Good morning. In today’s edition: What we could do to make India’s toll booths less of a pain point; should CEOs have fixed work hours?; and PVR Inox continues to falter.

THE TAKE

Beyond Mumbai Tolls: Rethinking How India Pays For Its Roads

Mumbaikars have reason to rejoice. The government has, in an apparent pre-election move, scrapped the toll for light motor vehicles at five entry points to Mumbai, effective Tuesday night.

The current toll is Rs 45 and has been rising steadily over the years. The clamour for removing this toll is not new and has been around for a few years. The toll is collected by MEP Infrastructure, a private company, to maintain 27 flyovers in the city of Mumbai and associated infrastructure.

The deal, awarded by the Maharashtra State Road Development Corporation (MSRDC), was set to expire in two years. The government's decision to scrap the toll raises questions about potential contractual breaches and compensation.

The larger issue is whether it was the toll itself or the hassle surrounding it that people had problems with. 

People likely hated the tolls more because of the inconvenience caused — the backed-up traffic jams and time lost — rather than the Rs 45 toll fee itself. One might rightly wonder why Mumbai’s roads are in such poor shape despite these tolls and other taxes. This particular toll in question was not for the whole city, just the flyovers.

Tolls in India are a bane, primarily due to the time lost idling, which translates to fuel burned and wasted by millions of motorists. Studies on this specific issue are limited, but it's estimated that tens of thousands of crores of rupees were once lost annually due to idling at toll plazas and traffic backups. This figure has likely decreased proportionally with the introduction of the radio frequency tag system, FASTag, though the extent of the reduction remains unclear.

In my experience, backups at toll plazas frequently occur because people without a FASTag enter the designated FASTag lane or a driver's account balance is insufficient, preventing the gate from rising. While there may be various reasons for these issues, the resulting delays are common.

Arguably, RFID-based systems like E-ZPass in the US operate more seamlessly, allowing vehicles to pass through tolls at speed. This system also appears to have some "leakage" built in. In the E-ZPass system, if your account is not topped up, you will get charged later whenever you do unlike in India where you will be stopped and forced to pay cash.

Hence, in India, eliminating the toll altogether might be a more effective solution than maintaining it. While FASTag addressed revenue leakage, it only marginally improved the ease of passage for motorists.

India's road transport minister, Nitin Gadkari, has announced and piloted a new system called the Global Navigation Satellite System (GNSS). This satellite-based road toll collection system allows for free travel of up to 20 km daily in each direction on national highways and expressways. Drivers will pay only for the distance travelled, rather than the distance between two toll points.

The GNSS-based system, which eliminates stopping at toll booths, is expected to launch in April next year and could eventually replace the FASTag system. If most vehicles utilise GNSS systems, toll plazas will likely become obsolete, at least in their current form. This transition offers numerous other potential cost savings as well.

The time value of delays incurred on Indian roads has rarely been recognised, as road management has historically been in private hands.. While the elimination of entry tolls into Mumbai city at various points is a welcome move, there should be an accompanying recognition of the cost of bad and poor roads on people’s time, business and lives.

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DIVERGENT VIEW

Should CEOs Have Fixed Working Hours?

In recent times, work-life balance and work hours have been widely discussed over and over again. Be it Infosys founder NR Narayana Murthy’s remarks on work or the death of an EY Global employee, people have become vocal about the need to provide a work environment conducive to having balance. 

Usually, the discussions surround the work life of employees. Often the work culture of an organisation is set by the example of its CEO and top leadership.  All these raise a fundamental question: should CEOs have fixed working hours and how can they best manage their time?

CO:RELATION

HDFC Bank Turnaround

After completing the mammoth merger exercise with housing finance giant HDFC Ltd, HDFC Bank's over Rs 36 lakh crore balance sheet will likely throw some weight. Last week, the bank's latest update suggested that the incremental deposit growth was much better than market expectations. The bank is concentrating on growing the high-yielding retail loans. It continues to tread cautiously on business loans but remains focused on improving the net interest margin, a key metric that measures banks' profitability. 

The bank's share price has barely moved in 2024. HDFC Bank shares rose only 37% in five years, even as the NSE Nifty doubled and the Nifty bank index grew at twice the pace. Such a prolonged underperformance from a market leader dragged Nifty and the Nifty Bank. However, the market is now looking at HDFC Bank positively. It is perhaps the first month after a long time that HDFC Bank shares have outperformed the Nifty Bank and the NSE Nifty.

CORE NUMBER

Rs 8,315.28 crore

This is the total amount raised by Hyundai Motor India Ltd from 225 anchor investors at Rs 1,960 per share on Monday. The much-anticipated IPO has gotten off to a sluggish start, with a mere 18% subscription on its first day. Qualified institutional buyers subscribed to just 5% of their portion, while non-institutional investors recorded a 13% subscription rate on Day 1 of bidding. Market experts are attributing this subdued response to concerns over the IPO's pricing, which has been set at Rs 1865 to Rs 1960 per share. This valuation is being perceived by some as aggressive, especially when compared to other listed automakers in India.

FROM THE PERIPHERY

—🪧 Workers at South Korean electronics major Samsung’s Tamil Nadu factory have finally called off their protests. According to the state’s labour department, the company has announced several welfare measures for the workers who had been protesting for better pay, work conditions and a labour union. While the management has reportedly promised to not victimise those who took part in the protests, the workers have said they will comply with the management. The protests began on September 9 and continued for over a month. 

—✈️ India's budget carrier SpiceJet has settled a $23.39 million dispute with aircraft lessors Aircastle and Wilmington Trust for $5 million, along with agreements on certain aircraft engines. This follows an earlier settlement with aircraft leasing and management company BBAM and a deal with Engine Lease Finance Corporation (ELFC), which claimed $16.7 million. All parties agreed to withdraw ongoing litigation. SpiceJet has now resolved three major financial disputes in recent weeks, reinforcing its financial health and maintaining strong relationships with leasing partners through amicable negotiations.

—🙄 Elon Musk, has jumped into the ring on X slamming Reliance's push for satellite broadband spectrum auctions in India. After Reuters reported that Reliance is pushing for an auction of satellite broadband spectrum, Musk fired back, calling it “unprecedented.” According to The Economic Times, Musk’s Starlink argues that globally, in line with International Telecommunication Union (ITU) guidelines, spectrum for satellites is allocated, not auctioned. Ambani’s Reliance wants a level playing field, insisting an auction is needed. As India’s satellite market booms, this showdown between billionaires has heated up—Musk, as always, unapologetically leading the charge online. 

—🎥 PVR-Inox, India's leading multiplex chain, posted a worrying Q2FY25 net loss of Rs 11.8 crore, a sharp decline from the Rs 166.3 crore profit reported in the same period last year. Revenue also took a hit, dropping 19% Year-on-Year to Rs 1,622.1 crore. This continues a troubling trend for the company, which has consistently struggled to turn a profit since the pandemic.  Factors like the 2024 general elections and a weak film slate have been cited for low audience turnout, forcing PVR-Inox to lower ticket prices. Despite efforts to innovate with premium offerings and a new food court venture, the chain faces stiff competition from regional players and changing audience habits..

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