Convergence Plus
Friday, May 24, 2019
Infosys has new sops for staff, CEO Salil Parekh to get Rs 10 crore shares

CEO Salil Parekh will get shares worth Rs 10 crore under a new employee stock option plan. InfosysNSE -1.06 % CEO Salil Parekh will get shares worth Rs 10 crore under a new employee stock option plan that the IT bellwether unveiled for staff on Thursday, as part of its revised performance criteria for the top executive.

The Bengaluru-based software services provider has also changed Parekh’s employee agreement to enable him to vest the restricted stock units in 12 months instead of the earlier three years.

The vesting period is the time between allotment of shares in an Esop & when the shares are fully owned by an employee.

Under the new plan, chief operating officer UB Pravin Rao also gets shares worth Rs 4 crore. In total, Infosys has revived its Esop for all staff, offering as much as five crore shares or 1.15% of its total stock. In 2016, the firm had committed 1% of shares in an Esop as it battled attrition of employees.

“The grant of stock incentives to Salil Parekh…(is) to incentivise him to increase shareholder value and to drive execution excellence of the agreed business strategy,” Infosys said in a regulatory filing after markets closed on Thursday. The move to provide incentives to employees, especially top executives, will benefit shareholders, said analysts.

“It is right to provide such stock-linked benefits to CEO and COO as long as they are linked to profitable and sustainable growth in terms of margins,” said Shriram Subramanian, MD, InGovern, a proxy advisory firm. “What the shareholders will see is overall profitability and not specific digital or application development growth.”

Infosys stock closed 2.47% higher at Rs 734.20 on the Bombay Stock Exchange.

“Our employees are our biggest asset, and through this programme we aim to recognise and reward individuals who are committed to driving value creation for all stakeholders through their continued and consistent performance,” Parekh said.

The company’s attrition rate continues to remain high, as more technology professionals with skills in newer areas such as digital and analytics, particularly in the three- to five-year experience bracket, leave for better opportunities.

“By making employees owners, they get an opportunity to be beneficiaries in the long-term success of the company and realise the results of their work and dedication,” Parekh said.

Attrition at Infosys climbed to more than 18% by the end of the fourth quarter of the previous fiscal year, compared to 17.8% in the third quarter. (Source: Economic Times)

Vodafone Idea's ₹25,000 crore rights issue oversubscribed nearly 1.08 times

Besides a public participation of 1.2 times the offering, the promoters, too, applied for ₹90 crore higher than their aggregate rights entitlement. The promoters, Aditya Birla Group and UK's Vodafone Group, were allotted ₹17,920 crore increasing their shareholding to 71.57% over 71.33% earlier

Vodafone Idea Ltd.'s ₹25,000 crore rights issue-- the largest so far by the company, received a good response from both foreign and public shareholders as the issue was oversubscribed nearly 1.08 times.

Besides a public participation of 1.2 times the offering, the promoters, too, applied for ₹90 crore higher than their aggregate rights entitlement. The promoters, Aditya Birla Group and UK's Vodafone Group, were allotted ₹17,920 crore increasing their shareholding to 71.57% over 71.33% earlier.

"The successful closure of rights issue is a clear indication of the investors’ belief in our post-merger strategy and our ability to leverage the growth opportunities offered by the sector," said Balesh Sharma, chief executive officer of the company. "We are progressing well on integration and are well on track to deliver our synergy targets. Our ongoing investments are improving broadband coverage and capacity, enabling us to offer a superior network experience to our customers as well as enhancing our ability to win new broadband customers," he said.

India's largest telecom firm by subscribers, Vodafone Idea's board of directors, in a May 4 meeting, had approved the rights issue for about 2,000 crore equity shares of ₹10 each at a price of ₹12.50 per share. The paid-up equity capital of the company post the rights offer would stand at ₹28,735 crore shares of face value of ₹10 each. The company looks to list the new shares on the bourses on May 10.

Under rights issue, existing shareholders are offered to purchase additional stock shares, known as subscription warrants, in proportion to their existing holdings. Rights are often transferable, allowing the holder to sell them in the open market.

The telecom operator's rival, Bharti Airtel Ltd. had also announced a ₹25,000 crore rights issue at a price of ₹220 per share, which opened for subscription on May 3 and will close on May 17, according to the company's exchange filings.

Vodafone Idea has been losing a large chunk of its subscriber base to other telecom operators, Bharti Airtel and Reliance Jio. While Vodafone lost 35.87 lakh users taking its total base to 41.52 crore, both Jio and Airtel added to their subscriber base.

Besides loss of subscribers, the company’s losses widened to ₹5,004.6 crore in the December quarter, compared with ₹4,973.8 crore in the preceding quarter. It also needs resources to meet its spectrum liabilities to the government and expand its 4G network coverage from the existing 62%. Its most immediate payment for ₹6,300 crore to the telecom department was due in April.

Vodafone Idea also plans to raise up to ₹5,000 crore by monetizing its 11.5% stake in Indus Towers and has also separately announced plans to sell its fibre network comprising more than 156,000km of intra- and inter-city fibre routes. (Source:Mint)

Airtel may monetise its data analytics division

Currently, data analytics is being used for internal use, but it might be hived off as a service which could be used by other players. Airtel is planning to monetise its data analytics and innovation division, where other telecom players can leverage the intelligence and solutions created by the company.

"We study customer preferences, their device pattern, consumption, interest, applications downloaded along with usage to make the right offer. All this data is being collected without compromising on the privacy of users," a senior company executive told DNA Money on the condition of anonymity.

Currently, data analytics is being used for internal use, but it might be hived off as a service which could be used by other players.

Airtel's X Labs – the data analytics and innovation division – was set up in Bengaluru to drive innovation in the areas of artificial intelligence, augmented reality, virtual reality and Internet of Things. The division is constantly engaged in building a pipeline of solutions and use cases, which could be replicated by other telecom firms as well, the executive said.

It is also in the process of building a data warehouse with the learnings from AI for predictive analysis and real-time recommendations. About hundreds of trillions of records from customer purchases, phone calls, network logs, apps, IoT devices, locations and more are generated every day. The intelligence team combines data science, data intelligence, and data infrastructure and process high volumes of data, create micro-targeting marketing campaigns, improve personalisation and optimisation and ensure revenue. The platform triggers insights from the activities of over 400 million customers.

The network of Airtel has around 7,450 million minutes of call usage per day, 25,000 terabyte data usage per day, 30 lakh users on My Airtel App everyday and 1,000 online recharges per minute every day.

The data analytics also involves various partnerships with network companies, handset makers, etc, to create a quality network for customers. From customer experience and online experience to data services and incubations, the team's focus is to innovate, personalise and differentiate the Airtel experience.

At some stage in the near future, for a premium customer, the company may give a guarantee that it will come and fix a solution for your network either in your house or office in a specified time.

Since the entry of Reliance Jio, the consumption of data on mobile has been growing at a massive pace, and with data being the silver lining, all the telecom players are latching onto it to boost their revenues. According to Nokia's annual Mobile Broadband India Traffic (MBiT) Index, the mobile data traffic in India grew 109% in 2018, with 4G alone contributing 92%. The average data usage grew by 69% in 2018 to touch 10GB a user per month in December.

The things for the telecom industry went awry after the entry of Reliance Jio into the sector in late 2016. The cumulative debt of the industry remains high at Rs 7 lakh crore. Continuous investment in their networks has become difficult for Airtel as well Vodafone Idea, which is still in the process of integrating the two networks.

• Customer intelligence and solutions can be leveraged by other telcos, currently, data analytics is for internal use
• Airtel's X Labs was set up in Bengaluru to drive innovation in the areas of artificial intelligence, augmented reality, virtual reality and Internet of Things (Source:DNA)

TeamViewer to invest in IoT connectivity and applications

Remote management solutions provider targets small and medium enterprises. Remote management solutions provider TeamViewer, which entered India in October 2018, will invest in its Internet of Things (IoT) solutions business that is primarily targeted at small and medium enterprises in the country.

“IoT is an important solution area for TeamViewer. Even before IoT became important, people have been using TeamViewer for a variety of use cases which can fall under IoT,” said Krunal Patel, Head of Business for India and South Asia, TeamViewer. Such use cases can include remote management and control of devices.

Patel said the company would invest in IoT connectivity and applications. However, he did not elaborate on the investment numbers for India. According to Patel, TeamViewer already has about 100 million downloads in India over the last three to five years. “We already had a huge viral effect of downloads. That gave us the confidence that this is a very good market,” he said.

The company will use both direct and indirect go-to-market strategies to build its business in the country. The direct approach will target enterprises and the government while the indirect approach is aimed at SMEs. “We are getting all globally available products to India,” Patel said. TeamViewer recently launched an IoT starter kit for businesses that can be set up immediately.

The company has three offices in India and begun customer service calls at India time, though technical calls are still escalated to its home base in Germany. Patel also said the company is already witnessing growth in India but declined to share revenue details.

TeamViewer has partnered with OEMs such as Bosch and Dell for their hardware requirements. Their global clients include Philips and agriculture machinery company Trimble, among others. (Source: The Hindu BusinessLine)

TCS modernises 1.5 lakh post offices under multi-year deal with India Post

The IT services company Tata Consultancy Services (TCS) said it has deployed an integrated solution for India Post that has helped modernise a network of more than 1.5 lakh post offices in the country.

In 2013, the Mumbai-based company had announced receiving an over Rs 1,100- crore multi-year contract from the Department of Posts (DoP) for an end-to-end IT modernisation programme. The partnership was aimed at equipping India Post with modern technologies and systems to enable it to offer more services to the customers in an effective manner.

“At the heart of this transformation is the Core System Integration (CSI) program designed and implemented by TCS. This involved deploying an integrated ERP solution that caters to mail operations, finance and accounting, and HR functions, and connects its vast network of more than 1.5 lakh post offices, making this the largest distributed e-postal network in the world,” TCS said in a statement.

The integrated solution supports requirements of over five lakh employees, services over 40,000 concurrent users, and processes over three million postal transactions a day, making this one of the largest SAP implementations globally, it added. On the front-end, TCS said, it has implemented its Point of Sale (PoS) solution across 24,000 post offices with over 80,000 PoS terminals and has also built a web portal with consignment tracking capabilities, and set up a multi-lingual call centre for customer support.

“An important objective of the transformation is to use the department’s nation-wide reach to drive financial inclusion and accessibility of citizen services in remote areas. “This is being accomplished through over 1.3 lakh DARPAN 1 hand-held devices that Gramin Dak Sevaks use to provide postal, banking, insurance, and cash management services in remote villages, even those without network connectivity,” TCS said.

TCS Business Group Head (Public Services) Debashis Ghosh said postal services across the world are reinventing themselves to stay relevant to a new generation in the digital era. “We are proud to have partnered with the Department of Posts in this pioneering, mission mode initiative to build a world class, future-ready digital platform that the nation can be proud of. With this, the department can offer smart postal services, enriched customer experiences, and innovative value-added services to the citizens of India,” he added. (Source: The Hindu Business Line)

Reliance Jio crosses 300 million customers mark

Jio became the fastest company in the world to achieve 100 million telecom subscribers in 170 days of starting commercial operation. Telecom operator Reliance Jio has crossed the 300 million customers mark in two-and-a-half years of its operations, sources said. The milestone was reached on March 2, they added.

Queries sent to Jio on the matter remained unanswered.

Jio became the fastest company in the world to achieve 100 million telecom subscribers in 170 days of starting commercial operation. However, in its television commercials during the ongoing IPL season, Jio is shown ‘Celebrating 300 million users’

In its earnings report for the quarter ended December 2018, Bharti Airtel had disclosed that it had 284 million customers.

However, as per regulatory filings, Bharti Airtel reported having 340.2 million customers on its network in December and 340.3 million customers at the end of January.

Bharti Airtel crossed the 300 million customers mark in 19th year of its operations.

Vodafone Idea became the largest telecom player in the country with 400 million customers following the merger of mobile business of Vodafone India and Idea Cellular on August 31, 2018. (Source: The Hindu BusinessLine)

BSNL, MTNL 4G launch back to square one

The non-availability of 4G airwaves to public sector companies, at a time when the private sector is closer to embracing the next-generation 5G technology, is bleeding the companies further as subscribers desert the state-run carriers for rivals, putting their revival at risk.

The Telecom Regulatory Authority of India (Trai), the sector watchdog, has lobbed the ball back into the government’s court on the fourth-generation or 4G spectrum allocation sans auction to state-owned operators Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL).

“Early this week, the Trai in a letter to the telecom department said that the allocation of the spectrum to public-owned entities is an administrative matter and the government would be in the best position to dispose of the matter,” a DoT official said.

The development has, however, put the Prime Minister Narendra Modi-led NDA government in a fix, which was also considering to seek approval from the Election Commission of India (ECI) to take the radio waves allocation proposal to the Cabinet, following the growing pressure from nearly 2 lakh employees of the two service providers.

A query to DoT did not elicit any response.

In March, the department, in a letter to the telecom regulator, has principally sought suggestion on whether spectrum— a natural resource could be allocated to two state-driven operators administratively.

The government earlier said that it has sought views from Trai to sanction much-needed airwaves that could lead to the two telcos to foray into commercial 4G services.

In the absence of 4G spectrum, the two already-stressed telecom carriers say that they couldn't compete with the private sector rivals such as Reliance Jio, Bharti Airtel and Vodafone Idea.

In the 2012 Supreme Court verdict, quashing 122 licenses, Justice GS Singhvi noted that while transferring or alienating the natural resources, the state is duty bound to adopt the method of an auction and ensure that a non-discriminatory method is adopted.

The non-availability of 4G airwaves to public sector companies, at a time when the private sector is closer to embracing the next-generation 5G technology, is bleeding the companies further as subscribers desert the state-run carriers for rivals, putting their revival at risk.

The two telecom firms— BSNL that operates across 20 telecom circles and MTNL that serves Delhi and Mumbai metropolitans were already demanding the government to approve their revival proposals that also include allocation of 4G spectrum, virtual retirement scheme (VRS) and assets monetization. The BSNL employee groups also blamed the incumbent government of favouring Reliance Jio over a state telco. Billionaire Mukesh Ambani-owned Jio is a pure-play 4G operator that launched its commercial services in September 2016.

Recently, the All India Trade Union Congress (AITUC) also alleged that a deliberate attempt is being made to shut down BSNL. (Source: Economic Times)

Walmart, Google ink pact for voice-controlled shopping

As e-commerce marketplace Flipkart launches grocery in Mumbai, its owner Walmart has teamed up with Google Assistant to add voice-controlled shopping. The new feature, Walmart Voice Order, is its latest salvo against Amazon and its dominant Alexa platform. Though the voice-enabled shopping feature has been unvieled in the US, analysts maintain it could be a matter of time for Walmart to introduce the feature for Flipkart in India.

Walmart customers will be able to buy groceries using a Google Assistant-enabled device, including smartphone and Google Home smart speaker. Last year, Walmart also announced a five-year strategic partnership with Microsoft for cloud services, to better compete with Amazon in the digital space.

The Indian e-commerce market is projected to be worth $65 billion by 2023, more than double that of $29 billion in 2018. (Source: The Hindu BusinessLine)

Kumar Mangalam Birla to rejig promoter cos ahead of Vodafone Idea issue

L&T set to seal Mindtree deal with Café Coffee Day founder VG Siddhartha SKI Carbon Black to buy Swiss Singapore for $450 million, in talks to relax debt covenants. Ahead of Vodafone Idea’s $3.6 billion rights issue, Kumar Mangalam Birla is reorganising unlisted group companies to raise funds, said people with knowledge of the matter. SKI Carbon Black Mauritius Ltd (Birla Carbon) is set to buy a controlling interest in Swiss Singapore Overseas Enterprises Pte Ltd for $450 million. Both are promoter companies of the Aditya Birla Group chairman. Birla owns 100% of Kiran Investments, which owns these entities.

Carbon Black is said to be in talks with banks to raise short-term debt of $300 million and $150 million. It has also sought a relaxation in loan covenants from 3.5 times debt to Ebitda (earnings before interest, taxes, depreciation, and amortisation) to 4.1-4.2 times, said the people cited above.

Axis Bank, Standard Chartered Bank, Bank of America Merrill Lynch and Citi are believed to be funding the acquisition. An independent valuation will determine the controlling interest that will get transferred.

An Aditya Birla Group spokesperson declined to comment.
As co-promoter, Birla and the group companies are to contribute Rs 7,250 crore to the rights issue. Vodafone Group intends to pitch in with Rs 11,000 crore.

The funds from SKI Carbon will be up-streamed to Kiran Investments, one of the apex promoter entities of Idea. Aditya Birla Group owns 26.54% of Vodafone Idea, held through Grasim, Hindalco and Birla TMT Holdings, among others.

The rights issue is expected to provide the company with ammunition for about two years in the highly competitive sector, analysts said. Vodafone Idea’s debt was Rs 1.24 lakh crore at the end of December. Finance costs were about Rs 7,750 crore each in the past four quarters and losses in that period added up to Rs 10,700 crore. And, coming up is the 5G spectrum auction.

“Bankers are increasingly getting wary of funding Idea’s losses. As a promoter too, his flexibility is getting crimped,” said an executive with one of the lenders to the group. “Earlier, Birla relied heavily on Essel Mining, another private company, as his key money spinner. But following the mining ban and regulatory crackdowns, Essel has lost much of its earlier sheen.”

The worry is that group financials are being stretched to support telecom, experts said. Birla Carbon still has some headroom left but the use of proceeds will create an overhang as it already has on Grasim and Hindalco, they said.

According to Fitch Ratings, the positive outlook of the company’s credit ratings is on the expectation that Birla Carbon’s leverage will improve over the next few years, after increasing in the financial year ended March 2019 due to a large payout to shareholders and other entities.

SKI Carbon Black raised about $500 million in debt during the Idea-Vodafone merger. With this round, it will nearly touch a $1 billion.

Its revenue has fluctuated historically along with carbon black prices, which move in tandem with the underlying feedstock—carbon black oil. Ebitda has declined since 2012 on the back of global oversupply. In FY16, it fell 40% because of an increase in supply from Chinese producers with low-cost carbon black products, which led to a drop in global operating utilisation levels to 75-80%.

The Aditya Birla Group had previously explored the idea of merging Essel with Hindalco for additional financial support after the 2007 Novelis acquisition, according to those with knowledge of the matter. Hindalco eventually made a success of the purchase, generating $350-400 million of free cashflows every year and went on to acquire Aleris for $2.58 billion in July 2018 to become the leading value-added aluminium maker globally.

Incorporated in 1978, Swiss Singapore is a leading bulk commodity trader dealing in various metals and minerals (coal, oil, sulphur, caustic soda), agro commodities (pulses, beans) and fertilisers across the world for group entities as well as third parties.

SKI Carbon Black is one of the world’s top three producers of carbon black with an 11% market share by value, behind Cabot Corp that commands a 21% share. The top three companies account for 40% of the estimated $15 billion global carbon black market. The rest of the market is fragmented, with many small companies competing at the regional level.

Birla is betting on the telecom sector normalising soon, which makes the success of the rights issue crucial. Idea will have nearly Rs 20,000 crore in debt maturing before FY21.

“Completion of Vodafone Idea’s announced deleveraging initiatives—rights issue and potential asset divestments of tower and fibre network—would help the company address potential funding shortfalls in the near to medium term, all else equal,” said Manish Adhukia and Manish Mubayi of Goldman Sachs.

“However, our analysis suggests leverage (net-debt-to-Ebitda) by FY21E is likely to remain at >7x, given its elevated capex/interest payments and resulting negative free cash flows (FCF); we forecast FCF for Vodafone Idea to stay negative at least until FY23E.”

Vodafone India merged with Idea Cellular on August 31 last year, making Vodafone Idea the country’s biggest phone company. It has a subscriber base of about 387 million and a revenue market share of 36%. (Source: ETTelecom)

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