VOLUME 03BEACON ISSUE 02FEBRUARY 2015 i

VOLUME 03BEACON ISSUE 02FEBRUARY 2015

ContentsABOUT US

OUR TEAM

INDUSTRY ANALYSIS

COMPANY ANALYSIS

BRAND ANALYSIS

GUEST LECTURE ON BEHAVIORAL FINANCE: AN EVENT REPORT

CONCEPT OF THE MONTH: TRIPLE BOTTOM LINE

VOLUME 03BEACON ISSUE 02FEBRUARY 2015 1

OUR PRESENCE

ABOUT US

VISION

The SIMCON - SIMSREE consulting club is an initiative started in 2012 for those students in pursuit of excellence in management consulting and strategic management. Aimed at creating awareness among the students about consultancy as a discipline, the club strives to maintain strong relations with top consultancy firms and provide platform to craft highly skilled & competent consultants from SIMSREE. The club is a resource for information about consulting and a place for students to obtain real-world consulting experience.

SIMCON provides an avenue of interaction among faculty, students and alumni through competitions, live projects, guest lectures, and conclaves. For this purpose the club has also been publishing its monthly newsletter – BEACON (BE A CONSULTANT) and maintains a FACEBOOK PAGE where latest news and development in the consulting industry are posted.

MISSIONTo create awareness amongst the students about consulting industry & its latest trends.

To maintain strong relations with top consultancy firms.

To provide platform to craft highly skilled & competent consultants from SIMSREE.

To provide exposure to students via competitions, live projects, guest lectures & conclaves.

Contributions invited:To make this feature a successful effort, we seek continued involvement and contribution from our readers, that is YOU. We invite articles, research papers, and trivia on themes related to consulting. Be it industry news, consulting trends, a joke, a cartoon or feedback, we are eager to hear from you. So go ahead, do your research, pen down your thoughts and mail your entries to simcon.simsree@gmail.com.

Best Regards,SIMCON - SIMSREE CONSULTING CLUB

VOLUME 03BEACON ISSUE 02FEBRUARY 2015 2

SANANDAN DESHPANDE

NIKHIL RAO

Ameya MAHABAL

Deepesh Jethwani

PRATHAMESH INDANI

SUSHIL GURAV

TEJAS SHAH

OUR TEAM

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REAL ESTATE INDUSTRYINDUSTRY ANALYSIS

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IntroductionThe Indian real estate market is expected to touch USD 180 bn by the year 2020. In India, Real Estate sector is the second largest employer after agriculture and is slated to grow at 30 per cent over the next decade. The sector has been the major beneficiary of the strong economic growth witnessed in India since the year 2000.There are many allied industries which benefit from growth of the real estate sector. That is why this sector has a huge multiplier effect on the economy. So as this sector grows, the national income grows multifold. In the budget 2014-15 announced on 10th July 2014, the Finance Minister has allocated Rs.4000Cr for low cost housing and Rs. 50000 Cr. for urban housing.

According to ICRA, the construction industry ranks 3rd among the 14 major sectors which has direct, indirect and induced effects in all the sectors of the economy. This means that it not only generates employment in Real Estate sector but also stimulates demand in other related sectors like cement, steel, brick, paint, consumer durables, etc.

The Real Estate sector can be subdivided into Residential and Commercial Real Estate.

Housing/Residential sector contributes nearly 80% to the real estate sector. According to KPMG research, it is estimated that around 2 million houses are required annually. The shrinking size of households (i.e. nuclear families) would also contribute to the growing need of houses. Thus, India needs around 50 million housing units by 2028. This sector can be further subdivided into 3 categories- Affordable, Mid-income and Luxury housing. Affordable housing is housing for Low Income Groups (area close to 400 sq. feet, cost less than USD 17000) and this category is expected to account for 85% of housing units by 2028. Mid-income housing is housing for middle class households (area between 800 and 1200 sq. feet, cost between USD 17000 and USD 170000) and this category will account for 7% of total housing demand by 2028. Luxury housing is the fastest growing category wherein the area is atleast 1200 sq. feet & cost more than USD 170000. Over the next 15 years, 1.5 million luxury houses would be required.

Commercial real estate comprises of office, retail and industrial real estate. Around 52% of the office space is occupied by IT/ITeS sector. The number of employees is also slated to increase from 2.4 to 5.1 million by 2022. BFSI is second largest occupying 16% of total

office space. Retail is expected to increase at a CAGR of 8% from 2012 to 2020. Manufacturing sector is the focus of the present government. The DMIC corridor is expected to boost Industrial real estate. DMIC would witness development of as many as 11 Industrial regions.

Market Size

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100

150

200

2020e2015e20102006

16 60 90 180

Indian Real Estate Market Size (USD Billion)

Key PlayersDLF is the largest player in terms of market capitalization in Indian real estate sector. It has presence across 30 cities in India. It has developed IT parks, hotels, commercial complexes and residential complexes. Unitech is the 1st real estate company listed in NSE NIFTY. It is also the first to be certified as ISO 90012.Indiabulls Real Estate is one of the largest real estate company in India. It has got 31 ongoing projects totaling around 73 mnsqft, 2588 acres of SEZ development and additional land bank of around 1001 acres. It has more than 90% of its portfolio in Mumbai, Delhi (NCR) and Chennai markets with Rs. 4,000 Cr of land bought by way of government auctions.

Company Name Revenue (in Rs Cr) FY14

M a r k e t Capitalization (in Rs Cr)

DLF 3435.7 23521Sobha 2613.8 4550Unitech 2144.3 4042Indiabulls real estate

387.6 2906

Oberoi Realty 705 8657Prestige estate 2152 8658G o d r e j properties

766 4932

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Porter's Five Forces1. Threat of new entrants• High initial investment required.• Track record of developer is important so new players find it difficult to win projects.• Profitability of the business is reduced.

2. Threat of substitutes• No substitutes for real estate sector so no threat of substitutes

3. Bargaining power of suppliers• Negligible threat of forward integration from suppliers.• Lower switching costs for changing/switching suppliers of raw material• Large number of suppliers of raw material.

4. Bargaining Power of Customers• Standardized products.• High switching costs.• Many real estate firms became cash crunched because people were unable to buy property due to high rates. • So this increased the bargaining power of buyers.

5. Competitive Rivalry• Large number of real estate firms operating in India.• The product is not differentiated.• Minimal profitability considering the current status of economy.

Laws and Regulations concerning Real EstateThe Right to Fair Compensation and Transparency in Land acquisition, Rehabilitation and Resettlement Act 2013 came into force from 1st Jan 2014 provides for fair compensation to those people who have to give up their land. It also provides to bring transparency to the process of acquisition of land for purposes like setting up factories, buildings or infrastructural projects and assures rehabilitation to those affected.This Act was viewed to be biased towards the land owners and ignores the need of poor who need affordable housing, hospitals, schools, employment opportunities and Industries. There were also many projects that were lost because of this Act. Due to lack of support to the central government in amendment of the law, an ordinance was passed recently on 29th Dec 2014. The union cabinet brought under its purview 13 central legislations involving Defence and National Security and providing higher compensation, rehabilitation & resettlement benefits to those farmers whose land is being acquired. Mandatory “consent” clause and SIA (Social Impact Assessment) are not required if land is acquired for the following 5 purposes- Defence, National Security, Industrial corridors, rural infrastructure and social infrastructure including PPP (Public Private Partnership) projects.

FDI Policy in real estateThe cash-starved debt-ridden property developers are

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in need of funds and the government’s recent initiative to ease the FDI rules in construction may well prove to be a boon for them. The minimum capital requirement for FDI is reduced from $10 mn to $5 mn and the built-up area is also reduced from 50000 sqmts to 20000 sqmts. More reforms are required to provide a long term solution to the funding crisis of the real estate. The relaxation in capital and area norms would provide a boost to residential, small office and shopping centre projects which are much in demand in tier 2 & 3 cities. Also the condition of mandatory 50% development from the date of approval in 5 years or after 3 years from the date of final investment (subject to development of trunk infrastructure) has been done away by the government. It has allowed the investors to exit when the project is completed. This is definitely an attractive proposition for current as well as future investors.The Government is reviewing foreign investment policies for LLPs (Limited Liability Partnerships), and might soon lift the curbs and give an automatic access to the foreign investors via LLPs in real estate sector where 100% FDI is permitted.

Impact Analysis• The impact of budget 2014 is Marginally Positive• Smart city Development- Rs. 7060 Cr has been

allocated for development of 100 smart cities. This move is likely to spur a positive sentiment to the real estate sector. There is a large growth in number of offices and ITeS segment apart from residential real estate growth from tier 2 and 3 cities. So all this cumulatively will bring opportunities for the real estate and allied sectors.

• Easing of FDI- There is relaxation in FDI norms in real estate sector as a measure to enhance affordable housing. The minimum investment limit is halved to $5 mn and size of project eligibile for FDI is reduced to 20000sq mtr from 50000sq mtr.

• Real estate investment trust (REIT)- The introduction of REITs is a positive sign and is likely to increase liquidity in the real estate sector. The real estate sector will be a direct beneficiary of such trusts.

• Housing loans- Income tax deduction on repayment of principal amount on housing loan limits under 80C has also been increased to Rs 1.5 Lacs from Rs 1 Lacs. The finance ministry has increased the home loan rebate on self-occupied property to Rs 200000 from Rs 150000. This will not only have a positive impact on real estate sector but also the banking sector.

• NHB is setting up an Urban Housing Fund and it is enhancing the fund allocation for Rural Housing

Fund to Rs. 60 bn in FY14 from Rs. 40 bn in FY13. In this way, the Government is trying to focus on reducing housing shortage by providing affordable houses.

• The reduction in abatement rate would increase the service tax outflow and make the luxury houses more and more expensive. Also, the hike in excise duty on marbles would increase the development cost which may be passed on to the customer.

• The introduction of TDS on transfer of high value immovable property is likely to have a negative impact on the cash flow in a situation of distress property sales or on those property sales which are making minimal gains.

• Overall the Budget is marginally positive for the construction and real estate sector.

Trend Analysis• After a lull of 3 years, sale of large land parcels

is picking up. Developers and PEs are aiming to buy land parcels amid the renewed hopes. Prestige Estates Projects bought an 8-acre prime plot of land in Bangalore for Rs 345 Cr in July 2014. The deal was preceded by Lodha Developers buying 87 acre in Thane from Clariant Chemicals (India). The deal was worth Rs1,154 Cr. Oberoi Realty’s purchased 25 acre land in suburban Mumbai’s Borivali from Tata Steel and the deal was worth Rs1,155 crore.

• Indian property market has begun to improve. India’s biggest cities rose in Jones Lang LaSalle’s ranking from 48th in 2012 to 40th in 2014 while the medium-sized cities rose from 49th to 42nd place. The improvement is due to PE firms investing a lot of money and demanding transparency.

• Investments have been on the rise. In FY14, nearly USD 800 million was invested into India’s real estate sector and this translates to almost Rs 4,800 Cr being injected into the sector through the PE route according to the CBRE report.

• The real estate industry has been under scrutiny with the mortgage crisis and other events, but it is still a large field which generates billions of dollars. There were 165000 companies operating in the residential brokerage and management field in 2013 generating USD 170 bn and there were 25000 companies in the commercial brokerage and management field generating revenues of USD 30 bn.

ReferencesIBEF, KPMG, PWC, Green Building Congress, Ernst & Young, Indian Realty News

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DLF COMPANY ANALYSIS

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Company OverviewDLF was founded in 1946 by Chaudhary Raghvendra Singh and is one of the largest commercial real estate developers in India. The primary businesses of DLF are developing residential, commercial and retail properties and it has 294 Million Sq Ft (MSF) of planned projects with approximately 47 MSF of projects under construction. DLF now has a presence in 15 states in India which encompass around 24 cities.Due to the passage of Delhi Development Act in 1957, private real estate developers were banned and the local government gained control of real estate development in Delhi. Due to this restriction, DLF started acquiring low cost land outside the area controlled by Delhi Development Authority in Gurgaon, Haryana.

Journey of DLF1950-64: Development of 22 Urban colonies1985: Commenced the development of the 3000 Acre DLF City, Gurgaon2003: Commenced development of DLF CyberCity in Gurgaon2005: Focus on IT parks & next generation malls2007: IPO launched and listed on BSE and NSE. Subscribed 5.12 times.Was the biggest IPO at that time.2012: Marks footprint in infrastructure2013: Launched Cyberhub - India's first integrated food entertainment destination at DLF CyberCity Gurgaon2014: Banned by SEBI from accessing capital markets

DLF has the following offerings in the real estate sector– Residential Offices C ommercia l

ComplexesRetail

Super Luxury homes

Corporate Parks

Malls Retai l Spaces

Luxury homes IT SEZs Shops in office complexes

Premium homes

DLF completed approximately 4.26 MSF of commercial & residential projects in FY14 and also added 9.76 MSF to new construction. As of March 31st, 2014, the total area under construction was 59 MSF.Some of the marquee projects of DLF include - DLF Mall of IndiaThe DLF Mall of India is an under construction shopping mall in Noida which will be the biggest mall in India when it starts operation in 2015. The total size

of development is around 1.9 Million Sq Ft. The mall is developed at a cost of Rs 1,100 Cr & is expected to generate revenue of Rs 200 Cr annually. It is expected to have a catchment area of approximately 45 Lakhs.DLF CyberCityDLF CyberCity is project developed by DLF in Gurgaon which offers office spaces to companies. It is one of the largest business district districts spread over 128 acres located at the Delhi Gurgaon border near NH 8.DLF EmporioDLF Emporio, a shopping mall located in Vasant Kunj, New Delhi, is one of the first truly zoned luxury malls in India. It is also one of the most expensive ones, with rental rates ranging from Rs 900- Rs 1000 Per Sq Ft per month.

ManagementName DesignationK P Singh ChairmanT C Goyal Managing DirectorG S Talwar Non Executive DirectorK N Memani Non Executive DirectorRajiv Krishan Luthra Non Executive/

Independent DirectorVed Kumar Jain Non Executive/

Independent DirectorRajeev Talwar Whole Time DirectorRajiv Singh Vice ChairmanPia Singh Whole Time DirectorD V Kapur Non Executive DirectorB Bhushan Non Executive DirectorPramod Bhasin Non Executive/

Independent DirectorMohit Gujral Whole Time Director

Shareholding Pattern

Others

General Public

Foreign Institutions

Promotors

Shareholding Pattern (%)

75%

20%

2 %3 %

VOLUME 03BEACON ISSUE 02FEBRUARY 2015 9

Competitor AnalysisName of the company

Market Cap(Rs Cr)

Sales Turnover(Rs Cr)

Total Assets(Rs Cr)

Net Profit(Rs Cr)

DLF 23,459.1 2,385.9 26,306.6 526.8O b e r o i Realty

9,546.66 622.56 2,734.12 295.12

P r e s t i g e Estate

8,628.75 2,005.19 4,754.47 340.02

G o d r e j Properties

4,948.83 664.00 3,310.55 97.65

Sobha 4,610.9 2,112.9 3,351.2 206.5Indiabulls 2,885.60 84.90 7,481.60 144.55

Competitor profiles 1. Oberoi Realty• Oberoi Realty is a real estate developer based in Mumbai, Maharashtra. They operate in Residential, Retail, Hospitality, Office Space, and Social Infrastructure properties in the Mumbai region.• The company has completed 32 projects covering around 4.98 Mn Sq Ft of saleable area across Mumbai• Oberoi Realty also has the distinction of developing the 2nd tallest tower of India – Oasis Tower

2. Godrej Properties • National real estate developer having presence in 12 cities in India. In the FY14, it added 8 new projects covering 13.42 million Sq Ft of saleable area• The current potential developable area for Godrej Properties is around 100 Million Sq Ft & has sold real estate worth Rs 5000 Cr in the last two years• It has a debt equity ratio of less than one due to its differentiated joint development business model

3. Unitech• Unitech was founded in 1971 by a group of technocrats & is now one of the leading real estate developers in the residential, retail, hospitality & commercial space.• Have built more than 100 residential projects till now & 4.5 Million Sq Ft of retail space currently under construction

4. Prestige Estate• Prestige Estate is the leading property developer in South India having presence in residential, commercial, retail and Leisure & Hospitality space• It has a presence in Bangalore, Goa, Hyderabad, Mangalore, Cochin & Chennai• In the FY14, the company launched 15.67 Million Sq Ft of developable area & sold 7.5 Million Sq Ft of space generating a revenue of around Rs 44,350 Million

SWOT Analysis Strengths

• DLF is one of the largest real estate developers in India and one of the few players with a pan India presence• It has been in operation for many years and understands the market well • DLF has presence in residential, retail as well as commercial space

Weaknesses• DLF has very high debts in year FY14 which stood at Rs 19,000 Crore & much of the income generated is spent on paying off the interests to banks• The brand image of DLF has taken a beating due to DLF-Vadra Land case as well as the recent ban by SEBI• DLF has limited international footprint

Opportunities• Growing economy, rising urbanization, increasing income & likely reduction in interest rates will increase the demand of residential & commercial projects• Demand for real estate from sectors such as education, tourism, hospitality is expected to rise significantly in the coming few years• The new govt initiative for 100 smart cities can revolutionize urban landscape and provides future growth potential for companies like DLF

Threats• Due to recent ban by SEBI on DLF for accessing capital markets for three years, DLF might find it difficult to raise funds• Consequently, the ongoing projects might also get delayed by to cash crunch. • The recent controversies surrounding DLF might further affect the brand image of DLF

Key FinancialsThe operating revenue of DLF increased by a mere 3% in FY13-14 as compared to the previous year & it posted a net profit of Rs 526.84 Cr in FY13-14. Poor macro economic conditions, slowing income growth, rising inflation & continuing high borrowing cost impacted the real estate sector in the FY13-14, leading to not so encouraging numbers for major players like DLF.As of March 31st 2014, the company’s net debt was approximately Rs 18,520 Crore.

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Rs in Cr FY 14 FY 13 GrowthOperating Revenues 3,435.72 3,304.84 3.96%Expenditure 1,152.44 760.54 51.53%Operating Profit (EBITDA)

1,233.50 1,389.50 -11.23%

PBT before exceptional items

2,283.28 2,544.30 -10.26%

Less: Provision for Tax

1,666.81 1,709.89 -2.52%

Net Profit 526.84 501.56 5.04%

In terms of RONW & ROCE, DLF lagged behind its peers Oberoi Realty & Prestige Estate which had ROCE of 15.03% & 12.91% and RONW of 10.79% & 11.44% respectively. The operating profit margin dropped from 64.62% in FY13 to 51.69% in FY14. The Net profit margin stood at 13.77%. Its competitors, Oberoi Realty & Prestige Estate had a Operating Profit margin of 56.22% &

affect DLF’s fund raising ability• The ban will also put pressure on DLF’s existing cash balance as it will damage the ability of the company to effectively raise funds for debt repayment. As per their latest Annual Report, they have a cash balance of around Rs 2,400 Crore and a consolidated net debt of around Rs 18,520 CroreThe company has been monetizing its noncore assets through securitization as well as outright sale to gather funds for debt repayment • The ruling can also deter potential investor from buying the stocks of DLF. Given the uncertainty around the operational impact of the regulatory orders, investors will avoid investing in DLF• The under construction projects can get delayed if DLF reaches a stage where it has to rely on customer payments for expense which are separate than those of a project. In order to manage its cash flows, DLF may have to lower slow down the pace of operations in a bid to lower costs or sell some of its existing inventory at distress valuation

2. Supreme Court has accepted DLF’s proposal of paying the Competition Commission of India (CCI) fine of Rs 630 Crore in instalments of Rs 75 Crore on the 15th of every month. The fine was imposed as it was found that the company had used its dominant position in relation to the buyer’s agreement it had signed with its customers in three projects - Belaire, Park Place and Magnolia, in Gurgaon.

3. DLF reportedly plans to raise Rs 3,500 Crore by selling 50% of its subsidiary DLF Cyber City Developers. Due to the recent ban of SEBI, DLF is cash strapped and due to limited fund raising options, it might consider selling this stake to raise funds.

4. DLF is also exploring to monetize Rs 3,000 worth of office space in order to reduce the fears of its fund raising ability due to SEBI’s ban. IT park developers Ascendas, Blackstone & GIC of Singapore were some of the developers who were approached as potential suitors for some of DLF’s tenanted offices. The company has 30 million sqft of rent yielding office portfolio across cities.

5. Kochi High Court has ordered to demolish a portion of DLF’s premium waterfront residential project called DLF Riverside as it was found that DLF has violated CRZ rules by encroaching the backwaters.

ReferencesDLF, LiveMint, Times Of India

0.0

0.5

1.0

1.5

2.0

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FY 2014FY 2013FY 2012FY 2011

3.51

1.741.54 1.64

Current Ratio

0

1

2

3

4

5

6

7

8 EPS

FY 2014FY 2013FY 2012FY 2011

EPS

7.48

6.13

2.95 2.96

25.06% respectively. The corresponding figures for Net Profit margin for these two companies were 41.81% & 15.79% respectively.The current ratio of DLF has been consistently been above been 1 indicating that the company is well placed to meet its short term financial obligations. In comparison, Oberoi Realty & Godrej Properties had a current ratio of 2.65 & 1.35 respectively, where as Prestige Estate had a current ratio of 0.97.

New Developments1. SEBI imposed a three year ban on DLF and its top executives from securities markets – In a major blow to DLF, regulator SEBI has banned the realty major along with six of its top executives for three years from the securities markets for ‘active and deliberate suppression’ of material information at the time of the IPO launch of DLF.Impact of ban – • Capital markets is one of the most accessible routes of for raising capital for real estate developers who need funds raising options over and above customer payments. Due to the long period of ban, this will

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COCA COLABRAND ANALYSIS

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Setup in 1886 owing to the curiosity of a pharmacist, the brand has grown leaps & bounds over the years. Coca cola accounts for 3.1% of all beverages (alcoholic & non-alcoholic) consumed across the globe.

Coca Cola’s Origin & Growth Over The YearsOwing to sheer curiosity, the Atlanta Pharmacist John Pemberton stirred up a fragrant, caramel coloured syrup. This was taken over to Jacob’s Pharmacy nearby, wherein it was mixed with carbonated water. This concoction was sampled by various customers and found to be interesting & special. It was here that Frank Robinson christened the drink as Coca Cola and noted it down in his distinctive script. Coca-Cola is still written in the same format. With sales of just 9 glasses a day in the first year, over the period of 1888-1891 the business was secured by Asa Griggs Candler for $2300 (around €1500), who would become Coca-Cola’s first president.

As a Candler turned this invention into a business and by 1895 Coca-Cola had three syrup plants in Chicago, Dallas and Los Angeles. To ward off imitation the company decided to create a unique bottle shape. In 1916, the famous Contour bottles were used by coca

cola. The advent of the century also saw the company expanding into Canada, Panama, Cuba, Puerto Rico, France, and other countries and US territories. By 1920, the company had around 1000 bottlers associated with it.

The brand advertised on National Television around the 1950s and has been innovating its advertising strategies over the years. (Click to see one of the first few commercials of Coca Cola).

After 70 years of immense success with a single brand Coca Cola, the company expanded with new flavours. Fanta,(originally developed in 1940s in Germany: owing to stoppage of import of Coca Cola syrup in Germany due to World War II), was introduced in global markets in 1950s, while Sprite followed in 1961, Tab in 1963 and Fresca in 1966. By the 1970s the brand had gone truly global with reaching across multiple countries. This was embodied by a 1971 commercial titled “I’d Like To Buy The World A Coke.”(Click to view the “I’d Like To Buy The World A Coke“ advertisement).

The 1980s saw Coca Cola go through multiple changes and struggles. With the market share slipping since 15 years to Pepsi, Coca Cola decided to twig its never-before touched formula and launched the “New Coke” as a reply to Pepsi’s Cola War. The new coke back fired and the public outcry to get back the original coke, lead the company to recall new coke & launch the original Coke again as “Coca Cola Classic”.

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Currently Coke is present across the globe, barring only 2 countries – namely North Korea & Cuba.Out of the 15 most valuable soft drinks brands across the globe in 2014, Coca Cola owns 6.

In INDIACoke had entered India for the first time in 1956 & made huge money operating under 100% foreign equity. After implementation of the Indian Foreign Exchange Act in 1974, Coke had to give up its Indian operations in 1977. They returned back to India in 1993, with a 100% owned subsidiary, Coca Cola India, owing to the liberalization policies. In 1999, they took over the carbonated beverages department of Parle & got the brands Thumps Up & GoldSpot with the deal. Over the years, the brand has grown by leaps & bounds in India. India is currently one of the fastest-growing emerging markets for coke & so it plans to invest around $5bn in India by 2020. Coke had around 56% market share in May 2013, while PepsiCo had around 34%. Mentioned below are a few taglines used by the company in order to achieve such numbers:• Always the real thing• Thanda Matlab Coca Cola• “Paanch” Maatlab Coca Cola• Piyo Sar Utha Ke• Jo Chaho Ho Jaaye, Coca Cola Enjoy• Brrr• Open HappinessCurrently, Coca Cola has multiple of its products in India, such as : Coca Cola, Diet Coke, Coke Zero, Thums Up, Sprite, Fanta, Limca, Maaza, Minute Maid (Pulpy Orange, Guava, Nimbu Fresh, Mango & mixed fruit), Burn, Kinley(bottled water & soda), Schweppes & Georgia.

Coca Cola’s Current Portfolio:With over a decade and a quarter of being in business and operating over 200 nations across the globe, coca cola has a lot of products in its portfolio. Coca Cola has over 500 brands producing over 3500 beverages, ranging over a variety of beverage products. The top brands under Coca Cola are as listed below : • Fuze – A well-received Asian brand, this biliion-dollar brand produces fruit juices, non-carbohydrated drinks & vitamin-fortified beverages along with teas.• Del Valle – A billion-dollar brand under Coca Cola, with huge markets in Latin America & Mexico, it is a line of natural fruit extracts & juices.• Minute Maid – A fruit brand of drinks, this brand has a line of fruit juices and has a large traction amongst the consumers in Europe.• Powerade – A product designed to directly compete

against Gatorade, Powerade holds around 25% of U.S. markets with regards to sports drinks.• Coca-cola Zero – A brand boasting of zero calories, it was the company’s biggest product launch in the decade. • Fanta – Originally invented in Nazi led Germany in WWII, Fanta is a fruit carbonated drink. It is considered the 2nd largest brand outside of US and offers around 100 different varieties globally.• Sprite – A drink flavoured with lemon & lime, it currently hold 8% of the beverage market.• Dr. Pepper• Diet Coke – A star, Diet Coke estimated around 17% market share in 2012.• Coca-Cola Classic – With around 26% market share in the beverage markets, it is the overall leader in beverage industry. Segmentation & Targeting:Their primary target is the non-alcohol beverage consumers. Under this broad category, the target is each country as a different segment, catering to local needs and tastes. A small segmentation & targeting example of the brand is as shown below:SEGMENT EXAMPLE

OF PRODUCT

TARGET AUDIENCE

Geographic Segmentation

Oasis British & Irish, young working adults.

Fuze Asian Markets such as Japan & China

Del Valle Latin American Markets such as Brazil & Venezuela

Demographic Segmentation

Diet Coke Health Conscious Adults between 30-50; Most users are women

Coca Cola Zero

Teens who are calorie conscious; was aimed to be the “male” equivalent for Diet Coke

M i n u t e Maid

Targeted for age groups 13-50, this fruit juice product caters to non-carbonated beverage lovers

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Positioning:Coca Cola, as per its website, are the world’s biggest non-alcohol beverage company. It positions itself as a non-alcoholic, thirst quencher. Owing to this, they have diversified into various beverages, under “Coca-Cola”, right from coffee, ice tea, fruit juices, water & vitamin water to carbonated drinks such as coca cola, Fanta, sprite etc. This vast positioning and diversification across beverage industry has aided in maintaining Coca Cola’s near 45-47% market share globally.

Differentiation:The ‘Coca-Cola’ logo has tremendous brand recall. Coca Cola’s name along with its trademark red & white logo is one of the most recognized words in the world, second only to “okay”.Over the years, Coca Cola has differentiated itself from other cola brands based on various advertising strategies and marketing strategies.

Coke’s Social Media InitiativesIn August 2008, two Coca Cola fans, namely Dusty Sorg and Michael Jedrzejewski created a Facebook page for coca cola. The page which ranks in the top 10 highest likes on Facebook, was once threated to be shut down owing to Facebook policies. It was then that Coca Cola was given the option to take over the page completely, sidelining the page founders, else the page would have been shut down. Taking this into account, Coca Cola decided to propose an alternative to the above situation. Coke decided to co-administer the page along with its original owners. Currently the page has around 93.6million likes.

Unique MarketingOver the years, the company has increased its expenditure in marketing & advertising.

Coca Cola has been innovative not only in terms of product development but even in its marketing & branding activities. Across the globe coca cola employs various marketing strategies. The Above the Line Activities of Coca Cola go beyond the promotion & social media.

Owing to the rising population of the millennials, coca cola has started targeting them in a focused fashion. All their advertisements are made currently keeping that in mind, and hence the new advertisements and schemes of personalized coke cans, just to name one strategy. This has led to a change in its traditional marketing approach. Coke now focuses on “Content Excellence” with its advertisements going along the lines of “Brand Engagement”. Listed below are a few unique marketing strategies developed by Coca Cola.

• Invisible Vending Machine• Happy Cycle• Father’s Day Surprise• Small World Machine• Hello Happiness• Rainbow Nation• Christmas Balloon• Real Ice Cold

These are just a few of the campaigns. Coca Cola has used many more campaigns to reach out to the masses for marketing & branding. The usage of customer engagement & juxtaposing them with activities that are local with respect to geographies, Coca Cola promotes itself in a unique manner. Across the various campaigns Coca Cola has tried to maintain true to its brand perception & values of Sharing Happiness. All the campaigns are an extension of this value & aid in ensuring Coca Cola promote itself from being just a simple carbonated drink.

Having said this, not all campaigns run by Coca Cola have been successful. They have seen their own share

Coke has the main handle with over 2.8 million followers followed by different handles for different brands along with handles for countries. It believes in active engagement with the customer using Twitter and relies on Crowd Sourced Contents for its various campaigns.

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of pitfalls with regards to the same. A few are as listed below:

• The launch of New Coke in 1985• In 1996, Coca Cola was the official sponsor for the Cricket World Cup. (Click here to view the coca cola ad). Pepsi grabbed the opportunity for guerilla (ambush) marketing, by roping in cricketers such as Azharuddin & Tendulkar and came out with a counter ad with the tag, “Nothing Official about it.” (Click here to view Pepsi’s ad)• After the success of Vanilla Coke in a few Asian markets like Bangkok & Hong Kong, the product was launched in India in April 2004. The product led to decline in sales immediately & drastically. The reason for failures were dime a dozen; a few of them being wrong positioning in the advertisement for actual target audience, taste similar to existing products. The product was pulled out of Indian markets within 10 months. The failure of the product is an example of wrong value message through advertisement along with high pricing & lower margins & is a case study in itself. (Click here to view the “Vanilla Coke” advertisement)• In 2012, Coca Cola had hired street graffiti artists to paint stencil red logos & ad slogans for the company's beverage brands across sidewalks and cement surfaces in New Orleans during the NCAA’s Men’s Final Four. This violated many a city ordinances and had residents expressing outrage over vandalism of public property.• In 2011, in a joint campaign with WWF, Coke pulled out around 1.4 Bn white cans of Coke, to show support for WWF’s Artic Research & Conservation effort. Soon after launching the cans, the company received multiple complaints stating the similarity of these white cans with the silver Diet Coke cans. Many a diabetic & weight conscious people complained of having confused the can with diet coke & facing problems owing to the same. The coke pulled back the cans & reverted to its traditional red cans again post this.• In 2015, Coca Cola, in its #MakeItHappy campaign, launched for the Super Bowl, were putting out automated replies to negative tweets in the form of ASCII art. Gawker Editorial Labs, tweeted first four paragraphs of Mein Kampf & as was expected, coca cola retweeted them in the form of ASCII art automatically, without verification. On understanding this debacle, the campaign was ended abruptly with these ASCII art being taken off their handle. The Cola wars have been going on for ages now with both brands taking potshots at each other & constant race for one-upmanship from both brands.

Current ScenarioOwing to the various repercussions and accusations about the high water usage, pesticide being present in the final product and high cadmium, lead, chromium laden sludge being provided as free fertilizers to the tribals, Coca Cola decided upon new sustainability vision & mission for 2020. Its vision statement for the planet is “Global leadership in sustainable water use. Industry leadership in packaging, energy and climate protection.”The Coca Cola Company has decided to be a water neutral company by 2020, across the globe. From the above graph, one can see them working towards the goal by looking at the 8% drop in water usage in the past 4 years. Its current goals are:• Water Stewardship• Sustainable Packaging• Climate Protection• Sustainable Agriculture In order to promote this the company has taken up various steps:i) 509 community water projects in over 100 countries(Click to view the “RAIN Project” of Coca Cola Foundation)ii) Support my school program with UNHSP in India, raising approximately Rs.50mn iii) Spread its Women Empowerment Programme, 5by20 to 40 Nationsiv) Modular community markets run by local women entrepreneurs, called EKOCENTER v) Promote recycling of its bottles through various means such as providing alternate caps, tweaking its vending machines to take up the used bottles as a currency.(Click here to view the 16 bottle Caps” by coca cola, Click to view the “Happiness arcade” campaign )

ReferencesBusiness Insider-Facts about Coca Cola, KickAssFacts, Coca Cola, The Richest, Business Insider-Coca Cola Consumption, Coca Cola History, Coca Cola Innovation, The Guardian, Forbes, Twitter, Facebook, The Economist, Coca Cola Sustainability Report, Coca Cola FAQs, AJC, Statista, Triple Pundit, V3IM, Study Mode

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GUEST LECTURE ON BEHAVIORAL FINANCEEVENT REPORT

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GUEST LECTURE ON BEHAVIORAL FINANCEEVENT REPORT

On Tuesday, 13th January, 2015, Mr. Rajeev Thakkar graced the auditorium of SIMSREE with his presence. In the lecture organized by the Simcon Committee, he enlightened the batch on ‘Behavior Finance’. Mr. Rajeev Thakkar is the Chief Investment Officer at PPFAS Mutual Fund. He has 20 years of experience in Investment related financial services and is an ardent fan of Value Investing as practiced by Warren Buffett and Charlie Munger. Mr. Thakkar keenly follows developments in the relatively new field of Behavioural Finance. Mr. Thakkar has completed his CA from ICAI and is a CFA holder in Investments and Securities.Mr. Thakkar started his lecture with explaining the concept of value investing. And if you really incorporate value investing how FII’s inflow and outflow or GDP growth number is above or below expectation or which government party is getting a majority in the parliament should not affect your decision of buying or selling of the stock. He explained value investing is looking at the activity of buying equity shares in a company as partnering with the promoters in running the business. What should matter to the investor is the prospects of the business, the true value of the business. This is known as inversing and value investing is buying this whole thing at discount.He further explained that Behavior Finance in a laymen terms is Psychology + Finance. He further explained the concept of human psychology with the example of dot com bubble of 2001. He elaborated further on why investing is difficult and the concept of Herd Mentality. He explained the reason behind why investing is difficult? Because market are made on the basis of varied opinions expressed by its participants. These opinions are subject to change with the changes in the sentiments of these emotional people. It’s the crowd behavior that dominates the decision making & is responsible for the sudden changes in the sentiments.He gave an example of Black Monday in May 2004

when the market lost around 700 points as the election results brought the Congress to power. What participated this huge fall? Had anything gone drastically wrong with the performance of the companies whose stock process crashed? Definitely no. But the sentiments changed. BJP going out of power was a big change and normally we do not like changes. Hence there was a gloom all around and people started dumping stocks as though there was going to be no future. The markets started crashing on reflexes as each one wanted to get out faster than his neighbor. This is known as madness of crowds. Herd mentality was at work & no rational thinking would work. Imagine yourself being emotionally strong & you bought when others were panicky. You would end up making huge fortune. But this seems easy only in hindsight. At that point of time to go against the crowd is the most difficult but the most sensible thing to do. Its application not only helps you to be in control of your emotions but also helps you to understand others emotions and benefits from their mistake.He then explained the basic difference between traditional & modern economic theory. He gave a few examples that counter argues the fundamental assumptions of traditional theory. He also stated that how Charlie Munger explains that one need not restrict oneself to equations, as we do in physics, but need to understand the psychology and behavior behind every decisions. He then explained the concept of Heuristics that heuristics are shortcuts that our minds take. He then elaborate on different types of heuristics like availability heuristics, representativeness heuristics etc. He then went to another concept into behavior finance i.e. anchoring and how it impacts one real life situation with some examples and explained that hoe human being by nature are not risk averse but loss averse.He then went to explaining the concept of Frame Dependence i.e. how much of our thinking process is dependent on certain frame. And how much we want other people or society to approve of us, in other words known as Social Proof. He concluded the lecture by saying that awareness will go a long way in making, a lot of mistakes that will create problems down the road. The lecture was very engaging wherein the students asked a lot of questions and Mr. Thakkar answered them all. The students at SIMSREE found the lecture very beneficial. We thank Mr. Rajeev Thakkar for taking time out and giving this very important lecture.

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CONCEPT OF THE MONTHTRIPLE BOTTOM LINE

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CONCEPT OF THE MONTHTRIPLE BOTTOM LINE

The term “Triple Bottom Line” was coined for the first time by John Elkington, the founder of British Consultancy Sustainability in 1994. He argued that companies should prepare three different bottom lines. First, the traditional bottom line measuring corporate profit i.e. the final accounts profit & loss statement. Second being the company’s “people account” i.e. a measure in some terms of the how socially responsible the company has been through it operations. Third being the company’s “planet” account – a measure of environmental responsibility depicted by the company. The triple bottom line is thus constitutes of 3Ps: Profit, People & Planet. The goal of this is to measure the financial, environmental & social performance of the organisation over a number of years. In other words, it is the measure of the full cost involved in doing business.

Calculating the TBL:One of the major challenges in reaching to the three bottom lines is the unit of measurement. Social Capital & Environmental health are not quantifiable in units. One methodology employed is weighing each factor through an index. These factors are not hard coded and hence allow the flexibility for business and local government to deliberate & decide upon these factors. Based on various literature available on sustainability below are mentioned a few sustainability measures employed:Economic Measures• Income• Cost of under or un-employment• Size of establishment• Job growth in terms of monetary measures• Employment distribution based on sectors• Percentage of firms in each sector• Revenue of sector contribution to GDPEnvironmental Measures• SO2 concentration

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• Concentration of Nitrogen oxides• Universally accepted priority Pollutants• Power consumption• Fossil fuel utilisation• Waste Management• Hazardous waste management• Alteration in land use or land coverSocial Measures• Rate of unemployment• Gender diversity i.e. female labour force utilisation• Median household income• Poverty rates• Percentage of population with education over post-graduation• Life expectancy changesAnother approach of calculating the Triple Bottom Line is using the participatory tool, wherein the stakeholders of the project or company are invited to partake in the assessment process and then using a Multi-Criteria Analysis(MCA), a mathematical software based decision-aiding process, along with economic valuation tools are employed to rank & evaluate various scenarios under consideration.

Advantages of Triple Bottom LineIncreasing awareness of malpractices by corporates in social and environmental practices forces several companies such as Nike and Tesco to rework upon their sourcing policies and to keep a hawk’s eye on the following of ethical and globally acceptable standards of their suppliers, even in places such as Mexico & Bangladesh where unregulated labour markets are prevalent. Triple Bottom Line also promoted the growth of the Fairtrade Movement. • Recognition for companies• Media Image build up• New & more funding• New Avenues for development

The Criticism against Triple Bottom Line• Quantification – It become highly difficult to pin point and reach a monetary value for social or environmental disasters.• Business adage of ‘Money makes Money’ – Smaller firms would find it difficult to prioritise social & environmental activities. • Focus on Core – Triple Bottom Line is looked upon as diverting the business from focusing upon its core competency. • Not Social Service – Many people view business as a source for improving their bottom line (economic). For social & environmental welfare, social service centres are supposed to focus upon

A Few Companies which have employed Triple Bottom Line• Nike• Shell• British Petroleum• British Telecom• AT&T• Dow Chemical

ReferencesIndiana University, University of Vermont, Jera Sustainable Development, SIBM, Page 193. Hindle, Tim. The Economist Guide To Management Ideas & Gurus. Profile Books Ltd