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New-age firms disrupting hiring processes as well

AristMedia

“Deepak Dhamija shares his insights on disruption in hiring process due to startup firms, published in all the major newspaper, magazine and free media titled – New-age firms disrupting hiring processes as well. Complete article given below”

Featured in – Economic Times,The Hindu – Business Line, India Today, NDTV profit, Business Today, Free Press Journal, Mydigitalfc,Businessnewsworld, Biznews.in,Newsnow.in
, Business India, Finance India Everyday,NVS24

As new-age firms dole-out fatter salaries to attract the most skilled employees, companies are in a rush to strengthen their work environment to hold on to talent.

A war of talent is raging between the new age companies and established organisations. These startups are not only changing the placements scenario in top B-schools , they are also hiring from leading banks and consulting firms by offering fatter pay cheques.

“Well funded organisations are offering better salaries and also getting good talent. This is happening in all the new age industries including e-commerce,” Paytm VP Business Planning and People Amit Sinha said.

“The toughest challenge facing most new technology companies these days isn’t getting funded but it’s about hiring the best, most skilled employees,” Kryptos Mobile Founder Anjli Jain said adding that the aggressive venture capital funded IT/ITES startups like Ola and Flipkart are offering fatter salaries, stock options and unique perks to lure and retain the best talent in the country.

The trend which is currently in the e-commerce and tech startup sector, was seen in aviation, telecom, insurance, retail and social sectors a few years ago.

“There is definitely an increase in the average salary offered to the employees. As per my understanding, there has been around 30-40 per cent increase in average salary. And the biggest reason for this is the aggressive goals of the funded startups combined with the availability of funds,” said Deepak Dhamija, Co-Founder Aristotle Consultancy .

Executive recruitment firm Hunt Partners Managing Partner Suresh Raina said: “Meaning, Engagement and Compensation are the three essentials to any corporate role and compensation has always been used as a lever by firms to attract talent.”

According to a research conducted by global management consultancy Hay Group, 82 per cent of startups surveyed pay more than the market median to their employees.

According to Rituparna Chakraborty, President Indian Staffing Federation, “all well funded organisation do not put their financial resources to pay fatter salaries, however most new age sectors would definitely offer lucrative compensation to attract talents.

Meanwhile, in order to contain attrition because, organisations are sticking to basics like competitive pay, good working environment, providing good opportunities for professional growth, and are offering lifestyle perks, work from home benefits, and better facilities.

“Clear vision, actual work on the ground, team bonding and organisational accountability play a very significant role in attracting and retaining talents. These factors along with the best possible remuneration ideally do wonder for any development organisation, Smile Foundation Co-Founder Santanu Mishra said.

“In order to contain the talent, companies should regularly revise their salaries to keep up with the job market,” Smartprix.com Co-Founder Abhinav Choudhary said.

Moreover, there should a channel of communication with the best performing employees to gauge whether they are happy with their current package, he added.

VAT troubled e-commerce giants Amazon and Flipkart looking Telangana as an alternate

Business Standard - article snapshot

“Deepak Dhamija shares his insights on Telangana: New hub emerging in South India, published in newspaper Business Standard – Telangana a magnet for e-commerce, retail, aviation companies. Complete article given below”

Telangana industries minister Jupally Krishna Rao assures 100% transparency and 15 days requisite permission will be given to setup industry in their state, giving competition to neighboring states which are lagging behind in new age business law and tax reforms.

Telangana, India’s youngest state, is slowly becoming the go-to state in the South for big businesses. In attracting investments from industry majors, the state is giving tough competition to its neighbours Andhra Pradesh and Karnataka.

In the past year, Telangana has become the favourite of major e-commerce, retail and aviation companies. While Amazon has one of its largest fulfilment centres in the state and is planning to open another, Flipkart has decided to set up its largest warehouse in Hyderabad. In its first major investment in India, Swedish furniture major IKEA has bought 13 acres near Hyderabad.

US aviation giant Boeing will set up a defence plant in the state, in association with the Tata group. This will be the biggest investment in defence sector in the country so far.

Speaking to Business Standard, Telangana industries minister Jupally Krishna Rao said: “We assure 100 per cent transparency to industry. Also, any sector trying to set up in our state is assured that all requisite permissions will be given in 15 days.”

The state also had abundant government land, which makes it easier to deal with businesses exploring new geographies, Rao said. “Also, our taxation policies are streamlined and transparent, making us an ideal destination for investments.”

On its part, India Inc has witnessed a fresh approach. “The new government realised bringing investment would help it get resources to work on other social initiatives. The government is giving an earnest push to the manufacturing sector, getting approvals for projects has become much easier and a start-up culture is being encouraged. Telangana could soon be the next big hub in southern India,” said Vanitha Datla, chairperson of the Confederation of Indian Industry, Telangana.

She added the state government had promised if projects coming to the state were good, it would either match or provide better taxation policies compared to other states.

Recently, e-commerce giants such as Amazon and Flipkart faced a number of taxation issues in Karnataka. The Karnataka tax department pulled up Amazon for allowing sellers to register fulfilment centres as additional place of business. This led to the state cancelling the licences of many small merchants registered on Amazon.

“With respect to Karnataka, we have always maintained the situation is one in which laws have not kept pace with the new-age online business models that enable a faster, convenient and nationwide access to customers for sellers, especially small and medium businesses, at significantly low costs. We continue to work with the state government and are optimistic about a resolution,” said an Amazon spokesperson.

Amazon has also been demanding exemption on value-added tax (VAT) payment, saying its fulfilment centre only stocks, packs and dispatches products; it doesn’t do business directly. As such, it wants the government to collect VAT from sellers.

Amazon claims the Telangana government has been providing support. “Telangana has been home to our IT operations for a while. In the past year, the state government’s support and the ease of doing business has encouraged us to make further significant investments. Additionally, we have a huge seller and a customer base in the state,” the Amazon spokesperson said.

Flipkart is also seeking clarity on e-commerce-related taxation and VAT issues in Karnataka and this has been cited as the main reason why the company has set up its largest fulfilment centre in Telangana.

Experts say Karnataka’s loss is Telangana gain. “Every company that has to grow in India has to have a hub in the South. Earlier, Karnataka was the favoured destination. But now, the state is unclear on a lot of policies and that is creating a problem for industry. Issues related to VAT have caused major friction between e-commerce companies and the state. Telangana is earning major brownie points on that front,” said Deepak Dhamija, co-founder of Aristotle Consultancy Pvt Ltd.

Source – Business Standard

Freelance CFOs, the unsung startup heroes

Times of india article“Sanjeev Lamba shares his insights on the importance of financial outsourcing for startups, published in the business section of The Times of India titled – Freelance CFOs, the unsung startup heroes. Complete article given below.”

Featured in – The Times of India

Behind every successful startup, there is an unsung hero — the chief financial officer (CFO) and his team of number crunchers, whose efforts make that million-dollar funding possible. If you scratch the surface, it is likely that these number crunchers have been sourced from a CFO service agency, a trend that is gaining popularity in India.

Apart from first-generation entrepreneurs, several venture capitalists (VCs) also engage such agencies either on an ongoing basis for monitoring their investee companies or for specific projects — such as for building robust performance management information systems (MIS) or to act as interim CFOs. Even second or third generation-run family enterprises are hiring these agencies for that professional touch.

As financial information is sensitive, stringent non-disclosure agreements between an outsourced CFO service agency and its clients lends comfort.

Startups in their initial stages don’t need a full-time CFO. At a later growth phase, they may need expert help only in some areas. According to industry estimates, hiring an outsourced CFO service agency can result in operational savings of 30-70%, with savings being higher for compliance-related work. Fees charged depend on the nature of the job and can range from Rs 30,000 to a few lakh per month. Hiring an experienced full-time CFO would typically cost a company upward of Rs 50 lakh per year.

Packages are available to suit every need such as compliance, process management or funding, with milestone payment and success fee (especially for funding-related services) options available.

A small business enterprise can even opt for a ‘freelance CFO’. Bangalore-based Jayant Tewari currently dons the CFO hat at five different companies. This ensures that companies which do not have the bandwidth for a full-time CFO get the same expertise at a fraction of the cost. He works on a retainership basis and an hourly rate kicks in if the time agreed upon under the retainership is exceeded — such as during the busy months of a financial closure or a deal.

No entrepreneur worth his salt can ignore the importance of streamlined processes, timely reporting and clean books of accounts, which aid good decision-making. “VCs require the processes in a startup to be in place as visibility of operation performance is vital. Later, VCs need ongoing reporting to get an idea of the growth of their investee company. Thus, at the basic level itself, the account books have to be crystal clean,” says Sanjeev Lamba, co-founder of Aristotle Consultancy, whose firm services clients such as Jabong, Fab Furnish, Food Panda and Press Play.

E-commerce companies tend to rely on current revenue run rate or cash burn rates for their projections. The outsourced CFO plays a crucial role in its monitoring. “Loose controls or missing transparency across investors-promoters are larger issues which the CFO has to focus on, especially in growth or hyper-growth cycles,” points out Sanjay Gaggar, founder and CEO, ixCFO.

For a client in the e-commerce space, which was funded by private equity (PE), ixCFO’s team kept tabs and helped control cash burn in a highly dynamic competitive environment. In addition, they also developed a reporting matrix to explain business scale viewpoint, a key performance indictor to the PE investor. Accounts were also kept in a due diligence-ready mode and the client subsequently raised $100 million from a global VC.

Deepak ‎Narayanan, co-founder at MyCFO, illustrates how his firm helped a traditional 80-year-old traditional company, which was a leader in industrial fragrances, bag significant PE funding.

To begin with, implementation of better MIS systems meant greater visibility into its operating parameters. A credible investment case was built up, helping the promoters get a good valuation from the PE investor, and MyCFO facilitated a smooth transition in the company’s management and continued to be involved in areas of budgeting, performance measurement and business intelligence.

Remember the service tax

ARis- Business line
“Sanjeev Lamba shares his insights on the Service Tax in India, published in The Hindu BusinessLine titled – Remember the service tax. Complete article given below”

Feature in – The Hindu BusinessLine

Visited the restaurant the other day and found yourself paying a lot more than you bargained for?

What you may have forgotten to take into account is the service tax, which can bump up the total quite a bit. Here’s explaining why your everyday bills get pricier because of service tax.

What’s taxed
Service tax is usually paid by the service provider – like a restaurant – but it is recovered from you. Until 2012, there was a specific list of services that were taxed. This list was updated to include more services from time to time. This concept was turned on its head in 2012 with the adoption of the ‘negative list’ method. Now, a list of the services exempt from tax is published instead of the other way around, and it is this list that is modified, usually in each Budget. All services not in the negative list are taxed.

As a result, chances are your everyday expenses will swell.

Charges that banks levy when they issue a demand draft, issue forex, or facilitate a NEFT transfer have service tax tacked on. The fees you pay on debit or credit cards and rents for bank locker rent are also subject to service tax.

Your airline ticket or a non-metered taxi too are pricier due to the service tax. Other frequently-used services that are taxed include those of hotels, air-conditioned restaurants, your brokerage, your telecom operator, commissions you pay a travel agent, and life insurance premiums (other than the Varishtha Pension Bima Yojna).

Quite a few changes were made in the recent Budget. For instance, it withdrew exemptions for services provided by mutual fund agents to the fund house or a distributor to the fund or the fund house. That can, consequently, send fund expenses up. Also incurring tax, thanks to provisions in this Budget, are trips to the amusement park, music concert or pageant tickets priced over ₹500.

What’s not
But tickets to the museum, trips to a zoo, wildlife sanctuary or tiger reserve will be cheaper as they move out of the tax net.

Renting out your house for residential purposes won’t attract tax, as long as the amount is below ₹10 lakh.

There’s no tax on recognised systems of healthcare services and since these cover most forms of healthcare, including Unani and Siddha treatments, you’re unlikely to ever fork over extra to the government. In some cases, while a service may be in the negative list, there are certain exceptions.

Confused? Here’s an example. Most government services are exempt from tax and postal services fall under this head.

But while the exemption covers basic services such as book post, post cards and inland letters, speed post and parcel services are taxed. If the postal department sells insurance policies or other third-party products, that’s taxed too.

Another sweeping change in service tax was made this year, effective once the Finance Act 2015 is notified later this month.

Education and higher education cesses have been removed — or subsumed into the tax rate. The service tax rate itself has been hiked to 14 per cent.

Rates and calculations
The rate used to be 12.36 per cent (including the two cesses). That’s quite a leap from the 5 per cent service tax in 2004!

Now, the tax is calculated on the consideration paid. However, only a certain percentage of this is used for the calculation. This reduction, called abatement, is defined for each service type. In a restaurant, the tax is applicable only on 40 per cent of your bill, working out to 5.6 per cent of the total bill. Now a restaurant bill is more unique as there’s also a service charge that often crops up.

The two are not to be confused, though. One, the service charge is not mandatory, says Sanjeev Lamba, Director, Aristotle Consultancy, a financial consulting firm. Two, the amount collected goes to the restaurant. Not the government!

Three, service charge can be levied even on takeaways (which don’t attract service tax). There’s no defined rate for these charges but it usually ranges from 5-10 per cent. And, four, service charges are considered while calculating the service tax.

On hotel bills, tax is charged on 60 per cent of the amount.

For ULIPs, insurance companies have the choice of charging service tax at 3 per cent for the first year and 1.5 per cent thereafter on the total receipt (including premium for risk cover and investment), instead of the regular service tax rate on the risk cover premium.

Due to changes made in this Budget, if you’re a business class or first class flyer, your tickets will get pricier, thanks to a reduction in abatement.

Tax will now be paid on 60 per cent of the ticket, up from 40 per cent earlier, working out to 8.4 per cent of the total value.

The other worrying point due to the recent Budget provisions is the 2 per cent Swachh Bharat cess coming in, which will be applicable from a date to be notified post-enactment of Finance Bill, 2015.

Says Krupa Venkatesh, Senior Director, Deloitte, the cess will be on the value of service and not on the tax amount, unlike education or higher education cess. That is, the service tax rate will be a whopping 16 per cent.

Finally, even if the GST taxation method is implemented, service tax will still be levied, though rates and methods may change.

So, remember to either factor in the tax component on the services you avail of, or confirm whether rates declared are inclusive of all taxes or not.

E-Commerce IPOs may build up, consolidation ahead

E-Commerce IPOs may build up, consolidation ahead“Deepak Dhamija shares his insights on the Future of E-Commerce industry in India, published in all the major newspaper titled – E-Commerce IPOs may build up, consolidation ahead. Complete article given below”

Featured in – ETRetail, Business Standard, NDTV Profit, The Hindu-Business Line, PTI News, EconomicTimes, ZeeBusiness. The Pioneer

The over USD 6-billion e-Commerce market in India will see IPOs gaining traction, preferably in the US, as well as see several consolidation moves in the next 2-3 years, experts said.

Private Equity (PE) and Venture Capital (VC) funds turned towards the Indian market around 2008-09 after the sub-prime crisis hit the US and the debt problems in Europe.

These funds started investing in the nascent online shopping market, where they expected huge returns in the medium-to-long term, they added.

The PE and VC funds usually have investment commitments in the range of 6-10 years, after which they have to return the amount with assured benefits to their Limited Partners (LPs). The funding varies on company-specific circumstances as well as market conditions.

Considering the investment cycle in India, these funds could look for a closure in 2016-18, experts said.

However, the investment scene is certainly not drying up as the e-Commerce market is attracting huge attention from investors globally and there will be more funds and companies coming into the country to invest in this space, they noted.

“When investors put in money, they also have a commitment that is generally around 7-8 years after which they have to return it to their LPs. Considering many funds invested around 2010, we will see either these e-Commerce firms going for IPOs or we will see consolidations to shore up value,” Aristotle Consultancy Director Deepak Dhamija told PTI.

Aristotle provides financial and legal solutions to e-Commerce firms such as Jabong, GoJavas, FoodPanda India, FabFurnish, Printvenue and the like.

Dhamija added that funds look at a 6-10 year window, but generally VC funds consider 7-8 years as the average age for RoI (Return on Investments).

An investment banker who did not wish to be named said these funds now are also selling or in the process of selling some of their stake to other funds.

“The e-Commerce market is booming for VC and PE funds. So, to keep the value of their investments high, many funds will look for IPOs or consolidations, going ahead. But many would wish to stay and will sell some stake to maintain their RoIs as well wait for valuations to go up,” he added.

Without giving a timeframe on exits, KPMG India Accounting Advisory Services (Partner and Head) Sai Venkateshwaran said: “We could potentially see exits for these PEs happening through a number of routes — IPOs, sale to strategic investors, other PEs, etc.”

India Venture Capitalist Association President Arvind Mathur said: “It is not as if only the current funds will be there in the next few years and then taper off. New funds will most likely enter the market, given the strong potential for e-Commerce in India and its demographic profile and vast rural areas where further penetration will occur in coming years.