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Kaushik Sarkar

CFOs Must Strike Balance Between Investing In R&D, Maintaining Financial Stability, Profitability: Kaushik Sarkar, Senior Vice President And CFO, BGSW

From Managing cash flow and maintaining profitability for sustained success to ensuring strong financial governance and transparency for the organization’s financial well-being, Kaushik Sarkar, Senior Vice President, and CFO, Bosch Global Software Technologies (BGSW), talks with BW CFO World about the challenges facing the technology sector, and how CFOs are overcoming them

Given the demand for innovation, how do CFOs balance the need for investment in R&D with the financial stability and profitability of their companies?

There are challenges when it comes to balancing research and development investment with financial stability due to the cost and risk associated with it. It can be expensive and there is always the risk that R&D projects will fail, either because the technology does not work or because the market is not ready for it. Companies need to make sure that they have enough cash reserves to support their R&D investments without jeopardising their financial stability.

Formulating a strategic R&D plan aligned with the overall company strategy, establishing feasible R&D budgets in collaboration with the CEO and engaging with stakeholders, including investors and analysts, to foster trust and secure future R&D funding are some of the key points to consider to counter R&D challenges. Vigilantly monitoring R&D spending and project outcomes to address issues promptly, along with implementing the MVP concept for early assessment and risk management, also plays a crucial role in striking a balance.

With the rapid pace of technological innovation, how is the technology sector adapting to changing customer demands and market dynamics?

The technology industry is increasingly focusing on providing a superior customer experience and is constantly evolving to adapt to changing customer demands and market dynamics. Investing in AI and ML, cloud adoption, customer-centric approaches, and market diversification are some ways in which industry is adapting. Tech companies prioritise superior customer experiences, including user-friendly interfaces, personalised support, and efficient issue resolution. They are also expanding into the healthcare, education, and transportation sectors due to increased demand for tech solutions in these fields.

Can you discuss the impact of emerging technologies such as artificial intelligence, blockchain, and 5G on the financial strategies and decision-making processes within tech companies?

AI, blockchain, and 5G are reshaping financial strategies and decisions as we speak. In finance, it’s key for us to have real-time data that our teams analyse for cost overruns, reduce returns, ensure high quality, and maintain high efficiency.

AI-powered chatbots and algorithms are employed to provide customer support, personalise financial advice, and manage risk. AI-driven credit assessments and investment decisions help enhance risk management, cash management, and treasury management. Blockchain technology is another game-changer in finance, offering secure and transparent financial transactions, automating back-office processes, and lowering costs. In the context of the Internet of Things (IoT), blockchain safeguards the integrity and privacy of IoT-generated data. It also optimises logistics and shipping processes, reducing paperwork and enhancing transparency. Financial institutions and organisations are increasingly investing in these technologies to stay competitive and better serve their customers, which serves as a guiding beacon for other industries.

Cybersecurity threats have become a major concern in the technology sector. How are CFOs addressing the financial risks associated with data breaches and cyberattacks?

Chief Financial Officers are addressing the financial risks associated with data breaches and cyberattacks in several ways. It includes implementing cybersecurity strategies, formulating a data breach response framework and procuring cyber insurance coverage. Allocation of resources towards the deployment of cutting-edge firewalls and intrusion detection systems can safeguard organisations’ critical data and systems against cyber threats. Structured plans to outline precise steps for the timely identification and containment of breaches, notification of affected stakeholders, and effective remediation procedures can also help in minimising the adverse impact of data breaches.

In addition to this, it is important to work with other stakeholders, such as the CEO, CIO, and CISO, to ensure that a cybersecurity strategy is implemented across all levels. This strategy should align with the company’s overall business strategy and should be designed to protect the company’s most critical assets.

How is the shift towards remote work and digital transformation influencing the financial priorities and investments of technology firms?

From managing cash flow and maintaining profitability for sustained success to investing in long-term prosperity and ensuring strong financial governance and transparency for the organisation’s financial well-being and sustainability, a CFO has many priorities. Firms are increasingly prioritising investments in technologies that support remote work and digital transformation. Moving data and apps to the cloud to boost remote work, scalability, and flexibility and adopting new collaboration tools like work management platforms, video conferencing tools, enhanced instant messaging tools and cloud-based productivity tools can help in the smooth transition.

tax 1

Impact Of Widening OIDAR Scope On Digital Services

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With new norms in place, the government will witness increase in tax collection. On the other hand, it will give rise to changes in consumer behaviour of digital services, including a possible shift from paid services to free alternatives or a reduction in consumption due to the increased cost

Foreign companies that provide internet services, including advertising, cloud services, music, and information, to non-GST-registered individuals in the country are now required to pay 18 per cent Integrated Goods and Services Tax (IGST), according to the finance ministry’s order. This order took effect on 1 October, 2023.

These new regulations are going to be liable for all digital firms, including giants like Netflix, Google, Facebook, and Spotify, who are now subject to an 18 per cent integrated GST (IGST), irrespective of whether the services are offered for personal or commercial purposes.

With new norms in place, the government will witness increase in tax collection. On the other hand, it will give rise to changes in consumer behaviour of digital services, including a possible shift from paid services to free alternatives or a reduction in consumption due to the increased cost. These amendments to the regulations are also expect to increase the compliance burden for these service providers since they will be required to register for GST, remit taxes, and file returns.

While explaining the impact of new regulations on pricing and cost structure, Pratap Daruka, chief financial officer of Tredence said, “In the digital realm, the recent introduction of an 18 per cent IGST casts a profound ripple across pricing and cost structures. With the escalation in costs, we may witness a drift towards free alternatives or even a reduction in consumption as consumers weigh value against expense. As businesses grapple with these augmented costs, the true challenge lies in striking an equilibrium: sustaining profitability while ensuring services remain affordable and enticing”.

To ensure compliance with the new regulations and avoid potential legal or financial consequences for non-compliance, the digital industry must proactively invest in understanding and adhering to these norms, mitigating the risks of legal or financial repercussions, he added further. 

Formerly, only business-to-business services were liable for IGST. Individuals and government entities were exempt from paying tax on non-business services obtained from overseas Online Information Database Access and Retrieval (OIDAR) service providers based outside of Indian jurisdiction.

Furthermore, Ranjeet Mahatani, partner at Dhruva Advisors said, “The primary concern for the industry is to determine whether the supply is covered by the amended definition of OIDAR services. Next, the issue is to determine who is liable to pay the applicable GST—if it is the service provider, what sort of information and documents he or she is obliged to gather from the recipient of the services,” while talking about the challenges of the removal of exemption from IGST for IT services.

It should be noted that, OIDAR services were first liable for indirect taxation under the service tax framework in 2001 In India. With the expansion of the online space in 2016, the scope of these services was also expanded. Furthermore, Section 16 of the IGST Act widened the definition of ‘non-taxable online recipient’ to include unregistered recipients, shifting the burden of tax collection to service providers.

Ashok Vaswani

RBI Approves Ashok Vaswani’s Appointment As MD & CEO Of Kotak Mahindra Bank

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The decision is based on the bank’s request for RBI’s approval of the new Managing Director & CEO of the bank on 19 July 2023

The Reserve Bank of India (RBI) gave its approval on Saturday to Ashok Vaswani’s nomination as Kotak Mahindra Bank’s managing director and Chief Executive Officer (CEO) for a three-year term. The appointment will take effect as of the day of assuming charge, which cannot be later than 1 January 2024, the lender stated in a regulatory filing.

From 2016 to 2019, Vaswani served as the CEO of Barclays in the United Kingdom. He also served as the British bank’s worldwide CEO for consumer and payments between 2019 and 2021. He served as Barclays’ chief digital officer from November 2021 to July 2022 before leaving the company.

The decision is based on the bank’s request for RBI’s approval of the new Managing Director & CEO of the bank on 19 July 2023. He is a veteran banker with exceptional track record and brings with him significant expertise in both consumer and corporate business, particularly for digital drive. Ashok is basically ghar vapsi and fits into the overall broad theme of getting global talent back to India and running our companies,” said Dipak Gupta, interim MD & CEO of Kotak Mahindra Bank.

The news came on a day when it recorded a net profit of Rs 3,191 crore for the July to September FY24 quarter, beating market expectations of Rs 3,092 crore. This is a 23.66 per cent increase from the Rs 2,581 crore clocked in the year-ago period.

penalty

L&T Finance Receives Rs 2.5 Billion Fine From RBI For Non Compliance

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The penalty has been levied by the RBI under the relevant sections of the Reserve Bank of India Act, 1934

The Reserve Bank of India (RBI) has taken regulatory action against L&T Finance by imposing a monetary penalty of Rs 2.50 crore (Rupees Two crore Fifty lakh only) on the company. This action was taken due to non-compliance with specific provisions of the Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016. The penalty has been levied by the RBI under the relevant sections of the Reserve Bank of India Act, 1934.

It’s important to note that this regulatory action is focused on addressing deficiencies in compliance and should not be construed as a judgment on the validity of any transactions or agreements between the company and its customers. The RBI’s decision came after a statutory inspection of L&T Finance, which covered its financial position as of 31 March 2021 and 31 March 2022.

This inspection included an examination of various reports and correspondence. During the inspection, several issues were identified, including the company’s failure to inform its retail borrowers about the risk gradation and the rationale behind different interest rates applied to different borrower categories in loan application forms or sanction letters.

Additionally, the company did not notify borrowers of changes in penal interest rates when rates were higher than initially communicated. It also failed to provide notice of changes in loan terms and conditions when charging an annualised interest rate higher than what was communicated at the time of sanction.

Subsequently, the RBI issued a notice to L&T Finance, requesting the company to provide reasons why a penalty should not be imposed for non-compliance with the RBI directions.

After evaluating the company’s response to the notice and additional submissions, along with oral statements made during a personal hearing, the RBI determined that there was a substantiated charge of non-compliance with the RBI directions. Therefore, the imposition of a monetary penalty was deemed appropriate to address this non-compliance.

 

 

AI

Cognizant, Vianai Systems Partner To Advance Generative AI Capabilities

Through this collaboration, Vianai’s hila Enterprise platform and Cognizant’s Neuro AI are combined to produce a seamless, unified interface that enables AI-driven, predictive decision-making

Cognizant and Vianai Systems declared go-to-market partnership to enhance human-centered generative AI offerings. Under this partnership, Vianai’s hilaTM Enterprise platform and Cognizant’s Neuro AI will produce unified interface that enables AI-driven, predictive decision making.

 

“Being able to monitor and improve LLM performance is critical to unlocking the true power of generative AI. With Vianai’s platform and our Neuro AI platform, we believe we will be able to offer our clients a high-quality solution to support seamless data analysis with predictive decision-making capabilities,” said Ravi Kumar S, Chief Executive Officer, Cognizant.”

 

Through this collaboration, Vianai’s hila Enterprise platform and Cognizant’s Neuro AI are combined to produce a seamless, unified interface that enables AI-driven, predictive decision-making.

 

“In every business around the world, there is a hunger to harness the power of AI, but serious challenges around hallucinations, price-performance and lack of trust are holding enterprises back. That’s why we built hila Enterprise, a platform that delivers trusted, human-centered applications of AI,” said Vishal Sikka, Founder and Chief Executive Officer of Vianai Systems.

Through Cognizant’s aspirations to resell Vianai solutions, as well as through potential for expansion in their respective customer bases, the partnership is anticipated to benefit both businesses, said the press report.

lay off

IT Sector Reports Drop In Employee Count Amid Decreasing Revenue

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As of the first half of FY24, all four businesses had collectively shed 39,000 workers. Compared to the first half of the previous fiscal year, when these organisations collectively added 81,650 people 

Tata Consultancy Services (TCS), Infosys, HCLTech and Wipro, the Big Four of Indian IT services, reported a workforce decline of 21, 213 in the second quarter. This was primarily due to a slowdown in hiring, a focus on better utilisation and the use of the pool of trained freshers already on projects, amid growing demand uncertainty.

 

With the exception of HCLTech, which lost 2,299 people during the September quarter, the other three companies all had a sharp fall in employment of more than 5,000.

 

As of the first half of FY24, all four businesses had collectively shed 39,000 workers. Comparing this headcount to the first half of the previous fiscal year, when these organisations collectively added 81,650 individuals, there has been a considerable decline.

 

Tata Consultancy Services (TCS), Infosys, HCLTech and Wipro, the Big Four of Indian IT services, reported a workforce decline of 21, 213 in the second quarter. This was primarily due to a slowdown in hiring, a focus on better utilisation and the use of the pool of trained freshers already on projects, amid growing demand uncertainty.

 

With the exception of HCLTech, which lost 2,299 people during the September quarter, the other three companies all had a sharp fall in employment of more than 5,000.

 

As of the first half of FY24, all four businesses had collectively shed 39,000 workers. Comparing this headcount to the first half of the previous fiscal year, when these organisations collectively added 81,650 individuals, there has been a considerable decline.

In the meantime, all attrition rates decreased sequentially and ranged between 14 and 16 per cent. As increasing the utilisation of the present staff continues to be a crucial lever to increase operating margins in the current business environment, IT organisations are attempting to avoid backfilling this attrition right away.

hdfc bank

HDFC Bank Shuffles Top Management Following Mega-Merger

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HDFC Bank is bringing changes in its top managerial positions with an aim to amplify its mortgages business

 

HDFC Bank is undergoing significant changes in its top-level management as it strives to boost its mortgages business, following the acquisition of another lender three months ago. The bank communicated these alterations in a memorandum to staff late on Sunday, as disclosed by individuals familiar with the situation, who preferred to remain anonymous when discussing confidential matters.

According to these sources, the bank has placed the information technology and digital functions, overseen by Ramesh Lakshminarayanan, directly under Chief Executive Officer Sashidhar Jagdishan. This strategic move towards technology aims to expand the range of products and services offered across its branches. Ashish Parthasarthy, a seasoned figure at the bank who has led the treasury since 2009, will now assume responsibility for the pivotal retail branch business, overseeing deposits and product distribution.

The bank’s shares have been seeing fluctuations following its acquisition of Housing Development Finance Corp. in July, becoming one of the largest banks. In addition, it received a significant downgrade last month from Nomura Holdings Inc., which highlighted the concerns regarding HDFC’s return on assets and pressures on loan growth.

Last April, HDFC agreed to acquire the largest mortgage lender in the country in a deal worth approximately USD 60 billion. This merger, resulting in a combined market value of nearly USD 190 billion at the time, followed a proposal by the banking regulator for large non-banking finance companies to transition into banks, preventing a recurrence of the nation’s significant shadow lending crisis in 2018.

Under Parthasarthy’s leadership, the bank is reorganising the geographical management of the retail branch business to supervise its expansion and product strategies in a more systematic manner, as stated by insiders. This effort will be co-led by Smita Bhagat and Sampath Kumar. Bhagat, a prominent female leader within the bank, previously held the position of group head for government and institutional business, ecosystem banking, inclusive banking, and start-ups. Kumar, on the other hand, served as the group head of liability products, third-party products, and non-resident business at the bank.

HDFC Bank has not yet responded to a request for comment.

Other significant changes include Arvind Vohra, who previously led the retail branch business, now overseeing the bank’s retail assets, excluding mortgages, which will be managed by Arvind Kapil, as previously announced. Parag Rao, who previously oversaw payments, consumer finance, and digital banking, now has an expanded role, overseeing product liabilities and management, including marketing.

Rakesh Singh will continue to lead investment banking and private banking, and will also take on additional responsibility for the offshore international business, according to insiders.

 

 

GDP

World Bank Forecasts India’s GDP Growth At 6.3% For FY24

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In its report, the global banking institution stated that despite significant global challenges, India was one of the fastest-growing major economies in FY 2022-23 at 7.2 per cent

 

World Bank forecasted India’s GDP growth at 6.3 per cent for FY23-24 despite global headwinds on Tuesday. The Bank also projected that India’s service sector activity will remain strong with growth at 7.4 per cent and added that investment growth will remain robust at 8.9 per cent in the current fiscal year.

In its India Development Update (IDU), the global banking institution stated that despite significant global challenges, India was one of the fastest-growing major economies in FY 2022-23 at 7.2 per cent. India’s growth rate was the second highest among G20 countries and it was nearly double the average for emerging market economies.

According to the research, India’s bank loan growth surged to 15.8 per cent in the first quarter (April-June 2023) of the current fiscal year, up from 13.3 per cent in the first quarter of FY2022-23.

“In the short term, an unfavourable global climate will continue to provide issues…Capturing public spending to attract more private investment will create more favourable conditions for India to exploit future global possibilities,” stated Auguste Tano Kouame, World Bank Country Director in India.

Furthermore, the forecast said that India’s fiscal deficit will fall to 5.9 per cent from 6.4 per cent. The central government fiscal deficit is expected to fall further, from 6.4 per cent to 5.9 per cent of GDP. The public debt is forecast to level off at 83 per cent of GDP and the current account deficit is forecast to fall to 1.4 per cent of GDP.

On inflation, the report projected that it will decrease gradually as food prices normalise and government measures increase the supply of key commodities.

The IDU also added that the volume of foreign direct investment will grow in India due to the rebalancing of the global value chain.