an issue. So, all this data will be transferred to cloud. This data can be used for analysis, diagnostics, on improving performance of the vehicle. This will be real life data and give the car makers real life continuous flow of information; product improvement cycles will be much shorter! In most cases in future, product errors will be related more to sensors and software. Software errors can be updated easily by releasing patches to all concerned cars as these cars will always be connected!

Another game changer will be what is going to happen to car service industry! Cars will go to workshops only for sheet metal work! Or small odd jobs! This will also affect vehicle manufacturer’s spare part sales; we know that drive train component manufacturers, will go down over a period! These components will exist only for old cars as no new cars will not need their products!

Another new area that will come up is third party software products! We really don’t know what these products are going to be! Most of the products will be available for passengers, as the driver naturally cannot use them while driving. Oh, I forgot we will have driverless cars at some stage, then all are going to be passengers. So, possibilities are simply unlimited!

I could write on and on and on! Let us wait and watch; there have been car racing games for computers. But now you will be having computers which drive real life cars on real roads! That too on their own! As a game changer or major disruptor of business, it’s a great thing for humanity. But for those who are in business of making current drive train components, it’s going to be a nightmare. As my friend had rightly said during a discussion, “I am ok with this change because it is for my next generation to handle this and not me because real inflexion point could be 2030, by that time I will retire!”


Is it three cheers for EV’s or one cheer?

EV’s are here to stay!

The other day I was at a party held by foundry technology experts group to commemorate an individual landmark. Fish, chicken and various tikkas were available in abundance. Liquor was flowing and I was as usual high with my drink H2O on the rocks! Different subjects were being discussed, old memories were shared. It was a fun atmosphere. I asked someone who is in foundry related service industry, “What do you think will be the effect EV’s on your business? And when do you think it will start affecting your current business?” He was very candid and said, “Yes, this is going to affect my business in a big way, that may be felt from year 2030. But then by that time it will be for my next generation to handle it, and not me!”

There were 2/3 others in this discussion. One of them was a foundry expert plus, energy consultant. Another person was a foundry expert for an International giant for Asia Pacific region. I am none of these but as a hobby, I read a lot about Electric Vehicles and consequently about Energy situation. It was mentioned that one the industrial giants, Kalyani group is already jumping the EV components bandwagon. Tata, Mahindra, Suzuki-Toyota combine, Hyundai (they claim that they will launch their first EV in India ahead of Suzuki-Toyota combine in 2019 itself.) will be four major players in India; for these four mentioned companies, it is imperative to be in EV market. Suzuki manufactures and sells more than 50% of their global production in India. Hyundai’s India % is sizable. Tata/Mahindra are local companies so they have to do it and have started off well in EV’s. My other friends were arguing that that 2030 is too early but inflexion point for production will come around 2040 which is 22 years hence.

(Point of Inflexion means a moment of dramatic change, especially in the development of a company, industry, or market.) 

Another argument was about power availability in India. I felt that people’s information on power situation in India was a little dated. India has jumped the power bandwagon in a big way. Solar and wind power may not need long distance transmission of power as is normally done, thereby reducing transmission losses. It could be done locally and there are huge number of diesel engine run water pumps in India, in rural areas. I will not go into details of whether this achievable but I can say that power generation costs have come down in India by using non- conventional methods; one tender was sanctioned in Gujarat in Dec 2017, at Rs.3/ per unit as against Rs.6/ plus of coal and fossil fuel methods.

These links give details about power generation situation in India as on Dec 2017 and renewable energy projections upto 2022, respectively. The argument in the party was that current power production is way below even today’s needs, so how can India feed EV requirements. When fossil fuels rates are controlled by Arabs how will we get cheap power? The two links clearly show that the current power generation situation is not as bad it is thought by many. In some areas in India there is a power surplus. Our current problem is that the grids are not able to distribute the power from surplus areas. As more and more power in India is going to be generated by non-conventional sources like solar and wind, price reduction  of power will quickly happen and capacities will be added faster! This is already happening in Germany and in California!

According to my understanding the Point of Inflexion for introduction of EV as a product reached long back. In September 2017 total EV production in the world was 1,23,000 which was 56% above 2016 Sept sell. Extrapolated to yearly sale it will be 1.45 million against world production of around 90 million. This is about 1.6%. This indicates that point of inflexion of product proving is crossed. There are reasonable number EV’s on the road. Major manufacturers like VW, Toyota, Ford, Nissan already have big plans for EV’s which will start rolling out in larger numbers.

In the discussion I was having, someone had a view that EV is just a passing fad and will die soon. IC engines can never die! This I felt was a very naive thinking. This gentleman also suggested that many products showed a lot of initial potential and then died. There are two strong reasons why this will not happen for EV. First is pollution. Delhi, London, Beijing and many others are classic examples of what havoc pollution can do. World is not left with many choices but to get pollution free methods of motoring around. Secondly, countries which have large amount of fossil fuels currently, control the economy and inflation related issues. World already has said enough is enough. Big searches for different methods are underway for alternative fuel. Already some major cities and some small nations have started creating laws which will be effective in not allowing diesel cars within their limits ; later on they will not allow even registration of fossil fuel cars.

Smaller companies have already made their foray into electric tempo, riksha. These are one of the most polluting vehicles. This is a good sign as the last mile is always tricky. These are not very costly and fancy vehicles, so big shots will not be interested. Another good sign is people are also talking of making ships run on EV! It is doable, weight and space is not an issue for them. Buses appear to be next after cars but I am reading about leading companies like Hero, Bajaj and Honda foraying into Electric two wheelers.

So, whether we like it or not, whether we know about it or not, whether we want it or not EV’s are here to come. So, during my next party with H2O on the rocks discussion will be more about when and not about “if” of EV’s. Cheers!

Money Matters!

My take on modern money management and bitcoin!

Money, Money, Money is lovely song by Abba from 70’s. Money is an important thing in life but it is not everything.

Historically when life started, there was no trade as there was no ownership concept. With individual ownership concept, starting 10000 years back, barter system started. Which later got converted to money and later into currency system. With industrial revolution, wealth generation started galloping and with that the greed! Before this period, only rich people were  the royalty and their kin! This of course continues, I need not say who the modern royalty is. Latest revolution in computers and related businesses have crossed imagination in wealth generation, beyond everybody’s expectations. But the main thing is the “you and me” gang started doing well, moneywise!

How do people make money? Some are brilliant wealth creators, they develop products, processes and concepts which the whole world appreciates and buys. Some inherit money but people like you and me, make money in a very conventional way. Typical people of our generation got themselves good education, took a job, tried to get office accommodation, later bought own home. With other family responsibilities, small amount of money remained in balance which was promptly invested in Bank Deposits. This was the process of living life, straight as an arrow and most important, safety first!

But is the conventional way of living safe life and being satisfied with it, relevant in today’s times. Probably safe deposits route was perfect for socialistic thinking of 70’s and 80’s of last century, we got used to it and continued. One person in Mumbai was given Shares of Wipro in 70’s worth Rs.10000/. The person was moneyed even in those days. He promptly forgot about the shares. When he died around 2010, his family found these shares which were simply stowed away. Their value had become Rs. 280/ million! Wow, Wow and Wow! In today’s financial jargon it is called long term investment! The money was invested in the so-called Market! In modern economies an individual is now being forced to be in the “Market”. For bank fixed deposit now, interest rates are negligible hence the shift. But there is greed. People got lured from FD in banks to very high returns from time immemorial. When banks could not give good returns, how someone else will be able to give high  returns on money. No one raised such issues, at least initially.

In came Charles Ponzi in 1920 in USA. He started one such scheme and lots of  people got sucked and ruined in his schemes. A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator on previous investments. As explained, excellent marketing techniques helped first group of people to be lured to such schemes. They were given exorbitant returns from the money invested by next batch of people. This cycle continued for some period and then unexpectedly for the investors, but expected by knowledgeable people, these schemes collapsed. With the schemes collapse, the people collapsed. The way Cadbury chocolate has become generic name for chocolate made by any other company, all such fraudulent schemes came to be known as Ponzi schemes.

Latest to join the bandwagon is the currency in news, I won’t call it popular, Bitcoin. Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin. Over the course of bitcoin’s history, it has undergone rapid growth to become a significant currency both on and offline – from the mid 2010 onward, some businesses on a global scale began accepting bitcoins in addition to standard currencies.

To give you some feel, in 2010 Bitcoin was trading at 1 bitcoin = US $ 0.003. In November 2017 at its peak it was trading at 1 bitcoin = US $ 17,900/. Today, January 2018 it is trading at 1 bitcoin = US $ 11,171/, this is the  reduction in one month. Ponzi Scheme? I don’t know. Bitcoin is trying to replace global currency in the form electronic currency. But for such type of Electronic currency to succeed, all nations in this world will have to agree. Ten developed nations in the world including US, UK, Denmark, Sweden, Australia have formally accepted Bitcoin as a currency. This may get accepted over a period of time as money. All sovereign countries formally have to be accept Bitcoin. Without this acceptance I visualize a tricky scenario e.g. today you can get one Pizza in US for one bitcoin. How much will you pay for the same Pizza in UK and in Australia? Is this rate going to be based on comparative rates of current currencies? Presently, I find it difficult to understand how this will be achieved. Will I dabble in Bitcoins today? Definitely not. The currency which can get 38% devalued in such a small duration, and has yet to get approval from most of the countries in the world, is a strict no, no for me. I am sure Bitcoin or something similar may become a global currency in future but I feel that is still some time away.

What will today’s generation tell their children about money management? Take your education and learn some special skills of your own! Well, I am sure you know the market conditions, if not study them and create your wealth. Don’t waste your money on homes and cars, when you can always rent whatever you want. But try to stay away from Bitcoins of this world. It is today’s Ponzi scheme!

To you my friends one quick suggestion. Under financial advisor, put some money in market schemes which are Trigger based. Your funds are normally invested in debt funds; but when the equity market is on the Bull run, the money  will get transferred to Equity, make decent money and when Bear run starts money will be shifted back to Debt funds! Any takers from my generation?

The Dirty Dozen!

Tightening the screws on wilful defaulters!


Pramod somehow managed to make Internet Genie run at the high speed that was expected of him. Genie as usual started narrating a story. He started with a question, “What do you know about Dirty Dozen?” Pramod knew that if he uttered a word, Genie would slip out of his control and system will hang! So Pramod did not give any reply to the question asked.

As usual Genie kept on talking. Pramod, I know you are thinking about the war movie released just when you had joined engineering. Did you like the movie? Lee Marvin and Charles Bronson were two of the main characters from a dozen of them. It was your kind of movie and I know that you had seen it a couple of times.

 The Dirty Dozen

But I am not talking of that Dirty Dozen; this is a list of modern day “Dirty Dozen” who have borrowed money from institutions to the tune of US $ 50/ Billion. Out of this at least 60% is borrowed by the Dirty Dozen. Their loans are declared NPA’s (non-performing assets) as these organizations will never be able to service the debt, ever! Pramod, I am not going to talk in technical lingo but will discuss in plain English. If this default is not handled properly the institutions who have given these loans will sink and will affect the overall market sentiment and Indian Economy. With these banks sinking our FD’s kept with these banks will sink and there will a major catastrophe. Government is pumping money in large amounts in the lending banks; Government has also come up with a comprehensive legislation in 2016 to overcome the issue.

Insolvency and Bankruptcy Code (IBC), 2016 seeks to address this issue by bringing in a consolidated legal framework for resolving defaults by infrastructure companies and partnership firms in a time-bound manner. The code, is in force since December 2016, supersedes all extant insolvency laws.

Before this there were different laws handling bad loans using separate routes, resulting in long delays or no action. Money would just go down the drain, but promoters would be billionaires many times over. Probably they had all conveniently forgotten the famous quote of Ex Chrysler Motors Chairman, Lee Iacocca. “We borrow the money the old way, we repay it”! Pramod, sometimes I get a feeling that the Dirty Dozen gang never had any intention of repaying the money! Below are the details of money owed by these companies.


India has done something right as its rank in “Ease of Doing business” jumped by 30 nos. Previously only debtors could apply for bankruptcy but now creditors can also ask for the bankruptcy proceedings against their customer if there is a proven delay in payment, as per law. This change has given more teeth to the system. Recently Ericson has filed insolvency case against Reliance Communication for non payment of dues. Before the new law,  it was not possible to do so. In the world of business companies run well and they fail too. There has to be a simple method and law to handle the failures. Since India was lacking this, foreign institutions were very careful while dealing with Indian companies.

Pramod, I am sure that you are aware that there is are proven international practices to handle the failed companies; first step is to start the insolvency process. Secondly, lenders using a legal process can “sell” these companies. If total valuation of the failed company is 100, then these companies can be “sold” at 80 to 90 % value. Second method is global organizations with huge funds, buy the “debts” of these companies; thereby releasing funds for lenders.

Pramod, on 24th November 2017 the Government has released an ordinance. In the ordinance, if the assets of the insolvent companies are NPA for more than one year, then the promoters of these companies cannot take part in bidding process for the “sell’ of their own failed companies. There are more such entities who are also banned.

In August, National Company Law Tribunal (NCLT) allowed Synergies Castings to acquire Synergies-Dooray Automotive, which made and supplied Aluminum alloy wheels for Rs 54 crore when the company owed Rs 900 crore to lenders. The company could pay Rs 20 crore upfront with the rest over five years. This prompted the government to promulgate the ordinance. Don’t pay your lenders, become sick and then buy your own company dirt cheap, sans the loans,  was the trick followed by “successful” manipulators. Pramod, the “experts” don’t want to run their business but they want to take advantages of loop holes! Pramod, would you like to become “successful” this way or you would rather follow Lee Iacocca’s footsteps?

Pramod, I want your reply on this as I know you have strong views!! Pramod just could not keep quiet. He said, ” Genie, I would rather be poor than being a cheat! I know that sometimes businesses fail genuinely, for example sudden policy changes, sudden changes in customer requirements and so on. But even during such events, I am not sure if the promoters have not made money on the side! Government is doing an excellent job of closing as many loop holes as possible in the system. At the same time, they are making the laws which are on par with international laws!”

With this statement Pramod broke the golden rule of silence that Genie had locked him in.  At that instant Genie slipped out of Pramod’s grasp, Genie’s speed became equivalent of 2 G and system hung!  Genie could not help but make a passing remark before escaping. ” Well said Pramod! Let us hope we see the results of the same very soon!”


And The winner is….

Crystal gazing of EV scenario in India!


Pramod somehow managed to make Internet Genie run at the high speed that was expected of him. Genie as usual started narrating a story. He started with a question, “I want your frank opinion about Indian Electric Vehicle scenario, your favourite subject.” Pramod knew that if he uttered a word, Genie would slip out of his control and system will hang! So Pramod did not give any reply to the question asked.

As usual Genie kept on talking. Pramod,  only a few months back, there was not much clarity about EV’s in India, but you had once said that Indian EV scenario depended mostly upon the international companies who have a large market share in car segment in India. Their current share must be around 75%. Mahindra had their foray in EV since some years back but have hardly got much traction. But suddenly the scenario has changed. It appears that many people have been working on EV’s, secretly. Last month Tata Motors grabbed an order of 10000 EV’s from a Government department for supply within one year. Pramod, this was a surprise for all! There is a story in today’s papers that Tata has invested US$ 900 million in Tesla Competitor, “Faraday Future.” This could be the secret of Tata getting ready for mass production, with “Tiago Electric?”! This indicates that both Indian companies Mahindra and Tata are well ahead of the pack for the Indian operations as their EV’s have reached production level.

What will be the situation in 2022, Pramod, five years from now? I know that Suzuki and Toyota have come together in India. Suzuki will produce EV’s for themselves as well as for Toyota, in India. Technology for EV will be provided by Toyota. These two have already joined hands with Denso, a Toyota group company, for manufacturing batteries, in Gujarat. So, this group will be the first to have their own batteries in Indian market! This will give them cost advantage. They are talking of their EV being available in India from 2020.

Honda is talking of EV in India by 2019! Hyundai has not said much but I am sure they will be around the corner! Nissan Renault is quite ahead in the global market for EV’s; if they decide to come to India, they have the wherewithal. But main India strategy has to be pricing as usual, quality must be good anyway! That is where Suzuki and Hyundai will have advantage over others as they are successfully doing this for so many years. But Pramod, don’t forget that Tata has reached mass production level already in 2017! So, they will have advantage over others!

Pramod there is breaking news below!


Pramod, I saw just now in Economic Times that PM Modi will inaugurate a fleet of 400 EV Nanos for OLA, in Delhi on 28th November! Looks like Tata Motors have hired Usain Bolt to learn how to make a clean start against all competitors!

There is not much clarity in heavy vehicles and buses. Goldstone Infratech from Hyderabad appears to have reached mass production stage as they have orders from Himachal Pradesh transport for 25 buses, the buses have already started plying; they also have orders from BEST, Mumbai for ten buses. In Mumbai, buses will run 220 km per charge and in Himachal hilly area the buses will run 110 km per charge. It is too early to predict more  as none of the others have said anything.


Pramod, what about infrastructure for charging? Well, Suzuki-Toyota combine have said that they will invest heavily in this area too. Government of India is also going to invest heavily in infrastructure. Oil companies, Indian Oil/BPCL et al have said that they will jointly put up the battery plants and invest heavily in charging infrastructure! They already have petrol pumps all over India along the roads! Things look reasonably good in infra area ! Now Pramod, I want you to stand on the stage and call the winner by saying, “And the winner is…”

Pramod, I want your reply on this as I know that you have strong views!! Pramod just could not keep quiet. He said, “Under Indian conditions, Tata Motors turned about to be the dark horse! Mahindra has been around for some time. But Suzuki Toyota could be the force the to recon with!  “

With this statement Pramod broke the golden rule of silence that Genie had locked him in.  At that instant Genie slipped out of Pramod’s grasp, Genie’s speed became equivalent of 2 G and system hung!  Genie could not help but make a passing remark before escaping. ” Pramod, don’t forget Hyundai!”



New .com bubble!

Startups, Venture funding and profitability go hand and hand else you have a failure on hand!

My friend Nandu Pradhan sent me a message if I have opened a blog tap! The fact of the matter is that I am on a bit of a sabbatical for a week or ten days. Thoughts keep on coming in the mind and somehow I am able to reach the end line pretty quickly.

I read an article about venture funding this morning. It said that venture fund taps seem to be shutting down, albeit slowly, at least in India. I don’t understand much about venture funding but I am told that this funding is given to start ups with brilliant ideas; then there is second and third round of funding as the idea tries to bloom into business. One term that goes hand in hand is “burn rate” while discussing startups. Burn rate is the money spent every month, without doing any business at least in the beginning.

Most of my life I have been running a small business and during this period, barring a few years, I never needed outside funds! Of course, those loans were in the form of bank facilities. I paid outrageous interest charges on the bank funds. At some stage, I decided that enough is enough and returned all the bank funds. Idea behind running my business was simple, it was my job, and it earned me a living! So idea was to keep on making money from whatever activities I was doing!

Don’t get me wrong but I honestly do not understand this concept of venture funding and startups. All can’t be Microsoft, Apple, Facebook and Googles of this world. These are some of the names that come to mind when we talk of starting up in garage and so on! Don’t forget that people behind them were brilliant people. They may not have had the best of the ideas to start with. Apple took 20 plus years to really hit it. Microsoft initially had a tough time but the idea of MS-DOS is what really took off! These guys had different business models. Microsoft has been making software products and are now also in cloud computing, in a big way! Microsoft’s obituary has been written a few times but lately they have become extremely agile to customer requirements. I need not write about Apple; once the iPod became a hit, rest as they say is history. They have real world hardware that they are selling at very high margins. Google made a brilliant search engine and the advertisements on the engine are their bread and butter; they hardly have anything else that is earning money. Facebook was pioneer in social media and have taken up Google business model but this forms 80% of their income. They have about 20% of their income from other sources. What I am trying to imply is that they are all real profit making companies and balance sheets have been in black, most of the times. They all have hard cash.

Coming back to start ups. I am sure that there is a genius lurking behind all these startups that we keep on hearing. Mr. Mukesh Ambani recently made a statement that Jio is a startup! I think what he meant by that is Jio is thinking out of box, its agile, its is taking business behemoths in the same field head on but of course there is a business plan which will make it profitable sooner than later!

I am naming two large e commerce giants in India, Flipkart and Amazon.  Amazon is doing billions of dollars of turnover world over but I understand that even after 20 years their E commerce business is not in profit! So they keep on pumping money. Because of market capitalization Bezos of this world have become billionaires. So must be Flipkart honchos. What is their business model? To my understanding this is trading business as these two companies’ sale products themselves or through their partners; they do not manufacture a single product. How come their burn rate is much more than their income? I feel that it is because of the discount war they keep on playing to gain territory It is a good thing that they do not take loans from banks; otherwise list of bank NPA’s will grow longer! Loss figures March 2016 Amazon Rs.3572/ crore, Flipkart Rs.2850/ crores, Paytm total loss Rs.7971/ crores! Not bad! Profits can always wait! (Ref. Economic Times dated 24th Sept 2017)

If the organization is not making money then what is the point in doing business? With the taps of funds being slowly turned off, the startups are thinking, in terms of operating profits! Real profits are miles away! I am not sure about operating profits too! I am surprised about both sides. Those running business are not really bothered about profits and the funding guys are hoping that one of their clients will become a Microsoft or a Google and then they will get windfall! I am sure the funding guys are very very smart people and they are pumping only part of their billions as investment in startups! But what about startups which are very small or medium size? Or do the promoters also make their money, on the side, from the “burn”? If there is no profit then how do you sustain? What do you achieve by having a high “burn rate”? Is the business model right? Do these guys have enough maturity? They must be real smart technically but running a business is different ball game! An idea, a great presentation, business plan (which always look lovely on paper) get them funding. But how long can the operations sustain on funding? Should the business not be self-sustaining? Is it easy to convert a brilliant idea into a self-sustaining business? There are many so called brilliant ideas, on paper; they face different hurdles, when they come into business domain.

Coming back to my lack of knowledge, I feel that business is a business is a business! The aim should be to make it profitable, of course not at any cost! One has to follow business ethics. When you get funding you don’t have to pay interest on funding that you get though you actually borrow it!  Funding is a cool name for this borrowing! One is really lucky that this is interest free loan. That most startups fail, is to me, an indication that most ideas don’t get converted to profitable business.

I will give you an example of a “startup”. This was not a startup in the conventional way. This person’s business and products were not hi fi type but products made for farmers and used in farming. Of course it was not cool! He was mentored by my wife Jaya. Jaya happens to be on cool side of life i.e Computers, IT and all. What she found was that the person was brilliant and knew his subject and had good products. He was trying to make too many products on laboratory scale for different produce. After a few meetings Jaya asked him, “What is the USP of your products? Which is your best product?” He said, “My products will give immediate results with very high returns in Pomegranates!” Jaya told him to concentrate only on that. He did it and rest as they say is history. Now he is a reasonably successful businessman. He received recognition from United Nations and business wise he is doing pretty alright! Mind you, he took funding but only after his business had grown reasonably well and was very much in black! Writing this story probably has answered the questions which I raised in the beginning! So startups and venture funding is good provided you have good profitable products and a profit making business plan; otherwise you have to be Amazon or Flipkart or Paytm! To hell with losses! There are enough people who will fund you, if you are large enough!

GST pluses and minuses

This is not a blog  in the usual sense! But I thought GST is very important  subject in India and it touches our life everyday. In my software business, we have handled GST related changes for our customers hence I know a bit about the subject. So I thought why not write about GST in simplest possible language without using accounting buzzwords.

This is not a blog  in the usual sense! But I thought GST is very important  subject in India and it touches our life everyday. In my software business, we have handled GST related changes for our customers hence I know a bit about the subject. So I thought why not write about GST in simplest possible language without using accounting buzzwords.

It’s more than a month after introduction of GST in India. There has always been a question why GST? Modern world has switched over to Goods & Services Tax (GST) over a period of last 15 years or so. I felt that there is a need to explain GST in the format that will make it easy to understand the simplicity as well as complexity of the system.

Why GST?

Before GST there was a plethora of taxes by different names, different authorities, different rates, different procedures, and different forms, making things extremely complex. What GST has done is that it has helped the system to go away from all these taxes. All these various taxes have been merged into two taxes one is under Central Govt (CGST) and other by State Govt (SGST). Central Govt portion takes care of previous excise tax and State Govt portion takes care VAT and Service tax.

Definition of GST

It is very simple. GST is a tax which is based on Supply and it is destination based. This means that whatever you supply Products or Services, there will be only one type of tax, GST! The beauty of this system is that there is same tax percentage for a supply all over India.


When a supply is a made within the state there are two elements of tax, CGST and SGST. If supply is made outside state then there is only one tax element, IGST. If tax percentage is defined at 18% for an item, then IGST is 18% for interstate transaction and intra state tax is 50% of 18%, each for two elements i.e. 9% CGST and 9% SGST.

Why so many tax percentages in GST?

India is a very complex heterogeneous country. Diversity of Income is quite extreme in India. Hence to take care of such issues tax % have been defined from 0% to 28%. This is a compromise that was needed to achieve the social goals as well as fiscal goals of the Govt. World over, taxes have been from 6% to 20 plus % depending on the particular countries requirements. But majority of the countries in the world are as big only as some of our states are or even smaller than them, with reasonably homogeneous population. If we take 28% GST, which is supposed to be on luxury items, in case of cars the prices of most cars did come down post GST. There are some cases where post GST, prices went up and they came down in others.

Input tax credit

At every stage, the seller can take Input Tax Credit of tax charged to him at the buying stage thereby taking care of double taxation. This means that seller charges the tax based on his profit margin and not on the complete price.

Immediate benefit of GST to Govt

Govt is all the time looking to increase the tax base in the country. With GST implementation, a large number of new entities have opted to register under GST, thereby helping in reduction of transactions in parallel economy or so called Black economy. There is an interesting rule. An entity buys something from another entity, which is not registered under GST and does not charge GST for the transaction. The onus of paying GST in this case is on the buyer. The buyer has to raise a self-Invoice for the amount equal to purchase value and charge GST as % defined in the system. He then pays that tax to the Govt. System of “Purchi” will have tough time in future.

Ease of use

For traders who make a large number of sell transactions every day, there is a system that allows them to be under Composition Scheme. They are required to pay GST to Govt every quarter, at a fixed % based on their turnover.

Why people Love to Hate GST?

First and foremost, the reason is ignorance! Second most important aspect is the transactions will come above board requiring the entity to pay correct amount of Income Tax! Hiding Income can become tough over a period because the transactions, and returns of different entities are now going to be entangled with each other.

GST Returns filing

This is another reason for hating the GST. Except for those who have opted for composition scheme, returns need to be filed on a monthly basis. In previous tax system returns were allowed on a quarterly basis. In GST returns, more information is required to be shared with Govt, every month. For example, when returns for July are filed, one has to fill up gross turnover value of that entity between 1st April and 31st July and so on. This will put the limitations of “playing around with figures” at the end of the year! You hate GST, of course many will hate GST!

Entanglement with each other

By a certain date of every month, sales details are to be shared with Govt and these are more detailed than was previously done. This includes names and GSTIN number of customers! This is to be uploaded to Govt site. In next couple of days after this is done, your customers will have visibility of these Invoices and are required to “approve” your Invoice, online. There is dispute resolution mechanism; in case of dispute, two months are allowed to resolve the dispute. There is one more entanglement. To claim set off the customer must “approve” your Invoice. Your customer will finally avail Input Tax Credit during payment of GST, only when you have shared the proof of actual payment of your liability of GST amount on the site! Now, now you hate GST more, you will hate Govt more. But what Govt is trying to do is to bring more discipline in the society and more compliance. The effect of this is even trickier. Everybody’s compliance rating, adhering to discipline will be made available in public domain. This will lead to getting lower business in case compliance rating is down! This is because the lack of compliance indicates indiscipline and financial burden to your customer. You cannot avail tax credit if your vendor has not paid taxes. What do you do in such cases, go to a better compliant vendor! Simple?

I have tried to explain the gist of GST in non-technical way and have tried not to use accounting jargon! Its early days for GST and we will see improvements over a period. This GST system will probably create world’s largest data under one roof and will be a challenge to data analysis experts too! Happy GSTing!