Written By Alnoor M Peermohamed

The move could mean that many startups would have major tax liabilities as the money they spend on marketing activities will no longer be considered a cost to the company

Consumer technology startups that spend a lot of money on buying customers through discounts and advertising could be in for a rude shock as the Income Tax department could ask them to begin classifying their marketing expenses as capital expenditure.

The move could mean that many startups would have major tax liabilities as the money they spend on marketing activities will no longer be considered a cost to the company. Right now, most consumer tech startups report this expenditure under marketing expenses that are deducted from their revenues, causing them to post losses.

The Economic Times first reported on Monday that Flipkart had lost an appeal against the IT department over the reclassification of marketing expenses and discounting as capital expenditure. The report stated that the IT department’s move could affect all large e-commerce firms in the country as well as startups.

“It’s a significant liability. If the tax department’s stance is taken, essentially marketing and discounting is an investment that goes into building a business and is not an operational cost.

If this happens it is quite likely that e-commerce companies would begin to show some form of profits on their bottom line,” said Devangshu Dutta, Chief Executive at Third Eyesight.

While the extent of tax liabilities will depend on how much a company is spending on marketing and discounting, firms which are operationally profitable could be taxed. Dutta says that in the case of e-commerce firms in India, the amount being spent on marketing could be anywhere between 40 to 60 percent of their revenues.

Flipkart’s main argument against marketing expenditure and discounts being classified as capital expenditure has been that there is no enduring benefit from the money they are spending. For instance, money spent on television advertising does not have any enduring benefits for Flipkart, making it a revenue expenditure and not capital expenditure.

“It’s going to get hard to differentiate between whether an expenditure made by the company is an enduring expenditure or not. It has to withstand the scrutiny of the court as well in the coming days, but this is going to be a significant issue,” said a legal expert from a reputed law firm who did not want to be named.

He added that if the IT department initiates such a kind of litigation it will have a marked implication on the industry as a whole and not just e-commerce giants such as Flipkart. The major contention of the hearing in the court will be to define what are the attributes of an expenditure to be classified as capital expenditure.

Source: business-standard

Softbank, the single largest investor in Didi Chuxing in China, Ola in India and Grab in Southeast Asia, has backed local players for growth over Uber in each of these markets

Written By Karan Choudhury & Alnoor Peermohamed

A comment made by Rajeev Misra, a board member of Softbank and about to join the Uber board, triggered a strong buzz on Friday that the Travis Kalanick-founded ride hailing firm may step off the pedal in India. Talks of a possible merger between Ola and Uber, with Softbank as the common investor, also did the rounds.

With the formal closing of the $9.3-billion investment, Japanese tech conglomerate Softbank has become the largest shareholder of Uber.

Misra told the Financial Times that Uber would have a faster path to profitability if it returned to its core markets such as the US, Europe, Latin America and Australia. ‘’This is a growth company, this is not just about them cutting their losses,” he said. “Who cares if they lost a billion more or half a billion less?”

Softbank is the single largest investor in Didi Chuxing in China, Ola in India and Grab in Southeast Asia. In each of these markets, Softbank has backed local players for growth over Uber. In fact, Softbank is learnt to be in talks to buy Tiger Global’s stake in Ola.

An Uber India spokesperson dismissed any talk of a merger between Ola and Uber as a baseless speculation. “Our business in India is stronger than ever and we are 100 per cent committed to serving our riders and driver partners in India”, the spokesperson said in a statement. Ola refused to comment on competition.

Uber’s shift to its main markets is likely to reduce the fight with Ola in India that has seen billions of dollars thrown on incentives and discounts to woo drivers and customers on to their respective platforms.

However, over the last one year, both firms have tactically cut incentives and discounts. Yet they are still burning cash.

Bhavish Agarwal, co-founder of Ola, is expected to raise big-ticket funds, estimated around $1 billion more, for expansion as well as newer growth initiatives such as electric vehicles, autos and bicycles.

Ola has projected 2019 as the year to turn profitable. It’s targeting to generate cash profits of over $1 billion by 2021.

It is still not clear whether Softbank would pursue a merger between Ola and Uber, similar to how the dominant Didi Chuxing acquired local stake of Uber in China with a minority stake to the US company. If there is a merger, it could also attract the attention of the Competition Commission of India.

Ola claims market leadership with presence in over 110 cities, covering around two million rides a day, while Uber with presence in 25 cities does around one million daily rides, according to estimates.

Analysts say that India’s taxi sector is seeing a pusback from traditional operators. With lower yields in India, it makes sense for Uber to focus on its higher revenue market, they say.

“To improve financial metrics, it makes sense for Uber to focus on Europe and the US, where the revenue per trip is higher. There is resistance from fleet taxis which believe that Ola and Uber are eating into their business. Those operators are demanding that the ride hailing business should also be included in the regulation,” says Devangshu Dutta, chief executive of Third Eyesight, a consultancy.

“If ride hailing services need to undertake the same level of compliances that fleet taxis do, Uber will find it difficult to make money in a competitive market where yields are low,” he said.

Karnataka, which is among the largest ride hailing markets in India, has brought in a regulation that has fixed minimum and maximum ride hailing fares based on the value of the vehicle, to ensure that drivers are adequately compensated and does not disrupt the traditional taxi market.

Source: business-standard

More to leverage consumers’ spending abilities, existing dealer network

A sanitaryware company is now selling kitchen cooktops and chimneys.

A water purifier brand has launched noodle maker, juicer and bread-making appliances.

Source: thehindubusinessline

Agriculture: Twenty Years from Now…

Following is a summary of my remarks in an “Agri Panel” at the Global Entrepreneurship Summit earlier today, in response to the question, “What do you think will be game-changing about how we think about agriculture, twenty years from now?”

Soon after the panel moderator sent me this very interesting question a couple of days ago, the first thing I did was to post this question on Twitter, Facebook, and LinkedIn to crowdsource thoughts from my friends. There were nearly two hundred unique responses! They added up to twenty pages of text, without counting the number of pages in the links I received. Overwhelming, isn’t it?

All I am doing now is to simply synthesize those inputs and share with you J

The future of any system is shaped the current aspirations of the key stakeholders. Let’s take a look at the aspirations of the consumers, producers and the society at large…

Consumers want sufficient quantity of food (because we would be nearly nine billion by then, and on average richer than today), that is tasty (although, a friend did say in lighter vein, “since we will have nano-bots in our blood streams, and since our memories could be uploaded on to cloud, maybe we don’t need food and therefore no agriculture; we probably just need some electricity, or batteries, or just a few hours of exposure to sun ;-), is safe (you are all consumers here, don’t you agree that harmful chemicals in food is your topmost concern?), nutritious (scientists say that most of the world is suffering from invisible hunger), and all of these at reasonable prices!

Farmers want higher incomes (as you know, per capita income of farmers around the world, especially in emerging economies, is far lower than the general per capita) with lower risk (weather and disease related production risks, price volatility). Their labour deserves more dignity (as it is, hardly any youth from the next generation wants to be a farmer) and they deserve better quality life (as in, the conveniences and comforts that are common in urban settings).

Society at large would like agriculture to conserve natural resources (water and top soil, for example) and where possible, actually renew them. Agriculture needs to be resilient to climate change (the summer rains and warm winters, extreme climate episodes like heavy downpours on one hand and droughts on the other, etc), and again, where possible, positively impact climate change (sequester carbon, minimize greenhouse gas emissions etc).

An interplay of these different – at times conflicting – aspirations gives rise to three distinct scenarios, all of which will co-exist in twenty years. Let me label them: Farms as Factories, Homes as Farms, and Back to Basics!

Farms as Factories: By using the metaphor of factories, all I am saying is that the consistent quality of output will be produced, crop after crop, by leveraging the evolving technologies – both farming (like seed, nutrients, farm-equipment, agronomy practices etc) and digital (IoT, block chain, hyper-spectral imaging, GPS / GIS etc). A friend called them, “hardware, software, and liveware”). Another friend went to the extent of visualising a self-managing seed! These seeds will analyse the experienced conditions like soil, weather, water etc and invoke the necessary embedded features that would maximize the yield and quality. This may sound like fantasy today, but those of you who are familiar with experiments on seeds with multiple layers of coating in the past may very well say this could be a reality in twenty years!

Homes as Farms: I am sure, you have heard of vertical farming, balcony farming, kitchen gardens and such other names. Once supply chains are established to supply DIY-type mini production units, seeds, nutrients etc to the households, this phenomenon will expand more rapidly. This food is safe without any doubt in the consumer mind, and zero carbon miles! Business Models are also in the works for another kind of service. If you are not adventurous enough to grow crops in your backyard yourself, you can simply let out the space to Service Providers who can grow crops on a BOO model. Besides experts growing the crops in this model, a colony-level kitchen garden is more optimal than a household level garden. And a third model, which is not a ‘home-as-farm’ strictly speaking, is a partnership between a group of, say, five thousand, consumers and a community of, say, five hundred farmers. I know of several such partnerships across cities, built as WhatsApp Groups integrating even the e-commerce functionality.

Back to Basics: Much of today’s ills of agriculture are due to chemical-intensive mono-cropping paradigm. A more sustainable future scenario would be an integrated farming system consisting of polyculture, permaculture, organic compost, bee-keeping, animal husbandry, renewable energy. In fact, I already see some farms where solar energy brings larger revenue than the conventional crops.

As the panel went forward, there were other questions, but for now I am wrapping up this post without covering them.

Source: shivsthirdeye

Written By Brent Jaswinski

We go inside the Indian company’s English development facility

Thomas R. “Big Tom” Callahan, Jr., an auto parts salesman from Sandusky, Ohio, once said, “You can get a good look at a T-bone by sticking your head up a bull’s ass, but wouldn’t you rather take a butcher’s word for it?” When it comes to steak, we at MO would be inclined to heed the butcher’s advice, but when it comes to motorcycles, we’d prefer to take that “deeper” look to see for ourselves…

Royal Enfield invited us to take a comprehensive behind-the-scenes look into its UK Technology Center in Leicestershire, England. There, with the collaboration from the Chennai, India factory, they have designed, engineered and tested two all-new from-the-ground-up models that both feature the new 650 parallel-Twin motor. These new models include the Interceptor INT 650 and the Continental GT 650. While there, we were able to speak with several of Royal Enfield’s reps, including all the top dogs, and gain further insight into the company and its new products.

Royal Enfield may not be the household name in America like it is in many other parts of the world. So, to give a little background on the company, Royal Enfield is not only the oldest motorcycle manufacturer in continuous production since 1901, but it’s also the fastest-growing motorcycle brand in the world, as well. Royal Enfield has grown 16-fold in the last eight years. The company has gone from building 50,000 units in 2010 to more than 800,000 by the end of this year and is aiming to produce 950,000 units next year. Royal Enfield’s sales are equivalent to the global sales of Harley-Davidson, KTM, BMW, Triumph, and Ducati, combined. Let that sink in for a second.

What’s most interesting and unique about Royal Enfield is the approach it has taken to become this global heavyweight motorcycle manufacturer. It’s important to make clear what Royal Enfield is, and what it isn’t. Siddhartha Lal, Royal Enfield’s CEO, explicitly states that the company isn’t interested in making high-performance sport bikes or big-displacement cruisers. But rather, it’s chasing after the middleweight market, specifically the 250-750cc segment. For years now, Royal Enfield has been making 350 and 500cc variants of its Classic, Bullet and Thunderbird models, along with the 535cc Continental GT café racer. However, there hasn’t been a larger-displacement bike to upgrade to since 1970, when Royal Enfield stopped making its 736cc Interceptor.

Enter the all-new 650 Twin. It’s a 648cc air/oil cooled parallel-Twin with a single overhead cam and four valves per cylinder. These features combined with a 9.5:1 compression ratio yield a claimed 47 horsepower at 7100 rpm, with about 39 ft.-lbs. of torque waiting at just 4000 rpm. These output numbers won’t make you the king of your local drag strip, but that’s not what Royal Enfield is about.

“Royal Enfield aims to lead and expand the middleweight segment globally,” Lal told us about why RE chose to make the 650 Twin. “While the new 650 Twins will be a compelling upgrade for our large customer base in India, we believe they will attract customers from other developing markets in Southeast Asia and Latin America to graduate to the middleweight segment as well.”

Unlike here in the United States, where many believe there’s no replacement for displacement, developing markets in the rest of the world don’t have a need for such big-bore bikes. In many cases, the roads just simply don’t allow for it. On top of that, certain countries’ governments either restrict engine size or make it very difficult to own large-displacement bikes by implementing steep import tariffs or luxury taxes. For example, learners in Australia are restricted to a motorcycle with a motor no bigger than 660cc for their first two years. In Indonesia, some provinces have import taxes on large-displacement motors starting at 30-40%, and tariffs in Malaysia can be hiked all the way up to 125%.

Royal Enfield reps say they’re out to capture the consumer, not the competition. They’re here to grow the market, not steal other manufacturer’s customers, although that might end up being the case. At the core of Royal Enfield’s goals, more than anything else is to provide motorcycles that are versatile, fun, agile and yet unintimidating and accessible – the key words here being, fun and accessible because that’s what CEO Siddhartha Lal and RE President, Rudratej (Rudy) Singh believe motorcycling is all about.

Now, before all you middle-aged guys holding onto your 15-year-old R1s (who, mind you, aren’t buying new motorcycles anymore) start typing away in the comments section writing off Royal Enfield by complaining that these new bikes are ugly and grossly underpowered, understand this: These bikes aren’t designed for you. Instead, young, urban riders – many of whom are women – are the key demographic to motorcycle growth right now. More and more young people are flocking to cities, where not only is the cost of living higher, but also navigating the urban sprawl is becoming exceedingly difficult and time-consuming. This is where a fun and affordable motorcycle begins to become attractive to a learning rider. This is a big segment of the market that Royal Enfield is after.

Giving budding riders a unique option is not just reserved for young people, although I imagine the new Royal Enfields will pique their interests. The new engine also answers the call of Royal Enfield loyalists who have long yearned for more mid-range torque and top speed from the traditionally styled bikes. In the past, especially in America, the 350, 500 and even top-spec 535cc (29hp) Continental GT models haven’t cranked out enough power to comfortably ride in modern, high-speed traffic conditions (And vibrated to annoying levels…-Ed.), so the new counterbalanced 650cc models will help remedy this situation.

There should be a lot of inherent value built into the new Royal Enfield motorcycles for a variety of reasons: They’re approachable in the sense that they’re unintimidating motorcycles. They’re simple in the sense that if you need to work on them, you can easily do so without the hassle of removing multiple body panels to access whichever components need attention. Their basic engineering makes them authentic in the sense that they’re not a replica, recreation or knock-off of some other style bike that was once popular. Royal Enfield has been around for a long time and it has stayed true to its heritage and has stuck to its guns (pun intended, as RE was once a gun manufacturer). And, finally, they’re affordable. The Interceptor INT 650 will cost about $6,000, according to hints from RE reps, and the Continental GT 650 will only be a few hundred more at around $6,500.

If classic roadster or café racer styling isn’t your cup of tea, Royal Enfield is also offering the Himalayan, a more adventure worthy bike with off-road capability. Some of its features include a single-cylinder, fuel-injected, 411cc air-cooled motor, 21- and 17-inch wheels, almost eight inches of suspension travel front and rear, and plenty of room and mounting points for hard and/or soft luggage. The Himalayan is currently Royal Enfield’s most versatile motorcycle and should take you from the beaten paths of the city, off the grid and into the wild. And at $4,499, it will keep your wallet happy too.

Of course, there are plenty of other, more sophisticated, more powerful bikes out there that will blow the doors off of any Royal Enfield in terms of performance. But, like we mentioned earlier, the company is not out to compete with the high-tech, high-performance machines other manufacturers are making. RE is in the business of selling passion with the mantra less is more.

Above all else, what makes Royal Enfield’s approach to selling motorcycles interesting is that it’s essentially striving to build the Toyota Camry or Honda Civic of motorcycles – relatively simple and cost-effective vehicles that can serve the duties of most buyers. This is in no shape or form an insult of any sort, because there’s one of these cars in just about every other driveway in America…

The new twin-cylinder Royal Enfield models are expected to hit the States and become available to the public sometime in April, about a month after we get to throw a leg over the Interceptor INT and Continental GT 650 during its launch in March. It will be interesting to see how these models stack up against the significantly more expensive Triumph Bonneville lineup of bikes that begin with the $9,100 Street Twin and rise up to $13,000 for a Thruxton. While looks and performance are obviously important, so is price.

We’ll see how this strategy works out for them. If Royal Enfield’s global performance is any indicator, we expect RE’s strategy to make waves Stateside, too.

Source: motorcycle