Make India Competitive Again

Tenneco Clean Air, the manufacturer of auto components, went public last week. Aside from being an important moment for the company, that instance was an important outlier.

It listed with a premium close to 27% at a time when many Indian firms backed by private equity have had weak debuts. Its anchor book—pre-IPO share allocation to major institutional investors—was oversubscribed by 170X.

The US parent of Tenneco Clean Air is owned by Apollo Global Management, an asset management firm based in New York. 

Other companies with similar PE backing haven’t fared so well in recent times. Sona Comstar, for instance, went public in 2021 with a P/E multiple of 79—far higher than Tenneco’s 29—courtesy of its backer Blackstone. The stock is currently well below its peak, which it hit in six months after going public.

Here’s a fact: private equity has underperformed the S&P 500 index over one, three, and five years, according to McKinsey & Company. This category of investors in India extract value from their portfolio companies before they head to the bourses, leaving little opportunity for public investors.

The Ken editor Seema Singh shines a light on the situation in this week’s edition of Make India Competitive Again, as read by Brady Ng.

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There’s one company that exemplifies the current moment in India’s AI investments. It doesn’t make advanced semiconductors or train large language models. Instead, it rents out space to companies that do.

The arrangement is called colocation—think of it as real estate for servers, where clients plug in their machines while the “landlord” provides power, cooling, and connectivity.

Sify Infinit Spaces, the data-centre arm of Sify Technologies, is India’s poster child for this setup. It will be behind the country’s first IPO for a company of its kind.

By tracking the colocation industry’s growth around the world, there’s incredible promise based on demand. Capacity worldwide has more than doubled since 2019 to hit 42 gigawatts (GW) in 2024, and could reach 65 GW by 2027. Sify should head the same way, if not grow even faster.

But that assumes India has enough power to support rapid scaling. One Nvidia GB300 rack can draw enough electricity to power 100 homes in the US, and it takes thousands of racks to train a foundational model. 

Even Sify acknowledges the problem in its DRHP by referring to power supply risk, grid reliability risk, and related issues.

Sumit Chakraborty, The Ken’s head of desk, looks into Sify Infinit Spaces’ IPO and the company’s promise in this edition of Make India Competitive Again, as read by Rahel Philipose.

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Artificial intelligence is no longer an option or privilege. It’s here to stay, even in schools.

OpenAI and India’s education ministry have partnered to distribute free ChatGPT licences to government schools, and AI is being introduced into CBSE and ICSE’s curricula.

The Ken conducted a survey in August to find out what our readers thought about language models becoming a constant presence in India’s education facilities. These were some of the questions in the survey:

• What do you think OpenAI’s goal is in Indian schools?
• Who should be responsible if data is misused?
• What data do you think OpenAI is most interested in?

On the ground, most schools haven’t figured out how to bring AI into the classroom, so they’re using it for everything except teaching, such as administration tasks and applicant interviews. That hardly lines up with the goal to make India’s students AI-literate.

The Ken reporter Atul Krishna unpacks the implications of ChatGPT’s proliferation in India’s education sector in the latest edition of Make India Competitive Again, as read by Snigdha Sharma.

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India is relaxing rules for states to approve and fund standalone battery-storage systems. There’s a rush to build those projects, and tariffs are going lower and lower.

Rajasthan set a “lowest tariff” record last week at Rs 1.77 lakh per megawatt per month, undercutting Andhra Pradesh. Maharashtra is now sending out feelers, so there may be an even lower figure soon.

It’s a situation that has played out in renewable energy before. Solar and wind projects were rapidly installed, but little was done to build local manufacturing muscle. 

The current rush of activity in the battery-storage space is only leading to market distortion. With government funding and other incentives, it’s “almost a risk-free business”, as one executive told The Ken.

There’s also the matter of relying heavily on Chinese imports, which also happened when solar and wind energy projects were being built. 

The result is an insecure supply chain for battery storage in India. The Ken editor Seema Singh has the details in the latest edition of Make India Competitive Again, as read by Brady Ng.

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The Indian Semiconductor Mission, or ISM, is one of the most ambitious initiatives undertaken by the government in decades. Out of Rs 76,000 crore earmarked for production-linked incentives, roughly Rs 65,000 crore has already been committed, and the mission supports 10 major projects across the value chain.

This is all good and great for building the infrastructure and facilities for making chips, but the right kind of human capital is just as important—and largely absent.

The ISM launched a skilling programme in July 2023 to address precisely that problem, aiming to train the professionals who would then populate India’s fledgling fabs. To do this, the ISM, the Indian Institute of Science, and California-headquartered Lam Research teamed up to use the latter’s virtual fab simulator, SEMulator3D, to prepare Indian college students for a career in semiconductor manufacturing.

The hitch is that this doesn’t really give students hands-on learning, so they aren’t truly prepared for life in fabs. The Ken reporter Keshav Pransukhka found out why in the latest edition of Make India Competitive Again, as read by Rachel Varghese.

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Let’s think back to what happened a little more than a week ago: On 30 August, Indian Prime Minister Narendra Modi and his Japanese counterpart, Shigeru Ishiba, boarded Japan’s fastest bullet train, the Hayabusa, and cruised toward Miyagi prefecture at 320 km/h. They were heading to a facility of semiconductor equipment giant Tokyo Electron Limited, or TEL, in Sendai, to spotlight India and Japan’s collaboration in the semiconductor sector.

Japan is a major player in chipmaking, and it’s a model for the way disruption-free operations are crucial for any nation that is a meaningful part of the semiconductor space. This is a particularly important takeaway for India, especially given how PM Modi said last week that he expects to eventually see a “full stack” semiconductor ecosystem in the country.

There are plenty of risks to mitigate—the dependence on Taiwan, erratic diplomatic moves by US President Donald Trump, and China’s weaponisation of its dominance in supply chains, to name a few. 

All of this means India needs rock-solid supply chain links for critical equipment and materials if it wants to become a reliable chip producer. 

The Ken contributor Ankit Tiwari dives into the details in this week’s edition of Make India Competitive Again, as read by Brady Ng.

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India’s MSMEs operate in informal frameworks that have barely evolved over the past two decades. The result is that small businesses have largely the same struggles as they did before, whether it’s the absence of adequate credit, difficulties in entering new markets, or payment delays.

Since MSMEs are the second-largest employer in India, solving these problems represents a significant opportunity.

After all, opportunity has already come knocking. Take for example the shift of manufacturing out of China. India should be a natural destination, but the smaller manufacturers in the country simply were not prepared or equipped with the competencies that major clients demand from their vendors.

There are startups in India taking steps to help small manufacturing businesses develop “full-stack factory solutions”.
The Ken reporter Pranathi DVLS explores this space in this edition of Make India Competitive Again, as read by Rahel Philipose.

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It’s been a month since India’s nationwide shift to E20 petrol—20% ethanol-blended petrol. Vehicle owners have come forward to complain about falling mileage, damage to their vehicles, voided warranties, and the absence of insurance coverage.

The change has sparked outrage, and nothing is being done to placate the country’s many millions of angry drivers.

India’s move to E20 fuel took place much faster than originally planned. This pace may have been inspired by a previous success, when the government had to address worsening air pollution in the 2010s. 

At the time, regulators were able to skip a step to implement more stringent vehicle emissions standards. Even though there was some opposition from automakers, the change was largely unchallenged, and the public was onboard.

The context is different this time around, and the confidence exuded by the government is misplaced. 

The Ken’s Suprita Anupam explains in this edition of Make India Competitive Again, as read by Brady Ng.

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Dialysis is a tough business, and not because of any serious lack of demand. Over 280,000 patients were undergoing regular dialysis in 2024, a number that’s projected to go up to 520,000 by 2029. Add in less frequent or one-time treatments, and the number of patients who need the procedure every year breaches one million. 

It is the economics that is the tricky bit. High procurement costs, tricky consumable-stock management, and very low margins—in fact, nowhere on the planet can one run a small dialysis business sustainably. 

And India, with the lowest dialysis price point in the world, is the toughest market to crack. 

Which perhaps explains why IPO-bound kidneycare chain Nephroplus’ founder Vikram Vuppala built the kidneycare chain the way he did. It is already India’s—and Asia’s—largest dialysis service provider. And it is expanding, both inside and outside the country’s borders, for which it wants to put the Rs 353 crore it plans to raise from its IPO to good use. 

In this edition of Make India Competitive Again, The Ken’s Sudeshna Ray explains how testing itself in a market like India, and building expertise in a “full-stack” model, has been key to its success overseas. 

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India’s stock market seldom tends to influence the workings of its federal bureaucracy. But for the country’s telecom mandarins, who have just floated a new draft national policy for the sector, the investor response to one listed company could be the canary in the coal mine. 

At Rs 9,800 crore, the market value of Tejas Networks, a Tata-owned maker of telecom equipment, is now half the peak it reached 10 months ago. What’s odd is that Tejas Networks is now worth only a little more than its revenue. At the heart of investor frustration, and perhaps even fear, is the big pile of payments the company is yet to receive from its customers, including the government (the owner of telco BSNL).

It’s striking, then, that the draft telecom policy includes a plan to handhold 500 startups and MSMEs working on emerging telecom technologies. But what’s truly conspicuous in the policy is what’s not in it.

The Ken’s Seema Singh explains in this edition of Make India Competitive Again, as narrated by Seetharaman G.

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