Building a Sunshine Nation

India has one of the highest Solar potential in the World. Can it tap into it build a sustainable economy?


Source: The Hindu

India generated 68% of its electricity from coal in the fiscal 2013-14. The inability of Coal India Ltd (the state-owned monopoly) to ramp up coal production resulted in 65,000 MW of installed capacity being stranded, causing a power deficit of 5.4% in the fiscal 2013-14. To plug the gap, imports rose to 152 million tonnes in 2013-14 (20% of total coal requirement) resulting in higher power prices. This situation, together with climate change imperative impels a rapid movement towards greener and cheaper sources of power, primarily solar energy.

Rising dreams and falling prices


Source: Financial Express


The movement is already under way as a result of Government’s ambitious ‘National Solar Mission’ announced in 2009 which envisages 20,000 MW solar capacity installed in the country by the year 2022. The Narendra Modi-led Government raised that target last month to 1,00,000 MW of installed solar capacity, inviting domestic and foreign companies to invest about $ 100 billion in the country’s Solar power sector. The buoyant mood behind this ambitious target is supported by 4 key factors. First is the abundant solar resource availability. India receives about 4.5-7 kWh/m^2 of solar energy on average with 1500-2000 hours of sunshine per year (depending on the location). This is enough to generate power more than 1000 times the current demand. A second factor is the falling prices of Solar Photovoltaic modules. Large-scale production, especially in China, has caused the module prices to drop by 80% between 2008 and 2014, dropping by 12% last year alone. As a result the tariffs for grid-interactive solar power have fallen from Rs.17.91/ kWh in the year 2011 to Rs. 5.73 /kWh in the latest round of auctions held by the Andhra Pradesh state government.

Nearing Grid-Parity

The third factor has been the tremendous rise in efficiencies of solar PV-modules. Over the last 8 years, research and mass-scale production have resulted in rise of conversion-efficiency for crystalline silicon modules from 12% to about 19% and that for thin-film (Cd-Te) modules from 8% to 13%. Companies like SunPower (in USA) are already manufacturing silicon modules with 25% efficiency commercially. Scientists at Fraunhofer Institute in Germany recently developed solar cells modules with 44.7% efficiency. This combination of falling costs and rising efficiencies has resulted in solar power approaching grid-parity. KPMG, a consulting firm, predicts solar tariffs to achieve grid-parity by the year 2018-19. Solar power is already more economical than diesel power with an average tariff of Rs. 7/kWh against Rs. 15/kWh for the latter.

The fourth significant factor has been the Government support to build the solar power sector. The ambitious ‘National Solar Mission’ provided various fiscal incentives like preferential feed-in tariff, excise duty concessions, wheeling-charge concessions, income-tax holiday, an 80% accelerated depreciation on solar-equipment, etc. Besides, off-grid solar plants receive a capital subsidy of 30% of the entire-project cost (and of 70% in North-eastern states and J&K). These factors along with falling prices have resulted in rise in installed capacity from 161 MW in 2010-11 to 2,319 MW in 2013-14.

Sunshine on the horizon


Source: Aditya Greens

This is however only a small amount of the total potential, which is estimated to be in the range of 7,00,000 to 11,00,000 MW. For the non-grid applications, Rooftop solar represents the most lucrative opportunity. It can fulfil 30% of the entire demand generated during the sunshine hours. The example of Germany shows that with robust and attractive policy, Rooftop solar can be effectively leveraged upon. Out of the total Solar capacity in Germany, 80% is via Rooftop solar modules which can meet about 10% of total demand on a typical summer day.

Apart from using Photovoltaic modules, Solar energy can be harnessed through thermal systems as well. In this domain, Solar cooking and Process-heating are the major segments. Of these, Solar cooking is the most mature category with an estimated potential of 2.6 lakh m^2 collector area and target installation sites like temples, hostels, canteens and prisons. Already, successful examples of mass-solar cooking like Shirdi temple and IIT-Roorkee’s student messes exist. But the most lucrative opportunity (of about 46 lakh sq. Metres of collector area) lies in the industrial heating segment. Indian industry accounts for 40% of the total primary energy consumption of which thermal-form accounts for a massive 70%. Solar process heating can easily replace Diesel, LDO or FO-fired boilers in industries like Textiles, Dairy, Pulp & paper and Food processing.

Clouds spoil the mood

Despite massive potential and Government’s good intentions, severe challenges face the nascent Solar power sector in India. The utility-scale projects through PPA-mode (Power Purchase Agreement) have persistently been under the shadow of poor financial condition of the state-owned distribution companies. The retrospective tariff reduction by Gujarat’s power utility and non-honouring of PPA agreement by Tamil Nadu’s power utility has made the investors apprehensive, lately. The health of the utility-scale projects via REC-mode (Renewable Energy Certificate) is even more precarious. Non-enforcement of RPOs (Renewable Purchase Obligations) by the state-governments has forced the REC prices to tumble by 70% from Rs. 9.5/kWh to Rs. 2.85/kWh. Only 2% of total solar RECs were traded in October 2014 as compared to 18% in April 2012. This has put projects of 500 MW capacity (1/6th of India’s current solar capacity) in a cash-crunch.

For the Rooftop solar industry, the main hurdle has been the indecisiveness in coming up with an effective policy for residential rooftops. In August 2014, a 30% capital subsidy was announced for Rooftop installations but this was applicable to only Government buildings. Moreover, there have severe delays for the last 8-10 months in subsidy payments as the MNRE budget was reduced from US $246 million in 2013-14 to US $72 million in 2014-15. A local rooftop installer, Zolt Energy’s Pradeep Palleli, said “Announcing subsidies and not releasing it in time is really a major hurdle hindering the growth of the rooftop solar industry.” Even the Solar thermal industry has hit a road-block after the Government withdrew the 30% capital subsidy on solar water heaters on October 1, 2014.


Who will make them?

The weakest pillar in India’s solar industry however is the crippled manufacturing-base. Global over-supply of cheap modules from manufacturers in China and USA has put many domestic-manufacturers out of business. For those who are left, capacity-utilization of factories remains below 30%, putting them on verge of bankruptcy. The high cost of domestic finance has been another major disadvantage. Solar-developers are getting access to loans at 3-4% from US Export-Import Bank (Ex-Im) while domestic interest-rates remain above 13-14%. Solar-developers have taken loans in excess of US $1 billion from the US Ex-Im Bank. But these come with riders to procure modules from US-based manufacturers, thus putting Indian module-manufacturers out of business.

Government to the rescue

To eliminate the barriers and shortfalls in the sector, the Government has to take proactive steps. Foremost among them should be creating an environment of certainty and stability, where in, programs are sustained and incentive-payments never delayed. To reduce the debt costs for developers, funding avenues like long-tenure, tax-free solar bonds. Lastly, the government can also leverage the ‘Make in India’ campaign to create a robust and sustainable solar-manufacturing industry in the country. Solar-sector focused Manufacturing and Investment zones should be set up to provide business friendly ecosystem along with superior physical infrastructure.

Work has already begun on many investment-encouraging initiatives. As a result, India is building the world’s largest solar-power plant in Rajasthan with a capacity of 4,000 MW, which is expected to bring the cost of solar down to retail tariffs (and even lower in some locations). Big business-houses like Tata-group, Mahindra Group, Reliance, NTPC, Aditya Birla Group and others have already planned investments worth thousands of crores to make the best of the solar-opportunity. The US $ 100 billion solar-investment plan by the Modi Government takes India’s commitment to solar technology to an unprecedented level. The sun has begun dawning on India. Combined effort by Government and Businesses can take it up the horizon and shine upon India’s future.



Harsh Jain is a second year student at IIM-Ahmedabad. He completed his graduation in mechanical engineering from IIT-Roorkee. With extensive research exposure in the form of market research projects and industry review reports in the energy sector, Harsh is an environment enthusiast and actively follows the latest trends in the power and automobile industries.


What’s clipping our wings?

Source : Bloomberg News

The Indian civil aviation industry, with a size of $16 billion, is among the top 10 globally. It has grown at a CAGR of 17%, which, if sustained, could make it the largest aviation market by 2030. Entry of Low Cost Carriers and thrust on development of modern airports has expanded the market from business class and corporate to the middle class, who have the potential to become the largest and most lucrative customer segment.


Figure 1: Indian commercial aviation sector

The Make-In-India program is designed to facilitate investment, foster innovation and build manufacturing infrastructure in a number of key segments that are instrumental in India’s growth and progress. In the aviation sector, the government has announced a number of key policy initiatives, such as 100% FDI in greenfield airport projects and 49% FDI in domestic passenger airlines, along with budgetary support in terms of investment and exemptions. However, there exist a lot of regulatory and taxation hurdles for airline companies in India, and measures need to be taken to support the development of the aviation sector in India.

Essential Air Services Fund (EASF): Connectivity between Tier-2 and Tier-3 cities is low due to air carriers refusing to operate flights on those routes as they perceive them to be unprofitable, due to low volumes. A proposal exists, for airlines to contribute a percentage of each ticket sold to a common fund which can be used to cross-subsidise air travel on unprofitable routes. This is similar to a fund in the telecom sector where operators contribute 5% of their gross revenues to a universal service obligation fund, which is used to provide telephone connectivity in rural areas. A similar policy in aviation would enable increase in connectivity on less busy routes.

Modification of the 5/20 rule: Currently, Indian airlines are required to have a minimum fleet of 20 aircraft and 5 years of operational experience to start international services. This serves as a deterrent for new entrants, who want to operate flights in the more profitable international segments. Instead, the policy can be modified to allow airlines to accumulate flying credits by deploying capacity on domestic routes, with additional credits for providing connectivity on routes deemed unprofitable. Also, the minimum operational experience requirement can be revised to one year. This will help improve domestic connectivity and attract more entrants in the aviation space.

Fuel taxation: High tax rates of 3-30% on Aviation Turbine Fuel (ATF) have made ATF in India 60% costlier than that available in ASEAN countries. Along with state and central taxes on ATF, there exist service taxes on air tickets and high airport charges, which are throttling Indian airline carriers’ competitiveness and adding to their debt burden. A comprehensive look at the taxation policies is required, with reduction in extra taxes.

MRO taxation: Airlines in India spend 13-15% of their revenues on Maintenance, Repair and Overhaul (MRO), making it the second largest cost component for airlines. Myopic policies regarding indirect taxes such as VAT and Service tax, along with laborious customs procedures regarding import of spare parts and consumables, has led to most airlines flying empty aircrafts to MRO facilities in foreign countries for servicing. Merely 5-10% of MRO work for domestic carriers is carried out in India. This represents a huge lost opportunity in terms of revenue and jobs. A task force needs to be set up to review the policies and modify the taxation regime to develop the domestic MRO industry.

Infrastructure development: There has been a thrust on development of infrastructure, particularly new airports, but there needs to be focus on developing low-frill airports under Public-Private-Partnership schemes. Also, a key impediment to growth of airline capacity in India is lack of availability of hangar space at key international airports, which needs to be addressed.

While the initiatives under the Make-In-India program serve as a good starting point, a comprehensive overhaul of aviation policy is required to achieve the growth targets and make Indian aviation competitive from a global standpoint.


Arundhati Hazra is a second year student at IIM Ahmedabad. She graduated from NITK Surathkal with a B.Tech in Electrical and Electronics Engineering, and worked for three years, in ST-Ericsson and AMD, before coming to IIM Ahmedabad. She enjoys reading, writing and quizzing. She interned with McKinsey and Company during summers.

Hype Cycle for Emerging Technologies in Digital Marketing

Businesses today have been extensively integrated with digitization, promising convergence of people and businesses, while disrupting existing business models. A new age of digital marketing has arrived where extensive campaigns are pushing new products through platforms such as websites, e-mails, apps and social networks. With over seven billion people and businesses, and a millions of technologies bringing a new world together, digital marketing plays a major role in empowering businesses with the much-needed edge to thrive with the competition.

Digital Business Development Path

 Rapid change is fueling digital marketing. Within the last decade we have seen technology giants driving businesses such as Facebook and Twitter. Mobile marketing and advertising marketers have begun focusing on consistent and contextual without being interruptive.  Change is the one thing that is constant, with changes being made faster than ever before. However, impact due to the change is highly dependent on it’s temporal context. For example, wearable technology like Google glass has gained a lot of news coverage when in fact, Steve Mann had already developed a similar device, ‘EyeTap digital Eye Glass’ in 1999. This is a prime example showcasing the importance of analyzing the visibility of a product with time for organizations to capitalize its technological and business resources to make the best marketing sense.

Hype Cycle

 The Hype Cycle is a branded graphical tool developed and used by IT research and advisory firm Gartner for representing the maturity, adoption and social application of specific technologies (See Figure 1). The hype cycle map how technologies move through different phases of hype and indicate whether certain technologies and products are good for the company in short term and long term. Marketers need to understand how and when to derive value from a product and also when to dispose of it when new things come along.


Fig 1: Five Phases of the Hype Cycle (source: Gartner)

What’s new in 2014?

Marketing Talent Communities: Marketplaces have come up that support organizations and marketers to find and hire qualified freelance talent on-demand. A lot of time is saved in the process of recruitment of a variety of qualified writers, designers, strategists, data-analysts etc. Bloomberg Institute is one such example which financial employers approach to hire talented college students through a normalized screening test called the Bloomberg Aptitude Test.

Marketing Technology Integrators: The scope of digital marketing has expanded broadly. Digital marketers can’t claim to address the digital marketing needs solely through offering new Web Content and Experience Management or Portal platforms. As a marketer, the time and attention required to solving technological solutions takes time away from their focus on target customer. Thus, marketing organizations are hiring services and products that design and implement software and increasingly integration-oriented implementation data solutions.

Transactional Ads: This is an example trying to connect marketing with productivity and conversion. Online ad units that are activated by gestures, present a secure transaction or coupon. This reduces the time consumption of the viewer by enabling a person to request information or to buy the advertised product without leaving the webpage on which the ad appears. If old companies can figure out a way to associate more with transactions, they can boost their chance of surviving in the online market. [3]

Quantified self: It is a movement to incorporate technology into data acquisition aspects of a person’s daily life in terms of inputs, states and performance. Applications or services on mobiles and wearable technology that provide self-tracking analytics contribute to self-knowledge through self-tracking with technology. Biometrics have been identified that people never knew existed making data collection cheaper and more convenient than ever before. Recently, companies like Google and Zomato have begun to use location data of a user’s phone to recommend suggestions to buy things based on the proximity to various shopping outlets.

Social co-browsing: Collaboratively sharing of the web space with one or more parties from a social network, regardless of the physical locations of the partners. In real-time, multi-user experience isn’t just slapped on top of an application, it’s directly built into the core experience. Companies would have to redesign their user experience to support social co-browsing so as to provide a natural extension of for users to communicate and interact to enrich their real-time, collaborative experience. [4]


Future Implications

Most of the technologies at the peak of their hype cycles today, will plateau in terms of productivity within the next two years. The window to gain competitive advantage in this fast-paced environment is limited. Thus companies must adapt themselves for speed, agility and rapid customer response.

Content marketing can be very resource intensive. Organization should use marketing talent communities and agencies as an escape valve for demand as a way to scale elastically as demand comes online.  The in-source and outsourced roles must be carefully mixed together in order to optimize productivity. Organizations should appoint strong leadership to ensure the success of their elaborate content marketing strategy.

Common view of digital-savvy customers should be kept in focus to ensure tight coordination of marketing activities in sync with the changing customer needs and reactions. Emerging architectures of digital marketing hubs should be carefully reviewed periodically to best utilize resources for most productive outcome.

With increase in social-marketing hype, the social marketing objects should be tied to the corporate vision of the companies. Analysis of how each social marketing activity will support that goal and provide a high return of investment. Gain from adapting to emergent technologies can lead to savings on media from improved efficiency or lift in sales from improved effectiveness of a company’s budget.

B2B management investments should be made into multi-channel, taking advantage of accessible areas in data mining, segmentation and behavioral analytics. Useful analytic results should be incorporated to the marketing strategy to further boost performance.

Criticism about Hype Cycle

Several disadvantages of Hype Cycle have been brought to light. Firstly, it is very difficult to objectively estimate the current location of a technology in its hype cycle. Secondly, terms such as ‘disillusionment’ and ‘enlightenment’ are misleading for people as they give a wrong idea about how exactly and to what extent a technology can be used for an organization. Also, there is no mention of how a technology transitions between phases and what all factors influence the shift. Lastly, several technologies are heavily correlated in terms of advancement through the different phases. The hype cycle does explain the cause-effect relationships between technologies and their impact on acceleration of technology progress and generation of excessive hype for a product.


Exploring the meteoric rise of Alipay

The birth and rise of Alipay

Launched in 2004, Alipay is Alibaba’s third- party online payment platform in China. Alipay is to Alibaba just as PayPal is to ebay i.e. a payment portal, which processes the online payments not only for Alibaba but also for other e-tailers. While Paypal has mostly focussed on the Western market, Alipay prime focus is its birth country – China. This is justified considering its fast-growing third-party online payment market. However, unlike ebay or Amazon, Alipay enjoys favourable market penetration in China.




300M+ registered users

 12.5B transactions

 3x: value of transactions compared to Paypal and Square

With over 300 million registered users trading with over 460,000 Chinese businesses to drive 12.5BN transactions, Alipay has the largest (about 50%) market share in China both in terms of number of users and volume of transactions online. Not only in the domestic market, Alipay has tied up with 300 worldwide merchants to trade in 12 foreign currencies. The domestic and international volumes drive over $520BN transaction revenues and are greater than the volume of transactions at ebay and Amazon put together.

Drivers of growth

The journey to becoming China’s leading and world’s 3rd online payment provider has been a steady one. The meteoric growth of Alipay rests on (3) key factors-

  1. Alibaba Advantage: Alibaba’s performance has been the growth engine for Alipay.


At the right place at the right time.

The e-commerce market in China has boomed over the past decade. Its revenue growth (2009-2012) has topped 70% compounded annually. Driven by social media and advent of mobile/smartphones, the market is expected to continue to rise and outperform the US e-commerce market for another half a decade. Alibaba has capitalised on the growing China market through Taobao and Tmall.

The following charts show Alibaba’s market share in 2013 in various segments –

Pic 42. Differentiated offerings

 Unlike its competitors, Alipay provides two key services that satiate both the buyer and the seller. These two value additions have significantly differentiated Alipay from its competitors and  helped in building trust, thereby strengthening the network effect.

Consumer Protection. In light of the volume of consumer complaints in the e-tailing business, Alipay ensures buyer protection through its escrow service. It collects payment from the buyer but releases it to the seller only if the buyer confirms her satisaction with the delivered product.

*78% respondents were concerned about the authenticity of items sold online.

The following flow diagram illustrates the model –

Pic 5

No Fee Is The Key. Alipay is the preferred payment platform for a host of domestic and international sellers. This is primarily due to its competitive and simple fee structure. It does not charge any fee on Taobao and charges a nominal fee of 0.5% – 1.5% to Chinese sellers on Tmall. PayPal, on the other hand, charges anywhere between 2.9% to 3.9% in addition to $0.3 per transaction and cross-border transaction fees.

 3. Banking on Financial & Investment Services

 Alipay added another feather to its cap in 2013 by introducing Yu’E Bao, its financial & investment services arm for retail customers. With a promise to pay returns greater than what Chinese banks pay, Alipay tied up Tian Hong Asset Management to launch the Yu’E Bao service.

This was a unique service as it was only once that Paypal attempted it in the US before shutting it down in 2011. Also, this service was direct competition to the traditional banks. While traditional banks provide about 3.3% returns on a savings account, Alipay’s returns are more than twice as much (about 7%). Simple maths has given a boost to the investment sentiment amongst the retail customers. This is evident in the sharp rise in the number of users of this service, which rose from 2.52MM in June 2013 to more than 100MM users in June 2014. The assets under management grew 5 times in the past year from $7Bn to $40Bn. The steep rise has been bolstered by a profit of $0.5Bn profit to its customers. Thus, there is clear monetary incentive for customers to leverage Alipay’s savings accounts.

Alipay has coupled high returns with convenience of usage. Customers can transfer amounts as low as 16 cents, and can withdraw money anytime without being penalized. Integration of messaging and alert services through mobile phones has been the icing on the cake. But are high returns and convenience enough to sustain internet finance, and by some extrapolation Alipay’s USPs?

 The Road Ahead

 In light of a majority share in the growing Chinese e-commerce market, Alipay is surely on the right track for a couple of reasons. Firstly, Alibaba’s brand name and trust will have a huge network effect in looping in more customers and sellers. Secondly, its unique escrow model and zero-domestic fee right from the beginning has given Alipay the first mover’s advantage in terms of protecting buyers and unlocking economies of scale to sellers. This effect is compounded by lack of differentiation and value added services from the competitors. Finally, launching forward looking internet financial services has added value to brand. Thus, with major threat in the foreseeable future, Alipay is set to become a one-stop shop for banking, wire servicing and investing, all done through mobile device. So much for amenities on the go!

Technology in India- Better Days Ahead?

The budget released by the Modi government this year had some clear-cut agendas, and was categorically termed as pro-business by most experts. But what does being pro-business mean, and what is it going to do for the population of India? Pro-business essentially implies that doing business in India has been made much simpler now. The policies guiding this would eventually be of benefit to the masses due to the creation of employment by new businesses. A related issue that the budget focused on is strengthening the MSME base of India. Several policies pertaining to increase in capital investment ceiling and easier exit options in case of bankruptcy have been introduced. It is evident that one of the government’s major goals is to boost entrepreneurship in the country.


The technology industry is arguably the fastest growing sector in India currently. Past trends show a consistent rise in its revenues.


Estimates forecast a growth of anywhere from 8% to 9% in the sector this year. In spite of great potential however India has failed to catch up with the rest of the nations in the IT sector. The categorical reason for this has been the lack of provision of relevant policies and basic facilities by our government. However, now that the government has recognized the problem at hand and is taking certain measures to resolve the issues, we should ideally be able to attain our capacity as a country. A major influence of these policies will be on the smaller businesses, as is intended by the policymakers. As MSMEs contribute nearly 8% to our nation’s GDP, encouraging their growth is a logical step to take. This can only happen when these businesses have germane and competitive technology, which they often cannot afford. Therefore, it is in the interest of both the entrepreneurs and the government that suitable action is taken to make technology cheaper and more accessible. This has hence become a part of our Prime Minister’s vision, to convert our nation to ‘Digital India’.


The Finance Minister recently revealed that nearly INR 200 crores has been allocated for technology development and broadband penetration for supporting MSMEs. The primary aim of this move might have been promotion of small businesses, but the benefit to the technology industry can’t be ignored. In addition, an allocation of INR 500 crores for Internet connectivity in villages and small towns has also been made. Once again, the benefit to the technological sector might be secondary, but it is undeniably there. The development of smart villages, greater connectivity, and better technology for MSMEs are all road stops towards the march to ‘Digital India’. While the journey promises to be one of digital evolution, there are also economic and social benefits involved. IT industries account for nearly 30% of the country’s GDP and 25% of the employed population. As it boosts and grows, employment levels are set to see higher figures also.


The evolution of technology is a necessary one for the growth of the economy of a country. It is interweaved with social benefits, growth of MSMEs and of well-established businesses also. While the budget does suggest major allocations for development of technology, both directly and indirectly, it remains to be seen how effective these measures would be. An indirect benefit to the industry comes from measures taken to boost the Manufacturing and Banking sectors. Due to these accounting for nearly 40% of the market for IT services, companies can expect more business in the coming years.

 One of the trends in the software industry has been its consistent and definitive orientation towards services rather than product development and research. So far, digital innovation has been a monopoly of the western world by and large. However, with the advent of better policies and greater financial support from the government, this may change soon. Initiatives like a district level incubator network and funding for startups will ensure greater innovation and hence software product research and development is one area where greater penetration can be expected. Influx of outsourced projects from global firms should also see an upward shift as the IT industry grows. Apart from this, companies should also focus on providing low cost software solutions to budding businesses as part of the services sector since the demand for these is on the rise. As part of the new plan, the government will also be reaching out to the industry for leveraging technology for better governance.

 Until now, both MSMEs and big businesses have suffered from a lack of Internet connectivity in India in the past and the growth of the industry as a whole seemed to be stagnating in the last few years, with India being ranked at 121 among 157 countries in terms of Internet penetration this year. This was in contrast to 114 in the previous year. The Modi government however has identified the problem and created the required policies. All that remains now is proper execution.

Management Consulting: First Impressions

So it’s been a little more than a month (my internship, not counted) since I started with my first project – perfect time to build first impressions!

On the one hand, it’s a jungle out here. With so much happening every minute you can’t help but feel that you’re running just to stay in the same place. Of course with the pressure of expectations, extreme ambition and the resulting aggression you almost expect someone to kick you down a well and shout “this is Spartaa” every other minute.

So life in a consulting firm is tough (big surprise) – the travel itself is enough to sap all energy out of you (for my first stint, I catch a flight, then a cab, followed by an overnight train, and then another cab – just to reach my client place). Not to mention the impossible deadlines, out of the world expectations (from clients, the team and most importantly, yourself) and the constant pressure to deliver. And not just deliver, do better than most of the rest – because only a select few manage to reach the next level – at every level. Late nights over countless cups of coffee are a given – and for someone who takes stress easily, health will be a major concern very soon.

So this is probably the first thing anyone will realize here – consulting is not worth all the late nights, stress, lost opportunities (work, sleep, social life – choose 2/3 at max) if you don’t enjoy the process. Here’s another thing I realized – the way to enjoy the process is not to look at a snapshot of what I am doing every second (that’ll look like mundane work 80% of the time) – but look at it within a reasonable timeframe (where the full impact of what you did is visible). Because most of the satisfaction at work comes when I can see what we have achieved for the client and for myself.

This past month has been a crazy one – with me struggling to get accustomed to this new way of living, thinking and functioning (of course this new way keeps changing every two weeks and definitely with every project!) – but within just a month, I see a difference in how I work – I can be a lot more focused; I have started internalizing the discipline of prioritizing the most important (and not the easiest) tasks first; excel spreadsheets don’t slow me down (that much) anymore (even though my laptop does, quite often); I am more cognizant of the client’s perspective now; and (I think) I am getting better at setting more realistic short-terms goals. And all this, while I felt like I was just going through the motions, without even deliberating on the learning aspect.

The steep learning curve, which consulting firms promise to provide, is pretty real!

A partner joked about it once, saying “it is true that you will learn in 2 years, what most of your batchmates from business school will in 5 years – but that will be mostly, because you’ll end up doing 5 years worth of work in 2 years!”

I may have made it sound, so far, like the learnings have all been tactical* – that is fortunately not true!

Whoever said business school is the last time you will find real intellectual challenge, would have been pleasantly surprised at what (s)he experienced at a consulting firm – I am learning about concepts and aspects of business, which I missed out heavily on while at school. I never understood, for example, the real essence of corporate governance – till I sat in one some meetings with CXOs of a company (people who are still at business school, do take a couple of courses on corporate governance). I’ve also started thinking a lot more in terms of systems and processes – I can actually see them in front of me – and I understand how bad processes can make even high-performing organizations crumble in no time. I can see why some spectacular start-up founders ultimately lead their companies to a spectacular demise when it’s time to scale. And now I see IT in a completely different light – with utmost respect even.

I can clearly see why consulting firms are titled “Finishing Schools” by many – in a very short time this experience is going to change the way I think –and hopefully all for the better. At IIMA, I learnt discipline, core business concepts and a way of looking at things from multiple dimensions; now this experience is going to make me a lot more (for want of a better word)“professional” in my approach.

At the very least, I expect the next couple of years to make me a stronger problem solver, a more rigorous thinker, an effective communicator and a better manager overall.

 *I would also like to mention, in passing, some other useful life skills that I have acquired – like tying a tie windsor while on a conference call in a cab; the ability to pack a suitcase in 7 minutes flat or optimizing my travel time to be ‘Just in Time’ for every flight

** The views expressed above are personal views of author and should not be associated with any firm.


Sahil Patwa is consult club alumni from PGP’14 batch. He holds a B.Tech in Mechanical Engineering from IIT Bombay

GE’s Alstom Acquisition: How Smart is the Move ?

On June 22nd 2014, one of Europe’s fiercest acquisition battles ended. French Government officially supported Alstom’s purchase from General Electric. During the previous two months, Siemens and Mitsubishi also played important roles in the bid. Both strategic and political reasons lie behind the structure of the deal.

On April 30th, Alstom (€21 billion revenues) presented the details of the proposed acquisition from GE (€120 billion revenues): all assets and liabilities related to the Energy activities transferred to GE for an Enterprise Value of 11.4 billion Euros to be paid in cash.

Figure 1

Source: GE Website

Is the deal value fair ? 

By using the comparable method, it emerges that GE has undervalued Alstom. Indeed, GE’s offer implied a EV/EBITDA multiple equal to 7,87, while Damodaran suggesting that a fair multiple for the sector should be equal to 9,78 and Valuemetrics to 10,44.  The main reasons of this undervaluation may be the industry trend and Alstom’s recent performance.  According to an Ernst & Young research of 2012, the M&A trend in the power and utilities industry has been decreasing in terms of value and number of deals. Considering similar transaction multiples of the recent past in the European market, they confirm the trend and are similar to the ones of Alstom’s acquisition. For example, in 2012 Electricite de France acquired Edison International with a EV/EBITDA multiple of 9.7 and Snam was acquired by Cassa Depositi e Prestiti with a multiple equal to 8.7. Moreover, the whole European energy sector has been facing threats due to the raise of energy resource prices.  Alstom has also negatively performed in the last years. In 2013, Net Income fell 28% to €556 million due to higher restructuring costs. Operating Profit fell 3% to €1.4 billion, with Operating Margin dropping from 7.2% to 7% and orders to 10% (€21.5 billion) because of a weak performance in the thermal power division.

The underlying strategy

The strategic rationale behind the deal is to integrate the Alstom energy activities (€14.8 billion revenues and 65.000 employees) within GE to strengthen its development’s prospects. The main sources of synergies are the complementary capabilities among the two firms: GE’s excellence in Gas Turbines and Wind Onshore and Alstom’s superiority in Hydro, Grid, and Steam turbines. Moreover, Alstom could use the cash received to refocus on the transportation sector.

The deal is likely to be very successful due to various elements. It strengthens GE’s position as the most competitive infrastructure Company in the world. Moreover, the type of technology that is going to be acquired is complementary to the existing capabilities of the company, thus increasing the likelihood of benefiting from the potential synergies in the short-term. Indeed, the synergies that GE is going to leverage are concrete and clear because Alstom mostly conducts business in areas where GE is already present, so the learning curve necessary to generate value is not very difficult to be achieved.

The benefits that GE is more likely to achieve are in the power business, especially regarding the production of clean energy. Indeed, the demand of pollution-free energy is likely to increase in the near future, especially from Asian countries like China or India. Thus the acquisition has taken place in an opportune moment in terms of industry cycle and given the huge scale that the company is going to put in place, it will be able to largely satisfy the future demand.

According to estimates provided by GE, the cost synergies opportunities that the company is expected to generate is about $1.2 billion within 2020 (see graph below for a more articulated analysis), a $4 billion increase in operating profits by 2018 and an EPS increase of $.04-.06 within 1 year.

 Another relevant factor is the past success in dealing with acquisitions of France and European companies. Among them we remember Jenbacher, an Austrian company that has been the cornerstone of GE’ global distributed power business and that under GE’s control has increased revenues 3x times. This success ranges also from various industries, not only in the power sector, ensuring that the post-merger integration phase will be conducted appropriately by GE given the previously developed skills.

 What are the Challenges ?

 Although the deal has a huge potential to be very successful, it is not immune to risk. The first important point that GE should be aware of is the strength of the France unions in the context of the France labor market. Any time it will take decisions regarding the firing or the reconversion of the France labor force may be very difficult to be implemented (or may be implemented at higher costs than in other countries of the world).

Another risk factor is the large amount of transactions costs that will be present as soon as the deal will be completed. They mainly derive from the terms of the deal, which require the constitution of three Joint Ventures that were not present in the first bid by GE. Thus, GE will face much more pressure in generating profits given the larger cost structure.

 Figure 2Source: Author’s elaboration on company’s data


 The deal has high chances to turn to be very successful and may be considered as a game changer in the industry. Although the initial terms had to be modified by GE due to the competition that arose from Siemens-Mitsubishi, the benefits are both large and concrete, and very likely to be monetized in the short-term. This is also related to the nature of the estimated synergies. Indeed, they are of the cost-saving type, which have a higher probability to be achieved compared to the growth ones. However, challenges arise from the institutional environment that surrounds GE’s activities in France, where the power of unions is very high as well as the high amount of transactions costs that arose in order to positively conclude the deal.


Gianmarco Bonaita is a Double Degree student of PGP coming from Bocconi University. He completed his undergraduate degree in Business Administration and Management at Bocconi University. He has been elected city councilman and has worked as a collaborator of journal for 3 months. He has had an internship in an Italian SME. He is passionate about travelling, skiing and photography.