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A Possible Recession? 6 Reasons To Start A Business During A Downturn

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A Possible Recession? 6 Reasons To Start A Company During A Downturn

The pandemic has brought out the creative side in everyone. Being locked down at home can lead to one of two things; laziness or over-productivity. The economic impact of the coronavirus is unpredictable, but sometimes economic downturns offer some advantages for startups.

What is a Recession?

A recession is a downturn in the economy.

Economists around the world have been predicting a recession for several years (historically, the economy dips around every ten years), the virus outbreak and related global stock market decline have experts anticipating recessions in the United States and around the globe happening this year.

Online business/startups are already growing big in India. If you are wondering why to start an online business or a startup in India, right now during this economic downturn, here are six compelling reasons to dive in.

1. Innovation is the need of the hour!

Recessions tend to create problems. Entrepreneurs are problem-solvers by nature. It also causes slow investments, so business and consumers often look to startups that can solve the given problems; to find solutions. The most successful of them are eager, resilient and flexible. Who then will be the most equipped during an economic crisis? As an entrepreneur, the ability to think on your feet and make detailed plans can give you a competitive edge and also your relatively new startup, with few expenses, catches the attention of potential consumers and prospective investors.

2. Providing Employment/Seeking new Talent

If you’re able to secure funding, or grow your business rapidly, increasing your team is the next thing on the list. This kind of economy can also mean that growing your team is more affordable than in a rising economy. However, finding the right staff can be extremely challenging.

In a downturn, when layoffs are high, highly qualified, talented and effective individuals can be found much more easily than a period of economic growth spurt. Potential employees are more likely to work at a lower salary in exchange for benefits. Consider this as an opportunity to bring fresh perspectives to your business.

A Possible Recession? 6 Reasons To Start A Company During A Downturn

Source: Pexels

3. Less competitors = More Attention

The hardest challenge that businesses face is getting noticed. When the economy is strong, everyone is jumping up on the opportunity to start his/ her own business. With the alarming rate at how fast the industry is, newly incorporated companies may be pushed to the backseat, making it very difficult for them to get the requisite exposure or attention. However, when there is a pandemic of this scale, there are less people attempting to start a business in a downturn because there are lesser investors and funding becomes a tough task.

Nonetheless, one can quickly draw the attention of the media by a strong display of its products which offer a solution to one of the many problems caused by the pandemic and as a result monetise the marketing that the media provides.

4. Downturns give startups negotiating power

When the economy is strong, a startup is just another startup, and the vendor or the investors set the rules. On the contrary, if your company depends on suppliers for all of its raw materials/ products, a downturn is a great time to negotiate or renegotiate because, most vendors despite focussing on aggressive selling techniques will want a deal that will benefit them even after the downturn ends. Meaning, you can strike a deal to purchase from the vendors in the absence of other customers providing them with guaranteed sales while allowing yourself to turn around what could be, a very viable business. Ultimately resulting in a win-win situation.

A Possible Recession? 6 Reasons To Start A Company During A Downturn

Source: Pexels

5. Things are Cheaper

Weak economic growth often leads to businesses cutting costs to stay afloat during the recession. For startups, this means resources are cheaper, and they are in abundance. Things like office space or furniture, advertising costs tend to be relatively less expensive, and vendors are more likely to discount prices to move stock quickly.
Labour both skilled and unskilled is cheaper, as mentioned before.

Interest rates for loans also tend to be at their lowest during an economic downturn. This means that with spending costs low, you can start off your business with a safe budget and manage costs. Some people have waited years to find value in these markets–and now that time has come.

And Finally…

6. Survival is Key

Startups have the ability to thrive during a downturn. This does not always guarantee success during the recession but, with a solid business plan to back up your new venture and family or friends who don’t want to or can’t invest more money into the stock or real estate markets, funding your startup the setting up and operating a business should not be much of a challenge. So it is important to save money wherever you can, and be prepared with plans for every possible outcome.

It is also important to keep in mind that you might experience a slow growth process than in standard times, but you will be well-positioned to grab all of the advantages that come from the next economic expansion, which will eventually happen after all this ends.

A Possible Recession? 6 Reasons To Start A Company During A Downturn

Source: Pexels

I’m sure you’ve heard of Microsoft, Apple, and Disney (to name a few) these companies are examples of some of the most notable entrepreneurs and their ideas came to life during economic downturns. What this means for the startup is there’s no better time than right now to get going. If you’re an entrepreneur who has the motivation to bring those ideas to life, this time is perfect to cook up some recession-proof business plans. Start pursuing your business dreams–in anticipation of the next period of growth and become your own boss!

I'm Annie, a TV and web series enthusiast. One can catch me watching many series, often all at once! When given the opportunity to choose between coffee or chai...Coffee will always have a special place in my heart. Being in the final year of my UG, I am not only confused about my future but our country's too. I also love writing and conveying ideas from a fresh perspective, I hope that one day this passion will lead me to great and satisfying milestones.

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How SEBI’s New Margin Rule Is Affecting Retail Traders?

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SEBI Margin Rule | News Aur Chai

Securities and Exchange Board of India has introduced new margin rules for traders. Traders and Brokers are not happy with the new regulations because they will have to invest a large amount of cash in fulfilling margin requirements for trade.

SEBI had introduced the new margin rule in the year 2020 for intraday traders. It is being implemented in a phased manner. Traders were supposed to maintain 25 per cent of the peak margin in the first phase; the margin was raised by 50 per cent in the second phase. In the third phase, as per the new margin rule, intraday traders will have to pay a 100 per cent upfront margin. According to new norms, the margin requirements will be calculated four times during every trading session because the money margin must be greater than the need.

As per the new rule, brokers must collect margin from investors for any purchase or sale, and if they fail to do so, they will have to pay the penalty. Thus, brokers will not receive power of attorney. Brokers cannot use power of attorney for pledging anymore.

Those investors who want to make use of margin will have to create margin pledges separately. As per the new rule, investors will have to pay at least a 30 per cent margin upfront to avail a margin loan. Shares brought today cannot be sold tomorrow. Funds from shares sold today cannot be used for new trades on the same day.

The market experts said that there must be proper adjustments for implementing new rules, or it may create chaos, trouble and disturbance to the market participants. The CEO and founder of Zerodha broking firm, Nithin Kamath tweeted that, “the day when the new rules came into effect was the dreaded day for brokers, exchanges, intraday traders”.

Traders Are Not Happy:

Changes in rules have evoked strong reactions from traders because they will have to invest a large amount of cash in fulfilling margin requirements for trades as per new margin rules. Even the trading in futures and options will become more expensive. Traders are disappointed because they will have to pay up more money to bet in stock markets. As per new margin rules, Traders are also liable for the penalty if the rules are not followed during the trading session. If a trader wants to buy Nifty worth Rs 10 lakh, he will have to pay a 20 per cent margin of around 2 lakh. If the margin of the trader does not meet the need, he will be penalized. Traders will have to pay the minimum amount for opening the Multilateral Trading facility account, and they have to maintain a minor balance at all times.

Why Gas SEBI Introduced A New Margin Rule?

SEBI has introduced new rules to protect retail investors from purchasing difficulty. The intended goal of SEBI behind new margin rules is to bring down the difficult market situation and avoid huge fluctuation in stock markets during extreme stress. The new margin rules are likely to bring transparency to the market; it is expected to strengthen the market’s safety.

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Maya Global Education Society Acquires GIAP Journals

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GIAP MGES Journals | News Aur Chai

Gyandhara International Academic Publications (GIAP Journals), headquarter at Mira Road, Thane, Maharashtra, has been completely acquired by Maya Global Education Society (MGES), Prayagraj, India, with effect from 25th August 2021. Maya Global Education Society is an emerging confluence of academicians to cater to challenges in the educational and research domain in the post-pandemic world. Its headquarter is at Prayagraj, India.

According to our trusted sources value of this acquisition is around 50,000 USD. MGES claimed that their core activity is developing an online research-based education and training system that will reach all parts of the society irrespective of their economic status.

MGES aims to delve into the following activities:
* Training to academicians on tools and systems to improve students’ engagement in an online environment.
* Training to early researchers on research tools, software, and methodology.
* Training to early professionals and graduates to meet the skills demand of Industrial Revolution 4.0 (based on World Economic Forum suggestions).
* Publication of open access research journals and books (Recently acquired GIAP Journals).
* Distribution of scholarly content to Universities and higher education institutions.

GIAP cofounder and CEO Mrs. Rajni told us in an exclusive interview that the journey of GIAP was like a dream come true. It started in 2012 with loans on personal jewelry. After serving in the academic fraternity for the last 9 years, it was a timely decision for all journals and books to grow under the able guidance of pure academicians and researchers.

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Kitex’s Stock Surged 46% In A Week Post Tussle With Kerala Government

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Kitex Vs Pinarayi Vijayan & Kerala Government 2021 | News Aur Chai

The stock of Kitex Garments, the world’s second-largest manufacturer of kids’ garments, based in Kerala, saw a secular uptrend recently, after the company’s announcement that it will relocate to Telangana following a squabble with the Kerala government. The group withdrew a 3,500-crore investment project from Kerala and is planning to move to Telangana with a 1000 crore worth investment project.

Sabu M Jacob, the chairperson and managing director of the Kitex Group, stated his morality forbids him from ever investing a single rupee in Kerala, his native state. The comment brings the confrontation between the Kerala government and the homegrown firm to a close.

What is at the root of the clash?

Kitex has been subjected to repeated inspections by various Kerala government authorities in recent weeks, with group chairperson Sabu Jacob publicly accusing Pinarayi Vijayan’s Left administration of hounding the firm.

The inspections, Jacob said, were intended to “harass” businesses like him and “push him into a corner.” The authorities who came down to examine the firm, he claimed, seemed as though they were on the lookout for thieves and criminals.

P Rajeev, the state’s Industries Minister, emphasized that the government had not conducted any Suo Motu inspections of the firm. While the industries department did not conduct any searches, he said the health and labour agencies did so in response to orders from the Kerala High Court and the National Human Rights Commission based on individual complaints. The accusations are allegedly related to the company’s treatment of employees and the contamination of a nearby river due to wastewater discharge.

A Congress MP and a Congress MLA, and a female employee filed charges against the organization. The charges ranged from polluting a local waterway to harassing employees and violating minimum wage laws.

The Kerala government has denied targeting Kitex on purpose. The inspections were carried out in response to complaints and directives from courts and the state’s human rights commission; according to state industries minister P. Rajeev, he said his government stands for “responsible investment”, and the state would be a hub for such investments in a few years. He added, “The LDF Govt. ensures that sustainable and innovative industries thrive here,”

What was the aftermath of the inspections?

Even though the final findings of the official inspections are still pending, Jacob escalated his feud with the government by announcing that he was cancelling investments worth Rs 3,500 crores that were announced during the ASCEND conference in January 2020. By 2025, the investments were intended at establishing an apparel park and industrial parks along the proposed economic corridor in Kochi, Thiruvananthapuram, and Palakkad, resulting in the creation of thousands of employment opportunities.

Without identifying anyone in the state administration, Jacob said that the state lacked a business-friendly environment. While he did not want to relinquish the intended investments in Kerala, he said he was compelled to do so due to political and bureaucratic persecution. He said that although other states in the country were gradually improving their economic environment, Kerala was still 50 years behind.

Jacob and a few Kitex officials went to Hyderabad last week on a private plane supplied by the Telangana government, where they met with a team led by the state’s Industries Minister, KT Rama Rao. The business revealed intentions to spend Rs 1,000 crore in an apparel park at the Kakatiya Mega Textile Park in Warangal after two days of negotiations.

The political consequences of the experiment

Jacob, the founder of the Kitex Group, is an industrialist who has also dabbled in politics. Jacob launched Twenty 20, a one-of-a-kind political experiment that won seats in panchayat elections in 2015 and then built on that success in the 2020 elections by winning seats in new panchayats.
This corporate-driven panchayat model has resulted in a lot of growth in tiny villages, putting both the Congress and the Communist Party of India in danger (Marxist).

Kerala’s rating in terms of ease of doing business

Kerala ranks worse than many other states and union territories when it comes to the ease of doing business. Based on improvements that states were asked to adopt in 2019, it was placed 28th out of 36 states and UTs in the ease of doing business rankings.

Kerala was judged to have failed to implement some labour reforms, such as single-window clearance and measures to ensure simple information flow and transparency.
Following the Kitex withdrawal, however, several groups that had thrived in the state for years came out openly in favour of the state administration.

RPG Enterprise’s chairperson Harsh Goenka publicly tweeted in support of the administration. He stated, “We are the largest employers in Kerala. We find the local government very supportive,”

Where does the company stand in the share market?

With the decision to invest in Telangana, Kitex’s shares were once again trapped in the upper circuit. On Wednesday, the stock soared almost 10%, reaching a record high of Rs 204.05.

Within a week, the stock price of the children’s clothing company rose by almost 85 percent. The stock price increased from Rs 110.05 to Rs 204.05, reaching its highest level in three years. The company’s market capitalization increased to Rs 1,357 crore from Rs 732 crore as a result of this.

Because it controls 55 percent of the firm, the promoter entity, which includes Kitex Managing Director Sabu Jacob, profited Rs 347 crore. Sabu Jacob’s entire share value increased to Rs 754 crore.

Meanwhile, the BSE pressed Kitex for an explanation for the sharp increase in share prices, which the firm attributed to a Rs 1,000 crore investment plan in Telangana.

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