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.

Reliance Jio plan wrapping at AGM and (most) likely fallout

⏩ Government's September spectrum auction eying a revenue of Rs 5.66 trillion is set to be flopped as other operator would not participate. Government fiscal arithmetic can go for a toss.

⏩ Jio is offering such freebies based on zero legacy costs w.r.t. 2/3G and 1% spectrum User charges vs 3% for others. Government has created an asymmetric market. Telecom pleas are not heeded by Government time and again, but it should understand that all Telecom have foot the spectrum bill out of its own banks' loans.

⏩ Stress level from Bharti/Idea should rise. They would defer capex plan. 

⏩ Vodafone could drop IPO plan

⏩ Rcom if not taken over by elder brother,  would be another JP Associates in the making.

Collated by Surya Narayan Nayak

Capital Float looks to expand to over 100 cities

Capital Float plans expansion in over 100 cities as it bids to offer loans for small brick-and-mortar store owners for a bigger share of the growing financial lending market

SME lending platform Capital Float, run by Zen Lefin Pvt. Ltd, is looking to expand its reach to over 100 cities and venture into newer categories like loan for small brick-and-mortar store owners, as it eyes a bigger share of the growing financial lending market in the country.

“We are expecting a 10 times growth by the end of March 2017, adding 15,000-20,000 customers (borrowers) cumulatively across all the loan products segment,” said co-founder and managing director Sashank Rishyasringa.

The company has offered loans to 3,000 borrowers until now.

Founded in 2013 by Rishyasringa and Gaurav Hinduja, Capital Float has disbursed loans amounting to over Rs.400 crore.

A technology-led non-banking financial company (NBFC) underwrites unsecured loans online to start-ups, business-to-business (B2B) providers, manufacturers and e-commerce merchants through its own books.

It currently gets 33% of the business from online vendors.

With the aim of extending its focus to small mom-and-pop or kirana shops along with micro small and medium enterprises (SMEs), the company has already made a mobile application that approves loans in less than eight minutes.

Loans to kirana shops could be in the range of Rs.50,000-100,000.

India currently has minimal lending options for small businesses. These businesses are largely ineligible to receive any financing from banks or NBFCs.

Traditional banks ask for collateral, financial statements and bank statements and do not offer small ticket size loans.

Capital Float is trying to solve the problem by lending money to small businesses that might not have collateral, significant revenues or years of experience.

The company offers an alternative for these small traditional business houses that have largely banked on chit funds and local money lenders to borrow money from.

Identifying a need to extend credit to such under-served, Rata Tata, Vijay Kelkar (former finance secretary and chairman of the National Institute of Public Finance and Policy) and Nandan Nilekani (co-founder of Infosys Ltd and the architect of Aadhaar) will soon start a microfinance institution named Avanti Finance, Mint reported on Monday.

Capital Float, which is currently focused on offering loans to small and medium merchants in Tier 1 and metro cities, is now looking to concentrate more on tier 2 and tier 3 cities. “I expect a significant contribution of these cities (tier 2 and tier 3) to the company’s growth, which could be around 33% by next year,” Rishyasringa added.

The loan products currently include working capital finance to online sellers for 90-180 days, long-term finance to merchants for six months to three years, bill discounting and taxi financing (loans for cab drivers), among others.

Broadly, the company has partnered with e-commerce websites, payment gateways, cab services, amounting to 50 partnerships, including with Snapdeal, Shopclues, Paytm and Uber to offer loans to a large pool of small businesses and merchants who work with these partners.

The company is also eyeing profitability in the next 12 months on the back of a robust demand for loans by SMEs.

To enable faster disbursal of loans, the company launched its mobile application two to three months ago, which is privately available to businesses through partners.

While loan applications were initially accessible only through the website, Capital Float is now seeing that mobile application and mobile browsing has grown to contribute 50% of loan applications, said Rishyasringa.

The mobile application is built on four technology pillars of India Stack—Aadhaar-based authentication, an electronic process of know-your-customer (e-KYC), electronic signature (e-Sign) and unified payment interface (UPI).

India Stack is a set of publicly available application programming interface (API)—that enable companies to build applications and businesses based on these four pillars.

The fin-tech company receives a loan enquiry every three minutes, said Rishyasringa. An inquiry implies a prospective borrower initiating a loan application process.

While the company remains stringent in extending loans, by approving 20% of the applications, total loan disbursal amounts to an average of Rs.70 crore per month.

Additionally, the average loan amount extended to a merchant is Rs.10 lakh at an interest rate of 16-19%, for a tenure of between 60 days to 2-3 years. The company maintains and targets to continue to maintain a non-performing asset (NPA) proportion of less than 1% of its total loan amount.

NPA is the proportion of the amount of bad loans to the total amount of loan disbursed.

Backed by George Soros’s Aspada Investment Co., SAIF Partners and Sequoia Capital, the company has raised $42 million, including $25 million in series B round of funding in May.

Other players in this segment that Capital Float competes with are Capital First Ltd, NeoGrowth Credit Pvt. Ltd and SMEcorner.in (Amadeus Advisors Pvt. Ltd). In July, NeoGrowth raised $35 million from IIFL Asset Management, Accion Frontier Inclusion Fund managed by (Quona Capital) and Aspada Investments, along with other investors

Corporate borrowing costs see greater fall than home loans: RBI

With banks turning stingy in passing on RBI's rate cuts to consumers, rate of home loans has fallen by only 0.26 percentage point since 2015, but corporates have managed to bring down their borrowing cost by 1.44 percentage point by tapping bond markets, as per the central bank.

With banks turning stingy in passing on RBI's rate cuts to consumers, rate of home loans has fallen by only 0.26 percentage point since 2015, but corporates have managed to bring down their borrowing cost by 1.44 percentage point by tapping bond markets, as per the central bank. Between January 15, 2015 and April 5, 2016, Reserve Bank reduced the repo rate by 150 basis points, but in response to this, the banks have lowered their benchmark lending rates by only 60 basis points, according to Reserve Bank's annual report for 2015-16.

Between December 2014 and June 2016, home loans dropped by just 0.26 per cent to 10.76 per cent in June 2016 from 10.50 per cent in December 2014.

During the same period, corporates' borrowing became cheaper by 144 basis points.

Corporates' borrowing from shortest maturity commercial papers dipped to 6.54 per cent in June 2016 from 7.98 per cent during December 2014.

Corporates are borrowing at a cheaper rate through issuance of commercial papers, RBI said, while adding that there was a surge in public issuances of corporate bonds in the fiscal year 2015-16.

In the second half of the year, following the September reduction in the policy repo rate and again towards the close of the year, yields of top-rated AAA corporate bonds eased, following g-secs (government securities) yields.

The corporate bond yields also declined following easing of g-secs yields during 2016-17 so far (up to August 2016).

"Taking advantage of low yields vis-a-vis bank lending rates, corporates raised more resources from the bond market in recent period," RBI stated.

According to RBI, banks are not passing on the benefits of rate cuts to customers to protect their earnings.

So far in the financial year 2016-17, there has hardly been any transmission of a reduction in the policy rate to the actual lending rates charged to customers, stated the report.

RBI said banks might have been loading a higher credit risk premia on their new customers in order to attain their desired return on net worth in a rising NPA environment.

Lenders are also charging a higher strategic risk premia on their riskier loans as part of their business strategy to reorient their lending operations towards less risky activities, it said.