Category: Entrepreneurship

Fossil fuel-producing nations turning into infrastructure investors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The “Global Energy & CO2 Status Report”, published by the International Energy Agency (IEA), states that “renewable energy saw the highest growth rate of all energy sources in 2017 and met around a quarter of global energy demand growth” — a significant statistic by any standard and one that clearly points to the fact that renewable energy is here to stay.

This has serious ramifications for fossil fuel-producing nations. While fossil fuels still contribute a large part of the global energy needs, the fact that a “structural shift” is in process is clear. It is clear that over a medium- to long-term horizon, fossil fuel-dependent nations will have to rethink their strategy to boost and manage their economies.

A quick look at the largest sovereign wealth funds (SWFs) in the world tells us that approximately 50 per cent of them are fossil fuel-based economies. Significant pools of capital are available with these SWFs and it should not be a surprise to see them diversify into various asset classes.

The next few decades may see fossil fuel-dependent countries go from being providers of energy and capital to focusing significantly more on being a source of capital, i.e., an investor. This switch towards investing is a visible trend, with SWFs being a source of significant capital across asset classes such as equity, private equity and infrastructure. The key takeaway is that SWFs, especially those from fossil fuel-producing countries, can be significant financiers of infrastructure.

Infrastructure as an asset class has two elements that make it attractive for SWFs: Fixed cash-flow profile and large market. Infrastructure assets, by their very nature, are highly regulated assets with fixed income type of cash flows. Such a structure works well for SWFs that are looking to match liabilities, i.e., cash outflows, on their balance sheets. In addition, infrastructure needs that countries face are large enough markets for SWFs to invest into in meaningful size to generate returns.

The large fossil fuel-driven SWFs are of significant size. Estimates by the Sovereign Wealth Funds Institute say the top 10 SWFs globally are managing more than $200 billion each, and four of these are fossil fuel-driven. Therefore, given the long-dated investment horizon of the SWFs, the nature of liabilities on their balance sheets, and the large size of capital that needs to be deployed, infrastructure as a broad sector is attractive.

For fossil fuel-producing countries, switching from being an energy supplier to a supplier of capital lets them reduce their exposure to fossil fuel price volatility in the short term and play a larger role in boosting trade ties with other nations through infrastructure creation in the long run.

For nations that need financing for infrastructure creation, the global shift towards renewables and its consequent impact on fossil fuel-producing countries to turn investors is an opportunity not to be missed.

There are also important lessons to be learnt by both investors and infrastructure destination nations from the Norwegian government’s decision against allowing unlisted infrastructure investments by its Sovereign Wealth Fund. The reason given was that the fund wasn’t equipped to deal with the risks involved, especially from a political and regulatory perspective.

This points towards the urgent need for infrastructure destination nations to, one, improve regulations around unlisted infrastructure assets and, two, create mechanisms that allow for listed infrastructure assets to grow.

The issues faced by the Norwegian Sovereign Fund are generic issues that all SWFs face. It is important that in a highly competitive global capital market, countries expedite the creation of an enabling environment for infrastructure creation.

Clearly, the global changes in the energy markets also have significant ramifications on the financial markets.

The energy transition from a world dependent on fossil fuels to one driven by renewables does not necessarily need to have winners and losers. In a global economy besieged by the fear of “trade wars”, switching roles for fossil fuel-producing nations from major energy suppliers to large providers of capital is worth considering.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

10% Indians hopeful of tasting success within a year, shows survey

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Despite pressures of a competitive job economy, one in 10 Indians feel optimistic about achieving success within one year, which is double the global average of 5 per cent, according to a LinkedIn survey on Wednesday.

“The growing optimism in India’s macroeconomic environment shines through in the confidence Indian professionals feel towards achieving success,” said Deepa Sapatnekar, Head of Communications for India, LinkedIn.

But instead of chasing a six-figure salary, most people in India tend to measure success on the scale of happiness and health, according to the results.

“Being happy” is the ultimate definition of success for 72 per cent Indians, according to the survey commissioned by the professional social network and conducted by international research firm YouGov.

Good health (65 per cent) and a healthy work-life balance (57 per cent) also emerged as important indicators of success.

Only 22 per cent attributed success to a “rise in paycheck” and 36 per cent defined success in terms of “earning a six-figure salary”, the results showed.

“While success means many different things to different people, it is heartening to see indicators like work-life balance, family time and health taking precedence over a six-figure salary,” Sapatnekar said.

The survey involved responses from over 18,000 adults from 15 other countries, including Britain, Australia and the US, besides India.

Nearly 70 per cent Indians said they felt successful and had a positive and balanced outlook on achieving success.

Among the 16 countries, Indian professionals ranked third in feeling successful, following the UAE in the first spot and Brazil in the second.

Nearly 80 per cent respondents from India said that education plays a positive role in their ability to achieve success, along with other factors such as one’s age (61 per cent), gender (56 gender) and the career they have chosen (68 per cent), which also have a positive impact on future success.

Around 30 per cent Indians think achieving social success is more important than achieving professional success, higher than the global average of 22 per cent, the survey showed.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

My Management Mantra: This boss says the best place to prepare for leadership is on the job

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Aditya Ghosh, CEO, Oyo Hotels & Homes – South Asia gives us an insight into his management mantra.

How do corporate leaders manage? Where do they draw inspiration from? ‘My Management Mantra’ is CNBCTV18.com‘s series of interviews with experienced leaders who run large companies and oversee a large workforce. This one features Aditya Ghosh, CEO, Oyo Hotels & Homes – South Asia.

1. What time do you like to be at your desk?

If desk means emails and work messages and starting to work … then around 5.30 am … in an increasingly virtual world, a hard wood desk is becoming an ornament.

2. Where is the best place to prepare for leadership: at business school or on the job?

On the job. I never went to business school.

3. Describe your management style.

Hopefully to always lead by example.

4. Are tough decisions best taken by one person or collectively?

One person with various inputs from others.

Inspiration is all around us. We just have to have the eyes to observe and not just see, and ears to listen and not just hear.

5. Do you want to be liked, feared or respected?

Both to be respected and liked.

6. What does your support team look like?

An incredible team that makes me look very good.

7. A business outside of aviation or a business leader that you draw inspiration from?

Inspiration is all around us. We just have to have the eyes to observe and not just see, and ears to listen and not just hear.

8. Which management book has influenced you the most?

I like reading but am not a regular reader of management books.

9. Do you socialise with your team outside of work?

Yes.

10. What would your key management advice be?

To have a healthy dose of fear, take pride in creating something new and the deep realisation of how many people you impact.

This piece was first published when Ghosh was president and whole-time director, Indigo Airlines.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

My Management Mantra: This airline boss believes in giving opportunities to colleagues to excel at work

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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How do corporate leaders manage? Where do they draw inspiration from? CNBCTV18.com is launching a series of interviews titled ‘My Management Mantra; with experienced leaders who run large companies and oversee a large workforce. The first one features Tony Fernandes, Group CEO of AirAsia, the founder of Malaysia-based low-cost airline AirAsia Bhd.

1. What time do you like to be at your desk?

I work on my phone most of the time but when I have scheduled meetings in the office, I like to be at my desk early so I can get started on the day.

2. Where is the best place to prepare for leadership: at business school or on the job?

Knowledge is important but nothing trains you to do something better than actually doing it.

3. Describe your management style.

I try to have the right people around me that I can trust with important decisions. You are only as good as your people.

Everyone has the potential to be amazing at something, and your job as manager is to give them the opportunity to be the best version of themselves.

4. Are tough decisions best taken by one person or collectively?

Building consensus is an important part of being a manager but ultimately, no. Truly effective solutions are designed by committee. Part of your responsibility as a person in charge is sometimes, after listening to everyone, you have to make difficult choices.

5. Do you want to be liked, feared or respected?

Liked and respected. AirAsia is a family, and there is no place for fear in this company.

6. What does your support team look like?

I can’t do anything without my personal assistant Jackye and my executive assistants Ben Jie and Jun Ho. They probably know my schedule better than I do and they make sure everything runs smoothly.

7. A business outside of aviation or a business leader that you draw inspiration from?

Elon Musk. He is a rare combination of thinker, dreamer and doer. Few others are willing to take on big problems, propose radical solutions then go all-out to make those a reality, whether it’s electric cars, space travel, Hyperloop or boring tunnels.

8. Which management book has influenced you the most?

I’ve recently been reading Time, Talent, Energy, which talks about how to unleash the full potential of your people by eliminating institutional factors that drag on performance.

9. Do you socialise with your team outside of work?

Sometimes. But if we did, we’d probably just talk about work again and they’d get sick of my face, so I try to keep a healthy distance.

10.  What would your key management advice be?

See the best in people. Everyone has the potential to be amazing at something, and your job as manager is to give them the opportunity to be the best version of themselves.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Online retailers create their own brands

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In Andrea Bright’s home, Kleenex tissues, Charmin toilet paper and Glad trash bags have all been replaced by one brand: Prince & Spring.

Never heard of it? It’s the 3-year-old house brand from Boxed.com, one among many new lines from online retailers vying to be the next private-label juggernaut. Think Costco’s Kirkland Signature or Kroger’s Simple Truth, but for online shoppers only.

Online retailers are creating their own brands for the same reason brick-and-mortar stores have long done so: They make a bigger profit, and the items help attract and keep customers. Jet.com launched Uniquely J last fall. Amazon now has Wickedly Prime, AmazonBasics and several other brands. And one new website, Brandless.com, has gone even further. Adamant that it’s not a private label, it nonetheless sells only its own goods such as toothpaste, tampons and trail mix.

For shoppers, who may see the new brands atop their search results, the online-only store labels can offer cost savings on basics, organic items they can’t find in nearby stores, or a change from products they see everywhere.

Bright, an academic counselor from Mattoon, Illinois, started buying Prince & Spring products about two years ago. They cost less, she says, and she finds them to be “very good quality.”

Since online retailers don’t have store shelves, they find other ways to get their labels in front of customers. Sites design packaging that pop on screens (Jet, for example, hired a tattoo artist for Uniquely J coffee labels). Some use organic ingredients or recycled materials to stand apart, while others ship boxes of free samples to hook shoppers.

In a box from Jet last December, Rachel Simpson got freebies: two Uniquely J sauces, including a Sriracha one.

“That was a pleasant surprise,” says Simpson, a data entry clerk who lives in Jonesboro, Arkansas. She frequently buys another brand of Sriracha from Jet, as well as other condiments.

Jet analyzes customer data to decide what free samples to send and also what products to make. Sriracha is a hot seller, but it didn’t have an organic version, so it created one for Uniquely J.

Jet says it started to work on Uniquely J before the site was bought by Walmart Inc. in 2016. But while you can find Walmart’s private-label brands on Jet, you won’t find Uniquely J in Walmart stores.

“We evaluate that all the time,” says Dan Hooker, who’s in charge of the online retailer’s private brands. “But right now, it’s an exclusive Jet.com offering.”

Amazon blurs the line. When it bought Whole Foods last year, it added the grocer’s 365 store brand to its site immediately. Wickedly Prime soups showed up at its new Seattle convenience store, and AmazonBasics smartphone chargers are at its physical bookstores.

Store brands typically start out selling frequently bought products, such as toilet paper and napkins, and grow from there. Prince & Spring did that, and now plans to add laundry detergent, almond butter and bottled water.

To make store brands, retailers find manufacturers who can produce the items they want, says Woochoel Shin, a marketing professor at the University of Florida’s Warrington College of Business. But sometimes it’s the big brands that also make the private-label goods — something many don’t want to advertise.

“If consumers knew that, who would buy the national brand product?” says Shin, who has studied store brands.

Kimberly-Clark, the maker of Kleenex tissues and Huggies diapers, says the private-label goods it makes account for less than 5 percent of its sales, but it won’t say which retailers it works with. Asked on a conference call in January about increasing competition from Amazon’s Mama Bear diapers, Kimberly-Clark CEO Thomas Falk answered a different question: “We haven’t confirmed that we are making Mama Bear; we really don’t talk about any private-label relationships.”

Amazon says it can’t say who makes its diapers, and Kimberly-Clark did not respond to a request for comment.

No matter who’s making them, the new online entries increase the pressure on big brands, which have already been dealing with the growth of private-label brands in stores.

How much of an effect are the new online brands having? Amazon, Boxed, and Jet wouldn’t give sales figures. But brick-and-mortar retailers show that store labels can be very lucrative.

The owner of Albertsons, Safeway and other supermarkets says its O Organics label recently surpassed $1 billion in annual sales, its fourth brand to do so. Kroger’s Simple Truth has passed the $2 billion mark. And wholesale club Costco says Kirkland-branded nuts, milk and other goods made up about a quarter of its $129 billion in annual sales.

Online-only brands are taking inspiration from well-known store brands in other ways. Boxed, often described as the online version of Costco since both sell bulk-sized items, looked to Costco when it needed to come up with a name for its house brand, says Jeff Gamsey, Boxed’s vice president of private brands.

The company considered Prince & Greene, the cross streets of Boxed’s old New York office and a nod to Kirkland, named for the Washington city where Costco was once based. But someone realized that Prince & Greene had the same initials as Procter & Gamble — the maker of Charmin and Bounty, and the very company the brand would be competing with. Greene was replaced with nearby Spring Street.

As for Brandless, don’t take the name too literally. “We’re a new kind of brand,” says co-founder and CEO Tina Sharkey, who says she doesn’t consider it a private label because the site doesn’t sell any other brands.

Its biggest selling point: Everything on the site costs $3, whether it’s the organic virgin coconut oil or the tissues made of sugar cane and bamboo grass. Sharkey says Brandless makes money on every item by working with manufacturers directly. “Nothing costs us more than $3 to make,” she says.

Since the company launched last summer, it has more than doubled the number of items it sells to 250. It doesn’t reveal sales figures, but says within 60 hours of launching, it received orders from all 48 states that it ships to.

Sharkey attributes the demand to young people ready to shed big brands.

“Millennials don’t want to buy the products that they grew up with and their parents use,” she says.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow