Plan India

On our last day in Mumbai, we visited Plan India, an Indian non-profit dedicated to improving the welfare of Indian children.

After visiting so many big companies – software firms, banks, insurance companies, etc., this visit was a marked contrast to what we had seen previously. Instead of taking an elevator and being shown into an air-conditioned, well-appointed boardroom, we found ourselves walking up several flights of stairs into a small, cramped, and very hot school classroom. Instead of reiterating all the wonderful growth opportunities in India that we had heard about from all the companies, this presentation focused instead on some of hard realities of Indian society that pertain to children: 20% of children not in school (a staggering 80 million children), children account for an estimated 20% of India’s GDP through child labor in “unorganized” work, only 2% of children with disabilities receive any sort of service, stigmatization of children with AIDS, disadvantage of girls, huge population of street children… and the list goes on.

After the presentation, we saw a film created by children as a part of one of Plan’s programs that addressed the issue of child labor in India. In the film, we saw children interviewing and documenting other children weaving rugs to support their family, tending goats as part of bonded labor, and “rag picking” through a garbage dump. The film was quite moving because it made these issues real and personal, rather than just statistics.

The second part of our Plan India visit was a trip to one of the slums of Mumbai (New Tank Road) where we were to see one of their programs – Doorstep Schools – in action. Going into the slums of Mumbai was unlike anything we had seen thus far in India – tiny, self-made dwellings, sometimes stacked two or three high with a ladder going to the upper homes, where a family of ten might live, were all crowded together into a big maze with no proper sanitation system or clean water.

We first visited their doorstep school bus, which they bring into different slum areas in an effort to bring some basic education to children who are not attending formal schools. We then wound our way through the narrow alleys of the slum to visit a preschool being run there. In a tiny, low-ceilinged second story “room” we observed a class of about 30 adorable preschoolers (I think we were a bit of a distraction to the class!).

All in all, it was a very interesting - and eye-opening - visit.

-Julie Green-Heffern

Sharekhan, Your Guide to the Financial Jungle

Monday afternoon we visited Sharekhan, one of the leading retail stock broking firms in India. In 2007, annual revenues were 62.5 million USD (2.5 billion Rupees). We were treated to an overview of the India market opportunity, followed by an in-depth presentation and discussion regarding Sharekhan's evolving business model and given a peak at some future innovations currently being launched.

We met with Naresh Agarwal - Chief Financial Officer, Sandeep Nanda - Head of Research, Jadeep Aroda – Technology, and Shrikanth Iyengar who leads the Alternative Investments group.

Stock markets were first launched in India 143 years ago. Trading was conducted at a set time and place in Bombay and in other regional markets in various cities across India. It was not until liberalization in the early 1990s with the launch of the National Stock Exchange did stock market investing become a growing retail phenomena. The NSE established a computer-terminal based trading network, and in 2000 Internet trading became available for end-users.

Tax rules in India are favorable for trading and investing, with short-term capital gains at 10% and gains on investments with at least a one year holding period completely tax-free.

Sharekhan was originally launched with an exclusively online business model shortly after Internet trading was allowed. However the leadership quickly recognized the need to build a network of retail locations due to slow adoption of in-home Internet connections, and adopted a franchise model to accelerate the expansion of retail outlets beyond the pace of opening exclusively company owned outlets. This successful strategy enabled Sharekhan to expand to 679 retail offices in 234 cities in 2007 from zero just four years earlier. Today franchises outnumber company owned locations 4 to 1.

Sharekhan has a growing client base which consists of over 400,000 accounts, and over 50% of client transactions are performed through the online portal. Typical daily transaction volumes exceed 250,000 per day. India has a savings rate over 25%, and savings are expected to fund much of the capital needs of India's rapidly growing economy.

In the current environment, with their extensive retail presence, lower costs of labor, and the high lifetime value of clients, Sharekhan has chosen to employ a large number of “feet on the street” representatives who provide live demonstrations of the trading platform at prospective customers' homes. At this time, building a customer base organically is economically more attractive then a consolidation through acquisition-based approach.

This approach is working at Sharekhan, which has captured significant share in India's retail brokerage market. The firm consistently receives positive reviews from customers and recently Citigroup Venture Capital took note and acquired an 85% controlling interest in the firm.

The last presentation of the day, regarding the Alternative Investments group at Sharekhan, was quite interesting to those of us interested in finance specialties. This group focuses on derivatives and developed methods to profit on market inefficiencies through arbitrage and hedging strategies.



Sharekhan's leadership treated the SCU Study Group to fascinating look inside the markets of India and the daily excitement and challenges of leading such a rapidly growing firm. India's modern stock market is relatively young and has experienced several waves of expansion and contraction, usually triggered by a scandal and new regulations to correct. In the midst of this dynamic environment, Sharekhan continues to grow by excelling in customer service and providing superior information and trading tools for their clients.

~Adam Corkins

ICICI Bank, Ltd

We visited Mumbai at the tail end of the Monsoon season and were told not to be surprised when the rain started pouring suddenly. When we arrived at the 2 large towers of ICICI Bank Ltd, we were assured the pouring rain would stop by the time our visit was over.


ICICI Bank Ltd.

After entering tower one, we were guided to the elevators and instructed to go to the 10th floor where the boardroom was located. The windows from the large and stately room provided views of two kinds. The view from one side consisted of other financial institutions such as the State Bank of India, the largest Indian bank, with ICICI being the second. On the other side, smaller buildings were scattered below and in the not so far distance, the haze of one of the many slums in Mumbai, a common sight due to the lack of space and organized housing within the city limits.



Dr. Samiran Chakraborty, Chief Economist and GMG Treasury Research began the discussion by providing an overview of the Indian economy. Some items he discussed included the inflation rate, which in the ‘80s, doubled that of the growth rate, however today now corresponds the growth rate. Although the government has published that 13%-38% of India’s people are in poverty, Dr. Chakraborty explained that the definition of poverty varies. One definition is based on the people who wear shoes. Many in India don’t consider this a necessity; therefore, if one can afford shoes, they are not in poverty.

Dr. Chakraborty also reviewed some history of the monetary policy in India and the “India Shining” campaign, which he stated was a terrible disaster because only the people who saw the improvements could believe in the campaign. Unfortunately, most were not seeing the improvements in the roads and water supply and therefore wouldn’t vote for the campaign.

Ms. Prerana Langa, Chief Manager, continued the discussion around the mortgage situation in India. She stated that in the last 9 months, there has been a drastic reduction in mortgage loans as no one I selling their house and that the housing demand is concentrated in pockets due to infrastructure issues. She recognized the fact that India needs more cities, but that there is no plan to build more as India is still trying to maximize the use of the current cities, which are constantly being expanded.

The merger of ICICI Ltd and ICICI Bank evolved the company from being a development financial institution to now offering a wide variety of financial services including life insurance, corporate financial services, as well as other banking services. Ms. Langa explained that from 2001 53% of the Indian M&A financing deals have gone through ICICI Bank.

Another topic Ms. Langa discussed was that of how ICICI Bank is involved in micro-banking in the rural areas. To reach 600,000 villages, it would be too expensive to build thousands of branches. Therefore, ICICI created many partnerships with banks that were already established in the rural areas. ICICI bank has been involved in financing the poor through group loans and they have been able to reach out to over 3 million households.

ICICI promotes “inclusive growth” however, full participation is challenging. Ms Langa quoted that 600 million people don’t have access to finance and so ICICI is trying to build the next generation of customers by reaching out to those who formally did not have financial access.



Ms. Langa also explained that ICICI is involved in a philanthropic exchange with GiveIndia. This group connects with the rural areas with enterprise through handicraft sellers and vocational training for the people in these villages. ICICI Bank has been involved with the financial side of this group by providing the people involved access to basic financial services and is trying to bridge the missing market gap with the rest of India.

-Julie Baker

Bharti AXA Life Insurance

This marked the beginning of the second phase of our trip. Mumbai, not only famous for its Bollywood (Indian Cinema equivalent of Hollywood) but also has been the financial capital of India.
Having spent the Saturday and Sunday in Bangalore, some of us arrived in Mumbai on Sunday afternoon while others had already arrived and had taken the city tour and were fairly comfortable with the place and the neighborhood. We all assembled in the hotel lobby to board the bus for a short ride. It was then that we realized that the Intercontinental Hotel was walkable from our hotel. More interestingly the ten-minute walk was on the Marine Drive also known as the Queen's Necklace. The meeting with Bharti AXA was in a way different than all the previous ones we had in Bangalore. It was a dinner hosted Mr. Nitin Chopra, CEO of the Bharti-AXA Life Insurance. Appetizers and drinks were being served on the table, while Mr. Chopra presented.

The presentation took us through the evolution of Life Insurance Sector in India. Following are some of the milestones

• 1870 - Establishment of first Indian Life Insurance office - Bombay Mutual Assurance Society

• 1912 ; 1938 - Life Insurance Sector regulated - Indian Life Insurance Companies Act enacted; Insurance Act 1938 passed

• 1956 - Life Insurance Nationalized through Life Insurance Corporation of India Act - LIC becomes a State monopoly

• 2000 - Opening of the Insurance sector for private players. Presently Foreign Direct Investment (FDI) is permitted upto 26 %

• 2005 - 14 companies offering life insurance - one dominant nationalized player and 13 pvt companies

• 2006 - 15 private sector companies - 2 wholly Indian owned.

Bharti AXA Life Insurance is a joint venture between Bharti, one of India’s leading business groups with interests in telecom, agri business and retail, and AXA, world leader in financial protection and wealth management. The joint venture company has a 74% stake from Bharti and 26% stake of AXA Asia Pacific Holdings Ltd (APH).

The company that launched its national operations in December 2006 has over 3000 employees across over 12 states in the country and their business philosophy is built around the promise of making people "Life Confident".

The following quote from their website and other press media did make a connection to what we got as an answer to one of the questions about their expansion strategies and customer acceptance.

"As we expand our presence across the country to cater to your insurance and wealth management needs with our product and service offerings, we continue to bring 'life confidence' to customers spread across India. Whatever your plans in life, you can be confident that Bharti AXA Life will offer the right financial solutions to help you achieve them"

The Bharti group is very popular across the length and breadth of the country as leading cell phone service provider - Airtel and if marketed as Airtel Insurance, people easily recognize the brand name. Also marketing message and bundling could very well be done with the backing of Airtel.

The market as of 2006, is dominated by LIC with 63 % share while ICICI Prudential and Bajaj Allianz are leading private players with market shares of 10.6 % and 7.4 % respectively. Bharti AXA has the challenges of second wave entrant while it has the advantage to learn from the existing players and enjoy the already created insurance awareness.

Some of the interesting facts about Life Insurance Sector in India

1. Contributes 4.1 % of India's GDP
2. Second largest financial service after banking
3. Total number of lives insured and on books as of March 31, 2006 - 198,466,127
4. As of same date above, Rs. 5,496 billion is the total Assets under Management of Life Insurance Corporations
5. A statutory requirement exists to reach rural areas

There are certain restrictions on how the assets are allocated and how the profits are to be shared and this underpins the time to return to profitablity for the private players. 50 % of the assets to be invested in Government Bonds and 15 % in Infrastructure bonds leaving only 35 % for the fund managers to creatively manage. It is typically known to be a 6 year period and with the opening up of this sector only in year 2000, none of the private players are profitable yet. This makes it ever more challenging for Bharti AXA which is the newest player in the market.

- Shesh Vasudevamurthy

Sights of Mumbai

On our first full day in Mumbai, Saturday, many of us opted to take a city tour to learn more about this city of 16 million people often called the New York City of India. The day started with a short bus ride on which our guide, Jyothi, explained the sights and sounds of this bustling place. Just like Bangalore, the streets are crowded and seemingly chaotic to the Western eye - though Jyothi explained it is an old system that works for them. "Three things are needed to drive in India," she explained, "good horn, good brakes, and good luck!"


The first stop was just outside the beautiful Taj Hotel where we would board a ferry at the historic Gateway of India. A one hour ride into the Arabian Sea would take us to our first destination of the day, Elephanta Island. As we looked back on Mumbai's skyline, it really did remind us of New York in its expanse and varied buildings. A short tram ride and 120 some odd steps straight up later, we reached the mouth of the famous Elephanta Caves. Four columns looked like they might be holding the mouth of the cave open, but on the contrary, we learned they had been carved right out of the rock. The columns, the beautiful statuesque carvings of the Hindi god, Shiva, and the temple in the middle all literally were carved from one rock. The caves reminded us all that though India is a very young nation with 50% of the population under the age of 25, the civilization is an ancient one.


The next stops on our tour (after a visit to the local McDonald's for lunch and a much needed break from the spicy Indian food we have been enjoying) included a Jain temple built of marble and filled with the sweet smell of flowers everywhere. Next, we saw the site of the men who clean the clothes of the people of Mumbai. Our guide told us most people have a washing machine now, but they still use these services to make sure everything is perfectly washed. These men clean the clothes by hitting them on a rock and then hang them up in the sun to dry. This truly was a sight you had to see to believe. A little village of men, bright white clothes hanging above the shanty roof tops, and what looked like outdoor baths smoothed by years of hitting clothes against the rock was another bustling business right in the middle of the city. There must have been thousands of items being washed, dried, or folded; Jyothi told us not one piece is ever lost or delivered incorrectly! These men make as much as a cab driver or hotel security guard and so are happy with their work.


Finally, we had the opportunity to see Mahatma Ghandi's house and his simple style of living. His bedroom consisted of a mat, a small desk, a journal and his sandals. It was quite amazing to see the humility of a man who changed the course of a country! I thought this quote, posted on the wall, was especially fitting to describe all that we are seeing, "I want to work for an India in which the poorest shall feel that it is their country in whose making they have an effective voice; India in which there shall be no high class and no low class of people; an India in which all communities shall live in perfect harmony."

- Becky Blevins