VIDYAVARDHAKA COLLEGE OF ENGINEERING

Department of Business Administration

Gokulam 3rd Stage, Mysuru – 570 002.

Subject: Legal and Business Environment Section : A

Subject Code: 18MBA24 Faculty: Dr. Narayanaswamy T

The following teams of Students are formed for the purpose of case study presentations, peer
tutoring, group assignments etc

Sl No Name Teams Case Study No.

1 Harshitha H M
2 Impana S N
3 Ningaraju K Team 1 8
4 Prathap.M
5 Ranjith.K
6 Basavaraj
7 Channesh A G
8 Dhanusha S Team 2 9
9 M P Arvind
10 Sneha S
11 Harshith U
12 Kajol R Mehta
13 Nisarga M C Team 3 10
14 Nishanth Jain R J
15 Pooja
16 Chandana R
17 Kalvapalli Viswanadha Reddy
18 Kavya.M Team 4 11
19 Manoj R
20 Prabha Venkatramana Bhat
21 Chandana J
22 Latha S V
23 Monnappa.K.T Team 5 12
24 Smitha H S
25 Vaishnavi K S
26 Bhavani R Konapur
27 Mukundachar.R
28 Sanath Kumar K.M Team 6 13
29 Shrunga.P
30 Uttam C R
31 Abhignashri C S
32 Kavyashree .R
33 Koushik R Team 7 14
34 Srinivas M J
35 Vinay Aradhya S.N

LAST DATE FOR SUBMISSION OF CASE ANALYSIS REPORT : 10 th June 2018

Page 1 of 40
 VIDYAVARDHAKA COLLEGE OF ENGINEERING
Department of Business Administration
Gokulam 3rd Stage, Mysuru – 570 002.

Subject: Legal and Business Environment Section : B

Subject Code: 18MBA24 Faculty: Dr. Narayanaswamy T

The following teams of Students are formed for the purpose of case study
presentations, peer tutoring, group assignments etc
Sl No Name Teams Case Study No.
1 Amal Jacob
2 Zeeshan
3 Navya Team 1 1
4 Nagashree
5 Pavithra
6 Ashrutha K
7 Yogendra Char
8 Namitha Team 2 2
9 Mohanakanasi
10 Prajwal KS
11 Aishwarya N
12 Viqas Kaleem
13 Parusharam Team 3 3
14 Lochan
15 Prakruthi
16 Bhargavi
17 Vinod TS
18 Lekhana Team 4 4
19 Rekha R
20 Kiran Kumar
21 Chaitra TH
22 Vinay R
23 Rishika Team 5 5
24 Vidya
25 Venkatesh
26 Chethan
27 Gururaj
28 Harshitha Team 6 6
29 Varsha
30 Spandana
31 Chirag
32 Sunayana
33 Sahana Team 7 7
34 Diana
35 Roshika
LAST DATE FOR SUBMISSION OF CASE ANALYSIS REPORT : 10 th June 2018

Page 2 of 40
 Guidelines for Case Study presentation and Case Study report submission

1. The power point should contain only key points in each slide (there should be no
paragraphs in the slides)
2. The slides should be prepared using own sentences. The content should not be
directly copied and pasted into slides from external sources such as internet
3. Acknowledge the source of information/data when presenting
numbers/tables/graphs
4. The content given in the case study is a bird’s eye view. The students have to
collect additional information to analyze the case questions
5. The PowerPoint presentations should be shown to the concerned faculty well in
advance (usually before the commencement of second internal test).
6. Each case study contains 5 questions. Each student can take up one question
for analysis and presentation.
7. Each member in the team should prepare well and present. The team can have a
group discussion before presenting the case.
8. In case of any doubts, discuss with the team members and also the concerned
faculty member.
9. The case study report should be individual and handwritten. Minimum 2 pages
each containing minimum 200 words.
10. Both presentation and case study report are a part of internal assessment
11. Marks will be allocated based on seriousness, preparation, relating to syllabus
concepts and practice, originality, team work, communication and so on.

Page 3 of 40
 CASE STUDY -1

TC moves NCLT against Hotel Leelaventure

1 min read . Updated: 23 Apr 2019, 11:17 PM IST PTI

ITC's current plea was mentioned before the Mumbai bench of the NCLT

ITC, along with the petition, has also filed two applications seeking waiver of the
requirement of minimum threshold of 10% shareholding

NEW DELHI: Diversified group ITC has moved the National Company Law Tribunal
against Hotel Leelaventure alleging "oppression and mismanagement". ITC's current
plea was mentioned before the Mumbai bench of the NCLT, which has posted the
matter for hearing tomorrow, Hotel Leelaventure said in a regulatory filing.

ITC, along with the petition, has also filed two applications seeking waiver of the
requirement of minimum threshold of 10% shareholding, it added.

As per the latest information available on bourses, ITC holds 7.92% stake in Hotel
Leelaventure.

However, the Kolkata-headquartered group did not share the reason for which it has
moved NCLT against Hotel Leelaventures. When contacted, a company spokesperson
said: "The matter is sub-judice and therefore we would not like to comment (on it)." On
March 18, Hotel Leelaventure had announced sale of its four hotels located in
Bengaluru, Chennai, Delhi and Udaipur, and a property to Canadian investment fund
Brookfield for ₹3,950 crore

Shares of Hotel Leelaventure Ltd were trading at ₹10.46 on the BSE during afternoon
trade, down 0.38 per cent from the previous close.

Analyze the case in detail.

Source:

1. https://www.livemint.com/companies/news/itc-moves-nclt-against-hotel-
leelaventure-1556038697975.html
2. https://www.livemint.com/companies/news/sebi-orders-pause-on-leela-
brookfield-deal-after-itc-lic-complaints-1556086306588.html
3. https://www.livemint.com/companies/news/itc-moves-nclt-seeking-to-
cancel-hotel-leelaventure-sale-hearing-on-june-18-1556100082733.html
4. https://www.livemint.com/companies/news/hotel-leelaventure-gets-
shareholders-nod-to-sell-hotels-1556285419277.html

Page 4 of 40
 CASE STUDY -2

Hyundai, Kia looking to locally manufacture electric cars in India

Hyundai is planning to launch its Kona EV in early July. It is also looking for partners like
LG for batteries

BusinessToday.In Last Updated: May 28, 2019 | 13:53 IST

South Korean auto major, Hyundai Motors together with its subsidiary, Kia Motors, are
planning to set up manufacturing plants for electric cars in India. The announcement
came after Indian government announced an outlay of Rs 10,000 crore for Phase 2 of
the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles, or FAME 2
scheme to improve electric mobility and enhance the number of electric vehicles in
commercial fleets. Maruti Suzuki is already working on the WagonR Electric and said
that it will be ready with its first India-focussed electric car by next year.

To power the electric cars in India, Hyundai and Kia Motors are looking for partners like
LG for batteries, said a report by Times of India. The South Korean auto companies are
also looking at other international battery suppliers for the battery requirements. At the
moment, both the companies are undertaking project viability tests in India for procuring
local machinery and batteries.

"One reason why I am here in India is to better understand what's going on in the
electric space here," said Albert Biermann, President Of Hyundai Group's R&D division
told Times of India.

"We can import the technology, but when the market gets too competitive, we can also
localize. We have a strong network of our sister companies and Korean suppliers. The
Korean battery technology is leading across the world and we have strong partnerships,
like with LG. So we can localize with those partners", Biermann added.

Meanwhile, Hyundai is planning to launch its Kona EV in early July. The car was
confirmed by the company last year and will be assembled in Chennai. Kona's
international model is driven the 150kW electric motor. Its 64kWh lithium ion battery
provides claimed range of up to 449km. Hyundai quotes zero to 80 per cent capacity
recharge times extending from 54 minutes on a 100kW DC public fast charger to nine
hours and 35 minutes when plugged into an optional home charger.

Other than Hyundai-Kia, Maruti Suzuki-Toyota, Mahindra & Mahindra and Tata Motors
are also close to launching the electric car models.

Page 5 of 40
Source:

1. https://www.businesstoday.in/sectors/auto/maruti-looks-to-launch-electric-
car-wagonr-electric-next-year/story/350778.html
2. https://www.businesstoday.in/sectors/auto/hyundai-kia-looking-electric-
cars-in-india-maruti-suzuki-tata-motors-mahindra-and-
mahindra/story/351214.html
3. https://www.livemint.com/companies/news/electric-vehicle-journey-to-
begin-with-hybrid-technology-in-india-honda-1558867265801.html
4. https://www.livemint.com/companies/news/electrical-switch-maker-salzer-
electronics-buys-72-32-stake-in-kaycee-industries-1558721172291.html
5. https://www.livemint.com/technology/tech-news/lilium-launched-world-s-
first-all-electric-flying-taxi-completes-maiden-test-here-s-how-it-looks-
1557987446378.html
6. https://www.livemint.com/auto-news/tesla-fires-sound-alarms-about-
electric-car-battery-safety-1558061846738.html
7. https://www.livemint.com/auto-news/4-wheeler-ev-adoption-to-take-time-to-
focus-on-two-and-three-wheelers-ola-1557718881490.html

Page 6 of 40
 CASE STUDY -3

India fears US-China trade tensions will lead to dumping of Chinese steel

Updated: 14 May 2019, 04:46 PM IST Reuters

This, after the US raised tariffs on Chinese products due to the escalating trade war.
Indian steel is vulnerable to displaced exports as a result of US-China trade dispute.
India fears China could soon start flooding excess steel into its market after the United
States raised tariffs on Chinese products due to the escalating trade war between the
world's two largest economies, according to three government sources and four industry
officials.
As a result, the Indian steel industry has asked the Indian government to put in so-
called safeguard duties of as much as 25% to protect it from growing imports. These
would be imposed on steel that the government determines has been dumped in India
at prices below the cost of production.
Since last year, China and the United States have been locked in a trade conflict as
Washington seeks to fix the trade balance, currently tilted in favour of Beijing. The two
nations have raised or threatened to raise tariffs on each other's goods, moves that
could re-draw trade flows and that have threatened to derail the global economy.
"China has excess (steel) capacity and there is a concern they could re-route it through
other countries like Vietnam and Cambodia into India," an Indian government source
with direct knowledge of the matter said.
"Steel sector is vulnerable," the source said, declining to be identified due to the
sensitive nature of discussions.
India, the world's second-largest steel producer, turned net importer in the year ended
March 31, 2019 after a gap of three years. That is because the country lacks the
capability to produce high-quality steel and has lost some of its global clients to cheaper
exports from China, Japan and South Korea.
"China, Japan, Korea which are major exporters to U.S., Europe and Canada, because
of trade actions, they are also diverting steel into India," Seshagiri Rao, joint managing
director at JSW Steel Ltd, told Reuters.
Demanded safeguarded duties
"It is very much essential for government of India to increase the safeguard duty to 25%
as soon as possible," said Rao. Currently, there are a range of such duty levels.
Last month, steel companies JSW, Steel Authority of India, Tata Steel, Jindal Steel and
Power - controlling over 45% of India's total steel production - met with government
officials to ask for safeguards, according to a source who attended the meeting.

Page 7 of 40
During the meeting, Steel Secretary Binoy Kumar, the top bureaucrat in the Ministry of
Steel, also said that the steel industry was at risk from global excess capacity, the
source said.
Kumar said India need to act soon to protect its fragile steel industry from predatory
imports as it would be difficult to revive it if the situation was allowed to deteriorate for
three-to-four years. However, he said a decision on safeguard duties has not yet been
taken.

The steel ministry did not respond to Reuters' emails and phone calls seeking
comments. Neither did SAIL, Tata and JSPL.
"What we are seeing is that part of displaced exports is already making inroads," said
Arnab Kumar Hazra, assistant secretary general at the Indian Steel Association, which
represents major steel producers. There was therefore every reason to argue for
safeguard duties given the perceived threat, he said.
India had imposed a slew of safeguards in 2015-2017 on several steel products to curb
cheaper imports and protect local industry, prompting Japan to refer India's behaviour to
the World Trade Organization (WTO) dispute panel.
India's trade deficit with China jumped more than a nine fold over the past decade to
$63.05 billion in the year ending March 2018.

With the latest U.S. tariffs on Chinese goods, India fears Beijing could also re-route
exports of electronic items, toys, furniture and organic chemicals to India through other
Southeast Asian nations.

New Delhi and Beijing have been negotiating over greater market access as China
wants to exports milk products and apples to India while New Delhi wants to sell China
bovine meat, sources said.

Source:

1. https://www.livemint.com/opinion/columns/opinion-seven-likely-outcomes-
of-the-us-china-trade-war-1557830883697.html
2. https://www.livemint.com/news/india/delhi-may-gain-from-us-china-trade-
war-by-slashing-own-tariffs-1558723579258.html
3. https://www.livemint.com/news/india/india-bats-for-a-strong-wto-appellate-
body-1557771129924.html
4. https://economictimes.indiatimes.com/markets/stocks/news/us-not-ready-
to-make-a-trade-deal-with-china-trump-says/articleshow/69517538.cms

Page 8 of 40
 5. https://www.livemint.com/videos/explained-fresh-threat-of-us-china-trade-war-
and-its-effects-on-india-1557196937255.html

CASE STUDY -4

Budget highlights: No tax on income till Rs 5 lakh, a big spread for farmers
& unorganised workers
Union Finance Minister Piyush Goyal's budget has proposed tax breaks for the
middle class and sops for farmers and millions of employees in the unorganised
sector. Taxable income up to Rs 5 lakh per year will be exempted from tax;
farmers owning up to 5 hectares of land will get income support of Rs 6,000 per
year and unorganised sector employees will get Rs 3,000 per month pension.

Here are the highlights from the FM's speech:

Income Tax reliefs:
* No tax for those whose taxable income is less than Rs 5 lakh
* Standard deduction increased to Rs 50,000 from Rs 40,000 for salaried class

Tax exemptions on investments:

* Individuals with gross income up to 6.5 lakh rupees will not need to pay any tax
if they make investments in provident funds and prescribed equities
* TDS threshold for home rent increased from Rs 1.8 lakh to 2.4 lakh
* Interest income up to Rs 40,000 in post offices and banks made tax free
* Capital gains tax exemptions under Section 54 to be available up to Rs 2 crore.
Capital gains exemption to be available on 2 house properties

Discuss further by collecting more data

Source
1. https://economictimes.indiatimes.com/news/economy/policy/budget-2019-
highlights/articleshow/67783883.cms
2. https://www.ibef.org/economy/union-budget-2018-19
3. https://www.paisabazaar.com/union-budget/budget-2019/

Page 9 of 40
 CASE STUDY -5

Q4FY19 earnings review: Topline growth hit three-quarter low on consumption

slowdown, challenging global macros

Niti Kiran Last Updated: May 27, 2019 | 17:13 IST

The past three quarters witnessed a decent double-digit volume growth on account of
low base effect due to reformist measures like demonetisation and implementation of
GST, but the base is not encouraging any more

The consumption slowdown, which has already hit the March quarter (Q4) of financial
year 2018-19 (FY19), will continue to haunt markets in the June quarter of FY20.
Q4FY19 is turning out to be a damp squib with close to 500 BSE firms registering a
three-quarter low topline growth amid poor demand coupled with liquidity crunch. The
net sales for the sample of 488 BSE-listed companies grew at 10 per cent year-on-year
in Q4FY19, the slowest in the last three quarters. Excluding BFSI firms, the volume
growth got restricted to just 7.6 per cent. "Lower sales growth of Indian companies is on
account of challenging domestic as well as global macro conditions. Consumption
slowdown coupled with liquidity crunch has affected demand domestically, while weak
global macros have built in uncertainty in sales and prices for global commodities,
causing overall sales to slow down," says Vineeta Sharma, head of research, Narnolia
Securities.
The past three quarters witnessed a decent double-digit volume growth on account of
low base effect due to reformist measures like demonetisation and implementation of
Goods and Services Tax (GST), but the base is not encouraging any more. "The slower
growth is a function of two factors, one is the base effect. The base has moved up
because in FY17, there was an impact of two major events of demonetisation and GST
implementation. So, base is not favourable any more. We have also witnessed
slowdown in consumption. Many FMCG companies have attributed the slowdown to the
onset of elections and slowing consumption trends in the rural market. The election
phenomenon could reverse in the forthcoming quarters but a structural slowdown in the
economy could pose a big challenge," adds Naveen Kulkarni, head of research,
Reliance Securities.

Marred with slow revenue growth, bottomline numbers were a disappointment too. The
operating profits of the ex-BFSI sample grew 3.5 per cent in Q4FY19, the slowest in the
last three quarters. However, profit after tax grew at 5.4 per cent as compared to 1.3 per

Page 10 of 40
cent and 2.9 per cent y-o-y in the last two consecutive quarters. "The profit growth has
been impacted by slow revenue growth and impact of operating leverage working
negatively," adds Kulkarni. However, this could reverse to some extent in the
forthcoming quarters if revenue growth picks up, he adds further.
The fiscal show
The volume growth for companies picked in FY19 after registering a degrowth in
previous two fiscal years on account of demonetisation and the implementation of GST.
The FY19 net sales of the ex-BFSI universe logged a six-year high double-digit growth
of 14.2 per cent in FY19 as compared to 7.2 per cent in FY18. "Expansion in volume
growth for companies will now be dependent on an increase in market share rather than
increase in the market itself," says Sharma.

Rising input costs due to volatile commodity prices and weaker operating leverages has
impacted the bottomline of companies and put pressure on the margins. FY19 saw net
profit growth of 3.8 per cent as compared to 4.2 per cent jump in Q4FY18 and 16.9 in
Q4FY17. Cost of services and raw materials as percentage of net sales grew 2.3
percentage points in the past two fiscal years. "Input cost inflation, especially
denominated by crude, is likely to remain a medium term concern," says Kulkarni.
Employee expenses as a percentage of sales saw a slight moderation from 11.6 per
cent to 11.4 per cent during the period. Moreover, debt funding is either getting costlier
or not easily available as interest expenses inched up to 2.9 per cent from 2.5 per cent,
as a percentage of net sales. According to Sharma, "There are weaker operating
leverages within the company due to unutilised capacity, higher inventory in the system,
higher power and freight costs." She analyses that sales and promotion expenses
where the company has some control to manage EBDITA are also rising due to weaker
demand. All of this translated into lower margins wherein both operating profit and net

Page 11 of 40
profit margin declined close to 100 basis points in the last two fiscal years. Sharma
expects that EBDITA (earnings before depreciation, interest, taxes and amortisation)
margins pressure in the near-term should continue, but as the topline for companies
grows, margins should pick up.
Major headwinds
Growth in GVA in agriculture has been slowing since Q1FY19 from 5.1 per cent to 2.7
per cent in Q3FY19. It may continue to fall in Q4FY19 too. The adjusted series of
average wage rates calculated by CMIE for rural labourers engaged in agricultural and
non-agricultural activities for men dipped from 4.45 per cent in December quarter of
FY17 to 3.85 per cent in the March quarter of FY19. The automobile segment's demand
remains under pressure largely on account of higher inventory levels, high base last
year and weak consumer sentiment. Overall, the fundamentals remain fragile with poor
demand and rural distress. Some consumer companies have also indicated a
sequential slowdown in their top line numbers in their rural pockets.

Sectoral trend
The sectoral show in Q4FY19 was a mix bag with a majority of them going with the tide
of de-accelerated volume growth. The worst hit were the diamond and jewellery,
infrastructure, retailing and healthcare sectors as their revenue growth slid over 8
percentage points in the last two quarters. Being a part of the jewellery industry, Titan,
with over 80 per cent turnover coming from the jewellery division, bucked the trend with
revenue growth of 19 per cent. Its jewellery division recorded a strong revenue growth
of 21 per cent. The companies in healthcare sector posted a massive decline of 50.4
per cent in net profits. Infrastructure firms and companies in retailing too posted a fall of

Page 12 of 40
over 15 per cent in their profit after tax in Q4FY19. "Infra was expected to slow down
considering this was the last quarter of the incumbent government. If the ruling party
gets another term, the pickup in infra spending is very likely and the current slowdown
will reverse. Healthcare is impacted by many other factors, which are not domestic in
nature," highlights Kulkarni.
The consumption-oriented sectors have seen a slowdown with some pockets of
discretionary consumption seeing a significant decline. The consumer durables
segment posted a growth of 15.7 per cent in net sales, but net profit declined 5.2 per
cent in the last quarter. Significant inventory pile up and volume pressure was visible on
passenger vehicles (PV) and two-wheeler segments in FY19. The four-year low growth
of 3 per cent y-o-y in the PV segment coupled with y-o-y growth of 5 per cent in two-
wheeler segment - the slowest in the past two years - represent the tepid demand the
auto segment is currently battling with. The FMCG space saw a net sales growth of 10.1
per cent in Q4FY19 as compared to 13.2 per cent growth in the previous quarter. The
FMCG major Hindustan Unilever saw some moderation in volume growth at 7 per cent
in March quarter after registering a double-digit growth in last five quarters. Gross
margins contracted 30 basis points y-o-y to 52.3 per cent. "Automobiles, consumer
companies have reported relatively weak numbers. IT has posted in-line performance,"
says Gautam Duggad, head of institutional research, Motilal Oswal Financial Services.

Amid slower than expected growth in companies, the Indian corporate banking is
showing some signs of improvement. The banking firms, which contribute nearly 5 per

Page 13 of 40
cent to the aggregate profits of our sample, reported better earnings during Q4FY19
with aggregate net profits of Rs 2,629 crore as compared to a combined loss of Rs
3,239 crore reported in the corresponding quarter of FY18, led by reversal of NPA cycle
and lower provisioning. The sector, however, witnessed a sequential fall of 73 per cent
in their net profits from Rs 9,780 crore to Rs 2,629 crore. "Asset quality has improved,
provision coverage ratio has gone up and loan growth has improved too. Guidance from
corporate banks has been encouraging for FY20. We are expecting 57 per cent of
incremental profit in Nifty in FY20 to be driven by BFSI," adds Duggad.
The companies in logistics and realty space showed a good growth in their bottomline
and topline numbers in the March quarter. The realty space logged over 100 per cent
growth in net profits while the logistics segment reported a jump of 75.2 per cent in the
same. Kulkarni from Reliance Securities points out that a quarter is not enough to read
into the numbers of these two sectors as there can be significant amount of volatility.
"Long-term trends are more critical and at present realty is a mixed bag with major
challenges on the financing front. Logistics has lower volatility and long-term growth
prospects are encouraging. However, rising fuel costs are a cause of concern for the
sector," he explains further.
By the end of this month, bulk of companies will come out with their fourth quarter
results that may further affirm our stance of weaker-than-expected earnings season.
However, once the dust settles on the political uncertainty, monsoons, rural distress and
global growth will direct the discourse.

Source
https://www.businesstoday.in/markets/stocks/q4fy19-earnings-review-topline-growth-hit-
three-quarter-low-on-consumption-slowdown-challenging-global-
macros/story/350908.html

Page 14 of 40
 CASE STUDY -6

IndiGo share hits 52-week high on robust Q4 results; SpiceJet trades near record
high

Buoyed by strong Q4, IndiGo share price gained as much as 3.18 per cent and touched
52-week high of Rs 1,716 against previous close level of Rs 1,663 on the BSE

BusinessToday.In New Delhi Last Updated: May 28, 2019 | 13:37 IST

Shares of InterGlobe Aviation, the parent company of IndiGo, hit a new high of Rs
1,716, up 3 per cent, on the Bombay Stock Exchange on Tuesday after the airline
reported a five-fold jump in net profit at Rs 589.6 crore during the January-March
quarter of FY19, compared to Rs 117.6 crore in the same quarter last year.

The low-cost carrier's total income rose by 35.5 per cent to Rs 8,259.8 crore in the
fourth quarter ended March 2019 compared to Rs 6,097.7 crore in the year-ago period,
InterGlobe Aviation said in a filing to the BSE.

Buoyed by strong Q4, IndiGo share price gained as much as 3.18 per cent and touched
52-week high of Rs 1,716 against previous close level of Rs 1,663 on the BSE. Paring
most of early gains, the stock was currently trading at Rs 1,673, up 0.55 per cent.

On the National Stock Exchange, IndiGo shares were up 0.41 per cent at Rs 1,669
apiece. The scrip opened higher at Rs 1,698 against previous close of Rs 1,662.15 and
touched 52-week high of Rs 1,716 in early trade.

According to experts, IndiGo's success is largely due to aggressive pricing on select

routes to gain market share. Typically, increasing passenger footfall on new routes
requires lower fares to make the airline and routes popular.

Overall, the financial year 2018-19 was a tough year for the airline due to high fuel
prices, weak rupee and intensely competitive environment. The aviation company has
reported a sharp decline of 93 per cent in its standalone net profit at Rs 156.10 crore for
FY19 as compared to Rs 2,242.40 crore in the last fiscal.

Page 15 of 40
Commenting on earnings numbers, IndiGo CEO Ronojoy Dutta said, "It is a tale of two
halves for IndiGo, with the first half of the year incurring losses and the second half of
the year experiencing a sharp recovery."

He also said that Jet Airways shut down helped in February and March, but the impact
will be limited to some international routes by June. A total of 285 former Jet pilots have
joined the airline which in turn has helped IndiGo overcome its pilot shortfall.

Meanwhile, rival SpiceJet's stock also gained as much as 5 per cent in intra-day trade to
Rs 153, hovering around its 52-week high of Rs 156, hit on December 20, 2017, in intra-
day trade on the BSE. Jet Airways shares were also up 1.18 per cent at Rs 154 apiece
after opening higher at Rs 153.70 on the BSE, The scrip hit an intra-day high of Rs
156.90 during the day's trade.

Source

1. https://www.livemint.com/companies/news/indigo-the-low-cost-conqueror-
is-now-coming-for-emirates-etihad-airways-1559043187672.html
2. https://www.businesstoday.in/sectors/aviation/indigo-cashes-in-on-jet-
airways-crisis-to-increase-march-quarter-profit-to-rs-590-
crore/story/351043.html
3. https://economictimes.indiatimes.com/markets/stocks/news/indigo-can-
expand-profitably-sustain-its-earnings-growth/articleshow/69531192.cms

Page 16 of 40
 CASE STUDY -7

Liabilities biggest hurdle to Jet Airways sale, says SBI

Updated: 02 May 2019, 01:05 PM IST

Liabilities and losses are considerable. All these past liabilities and then, profitably, can
they fly in future?, asks SBI chairman Rajnish Kumar

Creditors led by SBI have put Jet Airways up for sale after the carrier failed to pay back
debt

New Delhi: The top lender of ailing Jet Airways India Ltd said the burden of reversing
the grounded carrier’s negative net worth before it can fly again is the biggest challenge
for any potential investor.

“Liabilities and losses are considerable," Rajnish Kumar, chairman of State Bank of
India, said in an interview with 'Bloomberg Television' on Thursday. “All these past
liabilities and then, profitably, can they fly in future? These are some of the
considerations which are weighing upon the minds of the potential investors."

Creditors led by State Bank of India have put Jet Airways up for sale after the carrier
failed to pay back debt. Once India’s biggest airline by market value, Jet Airways has
been a victim of a budget airline boom in the fiercely competitive market in the South
Asian nation, where carriers offer base fare of as low as 1 cent to lure first time flyers.

The airline, which stopped all flights last month, has made losses in nine of the past 11
years. Jet Airways has seen lessors taking away its aircraft while rivals start services on
routes it previously operated.

The deadline for submission of binding bids to take over control and ownership of Jet
Airways is 10 May, Kumar said. The lenders, to which the airline owes more than $1
billion, have yet to take a call on how much debt will be forgiven, he said.

Jet Airways, the oldest surviving private airline which broke into a monopoly of Air India
Ltd., had a fleet of 124 and flew profitable routes like connecting India with London and
Toronto.

Page 17 of 40
Source

1. https://www.livemint.com/companies/news/liabilities-biggest-hurdle-to-jet-
airways-sale-says-sbi-1556781605155.html
2. https://economictimes.indiatimes.com/industry/transportation/airlines-/-
aviation/fall-of-jet-airways-the-naresh-goyal-story/videoshow/68991010.cms
3. https://www.livemint.com/videos/decoding-the-good-bad-and-the-ugly-of-jet-
airways-crisis-1555574533383.html
4. https://economictimes.indiatimes.com/industry/transportation/airlines-/-
aviation/cash-strapped-jet-airways-cancels-all-international-
flights/articleshow/68836939.cms
5. https://www.youtube.com/watch?v=YHs0WH0zcGg
6. https://www.business-standard.com/article/companies/hinduja-group-confirms-
evaluating-options-for-jet-airways-stake-119052401224_1.html

Page 18 of 40
 CASE STUDY -8

RBI PCA banks: Queue to check out of Hotel California is slowly forming

2 min read . Updated: 04 Jan 2019, 07:01 AM IST Aparna Iyer

With the government augmenting its bank recapitalisation plan, Bank of India, Oriental
Bank of Commerce and Corporation Bank now have a strong chance to exit RBI PCA
framework

Dena Bank will be the first lender to exit the prompt corrective action (PCA) framework,
the Reserve Bank of India’s (RBI) intensive care unit. But this exit is through death, as

Page 19 of 40
the lender would cease to exist as an entity after April, when its merger with Bank of
Baroda takes effect.

It is hard to say when the remaining 10 lenders still quarantined under RBI PCA
framework would come out. But the recent commitment of the government to infuse
capital seems to suggest that the distance to the door just got reduced. At least, the
investors holding the scrips of these lenders seem to think so, as six of them have
surged more than 10% in the last three weeks.

The optimism comes on reports that the government will soon infuse about ₹ 27,000
crore into six PCA banks. It is also willing to pour in ₹ 41,000 crore over and above the
original commitment of ₹ 65,000 crore into 21 public sector banks as part of the bank
recapitalisation plan.

What investors are betting on is that the government will be the parent who gives the
maximum attention to the weakest child. Hence, the RBI PCA banks would receive the
biggest chunk of funds. Indeed, in the previous round of infusion in fiscal year 2018, the
government did exactly that. The fact that Bank of India received a whopping ₹ 10,086
crore infusion last month shows how serious the government is in putting life back into
the lenders. According to analysts at Kotak Institutional Equities, the lender needed ₹
4,100 crore additional capital in 2019-20 to offset provision requirements.

As of September, Bank of India’s common equity Tier-I ratio was 7.5%, far higher than
the regulatory minimum of 5.5% and the additional capital infusion will boost this further.
Given the increased elbow room in capital, the lender can write off loans to bring down
its net bad loan ratio below the required threshold and exit PCA.

Analysts at Kotak believe that Bank of India, Oriental Bank of Commerce and
Corporation Bank now have a strong chance to exit PCA. Bank of India has the lowest
net bad loan ratio among PCA banks and also has a stronger capital adequacy ratio.

A bank is dragged into PCA if it breaches thresholds for capital, bad loans, leverage
ratio and return on assets. The Reserve Bank of India (RBI) looks into the performance
of the lenders on an annual basis to determine whether they are strong enough for it to
remove restrictions imposed on them under PCA.

The government’s capital infusion seeks to mend the capital ratios of weak banks under
PCA and also help them make provisions to bring down the net bad loan ratio to below
6%. In a nutshell, fresh money should enable banks to get the numbers to exit PCA. Of
course, some relaxation of norms may still be required from the central bank, on
parameters such as return on assets, since most state-owned lenders have been
running losses.

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To be fair, some banks have shown marked improvement in strengthening their balance
sheet, but most others continue to lag.

The government’s principal economic adviser Sanjeev Sanyal had chided RBI to have a
Hotel California approach to PCA. To borrow the reference to the 1970s song of that
title by American rock band Eagles, the queue to check out of the hotel is slowly
forming.

Source

1. https://www.livemint.com/industry/banking/12-psu-banks-to-get-rs-48-000-more-
in-fy19-as-part-of-bank-recapitalisation-plan-1550661562178.html
2. https://www.livemint.com/market/mark-to-market/psu-bank-capitalisation-and-a-
perfect-lesson-in-burning-capital-1551305977403.html
3. https://www.businesstoday.in/top-story/exit-of-boi-bom-obc-from-rbi-pca-
framework-is-credit-positive-moodys/story/318054.html
4. https://www.businesstoday.in/top-story/remaining-8-banks-to-be-out-of-pca-
framework-soon-says-finance-minister-goyal/story/315935.html
5. https://www.thehindubusinessline.com/money-and-banking/banks-coming-out-of-
pca-framework-may-not-see-sudden-growth-in-credit/article26474892.ece

Page 21 of 40
 CASE STUDY -9
Discuss the company results of Sun Pharma by referring to the following
link

Source
1. https://www.livemint.com/companies/company-results/sun-pharma-q4-
consolidated-net-profit-halves-to-rs-636-crore-1559047394493.html
2. https://www.businesstoday.in/current/corporate/sun-pharma-net-profit-rises-27pc-
to-rs-266542-crore-fy19-revenue-up-10/story/351396.html
3. https://www.sunpharma.com/

Page 22 of 40
 CASE STUDY -10

RULE IN FOSS V. HARBOTTLE

The claimants, Foss and Turton, were shareholders in a company ‘The Victoria
Park Company’ which was formed to buy land for use as a pleasure park. The
defendants were the other directors and shareholders of the company. The
claimants alleged that the defendants had defrauded the company in various
ways and in particular that the defendants had sold land belonging to them to the
company at exorbitant price. The claimants now asked the court to order that the
defendants make good the losses to the company.
It was held by Vice-Chancellor Wigram that since the company’s board of
directors was still in existence, and since it was still possible to call a general
meeting of the company, there was nothing to prevent the company from
obtaining redress in its corporate character, and the action by the claimants could
not be sustained.
In Foss v. Harbottle two minority shareholders in a company alleged that its
directors were guilty of buying their own land for the company’s use and paying
themselves a price greater than its value. This act of directors resulted in a loss
of the company. The minority shareholders decided to take action against the
directors, but the majority shareholders in a meeting resolved not to take any
action against the directors alleging that they were not responsible for the loss
which had occurred.
The court dismissed the suit on the ground that the acts of the directors were
capable of confirmation by the majority members and held that the proper plaintiff
for wrongs done to the company is the company itself and not the minority
shareholders and the company can act only
through majority shareholders. The rationale in that line of reasoning is that a
company is a separate legal entity from the members who compose it and as
such, if any right of the company is violated, it is the company which can bring an
action through the majority.
It was held that, “If the thing complained is a thing which, in substance, the
majority of the company are entitled to do, or something has been done
irregularity which the majority of the company are entitled to do regularly or if
something has been done illegally which majority of the company are entitled to
do legally, there can be no use in laying litigation about it, the ultimate end of

Page 23 of 40
 which is only that a meeting has to be called, and then ultimately the majority
gets its wishes.
It was also held that, it is elementary principle of law relating to joint stock
companies that the court will not interfere with the internal management of the
company, acting within their powers and jurisdiction to do so. Again it is clear that
in order to redress a wrong done to the company or to recover monies or
damages due to the company the action should prima facie be brought by the
company itself”.

Analyse the case in detail with advantages and exceptions

Page 24 of 40
 CASE STUDY -11

Ashbury Railway Carriage and Iron Co v Riche (1875) LR 7 HL 653 Case Summary

For the constitution of companies incorporated under the Companies Act 2006, a
memorandum of association containing the purpose for which it is incorporated is no
longer a requirement.[1] However, for companies limited by shares incorporated under
the Companies Act 1985, a memorandum of association clearly stating, the purpose for
which it was formed was required. Such object may not be unlawful[2], or its registration
may be quashed.[3] The lawful purpose for which a company may be formed is
unlimited, and companies can do most of the things required to fulfil this purpose.
However, the position of a company performing a lawful activity, which is outside of the
scope of its objects clause was unclear, until the House of Lords dealt with this issue in
Ashbury Railway Carriage and Iron Co. Ltd v Richie.[4]

The objects of Ashbury Railway Carriage and Iron Co Ltd were ‘to make or sell, or lend
on hire, railway-carriages and waggons, and all kinds of railway plant, fittings,
machinery and rolling-stock; to carry on the business of mechanical engineers and
general contractors; to purchase and sell, as merchants, timber, coal, metals, or other
materials; and to buy and sell any such materials on commission, or as agents’.[5] The
House of Lords considered the contract to be beyond, or outside of, the powers of the
company because it was not included in the objects clause in its memorandum. It was
held that by entering into the transaction the company was in breach of its constitution,
for it had no ‘competence’ or ‘power’ to make the contract and therefore, the transaction
had no legal effect. This meant that Richie’s claim against the company for breach of
contract failed, as there was no contract to be enforced.

This case established the ultra vires rules, which meant that a company only had legal
capacity to do what its objects clauses enabled it to do. In the case of Ashbury, had the
transaction been included in its objects clause, the company would have had the
capacity, making it valid. Another point to distinguish is that the memorandum in
Ashbury talks about the objects clauses restricting powers of the company. The
difference between these are that objects are those parts of the constitution which

Page 25 of 40
describe the activity a company is set up to carry on. Powers of a company are the
things it needs to be able to do to carry on the activity.

The difficulty with the ultra vires rules was that those dealing with a company would
have to check that it had capacity to enter into the contract by looking at its
memorandum in the Register of Companies, otherwise they risked finding themselves
unable to enforce a contract that the law would consider void unless the contract
entered into was within its object clause. This was quite impractical.

In order to appreciate the ways in which the law responded to the decision in Ashbury, it
is necessary to take a detailed look at the memorandum in Ashbury, which states that
the objects clauses restricts powers of the company. It is important to distinguish
between these: the objects describe the activity a company is set up to carry out, and
powers are what the company needs to be able to do to carry out this activity.

The inclusion of powers is not a requirement in company constitutions under CA 2006

or its predecessors, yet it has been accepted practice to expressly include them. One of
the ways in which the law reacted to the decision in Ashbury was to imply powers not
expressly included in the objects clause. This is illustrated in the case of The Attorney-
General & Ephraim Hutchings (Relator) v The Directors of the Great Eastern Railway
Company.[6] Lord Selborne LC considered that ‘whatever may fairly be regarded as
incidental to, or consequential upon, those things which the legislature has authorised,
ought not (unless expressly prohibited) to be held, by judicial construction, to be ultra
vires’. Anything which might fairly be regarded as incidental to, or consequential upon,
its objects, ought not to be held to be ultra vires’.[7]

This decision limited the effect of the ultra vires rules by bringing acts not expressly
identified in the memorandum within the powers of the company. But although this
represented an improved state of affairs for those transacting with a company, a
reliance on the company’s object clause still existed.

In order to further restrict the effect of the rules, the attention shifted to the drafting of
the object clauses in company constitutions. In Cotman v Brougham,[8] Lord Parker
stated the object clauses aimed at protecting shareholders and persons who deal with
the company, although both had very different interests in how wide the clause should
be. Protection of shareholders was best achieved by drafting the objects clause
narrowly, limiting the purposes for which the capital they invest in the company can be
used. And protection of those dealing with the company would be achieved by drafting
the objects clause widely,[9] so a particular transaction was less likely to be outside the
company’s objects. Clauses which were so wide to include every eventuality were
called ‘Cotman v Broughman’ clauses.

Page 26 of 40
Later cases used yet more devices to avoid the impact of the ultra vires rule. In Bell
Houses Ltd. v City Wall Properties Ltd.[10] the objects clause contained the object: ‘to
carry on any trade or business whatsoever which can, in the opinion of the board of
directors, be advantageously carried on by the company in connection with or as
ancillary to any of the above business or the general business of the company’.[11] The
claimant charged a fee for a kind of transaction not covered in the objects. The
defendant refused to pay arguing that the transaction was ultra vires the claimant
company. The Court of Appeal held that the transaction was intra vires the company, as
falling within the objects. ‘Bell Houses’ clauses were born.

In order to simplify matters, Parliament enabled companies to have a ‘general

commercial objects clause’ to include ‘any trade or business whatsoever’, this would
give companies the requisite powers to carry out any trade or business.[12] However, it
is still common practice to draft constitutions with long objects clause just in case.

It is evident that the ultra vires rules has had a significant effect on how company law
and company constitutions have evolved. However, its effect is becoming less
significant as a result of legislation, which provides that a company’s objects are
unrestricted, unless the articles restrict these.[13]

Footnotes

[1] Companies Act 2006, s 17

[2] ibid s 7 (2)

[3] R v Registrar of Companies, ex parte Attorney General [1991] BCLC 476, Ackner LJ
considered that the purpose of carrying on the business of prostitution was a sexually
immoral purpose, and so the association of the subscribers of Lindi St Clair Ltd was not
for lawful purposes and ordered that the registration be quashed

[4] (1874-75) LR 7 HL 653

[5] ibid page 654

[6] (1880) 5 App Cas 473

[7] ibid [478]

[8] [1918] AC 514

[9] ibid page 520- 521

[10] [1963 B No 2029] [1966] 2 QB 656

[11] ibid page 657

Page 27 of 40
[12] Companies Act 1985, s 3 (a)

[13] Companies Act 2006, s 31

Case Study -12

How independent are independent directors?

In context of Cyrus Mistry’s ouster, the case study examines corporate governance in
Tata group

In the context of Cyrus Mistry’s ouster as Chairman of Tata Sons, this case study
examines corporate governance in the Tata group. This is among the best cases
presented at the Case Symposium held at the Loyola Institute of Business
Administration (LIBA) held on April 7, 2017.

On October 24, 2016, the Tata Sons board — the majority shareholder of the Tata
group conglomerate — approved a resolution to oust Cyrus Mistry as Chairman of Tata
Sons. This move came as a surprise and a shock to everyone including Mistry himself.

It set off an acrimonious exchange of words between Tata Sons and Mistry, who was
hand-picked for the job less than five years ago by Ratan Tata. This was followed by a
bitter legal battle that continues to date. Tata Nano, the previous Chairman Ratan Tata’s
pet project, seems to have triggered the feud. The manner and pace in which the events
unfolded led one to hypothesise on the effectiveness of the Board of Management and
the position and extent of power and influence it has.

This case examines the role and the position of the independent directors in a large
conglomerate whose majority shareholders are the promoters, and questions the
independence of an independent body. It also narrates the events leading to the
removal of Mistry as Chairman of the Tata Board and the subsequent removal of an
independent director who backed Mistry. The case study examines corporate
governance policies in the Tata group and describes the role of the independent
director.

Page 28 of 40
Commenting on the issue, L Iyer of LVV Iyer & Associates had asked a pertinent
question: “What is at stake right now is not an independent director. What is at stake is
the independence of independent directors. If independent directors are under constant
threat of being removed, why would they act in an independent manner?”

Global brand

A global enterprise headquartered in Mumbai, the Tata group was founded by Jamsetji
Nusserwanji Tata in 1868. The visionary entrepreneurhelped pave the path to
industrialisation in India by encouraging businesses in sectors such as steel, energy,
textiles and hospitality. Over the last 150 years, the Tata group has grown to comprise
over 100 independent operating companies in more than 100 countries. It now employs
over 660,000 people and has assets of over $120.6 billion as of 2016.

Each Tata company operates independently under the guidance and supervision of its
own board of directors and shareholders. There are at present 29 publicly listed Tata
enterprises with a combined market capitalisation of $116.41 billion in 2016. Some
notable Tata companies include Tata Steel, Tata Motors, Tata Consultancy Services,
Tata Power, Tata Chemicals, Tata Global Beverages, Tata Teleservices, Titan, Tata
Communications and Indian Hotels.

Tata Sons

Tata Sons is the principal investment holding company and 66 per cent of its equity
share capital is held by philanthropic trusts that support education, health, livelihood
generation, and art and culture. The Tata Trusts — the majority shareholders of Tata
Sons — has endowed institutions for science and technology, medical research, social
studies and the performing arts.

Tata Sons aims to build multinational businesses that seek to distinguish themselves
through customer-centricity, innovation, entrepreneurship, trustworthiness and values-
driven business operations, while balancing the interests of diverse stakeholders
including shareholders, employees and civil society.

Page 29 of 40
Ratan Tata and Cyrus Mistry

Ratan N Tata took over as Chairman of Tata Sons from JRD Tata in November 1993
and has served as Chairman of the major Tata companies, including Tata Motors, Tata
Steel, Tata Consultancy Services, Tata Power, Tata Global Beverages, Tata Chemicals,
Indian Hotels and Tata Teleservices. During his tenure — from 1992 to 2012 — the
Group’s revenues grew manifold, totalling over $100 billion in 2011-12.

Cyrus Mistry, often regarded as Ratan Tata’s blue-eyed boy, was handpicked by the
billionaire mogul himself in mid-2012 to head the Tata Group and took charge in
December the same year. Cyrus is the younger son of billionaire and construction
magnate Pallonji Mistry. The Pallonjis have been a business family for over a century
and it was in the 1930s that Cyrus’ grandfather, Shapoorji Mistry, first acquired a stake
in Tata Sons. To date, their stake stands at 18.5 per cent and is held by Cyrus’ father. It
is the largest block of shares held by a single party.

Tata Motors

Tata Motors is India’s largest automobile company, with consolidated revenues of $34.7
billion (₹1, 88,818 crore) in 2012-13. It is the country’s market leader in commercial
vehicles and among the top three in passenger vehicles. It is also the world’s fifth-
largest truck and fourth-largest bus manufacturer. Tata Motors’ commercial and
passenger vehicles are being marketed in several countries in Europe, Africa, the
Middle East, South Asia, South East Asia, South America, CIS and Russia.

The company, formerly known as Tata Engineering and Locomotive Company, began
manufacturing commercial vehicles in 1954 with a 15-year collaboration agreement with
Daimler Benz of Germany. It has since tied up with international majors such as Jaguar
Land Rover and Fiat; developed the light commercial vehicle Tata Ace; the Prima range
of trucks; Tata Safari, India’s first sports utility vehicle; Tata Indica, the first indigenously
manufactured passenger car; and the Nano, the world’s most affordable car.

Nano’s bumpy ride

Page 30 of 40
The idea of a small, affordable car was born when Ratan Tata noticed middle-class
Indian families of three or four members travelling on bumpy roads at night on one two-
wheeler. The safety hazards of such situations, combined with his enthusiasm for cars,
led to the conception of the Tata Nano in 2003 It was called the “People’s Car” and was
to be priced at ₹1 lakh.

In 2006, Tata Motors announced that the Nano would be manufactured in Singur, West
Bengal, and started acquiring land to set up its manufacturing facilities. Since
automobile manufacturers usually work in a cluster, the company attracted many of its
subcontractors — the OEM (original equipment manufacturer) — to Singur. However,
local farmers, led by All India Trinamool Congress president Mamata Banerjee,
protested violently the forced acquisition of land. This led to Tata Motors pulling out of
Singur and relocating to Sanand in Gujarat. The entire plant, which was in its last stages
of completion, had to be moved, which led to heavy losses and delay in production.
However, the company decided to manufacture the first 50,000 cars at the company’s
facilities at Pantnagar, Uttarakhand.

Tata Motors made automotive history on March 23, 2009, when with much fan-fare, the
Nano was launched in Mumbai. The objective of the car was to provide a safe,
comfortable, and affordable ride. The car fulfilled the long-standing dream of Ratan
Tata.

The company boasted of creating a manufacturing facility at Sanand to manufacture

2,50,000 Nano’s per annum and also of setting up 380 sale outlets to meet the
anticipated demands and 450 service outlets to meet the after-sale service needs.

Dwindling sales

The Nano experienced a bumpy ride from the start. Originally set up at Singur in West
Bengal, the plant was shifted to Sanand following violent protests over land acquisition.
Inaugurated with much fanfare and buzz, the Nano car factory could never achieve full-
capacity in production as the car sales remained a challenge for the company.

There were further complications. First, except for the first few customers the company
was unable to sell the car at the much publicised price of ₹1 lakh. When bookings

Page 31 of 40
opened on April 9, 2009, Tata Motors dealers expected a surge of customers and the
company printed over 20 lakh booking forms, expecting more than 5,00,000 bookings.
Yet with each passing day, the disappointment became more acute. The dealers’
showroom floors were empty and many had to persuade existing customers to come
and have a preview of the Nano.

On April 25, 2009, when the bookings were closed, Tata Motors announced it had
received a total of 2,06,703 bookings but would be able to supply only 1,00,000 lucky
customers till the last quarter of 2010. The booking received was two to three times less
then what was expected. During June-August 2009, the company witnessed a spree of
cancellations amounting to more than 50 per cent of the original booking.

Second, the company failed to understand its intended audience — the cost of
maintaining a four-wheeler is generally beyond the budget of an average two-wheeler
owner. There was a lack of communication between the company and the prospective
owner. The company did nothing to create pride of ownership in the Nano. It simply
assumed that the customer would walk in, swayed by the low price, without
understanding the symbolics of owning a car — it is a status symbol in India.

To top it all, when the incidents of fire in the manufacturing unit started trickling in, the
company decided to keep mum, which further dented the image of Nano.

As per company data, Nano sales have been dwindling since 2011-12, when it sold
74,521 cars. The numbers dropped to 53,847 cars in 2012-13, followed by 21,130 cars
sold in 2013-14 and 16,903 cars in 2014-15.

Meanwhile, the plant faced a flash strike from a section of its workers. More than 300
workers at the Sanand facility went on strike on February 22, 2016, and allegedly
vandalised cars inside the plant.

Key issues

The company was no longer able to sell the Nano at the promised price of ₹1 lakh. The
board was forced to take stock of the situation and decide on the future of the car. Tata
Motors, however, felt a major part of investments in the Nano factory at Sanand could
be utilised for other products. Now, it produces the Tiago hatchback there.

Page 32 of 40
Emotional attachment, nevertheless, seems to counter cogent judgement and
discontinuing the Nano’s production altogether seems unlikely. In a letter to the board
and the trustees that was leaked to the media, Mistry wrote, “An even more challenging
situation arose in Tata Motors, both on commercial and passenger vehicles... The Nano
product development concept called for a car below ₹1 lakh, but the costs were always
above this. This product has consistently lost money, peaking at ₹1,000 crore. As there
is no line of sight to profitability for the Nano, any turnaround strategy requires the
company to shut down its production. Emotional reasons alone have kept us away from
this crucial decision.”

Take a look at the sequence of events.

Role of independent directors

As per the Companies Act, 2013, the executive authority to control the management
and affairs of a company vests in the team of directors of a company, collectively known
as its board of directors.

The institution of board of directors, although based on the premise that a group of
trustworthy and respectable people should look after the interests of the large number of
shareholders who are not directly involved in the management of the company, is
dominated by individuals who hold the maximum shares due to the “one share, one
vote” policy.

Section 149 of the Act defines an independent director as one who is other than a
managing or a whole-time director or a nominee director, who does not have any
material or pecuniary relationship with the company/directors. Such directors are
obligated to be fully aware of and question the conduct of organisations on relevant
issues. Unlike in the United States and the United Kingdom, in India, listed firms are
dominated by a major shareholder, usually the promoter, making it easier for the latter
to stamp out dissenting independent voices.

Conclusion

Page 33 of 40
In the Tata Sons case, the committee formed to find the next chairman was given four
months to do its job. A day after Mistry’s sacking, TCS CEO N Chandrasekaran and
JLR chief Ralph Speth were inducted into the Tata Sons board. Apart from these two,
Trent MD Noel Tata, Pepsico head Indra Nooyi and former Vodafone Chief Arun Sarin
were some of the names that had cropped up as potential candidates. Former TCS
Vice-Chairman S Ramadorai’s resignation as the Chairman of the Government’s
National Skills Development Agency had further fuelled speculation on his probable
appointment as Tata Sons chairman. In the end, N Chandrasekaran was chosen as the
next Chairman.

The Tata Nano is still under production. The current price is almost twice the initial price
— the ex-showroom price of Tata Nano GenX ranges from ₹2.06 lakh to ₹3.03 lakh,
making it still one of the country’s most affordable small cars.

Ratan Tata, in an interview in late 2007, had said: “The Nano was never meant to be a
₹1 lakh car; that happened by circumstance. I was interviewed by the (British
newspaper) Financial Times at the Geneva Motor Show and I talked about this future
product as a low-cost car. I was asked how much it would cost and I said about ₹1 lakh.
The next day they had a headline to the effect that the Tatas are to produce a ₹1-lakh
car. My immediate reaction was to issue a rebuttal, to clarify that that was not exactly
what I had said. Then I thought, I did say it would be around that figure, so why don’t we
just take that as a target. When I came back our people were aghast, but we had our
goal.”

Page 34 of 40
 Case Study - 13

Was the time right for Ola to re-enter the food delivery business?

V Namratha Prasad | Debapratim Purkayastha

How can the ride-share player differentiate its services and succeed amid strong
competition?
In December 2017, India’s mobile app-based ride-sharing firm Ola made a re-entry into the food
delivery space. It acquired the third largest player in the market — Foodpanda India (Foodpanda) —
for around $50 million from Germany-based Delivery Hero Group. Furthermore, Ola planned to
invest $200 million (₹1,330 crore) in expanding Foodpanda’s business — the largest funds infusion
in an Indian food delivery company.
Ola’s founding partner, Pranay Jivrajka, became the interim CEO of Foodpanda and was supported
by the existing leadership team at the food delivery business. The company, however, had no plan
to bring the Foodpanda ordering app (available on both mobile and desktop) into the Ola app.
Earlier market exit
It was in March 2015 that Ola — the market leader in the Indian ride sharing space – had launched
its food delivery feature called ‘Ola Café’ on its app in select Indian cities (Delhi, Mumbai, Bengaluru,
and Hyderabad). Ola Café promised to deliver food from nearby restaurants in less than 20 minutes.
At that time, the food delivery space in India was at a nascent stage with very few major players.
In June 2015, Ola launched its hyperlocal grocery delivery service, ‘Ola Store’ in three cities —
Bengaluru, Hyderabad, and Gurgaon — through a separate app. Ola had partnered with popular
retail chains in a particular neighborhood in order to provide the service. Both the services were
expected to help Ola better utilize its driver network.
In March 2016, Ola exited both businesses — ‘Ola Café’ and ‘Ola Store’ — due to lack of viability
and growth. Start-up ventures such as Ola Café found the Indian food delivery space a highly
expensive proposition, causing several of them to close down. At that time, an average order was
₹300 and the delivery cost was around ₹50. However, food delivery companies charged around 10-
15 per cent of the order value to popularise the service and grab market share. This meant that Ola
Cafe lost money on most small value orders below ₹300.
Industry observers felt that Ola had also been unable to stand up to the rising competition in that
space and had failed to effectively differentiate itself. While other companies offered to deliver the
entire menu, Ola offered only a few items on the menu in order to fulfil its promise of the fastest
delivery. There were certain reports which claimed that using drivers for food delivery slightly
impacted the ride sharing services.
Re-entry strategy
When it re-entered the food delivery space, Ola claimed that it had learnt its lessons from the
previous debacle. It stated that it was not starting off from scratch, but with a significant chunk of the
market under its belt. According to industry analysts, Foodpanda fulfilled almost 30,000 orders a day
in about 150 cities and worked with 15,000 restaurants.

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Moreover, in fiscal 2016-17, the company had a revenue growth of 64 per cent and a fall in losses of
70 per cent. In addition, Foodpanda had put in place serious measures to bring down its operating
costs and build a robust balance sheet.
Unlike rivals Zomato and Swiggy, which lost ₹1.5 on every rupee they earned in revenue,
Foodpanda said it made a profit on every order fulfilled (as of end 2017) and was expected to be
profitable in 2018-19 (see Table). Foodpanda fulfilled nearly 50 per cent of its orders through its own
delivery service.

After it was acquired, Foodpanda expected to benefit from Ola’s scale and efficiencies as a platform.
Ola, on its part, expected to gain certain synergies from the acquisition, such as a substantial
number of customers, apart from a considerable number of restaurants on board and brand recall
value.
Transaction volumes
Ola claimed it had re-entered the market in a bid to diversify its services, apart from gaining a
foothold in one of the most high-frequency consumer markets in India. Moreover, restaurants in India
typically enjoyed a 40-60 per cent margin on every order and they were increasingly willing to part
with a portion of this as commission to food delivery companies in return for increased business.
Analysts observed that the food delivery business in India not only had ample order values, but also
one of the highest frequency rates in terms of transaction volumes. Ola believed that those two
metrics would enable it to record a large number of digital transactions.
Certain analysts thought that Ola needed to carve out a place for itself in the food delivery space as
part of its natural evolution in the e-commerce ecosystem. A company insider stated that Ola
eventually planned to become an integrated services network, wherein its wallet app — Ola Money
— would be used for a host of services such as cab hailing, food-delivery, and grocery (re-entry
planned in 2018).
Ola’s re-entry into food delivery happened at a time when analysts claimed that the restaurant
business in India was seeing a resurgence after two years of dwindling business, following its rising
maturity and increase in investments. In 2017, the number of orders a day was estimated to have
reached 370,000, a jump of almost 130 per cent over 2016. The market also witnessed a series of
consolidations, which led to the emergence of a few strong market players. According to analysts,
the industry was expected to be worth $1 billion by 2018 and about $3.5 billion by 2021.
Future uncertain?
However, some industry observers were unsure whether Ola would be able to gain a significant
position in the food delivery space through Foodpanda. Ola was set to face a fierce battle from

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strong incumbents such as Zomato and Swiggy, apart from newcomers such as its rival ride-hailing
service Uber’s new venture, UberEats, and Google’s new venture, Aero.
While UberEats catered to about 10,000 orders a day in seven cities, Swiggy handled about 140,000
orders and Zomato about 100,000 orders — in a day! In addition to food delivery, Zomato also
offered a restaurant listings platform, table reservation, and other services. By the first half of 2018,
Zomato and Swiggy planned to raise fresh funds for further expansion.
Analysts said Ola would, through Foodpanda, be able to penetrate the Indian market better than
UberEats as it had a better network than Uber, given its presence in even small cities, unlike Uber,
which was present only in some cities. They observed that all successful online food delivery
companies had focussed on a handful of regions, and there was wide scope for expansion in the
market.
On the other hand, certain analysts said that in the food delivery space, getting just the logistics right
was not enough; companies needed to innovate and understand the preferences of the price-
sensitive and cash-dependent Indian customer. In such a scenario, can Ola succeed in making a
place for itself in the growing food delivery space?
Questions for discussion:
If you were a manager at Ola,
1. Do you think this is the right time to make an entry into the Indian food delivery market,
after a recent debacle in that space?
2. What steps would you take to succeed in a market in which it is difficult to survive, even
for incumbents?
3. What measures would you to take to differentiate the service and cater to Indian customer
preferences?

Source

https://bloncampus.thehindubusinessline.com/case-studies/was-the-time-right-for-ola-to-re-enter-the-
food-delivery-business/article25568273.ece

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 Case study 14

FDI  inflows contract for the first time in 6 years

29 May 2019, 12:50 AM IST

Asit Ranjan Mishra

FY19 saw FDI equity inflows falling 1% to $44.4 bn in fresh policy challenge

The two sectors where FDI inflows dropped the most in 2018-19 are telecom (fell 56%)
and pharma (dropped 74%)

NEW DELHI: India’s foreign direct investment (FDI) equity inflows fell for the first time in
six years in the year ended 31 March, underscoring the economic policy challenges
faced by the government when Narendra Modi starts his second innings as prime
minister on Thursday.

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Data released by the department for promotion of industry and internal trade on
Tuesday showed FDI equity inflows into India declined 1% to $44.4 billion in the year to
31 March, signalling a squeeze in long-term foreign investment into the country.

The decline in FDI inflows comes at a time when domestic indicators already point
towards a slowdown in consumption and investment activity. India’s economy grew at
the slowest pace in five quarters at 6.6% in the three months ended December,
prompting the statistics department to trim its 2018-19 forecast from the 7.2% previously
forecast to 7% in February. The first set of macro data the new government will have to
deal with is the fourth-quarter GDP data (to be announced on 31 May) that may further
decelerate to 6.4%.

The two sectors where FDI inflows dropped the most in 2018-19 are
telecommunications (fell 56% to $2.7 billion) and pharmaceuticals (dropped 74% to
$266 million).

However, FDI in the services sector, including financial, banking, insurance and
outsourcing businesses, rose 37.3% in 2018-19, arresting the extent of the decline in
FDI inflows. The telecom sector is going through tumultuous times after Reliance Jio
Infocomm Ltd’s entry in September 2016 brought data tariffs to rock bottom and made
voice calls free, making the sector less attractive for foreign investors. In the case of
pharmaceuticals, the price control mechanism introduced by the government on several
essential medicines might have discouraged foreign investment.

While Mauritius remained India’s top source for FDI, its share declined by 2 percentage
points to 32% in 2018-19, while the share of Singapore rose by 2 percentage points to
20% during the same year

Capital gains on investments made in India through companies in Mauritius and

Singapore have become fully taxable from 1 April, as concessions cease to exist on the
routes after India signed new double tax avoidance treaties with both countries. This
may further impact FDI inflows into India from these two countries. Macro indicators
such as vehicle sales and air passenger growth also point to a slowdown in the
economy.

Sales of automobiles across segments in India fell 16% in April to touch the lowest in
eight years, while domestic air travel in April contracted 4.5% for the first time in nearly
five years. The government in its full budget, which is likely to be presented in July, will
be tempted to breach fiscal discipline and go for a demand stimulus.

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Ashima Goyal, member of the prime minister’s Economic Advisory Council, in an
interview with Business Standard said: “Although the government is on a path towards
fiscal consolidation, there is limited space for a fiscal stimulus. The pre-election
slowdown in government spending can be reversed and expenditure planned for the
year frontloaded."

However, chief economic adviser Krishnamurthy Subramanian, in an interview last

week, said the core of consumption in the economy is pretty okay and one should not
oscillate between the extremes.

“If you look at what has happened in the last five years, for the reforms that have been
enacted, there is a lot of emphasis that has been placed on ensuring that the necessary
conditions for economic growth are created. The effect of this will start showing with
some lag," he said.

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