Tag: Influential Business Leaders

Kotak Mahindra Asset Management Company : Nilesh Shah

The corporate tax cut announcement by the Finance minister on 20th Sept 2019 has come as a game and sentiment changer for India Inc. The slash in effective rate from 34.9% to 25.2% (including surcharge), will have a long term ripple effect throughout the economy. An equally far reaching step has been the announcement of a special 17% rate for new companies incorporated on or after 1st Oct 2019 (and starting new manufacturing facilities before March 2023.)

These measures have created an air of optimism in the market not seen in a long time. The tax cut will lead to cash retention of around Rs 1.45 lakh cr with the corporate sector. These tax savings will become major risk-capital available with the companies. Lower tax would mean money saved for years together.

Companies may utilise this retained cash for lowering prices, future capex investment and expansion, debt de-leveraging or dividends/buybacks.

This in turn will create credit demand for banks. On the other side, it may lead to reduced NPA stress and also put money in hands of customers/investors. This, compounded with PSU bank recapitalization, the banks will find themselves in an advantageous position after a long time.

The 2nd element of the tax cut provides a special 17% rate for new manufacturing companies. This basically is the strongest pitch that India has made for FDI in a long time. In one fell swoop, this measure has brought the tax rate lower than most countries in the ASEAN region. This would augur well for companies moving away from China.

Government deserves all the laurels for these slew of measures. But it must not stop at that. Now that India has wrest the initiative, we must build up on the momentum. The availability of land, access to market, and supportive labour laws are business-efficiency and viability issues. Government must help in reducing these barriers for investors. And it is our studied understanding that government is aware of these issues and may look to address the same in the future.

There is this concern that the forgone revenue receipt by the government may lead to fiscal pressure. The expected fiscal deficit is likely to be around 3.7% post the new corporate rates. While this may be true, yet we believe that the growth boost from this measure may lead to greater tax revenue over the long term. For PE rerating there would be more steps required. Since we have increased tax rebate to corporate India, there is a gap on the fiscal side which needs to be bridged. If it is bridged through asset divestment, that is strategic divestment and not market divestment, then the market will get rerated. Moreover, if we bridge the gap on borrowing side by sovereign bond issue or by attractive FPI capital into the Indian bond market, then certainly market will get rerated.

In the short term though, the expectation of fiscal pressure has caused some spike in yield. The yields may remain relatively high until it becomes clear as to how the government will aim to mitigate the potential rise in fiscal deficit. However, we believe that the companies will now have a better interest coverage ratio and debt servicing capability. Thus, the spreads of high quality corporates may in fact come down over a period of time. Moreover, the low inflation still continues to provide cushion for rate cut, albeit in a more staggered manner.

The tax rebate is a step in the right direction – it is a bazooka move! It has changed the sentiment significantly, opened many more possibilities for rapid growth in days to come, however, we need to support it by some more innovative steps like strategic divestment, sovereign bond issue or inclusion on India in the bond index, which attracts more permanent FPI capital in the debt market.

We had pointed out earlier that market is likely to bounce back once the government comes out with a stimulus package. While the market run-up was steep and quick; we believe that the market still remains in around fair-value zone. There is still buying opportunity in the market due to panic selling that had happened earlier, especially in the mid and small cap segment.

For this very reason, we believe that a staggered approach to investment in mid/ smallcaps; and in large mid cap category fund, is a lucrative option. Lumpsum investors can look at investing through balanced advantage fund (BAF) with follow-on STP flowing into one of the above equity funds. Fixed income investors can look to invest in credit fund and Short term bond funds. Dynamic bond fund may also be a lucrative bet if yield spikes significantly from current levels.

To summarize, the India story is coming back on track. The next few months will be critical as to how we compete in the global arena to attract foreign capital and trade incentives. The political dispensation is clearly at it. India’s vast strength, its influential diaspora and cultural goodwill, amongst other things, must be mobilised to fulfil the very achievable 5 trillion-dollar dream.

The 8 Clues That a Candidate Will be an Exceptional Employee

Over the past 40 years, I have reviewed at least 30,000 resumes and LinkedIn profiles and personally interviewed over 5,000 job candidates. After tracking the subsequent performance of hundreds of these people, it became apparent that there were clues in the resume and work history that accurately predicted the likelihood the person would be successful even in roles that were promotions, different jobs, stretch assignments, or in different industries.

Not surprisingly, the people who were the most successful generally had a different mix of skills and years of experience than listed on the original job description. The reason is a bit counter-intuitive: The most talented people do more and learn faster than their peer group. As a result, they get promoted more rapidly and therefore are lighter in terms of overall years of experience and depth of skills.

This pattern of achievement makes it difficult to find these people using traditional sourcing techniques. To get around this, I suggest recruiters source for just a few critical skills and generic titles in combination with clues indicating the person possesses what I call the Achiever Pattern. The Achiever Pattern indicates the person is in the top half or better of their peer group.

Here are some clues hiring managers, recruiters, and sources can use to spot the Achiever Pattern when reviewing resumes or conducting an interview with a candidate:

  1. Demonstrates a fast growth rate.
    Those with the Achiever Pattern generally get promoted more rapidly than their peer group. Aside from a bigger title and job, this could also manifest as being assigned to lead larger or more important teams, or handling more important and more complex projects.
  2. Exhibits strong technical and rapid learning abilities.
    The best hiring managers tend to push their most promising subordinates by giving them stretch roles, assigning them to difficult projects, providing early exposure to senior managers and influential executives, and giving them advanced training opportunities. Look for this pattern in the candidate’s past few jobs and ask how they got assigned to big projects and why. The pattern typically reveals the person’s core strengths, learning ability, and potential. I refer to this approach as the “Sherlock Holmes’ Interview.”
  3. Shows outstanding team, collaborative, and influencing skills.
    During the interview, ask candidate to describe their role on past teams and the other people on those teams. Those with the Achiever Pattern will have been assigned to growing and increasingly important cross-functional teams. This could also include early exposure to important business leaders. Find out how the person got assigned to the team, the reason they were assigned (this reveals the person’s core strengths), the success of the team project, and what happened after the team project was complete.
  4. Has been rehired or referred by former coworkers.
    For their past few jobs, ask how the candidate got the job and why they changed jobs. Those with the Achiever Pattern are typically promoted into the role or referred by a former coworker or hired by a former boss.
  5. Builds great teams.
    When hiring people for management positions, it’s essential that they possess theHiring Manager Achiever Pattern. Clues for this abound, including low turnover, a formal approach to staff development, hiring former coworkers, and hiring other top achievers (which can be validated by a major portion of their previous staff members getting promoted into bigger roles). These are the managers everyone in the company wants to work with, so make sure you dig into this in detail during the interview.
  6. Receives lots of formal recognition.
    It’s a good idea to ask candidate what type of formal recognition they received at each job. This could include special or bigger bonuses, letters of praise, public awards, a prize, or some type of recognition at a company event.

     7. Shows intrinsic motivation to excel.
For each job in their recent history, ask about where the candidate went the extra mile. Highly  motivated  people will have multiple examples and will be able to provide great details and insights as to why they took  the initiative. Patterns here will reveal the type of work that is intrinsically motivating to that person. Map  these to the needs of the position you’re hiring for to ensure a strong fit.

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