Private Equity Still Votes for Commercial Real Estate in Major Cities

If the prolonged slowdown in the residential was not bad enough to begin with, major policy overhauls over the last five years – DeMo, RERA, GST, amendments in the Benami Transactions Act etc. – literally paralysed the residential segment.

While any policy change brings with it some amount of teething pains, the residential segment took a prolonged hit because it had attracted the bulk of black money in the sector. Commercial real estate was far less affected, if at all.

Residential was also far less organized than the commercial office segment. Largely driven by IT/ITeS and BFSI sectors, the commercial real estate segment has been quite transparent and predictable – the primary criteria for foreign investors’ confidence.

Commercial Vs. Residential – No Contest

Various Government-driven policies including ease of doing business in India are attracting both Indian and global companies, squarely benefiting commercial real estate. Big-bang boosters like the start-up revolution and the Make in India and Smart Cities missions have created a very lucrative environment for businesses to work and expand in India.

The demand for high-quality office spaces in India has never been higher. The residential sector, on the other hand, continues to struggle with problems that the commercial segment does not share.

Moreover, high-quality office space developers largely deal with prosperous multi-nationals who, apart from having deep pockets, have zero tolerance for opacity. They are also very exacting in their requirements, which naturally leads to the highest-possible product quality.

Residential developers are engaged in a B2C business largely defined by customers looking for the lowest possible prices. While reputed developers do ensure product quality regardless of their customers’ budget bandwidth, the bulk of Indian builders cut corners wherever possible to keep their projects affordable.

Another advantage that the commercial property sector enjoys is that office properties are primarily leased out rather than sold, which leaves far less scope for dodgy activities. The residential sector is primarily driven by sales. Compared to the lease yields for office spaces at 12-14% per annum, rental yields for housing are negligible 2.5-3.5% per annum in a best-case scenario.

The funding crunch that has crippled the residential sector has not seriously impacted the office sector. In fact, India’s first REIT listing and those to follow have opened up massive potential for increased liquidity infusions into Indian office spaces. Commercial real estate also remains largely unaffected by the dynamics that affect the residential segment, such as interest rate fluctuation, income tax breaks and even election sentiment.

While residential developers have had to curtail their supply pipeline to avoid exacerbating the already massive unsold housing inventory situation, REITs and the rapidly decreasing vacancy levels in Grade A office projects have prompted commercial real estate developers to increase their supply pipeline.

In the face of all this evidence, the commercial versus residential equation would appear to be a no-brainer. However, as in most matters related to real estate, it is not as simple as that. In many ways, it like trying to compare apples and oranges using the same yardstick.

An Inherently Different Asset Class

Commercial real estate is driven by leasing because this is a far more beneficial model for developers than selling them. High rental yields do not imply high sale value, because the demand for leased office spaces is much higher than for outright ownership of the same properties.

If a commercial space developer opts for outright sale, his top-line increases immediately. By leasing out the project instead, he can look forward to a very attractive bottom-line because of steadily increasing rental yields over the years.

Also, with REITs now a reality, developers can follow a predictable exit mechanism once the project is ready and operational, providing maximum returns on investment.

As per ANAROCK data, office rentals remained steady in 2018, with a marginal rise of 3% over the previous year. More importantly, however, the average vacancy levels reduced from 15.4% in 2016 to nearly 14.47% in 2018. Not surprisingly, vacancy was the least in Bangalore with mere 3.4% in 2018.

2019 will continue to see commercial real estate supply gain momentum on the back of vastly increased interest from PE players who are actively pumping in funds into this segment. As per ANAROCK data, the commercial segment saw a total PE inflow of nearly USD 2.8 bn in 2018, up from USD 2.20 bn in 2017.

In fact, if we analyse PE trends over the last few years, the commercial segment saw total PE inflows of nearly USD 7.4 bn between 2015 and 2018. In the same period, the residential sector drew just USD 2.9 bn. This clearly reflects the interest of PE players – both global and domestic.

The major differences between commercial and residential real estate in terms of performance – and indeed as investment asset classes - are quite apparent. Certainly, private equity investors are quite certain of which segment they are more comfortable with in the current Indian market scenario.

Will residential regain its numero uno position on the Indian real estate bestseller list in the future? If it does, there is certainly a long way to go before it happens. More so, it cannot happen on the basis of end-user sales alone – it can only happen if and when investors, both individual and institutional, become sufficiently interested in the Indian housing story once again.

Worldwide IT Spending to Grow 1.1 Percent in 2019: Gartner

Worldwide IT spending is projected to total $3.79 trillion in 2019, an increase of 1.1 percent from 2018, according to the latest forecast by Gartner, Inc.

“Currency headwinds fueled by the strengthening U.S. dollar have caused us to revise our 2019 IT spending forecast down from the previous quarter,” said John-David Lovelock, research vice president at Gartner. “Through the remainder of 2019, the U.S. dollar is expected to trend stronger, while enduring tremendous volatility due to uncertain economic and political environments and trade wars.

“In 2019, technology product managers will have to get more strategic with their portfolio mix by balancing products and services that will post growth in 2019 with those larger markets that will trend flat to down,” said Mr. Lovelock. “Successful product managers in 2020 will have had a long-term view to the changes made in 2019.”

The data center systems segment will experience the largest decline in 2019 with a decrease of 2.8 percent (see Table 1). This is mainly due to expected lower average selling prices (ASPs) in the server market driven by adjustments in the pattern of expected component costs.

The shift of enterprise IT spending from traditional (noncloud) offerings to new, cloud-based alternatives is continuing to drive growth in the enterprise software market. In 2019, the market is forecast to reach $427 billion, up 7.1 percent from $399 billion in 2018. The largest cloud shift has so far occurred in application software. However, Gartner expects increased growth for the infrastructure software segment in the near-term, particularly in integration platform as a service (iPaaS) and application platform as a service (aPaaS).

“The choices CIOs make about technology investments are essential to the success of digital business. Disruptive emerging technologies, such as artificial intelligence (AI), will reshape business models as well as the economics of public- and private-sector enterprises. AI is having a major effect on IT spending, although its role is often misunderstood,” said Mr. Lovelock. “AI is not a product, it is really a set of techniques or a computer engineering discipline. As such, AI is being embedded in many existing products and services, as well as being central to new development efforts in every industry. Gartner’s AI business value forecast predicts that organizations will receive $1.9 trillion worth of benefit from the use of AI this year alone.”

More detailed analysis on the outlook for the IT industry is available in the complimentary webinar “IT Spending Forecast, 1Q19 Update: AI — Use it, Build it or Sell it.”

Gartner’s IT spending forecast methodology relies heavily on rigorous analysis of sales by thousands of vendors across the entire range of IT products and services. Gartner uses primary research techniques, complemented by secondary research sources, to build a comprehensive database of market size data on which to base its forecast.

The Gartner quarterly IT spending forecast delivers a unique perspective on IT spending across the hardware, software, IT services and telecommunications segments. These reports help Gartner clients understand market opportunities and challenges. The most recent IT spending forecast research is available to Gartner clients in “Gartner Market Databook, 1Q19 Update.” This quarterly IT Spending Forecast page includes links to the latest IT spending reports, webinars, blog posts and press releases.

Mr. Lovelock will provide further analysis on the key drivers of the IT market at the Gartner Tech Growth & Innovation Conference taking place June 3-5 in San Diego, CA and June 12-13 in London. The conference is the premier event for technology providers to learn about the latest trends and tools, innovation predictions, positioning and thought leadership.

Financial Cybercrime and Identity Theft in India are Increasing in 2019: FIS PACE Report

Key facts:

* 2019 FIS PACE study finds that financial frauds' share of victims has doubled to 37 percent of respondents year-over-year

* Half of all consumers aged 27-37 experienced fraud during last year

* 96 percent of consumers who were victimized during last year had switched to mobile apps

A new research released today from FIS (NYSE: FIS), a global leader in financial services technology, found that financial fraud has grown substantially since last year, with the share of victims doubling to 37 percent of respondents, and all age segments falling victim to fraudsters. Age group of 27 to 37 has been most impacted by financial fraud than other age groups.
FIS' fifth annual PACE report highlights that Indians have embraced digital transactions, but they are yet to learn the do's and don'ts of sharing personal information, as social engineering and phishing emails are rampant.

There is a dramatic correlation in India between booming adoption of mobile apps, digital payments and increasing rate of financial fraud. 96 percent of Indian consumers who were victimized by financial fraud during the last year had switched to a mobile app and digital payments, from cash as mode of payment, significantly impacting the country's efforts towards financial integration.

"In the current digital banking landscape, it is imperative that the banks enhance investments in security, fraud prevention and customer education. Just as importantly, it can also enhance trustworthiness, which is currently consumers' top priority while banking. Customers' trust in their banks is not just a feeling or an emotion but an objective decision based on a number of expectations. However, banks can earn customers' trust if they focus on safe and secure transactions, fraud prevention and privacy of personal information," said Ramaswamy Venkatachalam, Managing Director, FIS, India.

The other interesting findings of the report are as follows:

Mobile apps drive engagement and innovation

Banks can no longer treat branches as their only channel to provide personalized service and engage customers. Mobile apps now serve as the digital 'face' for many banks, and a record 41 percent of bank interactions are now performed via mobile device. Mobile has become the default banking channel across all age groups. Looking ahead, Indian consumers want banks to invest in password-free and biometric-based banking, voice banking and wallets. 9 in 10 Indian consumers are interested in social media engagement from their PFIs.

Mobile Payments Are Now Mainstream

While cash and cards are still the preferred way to pay, mobile payments are rapidly gaining traction, especially among Gen Yers (18-26) who are a prime audience for banking providers. In fact, India is far ahead of the U.S., U.K. and Germany in mobile payment adoption. Convenience and a user-friendly interface, coupled with rapidly improving, low cost mobile data connectivity and merchant acceptance, are driving the growth of mobile payments. Mobile wallets that offer cash back and other incentives, are also spurring adoption. UPI 2.0 is also a boon for merchants, as it supports the use of an overdraft account and the verification of invoices prior to payments, moving mobile payments squarely into the Small and Medium Enterprise segment.

Public Sector Banks Leap Ahead in Customer Satisfaction

Customers of top 50 global banks and private sector banks are less satisfied than they were in 2018. However, public sector banks, traditionally seen as slow to react - saw their proportion of 'extremely satisfied' customers climb considerably, rocketing from the worst-performing category to the best. It's clear that innovation is no longer restricted to a certain set of banks. About 28 percent of young Gen Yers (18-26) and 35 percent of older consumers (53+) are not satisfied with their banks.

About FIS

FIS is a global leader in financial services technology, with a focus on retail and institutional banking, payments, asset and wealth management, risk and compliance, and outsourcing solutions. Through the depth and breadth of our solutions portfolio, global capabilities and domain expertise, FIS serves more than 20,000 clients in over 130 countries. Headquartered in Jacksonville, Florida, FIS employs more than 47,000 people worldwide and holds leadership positions in payment processing, financial software and banking solutions. Providing software, services and outsourcing of the technology that empowers the financial world, FIS is a Fortune 500 company and is a member of Standard & Poor's 500 Index. For more information about FIS, visit https://www.fisglobal.com.

Fortis Hospitals Conducts Robotic Cancer Surgery Workshop to Train Surgeons on Advanced Surgical Modalities

Fortis Hospitals conducts a workshop on Head & Neck Robotic Onco-surgery, MASOCON-2019 to impart best of knowledge and understanding around advanced surgical modalities of treatment in the oncology vertical for surgeons. Around 150 surgeons took part in the workshop headed by Dr. Sandeep Nayak, Consultant- Surgical Oncology, Fortis Hospitals, Bangalore and a few thousand watched it online worldwide.

The workshop transmitted live specialized surgeries called Robotic Assisted Breast-Axillo Insufflated Thyroidectomy (RABIT) & Robotic Minimally Invasive Neck Dissection (R-MIND) for oral cancer, which is newly devised surgeries by Dr. Sandeep Nayak. These are being demonstrated for the first time in the world in this workshop.

The theme of the workshop was ‘Old Territory, New Approach’ which focused on robotic surgery for oral cancer, throat cancer and thyroid surgeries which are some of the most common cancers in India. These procedures were included in the workshop since they have benefitted many patients and needs to percolate well in the medical fraternity.

Dr. Sandeep Nayak said “With the rapid development in technology we have better and advanced equipment available to doctors. The doctors need to learn to use these to the best advantage of the patients. Robotic-assisted surgeries have extensively helped doctors in enhancing the capabilities for performing surgeries with more precision and a magnified view. Through this workshop, we wanted to train the surgeons on newer treatment methods using robotics in the field of head and neck oncology which would be of great help to them in their field.”

ACT Fibernet Partners with ZEE5 to Expand its OTT Offerings

ACT Fibernet, India’s largest fiber-focused wired broadband ISP (Internet Service Provider), today announced a strategic partnership with ZEE5, India’s fastest growing OTT platform. As a step to expand its OTT offerings and provide an unmatchable entertainment experience, ACT Fibernet is onboarding a variety of video-on-demand content platforms to meet the entertainment needs of customers across all segments. 

As part of the partnership, ZEE5 will be listed on ACT Fibernet portal where existing customers can access premium content on the basis their subscription status. Additionally, first time users can avail exclusive one-month free subscription through ACT Fibernet. This offer will be available at an additional cost of INR 99 across all the 17 cities where ACT Fibernet has its presence.

Ravi Karthik, Head of Marketing, ACT Fibernet, commented, “ZEE5 as a platform provides entertainment across languages and multiple genres and we are very excited to bring their extensive offerings to our customers. In line with our brand philosophy ‘Feel the Advantage’, we aim to provide holistic entertainment experience to our customers and with the convenience to enjoy content from best of streaming providers in this category.”

Manish Aggarwal, Business Head, ZEE5 India said, “ZEE5 has always been at the forefront of providing cutting edge content to viewers across languages. ACT Fibernet is a leader in the ISP space with phenomenal connectivity and caters to a premium audience. This partnership will help us widen our viewer base by many folds. Additionally, with this association, we also aim to make ZEE5 more accessible to our audience who can reap the benefits of our vast content library.”

With over 3500 films, 500+ TV shows, 4000+ music videos, 35+ theatre plays and 90+ LIVE TV Channels across 12 languages, ZEE5 truly presents a blend of unrivalled content offering for its viewers across the nation and worldwide. With ZEE5, the global content of Zindagi as a brand, which was widely appreciated across the country, has also been brought back for its loyal viewers.

Availability: The ZEE5 App can be downloaded from Google Play Store http://bit.ly/zee5 and iOS App Store http://bit.ly/zee5ios. Also available at www.zee5.com, as a Progressive Web App (PWA),

About ACT Fibernet

ACT Fibernet is India’s largest fiber-focused wired broadband ISP as on September 30, 2017 (in terms of number of fiber broadband internet subscribers from residential homes) (Source: India Broadband Market Overview – 2017 dated February 19, 2018, prepared by Media Partners Asia). Headquartered in Bangalore, ACT Fibernet has operations in 15 Indian cities as on December 31, 2017 with approximately 1.28 million customers.

Only 37% of Indian Organizations are Very Confident in Internet Security: Accenture

Companies globally could incur US$5.2 trillion in additional costs and lost revenue over the next five years due to cyberattacks, as dependency on complex internet-enabled business models outpaces the ability to introduce adequate safeguards that protect critical assets, according to a new report from Accenture. 

Based on a survey of more than 1,700 CEOs and other C-suite executives around the globe including 100 respondents from large enterprises in India, the report —Securing the Digital Economy: Reinventing the Internet for Trust  — explores the complexities of the internet-related challenges facing business and outlines imperatives for the CEO’s evolving role in technology, business architecture and governance.

The report notes that cybercrime from a wide range of malicious activities poses significant challenges that can threaten business operations, innovation and growth, and the expansion into new products and services, ultimately costing companies trillions of dollars. The high-tech industry faces the highest risk, with more than US$753 billion hanging in the balance, followed by the life sciences and automotive industries, with US$642 billion and US$505 billion at risk, respectively.

“Internet security is lagging behind the sophistication of cybercriminals, leading to an erosion of trust in the digital economy. Businesses need to drive industry wide collaboration to improve governance; fine tune their own business architecture including internal and external processes; and embrace technologies that enhance digital safety,” said Anindya Basu, Geographic Unit and Country Senior Managing Director, Accenture in India. “It’s a complex problem to solve, but inaction is not an option. Lack of trust can weigh heavily on the bottom line.”

Among the key findings: 77 percent Indian respondents believe that the advancement of the digital economy will be severely hindered unless there is dramatic improvement to internet security, and more than half (59 percent) of respondents said they are concerned that the internet is getting increasingly unstable from a cybersecurity standpoint and they are unsure how to react.

At the same time, 64 percent of Indian respondents believe that addressing cybersecurity challenges will require an organized group effort, as no single organization can solve the challenge on its own. With heightened concerns about internet security, seven out of 10 (69 percent) of executives would also welcome stricter business regulations imposed by a central organization or governing body.

The rapid emergence of new technologies is creating additional challenges, 82 percent of Indian respondents admit that their organization is adopting new and emerging technologies faster than they can address related cybersecurity issues, with two-thirds (68 percent) noting that cybersecurity issues have escaped their control due to new technologies such as the internet of things (IoT) and the industrial internet of things (IIoT). A majority (81 percent) also said protecting their companies from weaknesses in third parties is increasingly difficult, which isn’t surprising given the complexity of today’s sprawling internet ecosystems.

Also, on the minds of many senior executives: consumer data protection. Fueled by security concerns, 70 percent of respondents believe that consumers can’t trust the safety of their online identities when too much of their personal data is already available without restrictions.

Next Steps

The study outlines three actions that CEOs and other C-suite leaders can take to help improve the safety of the internet:

Governance: Join Forces with Other Companies and Govern Globally – Step up efforts to collaborate with other top executives, government leaders and regulators to better understand how to prevent new cyberattacks.

Business Architecture: Connect and Protect with a Model Run on Digital Trust – Become brilliant at the basics of cybersecurity. Fully protect business across the entire ecosystem of partners and supply chains.

Technology: Advance Businesses and Enhance Safety – Embrace new technologies, master IoT security, and prepare for the quantum challenge. Ensure that software security and update functions are embedded into mobile and IoT devices from initial design.
To read more about the concrete and critical actions for building a trustworthy digital economy, download “Securing the Digital Economy: Reinventing the Internet for Trust" at www.accenture.com/ReinventTheInternet.

Methodology

Accenture Research surveyed 1,711 C-level executives from companies with annual revenues of US$1 billion or more in October and November 2018 across 13 countries: Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Spain, Switzerland, United Kingdom and the United States. In-depth interviews were conducted with CEOs (61 percent), chief operating officers (20 percent), chief innovation officers (9 percent) and chief strategy officers (9 percent). The average cost of cybercrime was calculated as a percentage of revenue for each industry — including the cost of facing a large cyberattack from our analysis of 460 major incidents. The cost of cybercrime includes both the cost organizations incur when responding to cybercrime incidents as well as revenue losses. These industry percentages were then applied to global industry revenues to generate a 5-year model of value at risk by industry.

Mindtree Crosses $1 Billion in Annual Revenue During Q4 of 2019

Mindtree, a global technology services and Digital transformation company, announced its consolidated results today for the fourth quarter ended March 31, 2019 as approved by its board of directors.

“Mindtree has delivered exceptional performance for both the fourth quarter and the full fiscal year as we cross the historic $1B milestone. Over the course of two decades our strategy of being expertise-led and backed by a unique culture continues to help us attract world class people and create customer successes.” Rostow Ravanan, CEO & Managing Director, Mindtree. ” Our ability to consistently grow significantly faster than the sector is a reflection of the investments we have made to align with technology trends disrupting our industry. We are well-poised to continue delivering industry leading returns for all our stakeholders, the best is yet to come”.

Key financial highlights:

Quarter ended March 31, 2019

In USD:

o   Revenue at $ 262.0 million (growth of 4.2% q-o-q / 15.8% y-o-y)

Constant Currency growth of 3.9% q-o-q

o    Net profit at $ 28.2 million (growth of 5.0% q-o-q / growth of 0.3% y-o-y)

In INR:

o    Revenue at  ₹ 18,394 million (growth of 2.9% q-o-q / 25.6% y-o-y)

o    Net profit at  ₹ 1,984 million (growth of 3.8% q-o-q / growth of 8.9% y-o-y)

Other highlights:

Clients:

o    349 active clients as of March 31, 2019

o    $10 million clients grew by 2, total of 23

o    $5 million clients grew by 1, total of 45

o    $1 million clients grew by 4, total of 120

People:

o    20,204 Mindtree Minds as of March 31, 2019

o    Trailing 12 months attrition is 14.2%

BOTs*:

o    Automation is playing a significant role in modernizing our technology service delivery, enhancing both efficiency and speed-to-results for our clients.

o    We have deployed 576 BOTs as of March 31, 2019

*Software that acts autonomously, free from any interference, human or otherwise, to perform a significant task which will otherwise be performed by a human

·         Multi-year and multi-million-dollar wins:

Existing clients

o    For a large hospitality company, Mindtree extended its Digital presence into cloud migration services

o    For a leading multinational paints and coatings company, Mindtree is chosen as a Digital Partner to provide Digital service operations and support services

New clients

o    For a leading sports retailer, Mindtree is chosen as a Digital partner for their e-commerce platform covering both applications and infrastructure services for end to end support

o    Mindtree is awarded its largest Salesforce AMS contract to date by a leading tobacco giant. Under this contract Mindtree was chosen to provide support services for their Salesforce applications

o    Mindtree is chosen as an automation solution partner for an industry leader in revenue integrity for healthcare provider organizations to bring efficiency in their business processes

o    Mindtree is chosen as a strategic engineering partner for a leading web hosting company to provide sustainment and support services

Recognition:

o    The Zinnov Zones for Digital Services Report names Mindtree an overall Leader, as well as a Leader in the following sub segments:

* Digital Strategy & Consulting

* Application and Platform Development

* UI/ UX & Customer Experience

* Legacy Modernization

* Deployment & Integration

* Data Analytics & AI

* Infra & Managed Services

o    The 2019 ISG Provider Lens™ SIAM/ITSM Quadrant Report names Mindtree a Rising Star USA in Service Operation and Delivery

o    Mindtree named Leader for Digital Transformation and Leveraging Packaged Software Platforms archetypes in the 2018 ISG Provider Lens™ Next-gen ADM Services Archetype Report

o    Mindtree named Leader for Legacy Transformation and Cloud-first Transformation in the 2018 ISG Provider Lens™ Digital Business Transformation Archetype Report

o    Mindtree has been placed on The Best of The Global Outsourcing 100® list by the International Association of Outsourcing Professionals (IAOP)

o    Mindtree recognized as an Innovator in Avasant’s Applied Intelligence and Advanced Analytics Services RadarView™ Report

Announcements

o    The Board of Directors, at its meeting held on April 17, 2019, have declared an interim dividend of 30% (Rs 3 per equity share of par value Rs 10 each). The Board of Directors have also recommended a Final Dividend of 40% (Rs. 4 per equity share of face value of Rs. 10 each) for the financial year ended March 31, 2019 and a special dividend of 200% (Rs. 20 per equity share of face value of Rs 10 each) to celebrate the twin achievements of exceeding USD 1 billion annual revenue milestone and 20th anniversary of the Company which are subject to the approval of Shareholders.