Hey there, FinOak fam! How's it going? We're excited to bring you another edition packed with interesting updates. Get ready to scroll down and catch up on what's been happening at EY and the relive Tupperware’s era as it might end soon. Plus, we've got some valuable insights on RBI’s floating rate bond 2028 offering an interest rate of 7.88% which is more than rates on current FD accounts should you invest? Let's dive in!

Column 1

Weekly Wrap Up

It’s an accounting halt- Project Everest

Accounting company EY halted a proposed restructuring of its companies that was intended to resolve regulatory concerns about potential conflicts of interest by separating its audit and consultancy units.

The "Project Everest" strategy, however, ran into opposition from some of EY's business partners. According to the business, the U.S. Executive Committee decided against going through with the split.

The split would have been the largest restructuring of the accounting industry since the demise of Enron-connected auditor Arthur Andersen in 2002, whose demise reduced the Big Five to the Big Four.

When the idea for the business split initially emerged internally in 2021, it was known as ‘Project Everest.’ US business leaders, such as senior executives John King and Frank Mahoney, were incensed by it because they wanted auditors to have a larger share of the lucrative tax practise pie. Not only were retiring partners anxious about their promised payouts, but so were the present partners who were apprehensive about the money.

EY’s Project Everest to break up the company, by the digits:-

How long did EY work on Project Everest? Over a year.

How much did EY spend on the business split? More than $100 million.

How much of EY's revenues come from the US? 40%, which explains why the team has such influence over the choice.

What next for EY?

Several countries won’t let firms do consulting work for companies they audit. And the rules are tightening. For instance, the Financial Reporting Council, the U.K.’s auditing and accounting regulator, established a June 2024 deadline in 2020 for the Big Four firms to separate auditing as a standalone business.

EY's global leadership team said in the note obtained by FT that it was still dedicated to "creating two world-class organisations that further advance audit quality, independence, and client choice," but it did not elaborate on how it would do so specifically now that a physical split was no longer an option.

General knowledge Update-

Today’s Big Four accounting firms, ranked by 2022 revenue

• Deloitte: $59.3 billion

• PwC: $50.3 billion

• EY : $45.4 billion

• KPMG: $34.64 billion

That's it, you may proceed to your other ‘Big 4’ checklist for the day now :)

India’s Favourite Dabbas: The Tupperware Saga

Running down memory lane, back to our school days, I’m sure we all had that one friend who used to get their tiffin in Tupperware! Be it roti and sabzi or homemade cheese/butter sandwiches—it pretty much kept everything fresh until lunch break or, if we may; during mid-class snack break we all had, hiding from our teacher!

History of Tupperware

Tupperware brand was launched in 1946 in Leominster, Massachusetts. Even though the Tupperware plastic was ready as far back as 1938, the first Tupperware product was developed in 1942.

Initial Spread of Tupperware

Tupperware was invented by Eric Tupper; however, it owes its success to the public face: Brownie Wise; while Tupper had a great product, it was not selling in the marketplace until Wise came along. Wise organized events to sell containers, met directly with housewives and mothers (who were the main consumers of products), and also organized the first (of many) ‘Tupperware parties’.

Unique Selling Model

The concept of Tupperware parties came as a system where a household holds a party with the hostess demonstrating and selling Tupperware containers. This method of selling was praised for empowering women of different socioeconomic strata. It gave a different feel to the traditional door-to-door salesmen method, where salesmen (primarily women) would go around helping sell.

Tupperware Parties helped employ 1.9 million salesmen (on contract), globally by the end of 2007.

Adoption into Indian Market

The Tupperware model was introduced in India, in 1996 in Delhi, with 10-15 employees and a sales force of 30-40 women. It helped convert many Indian consumers from traditional metal food containers to plastic ones.

Leading to the ‘Rise of Indian Solopreneur’ (Pun Intended) – Indian housewives and moms who would earn an additional income by selling Tupperware from their houses, by the end of 2020, Tupperware had more than 50,000 active consultants in India.

Problems with the Model

Even though this model seems too good to be true, it still had a few problems it had to deal with.

1. Face-to-face selling model has lost relevance in this digital world, especially post-COVID. Thus, Tupperware had to exit the New Zealand market in 2022.

2. The youth has started to prefer more eco-friendly packaging instead of plastic containers; hence losing the significance of the brand, and its entire selling model, as a whole.

Problem and Way Forward

Tupperware has made some significant losses for three years, as of before the pandemic. Tupperware was also short on cash and could not match revenues with sales in the long run.

In April 2023, the company said, there was "substantial doubt about the company's ability to continue as a going concern". The shares of Tupperware falling by 50% on the same day as this announcement, wasn’t a big confidence booster either.

As logic pertains, the company may have to close in the near future due to low revenues and debt burdens; unless it receives a cash infusion immediately.

Column 2

Personal Finance

RBI's Floating Rate Bond 2028 Offers 7.88% Interest! Should you invest in government bonds?

The Reserve Bank of India (RBI) recently gave a so-called ‘welcome surprise’ to its investors, by increasing the interest rate on Floating Rate Bond 2028 to a whopping 7.88% per annum from April 04, 2023, to October 03, 2023! That's so much higher than what most fixed deposits offer, making it a very attractive investment option for those looking to maximize their returns.

So, What is a government bond?

A government bond is a fixed-income instrument issued by the government to raise funds for various purposes like infrastructure development, social welfare schemes, and more. The bond is essentially a loan taken by the government, making investors, ‘lenders’, who lend money to the government. The government in return, pays interest on the bond amount along with the principal amount, at the end of the bond's tenure.

Different Types of Government Bonds

There are two primary types of government bonds: fixed-interest bonds and fluctuating-interest bonds.

In fixed-interest bonds, the interest rate remains constant throughout the bond's tenure, whereas in fluctuating interest bonds, the interest rate changes as per the market conditions.

Advantages of Investing in Government Bonds 

Here are some of the top advantages of investing in government bonds:

1. Safety and Stability - Government bonds are considered to be one of the safest investment options because the government guarantees them. It offers stability and regular income to the investors.
   

2. High Returns - Government bonds offer attractive returns compared to other investment options like fixed deposits or savings accounts. The interest rate is usually higher than the inflation rate, which means that investors can earn a positive real rate of return.
   

3. Easy to Invest - Investing in government bonds is hassle-free, and the process is straightforward. Investors can invest in bonds online or offline through various financial institutions.

Disadvantages of Investing in Government Bonds

Here are some of the disadvantages of investing in government bonds:

1. Low Liquidity - Government bonds have low liquidity, which means that investors cannot sell their bonds before the maturity date. This can be a disadvantage for investors who require immediate cash.
   

2. Interest Rate Risk - In bonds with fluctuating interest rates, there is an interest rate risk, which means that the value of the bond can fluctuate based on market conditions. This can result in a lower return on investment.
   

3. Inflation Risk - Inflation can reduce the real value of the investment, and government bonds are not immune to inflation. Investors need to consider the inflation rate before investing in government bonds.

Investing in government bonds can be a good option for young adults who want to earn a stable income with considerably low risk. Government bonds are considered to be one of the safest investment options, with very attractive returns. However, investors should consider the flip side of investing in government bonds, like low liquidity and inflation risk, before investing their money in government bonds.

This will be all for this week, see you next week :)

Team FinOak