merged (1)

1st Edition, Issue-1 The Makeover of Dharavi: Will it Change the Face of Mumbai?

However, a major constraint for implementing the ‘Dharavi Redevelopment Project’ was the
land ownership as nearly 70 acres of land was thought to be belonging to Indian Railways.
However, the assurance from the Indian Railways for handing over the land in favour of the
project played a great role in facilitating the process of development. In this context, Prakash
had stated that, "Railway Minister Piyush Goyal assuring to hand over this land to the state
government helped. Added to this, we got 20 acres of saltpan land for construction of transit
camps." Experts had claimed that, in addition to Dharavi, another stretch of land measuring up
to 94 acres was to facilitate creation of ‘8,000 saleable 2BHK housing units’. As a matter of
fact, "The Slum Rehabilitation Authority (SRA) has approved several projects, which are likely
to generate 2.35 lakh more houses. Moreover, private and MHADA development would also
create more than 3 lakh houses. So, in the next five years, we can see more than seven lakh
additional houses in Mumbai,” mentioned by Prakash.

Despite such hopes, real estate industry professionals had expressed concerns over the
implementation of Dharavi’s revamp. "This mammoth project is unlikely to take off," claimed
Pankaj Kapoor (Pankaj), MD, Liases Foras, a Mumbai-based real estate research firm. Pankaj
had added that, attempts to revive the slum had been made earlier as well. In a related
context, he stated that, "The government fails to understand that Dharavi is not a housing
project, but an integrated cottage and commercial industry. Dismantling this well-settled
scenario fabric isn't a good idea. No developer, Indian or foreign, has the financial capacity to
undertake this project or putting in an initial Rs 25,000 crore to Rs 30,000 crore that is
required. The chances of recovery are dim, considering the market is heavy and interest-
ridden.”23

Therefore, it was clear that, Dharavi’s revamp was a failed attempt each time it had been
planned. Therefore, in order to manage the strategic risks related to land acquisition, the
revamp project was planned in phases. As early as the year 2010, a sub-committee was
appointed in order to consider the pros and cons related to the revamp of Dharavi. Instead of
addressing the land development in the five sectors, the total area of the land was to be
divided into 32 sectors. Fresh bids were invited in order to increase viable options for
revamping Dharavi. Professionals related to the industry opined that, calling for such bids
would reduce the chances for cartelisation, hence reduce the risk of investments.24

However, in late-2018, the GoM through ‘Maharashtra Slum Redevelopment Authority’ had
invited global tenders for ‘Dharavi Slum Redevelopment Project’. According to the terms and
conditions of the bid documents, it was clear that the lead partner would have to take the
responsibility of launching a ‘Special Purpose Vehicle’ (SPV). This was supposed to occupy a
significant stake with 80% equity stake. Technical experts acknowledged that, the SPV would
be given the responsibility to construct free houses for the eligible slum-dwellers. ‘The Floor
Space Index (FSI) of 4’ was specified by the GoM for the project.

According to Anuj Puri (Anuj), Chairman, ANAROCK Property Consultants, leading real estate
services company in India, “Building affordable to mid-range housing projects here would
completely reinvent the residential real estate equation of Central Mumbai and also make a
major contribution to the Central Government’s Housing for All by 2022 target.” Experts at the
same time agreed that, undertaking the project was quite tough for the GoM. In fact, Anuj had
clearly stated that, “Dharavi is not an area of contention and confusion on the basis of costs

23 “Dharavi redevelopment project to change face of Mumbai's real estate”, op.cit.
24 Mehta Rajshri, “Proposal to develop Dharavi in phases to beat land mafia”,
https://www.dnaindia.com/mumbai/report-proposal-to-develop-dharavi-in-phases-to-beat-land-mafia-1339491,
January 26th 2010

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alone. The biggest question is of land ownership and relocation of its existing inhabitants. In
terms of land ownership, almost one-fifth of the land here is privately-owned.” Taking into
consideration the entire process of revamp, technical wizards had acknowledged that, the real
estate industry was to undergo a complete makeover once the development initiative was
implemented. Anuj had admitted that, “Dharavi rubs shoulders with upmarket Bandra and is
right next to the avant-garde Bandra-Kurla Complex. This makes Dharavi an incredibly
attractive proposition for home-buyers, investors and developers alike.”25

In spite of such interesting proceedings, many of industry analysts’ had continuously stated
that the redevelopment project was a sort of 'sophisticated land grab’. Such process was to
benefit the builders more in comparison to the inhabitants of Dharavi. Several options were
being rediscovered such as the slum-dwellers developing on their own were also given a
thought as well. Unfortunately, fund constraints were the key point which stalled such plans.
At the same time, it was understood that, Dharavi was to be developed on the whole and not
in phases.26

During the end of 2018, Dharavi revamp project had finally received the GoM’s approval. The
project was stretched for a period of seven years respectively. The implementation model was
in Public Private Partnership (PPP) mode. The entire process of construction was due to be
started within March 2019 respectively.27

By the beginning of the year 2019, SecLink,28 the Dubai-based infrastructure firm won the
project to revamp Dharavi. Post such development, SecLink was scheduled to start the work
within the stretch of 2.40 km2 of land. The bid was presumably finalised after several options
were being considered. Feasibility of the development project was defined through setting up
of commercial hubs within the built-up land area. The project when implemented would yield
a huge utility space. On the basis of the PPP model, the private firm would have about 80%
stake in the entire process.29

It was important to note that, the project took into consideration, rehabilitation of 68,000
people which constituted of slum-dwellers along with small-business owners.30

Looking back, there were several failures associated with revamping of Dharavi which required
to be addressed. Till the point of time, that the deal for revamp was being finalised, only 358
families could be rehabilitated. This constituted only 0.6% of the total number of families in
the slum. The redevelopment project required to compulsorily include families from Dharavi
who were residing in the slum ‘since and before 1st January 2000’.

Experts agreed to the fact that, in the past, the development project was implemented through
revamping a less complicated area within the total area of the slum. This area was inhabited by a

25 “Maharashtra invites global tenders for Dharavi slum redevelopment project”,
https://www.thehindubusinessline.com/news/national/maharashtra-invites-global-tenders-for-dharavi-slum-
redevelopment-project/article25586720.ece, November 24th 2018
26 Mahamulkar Sujit, “Dharavi to be redeveloped as a whole with 80% private stake”,
https://timesofindia.indiatimes.com/city/mumbai/dharavi-to-be-redeveloped-as-a-whole-with-80-private-
stake/articleshow/66253470.cms, October 17th 2018
27 “Dharavi makeover in 7 years?”, https://www.timesnownews.com/mirror-now/society/video/dharavi-
makeover-in-7-years/172305, December 5th 2018
28 SecLink Group serves as the major component in building up urban infrastructure. This was carried out through
bringing together a comprehensive value chain of specialists in order to bring in the change.
29 “Dubai-based firm bags Dharavi makeover project”, op.cit.
30 “DUBAI-BASED SECLINK GROUP FRONTRUNNER IN DHARAVI REDEVELOPMENT”, http://remumbai.in/dubai-
based-seclink-group-frontrunner-in-dharavi-redevelopment, January 31st 2019

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lesser number of slum owners. Just before the elections, the GoM however had put a mandate
that, the risks pertaining to the project was to be equally shared by the government. It was
imperative that, since the project was first conceived in 2004, the successive state
governments had always tried to initiate every major decision before the elections. (Exhibit VII).
Experts had repeatedly stated that, the area of so-called slum was under the control of the
political parties. However, over the period of years, the political grip of the land had loosened.
Political reasons attributed were obviously related to anti-incumbency and resentment for the
state government not being able to take a fruitful decision.31

Exhibit VII
Measures Initiated to Revamp Dharavi

Source: Phadke Mansi, “On edge of election season, Dharavi makeover project looks set for takeoff
again”, https://theprint.in/statedraft/on-edge-of-election-season-dharavi-makeover-project-looks-

set-for-takeoff-again/200978/, March 4th 2019

Slum-dwellers however, were not very hopeful with the revamp process of Dharavi. They were
of the idea that, the GoM had given the approval for initiating the project during 2018
especially before the Lok Sabha polls (India’s General Election) which were scheduled in first

31 Phadke Manasi, “On edge of election season, Dharavi makeover project looks set for takeoff again”,
https://theprint.in/statedraft/on-edge-of-election-season-dharavi-makeover-project-looks-set-for-takeoff-
again/200978, March 4th 2019

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half of 2019.32 Despite such discussions, it was clear that, the redevelopment of Dharavi would
support the real-estate industry of Mumbai region in the long run.33

Since the project was considered to be one of the biggest development projects, it attracted
immense professional talents (builders, academics and consultants) from all across the globe.
It was agreed by the consultants’ that, if the project was to become successful, it would serve
as a live example for slum development across the globe.34

Speaking about the public interest, Prakash had claimed that, “We have many international
companies interested in this project.” He added further by saying that, “We have made it
viable for investors as the state government is both partner and guarantor for the
redevelopment.” The failure of the project to take up in the past was attributed towards faulty
policy framework as well as gaps related to the architectural design. “Past experience has
shown such high capital investments have failed to provide the requisite returns,”
acknowledged by Pankaj. He further added that, “There is lot of capital investment and the
gestation period is very high.”

At the same time, Sunil Bajaj, India-based real estate consultant had admitted that, “Dharavi is
bustling cottage industry, so the developer has to deal with the social and economic fabric of
this place too.” Experts like him had continuously emphasised that, the redevelopment project
should have a holistic approach in order to be made feasible. However, a category of the local
population called the entire redevelopment project to be a farce against the backdrop of
elections. “For the past four years, this government did nothing. This is just a pre-poll sop,”
exclaimed Raju Kode, the President of the ‘Dharavi Bachao Samiti’.35

At the same time, Baburao Mane, the Head of ‘Dharavi Bachao Andolan’36 had said that such
political stunts were being carried out since the last 14 years. He said, “All these big-ticket
tenders have failed in the past. Even this one will. The state government should have created
smaller clusters and revamped it.”37

32 Ashar Sandeep A, “Simply Put: The new plan for Dharavi”, https://indianexpress.com/article/explained/simply-
put-the-new-plan-for-dharavi-mumbai-slum-revamp-5550989, January 24th 2019
33 “Dharavi redevelopment project to change face of Mumbai's real estate”, op.cit.
34 Lee Kevin, “Dharavi redevelopment: So close, yet so far”, https://www.cnbctv18.com/infrastructure/dharavi-
redevelopment-so-close-yet-so-far-2194911.htm, February 6th 2019
35 A local body supporting the cause of improvement of Dharavi.
36 An outfit comprising residents of the slum supporting the cause of slum improvement.
37 Kamath Naresh, “Maharashtra government revives its Dharavi revamp plan”,
https://www.hindustantimes.com/mumbai-news/maharashtra-government-revives-its-dharavi-revamp-
plan/story-Ul6A8l7LPzups2k0jwQjQI.html, October 17th 2018

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Annexure I
A Map of Scattered Clusters of Slums in Mumbai

Source: “Dharavi is not Mumbai’s biggest slum”, https://timesofindia.indiatimes.com/india/dharavi-
is-not-mumbais-biggest-slum/articleshow/61779282.cms, November 24th 2017
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1st Edition, Issue-1 Patisserie Valerie Crisis What Went Wrong?

Patisserie Valerie Crisis
What Went Wrong?

Case Study

This case was written by Shilpa Bhadrapur and reviewed by K. Bhagyalakshmi, Amity Research
Centers Headquarter, Bangalore. It is intended to be used as the basis for class discussion
rather than to illustrate either effective or ineffective handling of a management situation. The
case was compiled from published sources.
© 2019, Amity Research Centers Headquarter, Bangalore.
Website: www.amity.edu/casestudies/
No part of this publication may be copied, stored, transmitted, reproduced or distributed in
any form or medium whatsoever without the permission of the copyright owner.

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Author: Shilpa Bhadrapur

Patisserie Valerie Crisis: What Went Wrong?

Abstract: Patisserie Valerie was a heritage brand Co-founded by Belgian born Madam Valerie
along with her husband Theo Vermeirsch in 1926 in London's Soho district, with an intention to
introduce fine Continental Patisserie to the people of England. The company had become an
instant hit and very soon grew in popularity across the UK. The Scalzo brothers bought the
company in 1987 from the descendants of the founder and grew the business further. In the
year 2006, the Scalzo brothers sold the company to Luke Johnson (Johnson). Under Johnson’s
leadership, the company had rapidly scaled its operations. In 2018, the café chain’s business
was booming with 206 stores and 2500 employees. However, its peers like Byron and Cote and
Carluccio, the popular restaurant chains were shutting down operations in several locations due
to Britain's struggling restaurant sector. While analysts were skeptical of Patisserie Valerie’s
smooth expansion, their suspicions were confirmed when the company had suddenly discovered
‘significant, and potentially fraudulent, accounting irregularities’ in its accounts. Patisserie
Valerie had faced the worst financial crisis after it revealed a multimillion
pound accounting black hole. What went so wrong with Patisserie Valerie?

Case Study

In 2018, the news media was circulating a big story on Patisserie Holdings Plc. which had
plunged into a financial crisis. Around 70 stores that belonged to the company were closed
immediately which had resulted in the loss of close to 900 jobs. The company also owned well
established brands like Baker and Spice, Flour Power City, Philpotts, and Druckers Vienna
Patisserie. Patisserie Holdings had fallen into administration in January 2019 after a fraud
showing £40 million black hole in its accounts was discovered.1

While in February 2018, Patisserie Valerie’s shares had hit record peak and the company had
reported strong financial performance, its competitors like Carluccio’s and Cote had shut down
its operations. In June 2018, the board members of Patisserie Valerie had sold their shares
worth £13 million. In an article published in ‘This is Money’, October 2018, analysts had rightly
asked, “After Patisserie Valerie bosses sell £13 million shares months before scandal, why
didn’t ANYONE in charge see their cakes were sinking?”2 Just before Patisserie Valerie had
collapsed into administration in 2019, a shareholder Chris Boxall had questioned, “The issue

1 Butler Sarah, “Redundant Patisserie Valerie staff have not been paid”,
https://www.theguardian.com/business/2019/feb/01/redundant-patisserie-valerie-staff-have-not-been-paid,
February 1st 2019
2 Wojtus Ania, “Case study: Did Patisserie Valerie try to have its cake and eat it too?”,
https://blog.eqs.com/case-study-did-patisserie-valerie-try-to-have-its-cake-and-eat-it-too, December 4th 2018
“© 2019, Amity Research Centers HQ, Bangalore. All rights reserved.”

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with Patisserie Holdings - we've never seen anything like it...most of us would have taken a
shot at running a cake and coffee shop - what could have gone wrong?”3

Patisserie Valerie – The Inception Story

The first Patisserie Valerie was launched in 1926 by Belgian born Esther Van Gyseghem, widely
known as Madame Valerie and her husband Theophile (Theo) Vermeirsch4 at Soho in London.
She had aimed to introduce the Belgian bakery specialties in pastries and sweets to the people
of England. Post its launch, Patisserie Valerie instantly grew in popularity. The cakes and
pastries offered by the bakery had become an epitome of indulgence for the people of London.
For instance, one of her first recipes ‘Cortina Gateau’ made with Chocolate sponge, fresh
cream and white Belgian chocolate was still available in the menu.5 However, the journey to
success was not a very smooth one for Madame Valerie. The Frith street where her store was
located was bombed during the Second World War by the Luftwaffe. Despite that, she was
determined to continue her thriving business and went on to reopen her store on Old
Compton Street. Soon Patisserie Valerie became a huge brand with several stores spread
across high streets of the UK. Customers were impressed by Madame Valerie’s beautifully
decorated stores.The bakery’s chain of stores in the later years included the unique décor
inspired by 1950’s era and further styled by Toulouse- Lautrec style cartoons by Terron.
Patisserie Valerie specialised in fine quality cakes and patisseries and it also offered continental
breakfasts, lunches, teas and coffees.6 (Exhibit I).

Exhibit I
The Founders of Patisserie Valerie: Theo and Esther Vermeirsch

Source: Morris Ben, “Patisserie Valerie: Unravelling the history of the café chain”,
https://www.bbc.com/news/business-47094831, February 6th 2019

In 1987, the Scalzo brothers (Robert, Victor and Enzo) had bought Patisserie Valerie and went
on to open eight more outlets and three franchises in locations around central London.
According to Peter Harden7, “The upmarket patisserie is very much a coming thing. The British

3 Azeez Wale, “Bakery chain Patisserie Valerie collapses into administration”,
https://news.sky.com/story/bakery-chain-patisserie-valerie-collapses-into-administration-11614744, January
22nd 2019
4 Morris Ben, “Patisserie Valerie: Unravelling the history of the café chain”,
https://www.bbc.com/news/business-47094831, February 6th 2019
5 “The History of Patisserie Valerie”, https://www.patisserie-valerie.co.uk/blog.aspx/1/47/The-History-of-
Patisserie-Valerie
6 “About Us”, http://combute.site/about.aspx, January 6th 2017
7 Peter Harden was co-author of the best seller Harden's London Restaurants guide.

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have in recent decades put up with fairly crummy bread and bullet-like croissants. If you look
around town there is an absolute explosion in quality baking concepts.”8(Exhibit II).

Exhibit II
The Scalzo Brothers

Source: “You can't resign from a family”,
https://www.theguardian.com/money/2006/jan/21/workandcareers.familyandrelationships,January

21st 2006

In the year 2006, Patisserie Valerie was bought by Luke Johnson (Johnson) from the Scalzo
brothers for £6 million. The business went public via an IPO in 2014 and was worth £190
million during the time.9 Johnson’s private equity firm ‘Risk Capital Partners’ had invested in
buying the company, since then it had expanded nationally from just 10 local stores across
London. During the acquisition, Johnson had stated, “We have significant experience of rolling
out successful food and drink concepts, including Pizza Express, Strada and Giraffe. Patisserie
Valerie is a much-loved institution with tremendous heritage. We are confident there are
many upscale locations across Britain's cities that would love the authentic pastries, cakes and
savouries supplied by Patisserie Valerie.” Initially, Johnson had worked in advertising at BMP10
and later joined as a media analyst at Kleinwort Benson.11 He had achieved significant success
and became popular when he floated the Pizza Express chain in 1993. Risk Capital Partners had
also acquired other firms in the UK like Seafood Holdings, a company involved in supplying fish
to several restaurants in upmarket areas across the UK. It had also acquired Giraffe, a
restaurant chain, a design group Loewy, and also as diverse company as Greyhound Racing
Association, a private company involved in the management of sports.12 Victor Scalzo had
continued as a shareholder of the company and operated as the Director of Baker & Spice13. As
of 2014, the Patisserie Valerie chain had 89 stores. Within a span of seven years, the chain had
grown rapidly by opening 72 stores.14

According to company sources, the capex and cost of fitting out each store were £250,000 and
the average payback period per store was 23 months. Analysts further pointed out that the
new stores were profitable in the first month itself registering average weekly sales of £14,000.

8 Brown Jonathan, “A culinary empire: The man who ate Britain”, https://www.independent.co.uk/news/uk/this-
britain/a-culinary-empire-the-man-who-ate-britain-416728.html, September 20th 2006
9 Eley Jonathan, “Patisserie Valerie: Luke Johnson puts his money where his mouth is”,
https://www.ft.com/content/7450e57a-ce31-11e8-b276-b9069bde0956, October 13th 2018
10 BMP Media Group is a full service digital media and marketing agency.
11 Kleinwort Benson is a leading investment bank that offered a wide range of financial services from offices
throughout the United Kingdom and Channel Islands.
12 Whitehead Jennifer,“C4 chairman Johnson buys stake in Patisserie Valerie”,
https://www.campaignlive.com/article/c4-chairman-johnson-buys-stake-patisserie-valerie/593433, September
20th 2006
13 Baker & Spice was a subsidiary of Patisserie Valerie.
14 Cohen Norma, “Patisserie Valerie chain owner seeks float”, https://www.ft.com/content/54724fac-cab5-11e3-
9c6a-00144feabdc0, April 23rd 2014

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Further, the bakery chain had identified 250 potential sites across the UK for setting up stores.
Lee Ginsberg previously working as the CEO of Domino’s Pizza Group was appointed as the
non-executive director of Patisserie Valerie. Patisserie Holdings business further grew with the
acquisition of four other brands such as Philpotts, UK-based sandwich and salad chain
operating 23 outlets, Drucker's Vienna Patisserie, chain of patisseries operating across the UK,
Flour Power City Baker, a London based organic wholesale bakery and Baker & Spice,
bakery and food retail chain shop. The company had adopted and followed a vertically
integrated business model. There were seven centrally located company operated bakeries
that delivered freshly made products to all its stores. These products were mainly sold in these
retail stores or via the new online channel. Johnson Patisserie Holdings Executive Chairman
was further supported by a dynamic team with Paul May as chief executive and Chris Marsh, as
finance director. Johnson’s private equity firm ‘Risk Capital Partners’ held 70% of percent of
the company’s shares (Pre-IPO).15

In 2014, Johnson had aimed to open several stores in areas like Wales and Ireland. The parent
company, Patisserie Holdings was operating 138 stores among which 89 belonged to Patisserie
Valerie. Paul May had stated that the stores served ‘affordable treats’ all day long driving sales
even in the afternoon period when sales were generally slow. He further stated, “With this
favorable positioning across fragmented markets, we believe we are well-placed to continue to
deliver strong organic growth, with additional opportunities for potentially attractive
acquisitions of other, smaller branded groups.”16

At the beginning of 2018, Patisserie Valeria was performing excellently while the rest of the
restaurant businesses and café shops located at UK’s high street were struggling to survive. For
investors, the business at Patisserie Valerie cafe chain that had grown with 206 stores and 2500
employees was booming in the year 2018. Further, Johnson had reinforced his belief in the
company and expressed his delight over the company’s performance in a report published in
May 2018 for the London stock market. It was surprising because popular restaurant chains like
Byron and Cote and Carluccio’s were shutting down operations in several locations as the
restaurant sector was struggling during the same period. Meanwhile, Johnson and some of the
directors were said to harbour serious doubts on the company’s excellent performance amidst
the UK’s struggling restaurant sector. In February 2018, the price of shares had increased further,
building the confidence of the investors. At that point, Paul May Chris Marsh and James Horler,
had sold shares worth more than £5.9million.They were primarily responsible for the smooth
functioning of the management. When stock price surged again in mid June reaching £4.92,
other board members like Lee Ginsberg also joined Marsh and May to sell shares worth £7.2
million. They were extremely happy at their good fortunes but their happiness was short-lived
and soon the company ran into deep trouble due to accounting irregularities.17

Can Patisserie Valerie Overcome the Looming Crisis?

In October 2018, the company had discovered ‘significant, and potentially fraudulent, accounting
irregularities’ in its accounts. The company had discovered a £1.14 million unpaid tax bill. Tax
authority HMRC had filed a petition to wind up Patisserie Valerie over the unpaid bill. The

15 “Patisserie Valerie chain owner seeks float”, op.cit.
16 Goldhill Olivia, “Patisserie Valerie owner seeks initial public offering”,
https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10782104/Patisserie-Valerie-owner-
seeks-initial-public-offering.html, April 23rd 2014
17 Craven Neil, “After Patisserie Valerie bosses sell £13m shares months before scandal, why didn't ANYONE in
charge see their cakes were sinking?”, https://www.thisismoney.co.uk/money/markets/article-6298703/Why-
didnt-charge-Patisserie-Valerie-sinking.html, October 20th 2018

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company’s shares were traded at 429p just before they were suspended. Further, the company’s
accounts were frozen; while an initial assessment revealed that the company actually had a huge
debt of £10 million unlike its claim of having £28.8 million in the bank. Besides, analysts had
estimated that the company’s earnings would drop from £31 million to £12 million in September
2019. Patisserie Valerie’s news had jolted the whole city; analysts at Aberdeen Standard
Investments18, which had a 2.9% stake in the business expressed that the whole episode was
‘entirely unforeseen’. Johnson had injected short term funding of £20 million to provide
‘immediate liquidity’ to the company and external shareholders had raised £15.7million.19

The discovery of the two ‘secret’ overdrafts with Barclays and HSBC banks had given an inkling
of the financial troubles engulfing the company. More than £10 million had already been spent
through them. An investigation was initiated by the Serious Fraud Office and Financial
Reporting Council (FRC) into the accounting mistakes of the company. Patisserie Valerie’s
auditor Grant Thornton was also under investigation, the company was speculating taking legal
action against Grant Thornton. Shedding light on the Patisserie Valerie scandal and its
implications on the industry, Mario Spanicciati (Spanicciati), Chief Strategy Officer, BlackLine
stated, “Patisserie Valerie is just the latest high profile organisation to face claims of potential
fraud, inaccurate data and lack of financial controls. While details are continuing to emerge, it
raises the question of how this could happen, why it wasn’t identified earlier via standard
financial processes and controls, and of course who is ultimately responsible.” He further
explained, “Although in this instance it seems the financial irregularities are as a result of
fraudulent activity, basic reporting and controls into the CFO’s team should be there as a
matter of course in today’s technology-driven business world. This is particularly important as
both data sources and volumes grow exponentially. Recent research from BlackLine indicates
that this lack of visibility and control may be more prevalent than we would like to think. In
fact, 33% of UK CFOs in large organizations admitted to being concerned about errors in
accounts that they know must exist, but of which they have no visibility.” Further Spanicciati
added, “Was this lack of visibility partly to blame for the Patisserie Valerie incident? Increased
visibility is an essential safeguard against error; if management and finance professionals,
including auditors, are given access to near real-time data, they can recognise and identify
anomalies or potential fraud as it appears, not just at month-end or at the end of the
quarter.”20

According to industry sources, Johnson had incurred losses of more than £100 million. Analysts
further pointed out that there were several red flags that the company had failed to pick up. For
instance, the new stores that were launched were located in far-flung corners and average
takings had remained stagnant. Sources further pointed out that the company accounts had
hidden away huge cash reserves earned through nominal interest earnings of £1,000 on the sum
of £25 million. This huge sum was reaffirmed as £9.8 million debt. According to the company
sources, Johnson undertook a very meticulous approach to all his investments and Patisserie
Valerie was by far one of his major investments. “Everyone who has ever worked with Johnson

18 Aberdeen Standard Investments was a leading global asset manager, dedicated to creating long-term value for
our clients.
19 Halstead Mark, “Quick Guide to the Patisserie Valerie Accounting Scandal”,
https://www.redflagalert.com/articles/press/quick-guide-to-the-patisserie-valerie-accounting-scandal, October
17th 2018
20 Skoulding Lucy, “Was lack of visibility to blame for Patisserie Valerie fraud?”,
https://www.accountancyage.com/2018/10/19/was-lack-of-visibility-to-blame-for-patisserie-valerie-fraud/,
October 19th 2018

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says he is normally all over the fine details of his investments. How could it be that this could
have happened that he let this past him? Nobody can get their head around it.”21

Another sign of trouble that was missed by the experts was the company’s figures that looked
abnormal. There was no significant change in the average sales per store, despite the company
doubling its stores over the period of five years (2015 -2017). Patisserie Valerie reported sales
of about £600,000 a year. As of September 2014, there were 128 stores, each one of which
was contributing revenue of £598,000 a year. While in 2017, the number of stores had
increased to 192 but average revenue per store was at £596,000 a year. According to analysts,
the graphs were very stable which made it suspicious; any business performance was rarely
this smooth but varied due to external factors like competition, politics, weather etc. Normally
profit per store would also vary due to inflation in wages, rents or material costs (Exhibit III).

Exhibit III
Progression of sales (As of 2017)

Source: McCrum Dan, “Too smooth: the red flag at Patisserie Valerie which was missed”,
https://ftalphaville.ft.com/2018/10/16/1539662400000/Too-smooth--the-red-flag-at-Patisserie-

Valerie-which-was-missed/?kbc=21db2280-83f0-402b-a5d4-48a6affe7282, October 16th 2018

Similar to the Conviviality collapse which was valued at more than £500 million, the Patisserie
Valeria was also one of the quickest collapses in corporate history. In this regard, Johnson had
informed, “The board has now reached the conclusion that there is a material shortfall
between the reported financial status and the current financial status of the business. Without
an immediate injection of capital, the directors are of the view that that (Sic., there) is no
scope for the business to continue trading in its current form.”22 (Annexure I).

The Rescue Plan for Patisserie Valeria

In October 2018, soon after the crisis began, Johnson had infused £20 million in loan to rescue
the company from collapsing. In this regard, he expressed, “I did it because I believe in
Patisserie Valerie. I spent 12 years involved with this business, we've employed 2,800 staff and
rescuing it has essentially saved those jobs and I believe it has a strong future.” Further, a huge

21 “After Patisserie Valerie bosses sell £13m shares months before scandal, why didn't ANYONE in charge see
their cakes were sinking?”, op.cit.
22 Pagano Maggie, “Patisserie Valerie scandal leaves bitter taste”, https://reaction.life/patisserie-valerie-scandal-
leaves-bitter-taste/, October 12th 2018

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sum of £1million was raised through the issue of new shares. Johnson further informed, “The
money will flow into the business in the coming days.” Funds raised would aid the company to
payback a portion of Johnson’s loan and also pay the huge tax bill owed to HM
Revenue & Customs. With regard to store closures, Johnson stated, “No stores will be taken
back (by landlords).This is not the climate where landlords want retail sites back, frankly, so I'm
very confident that we will be opening all our stores for business tomorrow.”23 Johnson was
the largest investor in Patisserie Holdings possessing 37% stake in the business (Exhibit IV).
Analysts at PwC had speculated the closure of the company after going into administration.
However some of the measures pointed out by Johnson were, “We are going to cease new
openings for a period and focus on making the most of what we have, we are going to stabilise
our relations with suppliers, landlords, etc., we're going to beef up our systems and controls.
Obviously, we are going to make some additions to the senior leadership, particularly in
finance.”24

Exhibit IV
Top Investors in Patisserie Valerie

Source: Marriage Madison and Beioley Kate, “Patisserie Valerie report talks of fake invoices and
ledgers”, https://www.ft.com/content/657dd1c8-1feb-11e9-b126-46fc3ad87c65, January 26th 2019

Patisserie Holdings had suspended its shares until the company further investigates the
financial irregularities identified in 2018. On November 2018, the company held a meeting to
discuss the emergency share issue. As per the company source, Patisserie Valerie would start
dealing in new shares “once the company’s ordinary shares cease to be suspended from
trading”. In October 2018, the company had stopped trading in its stock and after the financial
irregularities were identified the company’s finance director Chris Marsh was suspended.25

Patisserie Valeria had hired two prominent companies to help stabilize the situation, RSM as
auditor along with KPMG to review all available options. The company’s statement to investors

23 “'BUSINESS AS NORMAL' Patisserie Valerie ‘saved from collapse’ as chairman steps in with £20m loan after
finance chief arrested over ‘missing cash’”, https://www.thesun.co.uk/news/7477816/patisserie-valerie-
chairman-saved-collapse-finance-chief-arrested/, October 12th 2018
24 ibid.
25 Eley Jonathan, “Patisserie Valerie calls emergency shareholder meeting”,
https://www.ft.com/content/3a0857ce-d15e-11e8-a9f2-7574db66bcd5, October 16th 2018

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stated, ‘the cash flow and profitability of the business has been overstated in the past’ and was
significantly low compared to the numbers given in the trading update given on 12th October
2018. The company further stated, “Among other manipulations, this involved thousands of
false entries into the company's ledgers. It will take some time before a reliable trading
outlook can be completed while the above work streams progress.” Talks with bankers were
carried out to extend banking facilities to the company beyond January 18. New hiring was
undertaken at top management in positions like the commercial director, production director,
chief executive, interim chief financial officer and non-executive director. After the accounting
irregularities were made public in October 2018, Chris Marsh was arrested and later released
on bail. Further, Grant Thornton was also under investigation by the Financial Reporting
Council (FRC) over the management of the company’s finances. Chris Marsh’s involvement in
the financial irregularities of the parent company Patisserie Holdings was also investigated by
FRC. To save Patisserie Valerie from complete collapse a rescue deal was made by the
desperate investors in November 2018.26 Weeks after the shareholders had approved a £15
million rescue plan for the company, Paul May, Chief Executive, Patisserie Valerie had resigned
and Stephen Francis, turnaround specialist had joined in his place.27

Patisserie Holdings had fallen into administration in January 2019 after a fraud showing £40
million black hole in its accounts was discovered.28 After going into administration, Patisserie
Holdings had closed 71 stores which had resulted in loss of 920 jobs. Around nine stores in
London were closed and further three concessions in Debenhams were closed. Two stores in
Glasgow along with branches in Leeds, Manchester, Newcastle and Liverpool had closed.
Overall 19 Druckers stores, 25 Patisserie Valerie concessions close to motorway service
stations and 27 Patisserie Valerie stores had closed. According to David Costley-Wood, partner
at KPMG and joint administrator, “Since our appointment less than 24 hours ago, we have
been pleased with the level of interest we have received in the business, and so remain
hopeful of achieving a positive outcome. In the meantime, we can reassure customers that
across the remaining 122 stores, it is all but business as usual.”29

On 14 February 2019, an announcement was made by the joint administrators of the parent
company and its subsidiaries that Philpotts and Patisserie Valerie were bought out of
administration. A Dublin based private equity company Causeway Capital Partners had
purchased a total of 96 Patisserie Valerie stores. Consequently, A.F. Blakemore & Son30 had
purchased 21 Philpotts stores located in the UK. “To have been able to secure the future of the
majority of the Patisserie Valerie and Philpotts business, along with such a significant number
of jobs, all against a challenging backdrop, is really pleasing. It was clear from the outset of our
appointment that the loyalty shown in the brands from their very many customers was a
significant factor in ensuring that these businesses would remain part and parcel of our high
streets,” expressed David Costley-Wood, a partner at KPMG and joint administrator.31

26 Clark Jessica, “Patisserie Valerie reveals balance sheet was significantly manipulated in 'devastating' fraud”,
http://www.cityam.com/271730/patisserie-valerie-reveals-balance-sheet-significantly, January 16th 2019
27 Hodgson Camilla and Eley Jonathan, “Patisserie Valerie chief resigns”, https://www.ft.com/content/08fd9b78-
e8d6-11e8-a34c-663b3f553b35, November 15th 2018
28 “Redundant Patisserie Valerie staff have not been paid”, op.cit.
29 “Patisserie Valerie reveals which London cafes are set to close as timeline charts cafe chain's collapse”,
http://www.cityam.com/272084/administrators-close-71-patisserie-holdings-branches-making, February 4th
2019
30 A.F. Blakemore & Son was a food retail, wholesale and distribution company.
31 “Administrators secure future of Patisserie Valerie and Philpotts”,
https://home.kpmg/uk/en/home/media/press-releases/2019/02/administrators-secure-future-of-patisserie-
valerie-and-philpotts.html, February 14th 2019

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Lessons Learnt From the Crisis

As per an article published in Financial Times, Johnson expressed that entrepreneurs “possess
animal spirits and optimism that contribute disproportionately to innovation, job creation and
tax generation.” He further compared them to politicians who, “are mostly infatuated with
slicing up the existing cake, without ever really knowing how to grow it.” Patisserie Valeria’s
growth from just eight stores in 2006 to more than 200 in 2019 had come under the
serious regulatory scanner. According to analysts, the failure of Patisserie Valeria showed that
along with possessing high aspirations and ability for risk taking, it was also essential to gain
control over financial and ethical activities of the company. There were several examples of
companies listed on Aim junior market in London that had faced potentially
fraudulent, accounting irregularities similar to Patisserie Valerie. Drinks supplier Conviviality
had gone into administration in 2018 faced with a £30 million tax bill. In 2016 Redcentric, a
technology company was involved in an accounting scandal due to misstated assets. In both
cases, investors were deceived by the numbers. Weak control was not only prevalent in
smaller companies but there were several instances where bigger companies like BHS32 and
Carillion33 had also collapsed due to fraudulent scandals. However, analysts had pointed out
that businesses in retail and restaurant sectors expanding rapidly faced such challenges.

Companies like Patisserie Valerie that grew at the rate of 20 stores each year (target set in
2018) had become unmanageable for the directors. Analysts pointed out that most companies
prioritised expanding their company over ensuring controls. Further in 2014, when Patisserie
Valerie had floated on Aim, two non-executive directors were appointed. Analysts had
observed that investors had trusted the judgement of these two experts and Johnson to
oversee the expansion of the company since 2006. However, the smooth expansion was a sign
of deep trouble in the case of Patisserie Valerie. A significant gap of £40 million in its finances
was discovered in the company accounts. According to analysts, one key lesson learnt from the
Patisserie Valerie crisis was that, though optimism was an important virtue of entrepreneurs, it
was equally important for auditors and finance directors to practice caution in business
practices. Both were equally important for the success of a business.34 (Exhibit V).

Further, in some forward-looking statements, Spanicciati expressed, “Many financial close
processes are simply not adequately designed to support the time-sensitive nature of financial
reporting, and despite the number of cases regarding fraudulent activity and inaccurate
reporting, the issue that seems continues to resurface is the fact that many organisations are
still heavily reliant on outdated systems – such as spreadsheets. These are highly susceptible to
error, time-consuming and easy to get wrong.” He further pointed out, “While the arrest of
Patisserie Valerie’s CFO may be of no surprise, our research also showed that half of the UK’s
CEOs we asked believed it is ultimately their responsibility to ensure that accounts are correct.
Less than a third of (30%) CFOs thought that it was theirs. Is it possible there is a gap between
CFO’s and CEOs’ expectations of accountability – a gap that can allow errors and deliberate
fraud to slip in?.”35 In this regard, Nigel Wilson, Chief Executive of Legal & General, stated:
“We need auditors to make greater use of technology [and] provide more detailed and
opinionated forward-looking financial analysis, not simply confirming the ‘truth and fairness’ of

32 Founded in 1928, BHS has 164 stores and 74 franchises operating in 18 countries. But the retail chain had
collapsed in 2016.
33 Carillion was the outsourcing group that went into liquidation in 2018.
34 “Patisserie Valerie offers a bitter financial lesson”, https://www.ft.com/content/6a8bacc0-1f0b-11e9-b126-
46fc3ad87c65, January 23rd 2019
35 “Was lack of visibility to blame for Patisserie Valerie fraud?”, op.cit.

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historic information.”36 Spanicciati further suggested, “The bottom line is that there needs to

be organisational buy-in from the top to ensure that processes and technology are in place to

enable continuous visibility of financial data. Without that we can expect to see many more
similar cases, at a time when advances in available tools means there’s really no excuse.”37

The role of the Exhibit V
external auditors Patisserie Valerie Crisis – Some Lessons Learnt

The lack of Grant Thornton was investigated over its auditing of Patisserie Holdings.
internal controls The financial irregularities at the company had given raise to new inquiry
to explore the future of audit in November 2018 by Business, Energy and
Industrial Strategy (BEIS) Committee. According to Rachel Reeves, Chair
of the BEIS Committee, “misleading audits have been at the heart of
corporate failures over recent decades. Recent accounting scandals at
BHS, Carillion, and at Patisserie Valerie have shown accounts bearing
closer resemblance to works of fiction than an accurate reflection of the
true financial performance of the business. Repeated accounting failures
have contributed to the collapse of major businesses and undermined
public and investor confidence”.
Patisserie Valerie had provided a company update on 16th January 2019.
According to company sources, “the work carried out by the Company’s
forensic accountants since [10th October 2018] has revealed that the
misstatement of its accounts was extensive, involving very significant
manipulation of the balance sheet and profit and loss accounts. Among
other manipulations, this involved thousands of false entries into the
Company’s ledgers. A strong internal audit or quality & assurance
function is core to effective governance. The internal auditors provide
senior management, the Audit Committee and the Board of Directors
with assurance that helps them fulfil their duties as board members.”

Luke Johnson was executive chairman of Patisserie Holdings. Before the

crisis, he was on board of 17 companies. Patisserie Valerie scandal had

tarnished his reputation. It was utmost important for board members to

understand the responsibilities of a company director. Their reputation

was at risk if they failed to understand the legal duties and liabilities. The

Corporate directors at Patisserie Valerie did not possess the knowledge and skill to

governance handle the crisis faced by the company. They had failed to identify and

failures respond to any red flags. They could have questioned the company’s

operating margins which were significantly higher in comparison to their

counterparts. After the Carillion incident had surfaced they could have

got more vigilant in terms of the company’s dealings with its main

suppliers and its terms of payment. The board members had also missed

to enquire the details of leases for which the funds had remained

committed despite the increase in the number of stores.

Source: Rachel, “The collapse of Patisserie Valerie offers some key lessons for non-executive directors

and board members. Find out what these lessons are!”, https://www.nedonboard.com/the-collapse-

of-patisserie-valerie-offers-some-key-lessons-for-non-executive-directors-and-board-members-find-
out-what-these-lessons-are/, January 24th 2019

36 Jenkins Patrick, “Scope and quality of audits needs reform, say City chiefs”,
https://www.ft.com/content/c3edd6e6-d3c3-11e8-a9f2-7574db66bcd5, October 22nd 2018
37 “Was lack of visibility to blame for Patisserie Valerie fraud?”, op.cit.

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Annexure I
Timeline of Patisserie Valerie's collapse

Source: “Patisserie Valerie reveals which London cafes are set to close as timeline charts cafe chain's
collapse”, http://www.cityam.com/272084/administrators-close-71-patisserie-holdings-branches-

making, February 4th 2019

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Uber Makes a Swift Ride in the Middle East
with Careem Acquisition

Case Study

This case was written by Disha Parikh and reviewed by Dr. A. Saravanan Naidu, Amity
Research Centers Headquarter, Bangalore. It is intended to be used as the basis for class
discussion rather than to illustrate either effective or ineffective handling of a management
situation. The case was compiled from published sources.
© 2019, Amity Research Centers Headquarter, Bangalore.
Website: www.amity.edu/casestudies/
No part of this publication may be copied, stored, transmitted, reproduced or distributed in
any form or medium whatsoever without the permission of the copyright owner.

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Author: Disha Parikh

Uber Makes a Swift Ride in the Middle East with Careem
Acquisition

Abstract: In 2010, Travis Kalanick and Garrett Camp founded Uber, a ride hailing company, in
San Francisco in order to ‘ignite opportunity by setting the world in motion’. In 2013, the
company entered in the Middle East by launching operations in Dubai. Uber had a bumpy ride
in the Middle East due to problems in dealing with the Government, different culture, fierce
competition, bad reputation, etc. In 2019, Uber decided to acquire its biggest rival in the
region, the home grown taxi company ‘Careem’ for a total consideration of $3.1 billion,
inclusive of $1.7 billion convertible notes and $1.4 billion in cash. Moreover, the deal was the
largest-ever technology industry transaction in the region. According to experts, the move
would benefit Uber’s forthcoming IPO, especially after its retreat from China, Russia and
Southeast Asia. Besides, Uber would be able to reduce loss, access some untapped markets,
develop a consumer-facing super-app, etc. The deal was expected to get approved in Q1 of
2020, after getting consent from the regulating authorities in different countries. Against this
backdrop, it remained to be seen whether Uber could establish a strong footprint in the region
by using its global standards and Careem’s local expertise and touch. Would Uber succeed to
create confidence among riders about their safety and privacy?

Case Study

“Regional stakeholders were hoping for Careem to further grow and become an acquirer,
rather than fold into Uber. However, an acquisition by Uber could also be viewed positively as a
sign of the attractiveness and maturity of regional markets.”1

– Khaldoon Tabaza, Founder of iMena Group2

“An Uber-Careem merger underscores the huge potential of car-hailing in the Middle East.”3
– Sam Blatteis, CEO, MENA Catalysts4

San Francisco headquartered Uber was founded by Travis Kalanick and Garrett Camp. The
brand started its road show in 2010 across the city with the mission to ‘ignite opportunity
by setting the world in motion’. Over the period, it had expanded its services like UberPool,

1 Alkhalisi Zahraa, “Why Uber may buy its big rival in the Middle East”,
https://edition.cnn.com/2019/03/06/tech/uber-careem-merger/index.html, March 6th 2019
2 A Dubai-based startup operating firm.
3 Somerville Heather, et al., “Uber buys rival Careem in $3.1 billion deal to dominate ride-hailing in Middle East”,
https://www.reuters.com/article/us-careem-m-a-uber/uber-buys-rival-careem-in-31-billion-deal-to-dominate-
ride-hailing-in-middle-east-idUSKCN1R70IM, March 26th 2019
4 A Middle East based public policy advisory and research firm.
“© 2019, Amity Research Centers HQ, Bangalore. All rights reserved.”

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UberEats, etc. The global expansion of Uber was initiated in 2011 with a launch in Paris, the
city behind Uber’s core idea. As part of its global movement, the company entered the Middle
East in 2013.

In the Middle East, Uber witnessed stiff competition from a home grown player Careem,
founded by Mudassir Sheikha and Magnus Olsson, which pioneered cab business in UAE in
2012. Besides, Uber had to deal with the legal framework in different countries of the Middle
East. Across the region, Careem outperformed Uber due to its cultural considerations,
understanding and dealings with local Governments, etc. Moreover, it had a substantial
presence in 120 cities across 15 countries. In an unprecedented move, Uber acquired Careem
for $3.1 billion, inclusive of convertible notes amounting $1.7 billion and $1.4 billion in cash.
The deal was meant to reduce rivalry and loss, get advantage of Careem’s local expertise,
capture some untapped markets, etc. It would also benefit Uber’s upcoming IPO plan. The deal
was expected to get regulatory clearance in Q1 of 2020. With this background, the Case
intended to explore the synergies arising as a result of deal and the underlying challenges.

Uber in the Middle East – A Business Overview

It was a snowy evening in Paris during December 2008, when Travis Kalanick (Kalanick) and
Garrett Camp couldn’t find the ride for them, which triggered the idea of Uber. Soon after that,
the duo initiated a smartphone app to hail a cab just on a click of a button by connecting the
commuters with the drivers. Thus, UberCab was launched in San Francisco in 20095 with a
mission to ‘ignite opportunity by setting the world in motion’.6 In 2010, a black town car was
introduced to riders to travel anywhere in San Francisco. In order to differ itself from the
taxicab industry, UberCab disjoined the word cab from its name at the same time.

Over the years, Uber introduced UberPool and UberEats, the idea to be Uber for food and
UberMilitary. In 2011, Uber spread its operations in Paris, the city where the idea of Uber was
initially invented. Thereafter, Uber’s global voyage started. By 2014, it was present in 100
cities.7 United Arab Emirates (UAE) was also among them as Dubai became the 44th city to
allow Uber in 2013.8 In Dubai, the Roads and Transport Authority (RTA) was entrusted with the
responsibility of ‘planning and executing transport and traffic projects, preparing legislation
and strategic plans, developing other integrated solutions of road systems’.9

Though, Uber debuted in Dubai in September 2013, it was not allowed by the RTA to run in the
country due to imprecise legislations to govern such companies in UAE. So, the brand had to
partner with limo companies to hire drivers for its operations. According to Karima Berkani
(Berkani), Marketing Manager of Uber, the company “had to partner with some limousine
companies - and not individuals as usually done in other countries - since prevailing rules
prevent individuals from taking up such jobs… The UAE is the only country in the Gulf that does
not let individuals to work with us.”10 Furthermore, 30% surcharge on the minimum fare was

5 “The history of Uber”, https://www.uber.com/en-IN/newsroom/history/
6 “About Us”, https://www.uber.com/in/en/about/
7 “The history of Uber”, op.cit.
8 “Uber eyes Middle East expansion after successful first year in UAE”,
https://www.thenational.ae/business/uber-eyes-middle-east-expansion-after-successful-first-year-in-uae-
1.240284, September 25th 2014
9 “Roads and Transport Authority”, https://in.linkedin.com/company/road-and-transport-authority
10 Al Zarooni Mustafa, “Uber in UAE operating in legal vacuum”,
https://www.khaleejtimes.com/nation/transport/uber-in-uae-operating-in-legal-vacuum, October 22nd 2015

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imposed by RTA to protect local taxi companies in competition.11 As a result, Berkani claimed
that “Dubai is the only city in the world where its fare is much higher than those of local taxis.”
At the same time, the rides offered by Uber were reliable and secured. In this regard, Berkani
stated, “Uber provides customers with a safe and reliable ride as the company keeps a record
of drivers, who need to get a 'letter of good conduct' from a competent authority and have a
clean police record.” Besides, the company’s smartphone application permitted the customers
to upload their feedback about the drivers.12

However, Uber was not the only ride hailing company in the Middle East, its major competitor
in the region included Careem, a taxi app pioneered in the UAE, along with conventional taxi
services.13 Careem was founded by two ex-McKinsey & Company consultants Mudassir Sheikha
(Sheikha) and Magnus Olsson (Olsson) in 2012, just a year before Uber entered the market.
The idea of starting Careem struck the founders as they were searching for something that
would tangibly improve individuals' lives, in the wake of growing unemployment in the region.
A conversation with a taxi driver made them realise about the importance of transportation in
job creation. Sheikha said, “It was that conversation, that made us realize...this could be a
source of a lot of job creation.” Soon after Careem started its operations, Uber entered as a big
rival having larger global presence. But, Careem’s leadership didn’t lose confidence. Without
bothering much and getting distracted from the emerging big competitor, the company started
focusing on growth, as Olsson described, “We focus on what we want to do better, and we go
do that.” He further said, “We’ve been successful, because we kept solving local problems.”14

In 2014, as a part of its first anniversary in the Middle East, Uber expanded its product line with
the launch of two more services; low cost service and its corporate account service called
‘UberX’ and ‘Uber for Business’ respectively. Jean-Pierre Mondalek (Mondalek), the General
Manager, Uber UAE, mentioned, “We have grown more than ten-fold since we launched last
year. The reason we have been able to expand so fast is because we are a tech company.
We’re growing faster now than we were last year.” Within a year, Uber’s network expanded
into neighbouring cities such as Abu Dhabi, Beirut, Jeddah, Riyadh and Doha. Talking about the
growth of Uber in UAE, Mondalek stated, “We were a team of three and now we are 20
serving the Middle East region. It is a utopian market for Uber – that’s the reason we have
grown so fast in the UAE. The smart city government initiative encourages innovative
technology like ours. The RTA’s reaction to us was to launch their own smart app and that’s
awesome. I applaud them for thinking ahead.” On the future plans, he said, “Today we’re an
on-demand transportation service, tomorrow logistics, and in the future on-demand
lifestyle.”15

At the same time, Careem started expanding its boundaries with the help of $10 million in
second round of investment in 2014, giving tight competition to Uber. Careem was operating
across 12 cities by 2015, whereas Uber was running in 10. In comparison to traditional taxis,
Uber and Careem charged more. They targeted quality customers who wanted an easier
experience and prioritised convenience over price.16 Even though Uber was getting
acceptance, it had to struggle constantly with the suffocating legal vacuum. By showing a ray

11 “Uber eyes Middle East expansion after successful first year in UAE”, op.cit.
12 “Uber in UAE operating in legal vacuum”, op.cit.
13 Lemon Jason, “Careem, Uber and Easy Taxi Compete for Customers in Middle East”,
https://stepfeed.com/careem-uber-and-easy-taxi-compete-for-customers-in-middle-east-3713, March 10th 2015
14 Boyd E. B., “How a Middle East startup took on Uber—and won”, https://www.fastcompany.com/90248563/how-
a-middle-east-startup-took-on-uber-and-won, November 10th 2018
15 “Uber eyes Middle East expansion after successful first year in UAE”, op.cit.
16 “Careem, Uber and Easy Taxi Compete for Customers in Middle East”, op.cit.

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of hope, Adel Shakri, Director of Planning and Business Development at the RTA's Public
Transport Agency mentioned, “The RTA has conducted studies and put in place legislations
that will let companies like Uber operate in the emirate from next year. The RTA is studying the
... latest developments in offering smart services, which provide convenience to residents and
visitors to the emirate of Dubai.”17

Meanwhile, Careem blamed Uber for ‘poaching’ its drivers. Opposing the argument, Jambu
Palaniappan (Palaniappan), Uber's General Manager in the Middle East, explained, “The
fundamental premise that the drivers are Careem’s drivers is one that I would disagree with.
These are drivers that work for limousine and taxi companies across Middle Eastern markets.
For us, it’s about giving those drivers and companies an option.” Calling the strategy as
‘aggressive but fair’, Olsson said, “We definitely see them competing. And that’s all fine and it’s
really to the benefit of customers.” Moreover, another ride hailing firm named EasyTaxi was
also operating in the same manner as Uber and Careem.18

By 2016, both the companies had shown fantastic growth in the whole Middle East and North
Africa (MENA) region especially in Egypt. According to data gathered from Uber, Careem and
EasyTaxi; the market analysts concluded that Careem had grown rapidly in Saudi Arabia and
the UAE, in Egypt Uber was growing faster among the new user, whereas EasyTaxi’s growth
was stammering throughout the region. In Egypt’s Cairo, Uber had witnessed a 200 times
growth in its business and employed 3,000 new drivers a month. Palaniappan was quite
optimistic about leading the market, after the company’s investment of $250 million in the
region.19

In a major development, Careem’s valuation in 2016 was $1 billion after it raised an
investment of $350 million from Rakuten, the Japanese e-commerce firm and Saudi Telecom
Company. The company claimed that it would further expand market from the money raised.
Besides, the firm already had 150,000 drivers and about 6 million users from 47 cities in 11
countries. Uber on the other hand received a $3.5 billion investment from Saudi Arabia’s main
investment fund, Public Investment Fund, which increased Uber’s valuation to $62 billion.20
Uber had grown 4 times from 2015 and it had 19,000 drivers and 395,000 loyal riders as of
2016. Considering Middle East as one of the most progressive region, Uber’s CEO Kalanick
stated, “Our experience in Saudi Arabia is a great example of how Uber can benefit riders,
drivers and cities, and we look forward to partnering to support their economic and social
reforms.”21

For further expansion, Uber and Careem had entered Amman to offer their services in 2016.
Mahmoud Fouz, CEO of Easy in the Middle East, a ride-hailing app in Amman, explained,
“There’s no denying the growing demand and global trend towards [services using] private
cars. We are also open to exploiting this demand, but it has to happen in a structured way that

17 “Uber in UAE operating in legal vacuum”, op.cit.
18 “Careem, Uber and Easy Taxi Compete for Customers in Middle East”, op.cit.
19 Bhuiyan Johana, “Uber explodes in Egypt, while EasyTaxi stutters in the Middle East”,
https://www.recode.net/2016/4/22/11586316/uber-careem-middle-east-ride-hail, April 22nd 2016
20 Russell Jon, “Uber’s Middle Eastern rival Careem raises $350M at a $1B valuation”,
https://techcrunch.com/2016/12/18/careem-350-million/, December 19th 2016
21 Yadron Danny, “Uber lands $3.5bn investment from Saudi Arabia”,
https://www.theguardian.com/technology/2016/jun/01/uber-investment-saudi-arabia-royal-government-tech,
June 1st 2016

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doesn’t destroy the existing players.”22 In a major development, during a deal with Dubai’s
RTA, Careem succeeded to be the ‘sole app provider for its 9,841 taxis and 4,700 limousines’.
The same format was replicated in the Egypt and Bassel.23 On the other hand, the ride hailing
services of Uber and Careem were temporarily suspended in Abu Dhabi without any specific
mandate to resume them. Around 50 drivers of these brands were arrested for violating the
regulations.24 Careem resumed soon after the ban on a ‘skeleton basis’, but the ban on Uber
was continued.

In 2017, Careem launched Careem Limo service. At that time, Aura Lunde, General Manager of
Careem UAE mentioned that the company would, “continue to work in close partnership with
the local authorities to enhance the transportation network for all residents and visitors to Abu
Dhabi and that hope to introduce new services in the near future.”25 At the same time, Uber
agreed to be fully regulated by Dubai’s RTA, indicating the company’s improving relations with
the Government. Regarding the deal, Anthony Khoury, Regional Director of Uber in the Middle
East, mentioned, “The deal is two-fold: Uber is now fully regulated by the RTA and we have
become strategic partners undergoing a collaborative study to launch an economy solution for
transportation by the second half of 2017 that is more affordable and reduces congestion on
the road.” As per the agreement, Uber would be allowed to utilise 14,000 vehicles through its
app. Moreover, the company planned to launch its carpooling service called ‘UberPool’ and
driverless cars in Dubai.26

According to the Uber spokesperson, “The situation in the Middle East is very different from
other parts of the world.”27 To understand and act in the Middle East market was
comparatively easy for Careem being a home-grown start-up which gave it the competitive
advantage and put it ahead in the competition. The flexibility in dealing with the Governments
had also given advantage to the firm.28 By exercising collaboration and diplomacy, Careem
succeeded to handle better relations with Government, whereas Uber had gone through
struggles to patch up with the Government. Furthermore, the image of Kalanick as a ‘rebel
hero’ in the industry for regulating a taxi industry was hindering Uber.

Careem’s way to deal with the Government was ‘stay quiet and negotiate behind the scenes’.
Samir Satchu, Careem’s Head of Government Relations, explained, “Patience is a word we use
quite a lot. If your mission is tied to the improvement of people’s lives, you’re not going to
achieve that over one year . . . There has to be a much more sustainable and longer-term
outlook.”

Not only that, Careem had a better idea about the culture hence, the cultural deliberation also
helped it in getting acceptance. Uber leaded by Kalanick had a tarnished repute among the

22 Cuthbert Olivia, “Jordan cracks down on Uber and Careem as congestion clogs its capital”,
https://www.theguardian.com/sustainable-business/2016/nov/18/amman-congestion-crisis-uber-careem-
jordan-ride-sharing-apps, November 18th 2016
23 Williamson Rachel, “Careem v Uber: the local kid is winning”, https://www.wamda.com/2016/10/careem-v-
uber-local-boy-winning, October 6th 2016
24 Carvalho Stanley and Aswad Celine, “Uber, Careem suspend services in UAE capital”,
https://www.reuters.com/article/us-emirates-uber/uber-careem-suspend-services-in-uae-capital-
idUSKCN1130M9, August 28th 2016
25 “Careem is back in Abu Dhabi”, https://www.khaleejtimes.com/news/transport/careem-launches-limo-
service-in-abu-dhabi, February 10th 2017
26 “Uber Signs Deal With Dubai Transportation Authorities”, http://fortune.com/2017/01/11/uber-dubai-2/,
January 11th 2017
27 “Jordan cracks down on Uber and Careem as congestion clogs its capital”, op.cit.
28 “Careem v Uber: the local kid is winning”, op.cit.

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women in general as well as for the female passenger’s safety. The country specific restrictions
on women made them a lucrative target audience. Careem created the perception of being
safe and reputed cab among the women by introducing call-masking option to stop drivers
from seeing passenger’s phone numbers, emergency hotline to help while service, to keep
proper records of drivers, prohibit drivers to use rearview mirror, etc. Besides, Careem also
supported cash payments to promote convenience. Moreover, Careem treated its drivers,
whom it called captains in a better way than Uber which seemed indifferent towards its
drivers’ issues.

Meanwhile, Uber sold its business to the local operators competing with it in China and Russia
few years back and also left Southeast Asia due to flat margins to avoid price wars. Even in the
Middle East, Careem was dominant; Uber was not the market leader. Dara Khosrowshahi
(Khosrowshahi), Uber’s CEO after Kalanick stepped out, described, “One of the potential
dangers of our global strategy is that we take on too many battles across too many fronts with
too many competitors.”29 Besides competition, Uber’s revenue in 2018 was $11.3 billion,
which was increased by 43% from the previous year. But, the company also booked loss of $1.8
billion before taxes, depreciation and other expenses which had decreased from $2.2 billion
noted in 2017.30 In 2018, the Emirati drivers and their private cars were allowed on the
platform of Uber and Careem. With this move, Uber was relaunched in Abu Dhabi.31

Contradicting its moves of selling own business to the rivals in Asian countries, in Middle East
Uber planned to acquire its biggest rival Careem. Through the acquisition, Uber could make
strong footprints, widen its presence and reduce competition in the region. Besides Rakuten
and Saudi Telecom, Careem’s investors included Kingdom Holding, an investment firm of
Prince Alwaleed bin Talal, Didi Chuxing, a Chinese ride-hailing and technology conglomerate32
and Daimler AG, the German car maker.33 According to an anonymous source, “In the Middle
East they don’t feel they are smaller than Careem but bigger and of a substantial size, so they
say ‘why should we exit the market? Careem should merge into us’ and Uber’s brand remains
in the market.”34

Will Careem’s Acquisition Reshape Uber’s Business in the Middle East?

In March 2019, Uber signed an agreement with Careem to take over the later for a total
consideration of $3.1 billion, inclusive of convertible notes amounting to $1.7 billion and $1.4
billion in cash (Exhibit I). However, the deal yet needed approvals from regulatory authorities.
According to the sources, the transaction would be completed probably in the Q1 of 2020.
Careem would exist as Uber’s wholly-owned subsidiary post acquisition. But, even after that
Careem’s management, brand name and services would be unchanged. Furthermore, the
company would carry on operating as an independent entity. The new board would host

29 “How a Middle East startup took on Uber—and won”, op.cit.
30 Somerville Heather, “Uber posts $50 billion in annual bookings as profit remains elusive ahead of IPO”,
https://in.reuters.com/article/uber-results/uber-posts-50-billion-in-annual-bookings-as-profit-remains-elusive-
ahead-of-ipo-idINKCN1Q42CQ, February 15th 2019
31 “Careem and Uber open up services to Emirati drivers and their private cars”,
https://gulfnews.com/technology/careem-and-uber-open-up-services-to-emirati-drivers-and-their-private-cars-
1.60460089, November 19th 2018
32 Derhally Massoud A., “Uber prefers acquisition of Careem to merger”,
https://www.thenational.ae/business/technology/uber-prefers-acquisition-of-careem-to-merger-1.771293,
September 18th 2018
33 “Uber buys rival Careem in $3.1 billion deal to dominate ride-hailing in Middle East”, op.cit.
34 “Uber prefers acquisition of Careem to merger”, op.cit.

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Uber’s three representatives along with Careem’s two. Careem had substantial placement
among 120 cities across 15 nations (Annexure I). Moreover, it had furnished over one million
economic opportunities in the MENA region.35 In order to become one-stop shop for
consumers, Careem also diversified into food delivery and payment services. In 2018, Careem’s
valuation was around $2 billion.36 All investors of Careem supported the deal. At the same
time, Uber had presence in over 70 countries, but faced cut throat competition in India and
Latin America and regulatory hitches in Europe.37

Exhibit I
Uber and Careem in the MENA Region

Source: Lomas Natasha, “Uber is paying $3.1BN to pick up Middle East rival Careem”,
https://techcrunch.com/2019/03/26/uber-is-paying-3-1bn-to-pick-up-middle-east-rival-careem/,

March 26th 2019

Regarding the deal, Khosrowshahi explained, “This is an important moment for Uber as we
continue to expand the strength of our platform around the world. With a proven ability to
develop innovative local solutions, Careem has played a key role in shaping the future of urban
mobility across the Middle East, becoming one of the most successful startups in the region.
Working closely with Careem’s founders, I’m confident we will deliver exceptional outcomes
for riders, drivers, and cities, in this fast-moving part of the world.”38 While talking about
Careem’s leadership, he mentioned, “They are first-class entrepreneurs who share our
platform vision and, like us, have launched a wide range of products—from digital payments to
food delivery—to serve customers.”39

In a mail addressing Uber staff, Khosrowshahi cited, “We intend to operate Careem
independently, under the leadership of Co-founder and current CEO Mudassir Sheikha.”40 He
further added, “After careful consideration, we decided that this framework has the advantage
of letting us build new products and try new ideas across not one, but two, strong brands, with
strong operators within each. Over time, by integrating parts of our networks, we can operate
more efficiently, achieve even lower wait times, expand new products like high-capacity

35 “Uber to Acquire Careem To Expand the Greater Middle East Regional Opportunity Together”,
https://www.uber.com/newsroom/uber-careem/, March 25th 2019
36 Conger Kate, “Uber to Acquire Careem, Its Top Mideast Rival, for $3.1 Billion”,
https://www.nytimes.com/2019/03/26/business/dealbook/uber-careem-mideast-rival.html, March 26th 2019
37 “Uber buys rival Careem in $3.1 billion deal to dominate ride-hailing in Middle East”, op.cit.
38 “Uber to Acquire Careem To Expand the Greater Middle East Regional Opportunity Together”, op.cit.
39 Griswold Alison, “Uber is finally buying, not selling to, a major international rival”,
https://qz.com/1580967/uber-buys-careem-solidifying-middle-east-position-before-ipo/, March 26th 2019
40 “Accelerating in the Middle East”, https://www.uber.com/en-JO/newsroom/careem-email/, March 26th 2019

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vehicles and payments, and quicken the already remarkable pace of innovation in the
region.”41

According to Sheikha, “Joining forces with Uber will help us accelerate Careem’s purpose of
simplifying and improving the lives of people, and building an awesome organisation that
inspires. The mobility and broader internet opportunity in the region is massive and untapped,
and has the potential to leapfrog our region into the digital future. We could not have found a
better partner than Uber under Dara’s leadership to realise this opportunity. This is a
milestone moment for us and the region, and will serve as a catalyst for the region’s
technology ecosystem by increasing the availability of resources for budding entrepreneurs
from local and global investors.”42 He added, “In a single platform, we can build a more holistic
view of the consumer.”43

The takeover was significant for Uber also due to company’s expected IPO in 2019. In terms of
financial performance, in the last quarter of 2018, Uber was valued at approximately $120
billion.44 The company’s revenue was increased by 25% amounting $3 billion whereas the piled
up loss was of $865 million. The company had cash of $6.4 billion and recorded 37% growth in
gross bookings.45 David Brophy, Professor of Finance at the University of Michigan’s Ross
School of Business opined, “Uber needs to show it can control costs and can make money,
basically provide a strong argument that its business model is not broken and that it can
achieve and sustain profitability despite issues with drivers, customers and politicians.”46

The reason behind the loss of Uber was its efforts to stay competitive by spending money on
subsidies for riders and drivers. One of the motives behind acquiring Careem was to reduce the
losses.47 Michael Ramsey, Senior Director Analyst at Gartner, a Consulting Firm, opined, “In this
market, a merger usually is a signal that one or both companies are suffering from the costs of
competition. A merger, theoretically, reduces the cost of keeping drivers. There are some
benefits of scale for using a single back-end, but mostly it is a reduction in competition.”48

More interestingly, Uber would be able to catch some untapped markets such as Palestine,
Iraq and Morocco. However, Uber’s privacy could be at threat due to the transaction. In
addition, Uber would mentor Careem’s security and legal teams over the issue of hacked data
of Careem’s 14 million users in 2018.49 Mentioning a reason for Careem to merge with Uber,
Khaldoon Tabaza, Founder of iMena Group, a Dubai-based Startup Operating Firm, stated,
“Careem would likely lean more toward an acquisition by Uber to protect value created, and
avoid further losses once Uber has more firepower as a result of its IPO.”50

41 Lomas Natasha, “Uber is paying $3.1BN to pick up Middle East rival Careem”,
https://techcrunch.com/2019/03/26/uber-is-paying-3-1bn-to-pick-up-middle-east-rival-careem/, March 26th 2019
42 “Uber to Acquire Careem To Expand the Greater Middle East Regional Opportunity Together”, op.cit.
43 Evans Michelle, “Uber Acquires Careem For $3.1 Billion As The Middle East Startup Pushes To Become A Super
App”, https://www.forbes.com/sites/michelleevans1/2019/03/26/meet-careem-ubers-3-1-billion-new-
acquisition-in-the-middle-east/#464e53c1e3cd, March 26th 2019
44 “Uber to Acquire Careem, Its Top Mideast Rival, for $3.1 Billion”, op.cit.
45 Conger Kate and Isaac Mike, “As Uber Prepares for I.P.O., Its Losses Pile Up”,
https://www.nytimes.com/2019/02/15/technology/uber-stock.html?module=inline, February 15th 2019
46 “Uber posts $50 billion in annual bookings as profit remains elusive ahead of IPO”, op.cit.
47 “Uber to Acquire Careem, Its Top Mideast Rival, for $3.1 Billion”, op.cit.
48 “Why Uber may buy its big rival in the Middle East”, op.cit.
49 “Uber to Acquire Careem, Its Top Mideast Rival, for $3.1 Billion”, op.cit.
50 “Why Uber may buy its big rival in the Middle East”, op.cit.

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On the other hand, Careem was also facing tough competition from local players as well as
from Uber, but its built-in mapping capabilities performed as a competitive advantage for it.
Besides, Careem was working to develop a do-everything mobile app largely known as Super
app by bringing all customer’s aspects on a sole platform. Such plans of Careem would be
boosted by Uber. Citing Careem’s mapping, messaging and payment capabilities, Sheikha said,
“In the process of building a car-sharing service, we have built a lot of the underlining
infrastructure. We can build more businesses on top of it. We will build some verticals
ourselves, but we are also building a framework upon which others can build upon our
platform, so we are not the only source of innovation.”51

According to Khosrowshahi, “This framework has the advantage of letting us build new
products and try new ideas across not one but two strong brands, with strong operators within
each.”52 Talking about the difficult situation before the deal, Hubert Horan, an Independent
Transportation Consultant explained, “The bigger issue is that even with dominance, there is
no evidence that any of these companies can actually earn sustainable profits while providing
the level of fares and car availability that made them popular.”53

Due to acquisition, the synergies of both the companies would be able to amend ample
transportation infrastructure besides facilitating with vivid mobility, delivery and payment
alternatives. The companies would develop a consumer-facing super-app to equip the region
with more advanced services in order to accelerate the delivery of digital services. Further, it
planned to expand services such as Careem’s digital payment platform (Careem Pay) and last-
mile delivery (Careem NOW). In due course, the companies could expand quickly, offer
services in remote areas and enhance digital economy.

For the Middle East region, the deal was considered as the largest-ever technology industry
transaction. Uber’s presence as a global leader and its technological know-how would
complement with the Careem’s local technology infrastructure and capacity to deal with
innovative local solutions. In order to promote the variety and reliability of services, the
transaction brought a chance to offer services on a large scale, at different price bands. The
collaborated companies would also raise a better work and earning opportunities for its drivers
and captains.54

Amidst such opportunities, the deal had to get approval from regulatory authorities of Careem
operated countries ranged from Pakistan in the east to Morocco in the west. The acquisition
would put the companies in monopoly situation which possibly increase fares and change the
dynamics of taxi industry. Uber-Careem acquisition had to get through from anti-competition
laws. The deal might get consent in some countries, but the Egyptian Competition Authority
had temporarily banned the ride hailing brands in 2018 for some time citing ‘pursuing a
merger or any agreement that would restrict competition would be in violation of Egyptian
law’. Even the drivers in Turkey opposed the deal. According to experts, Uber in its zeal to
become the ‘Amazon for transportation’ had tried to convert stiff competitive markets into
monopoly with the intention to attract investors for its upcoming IPO.55

51 “Uber Acquires Careem For $3.1 Billion As The Middle East Startup Pushes To Become A Super App”, op.cit.
52 “Uber to Acquire Careem, Its Top Mideast Rival, for $3.1 Billion”, op.cit.
53 “Why Uber may buy its big rival in the Middle East”, op.cit.
54 “Uber to Acquire Careem To Expand the Greater Middle East Regional Opportunity Together”, op.cit.
55 Marx Paris, “Not so Fast: the Uber-Careem Merger Isn’t Done Yet”, https://medium.com/radical-urbanist/not-
so-fast-the-uber-careem-merger-isnt-done-yet-c8b859f293f7, March 28th 2019

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Another challenge for Uber was to create confidence that their ride would be safe. After the
acquisition, there was a threat among Careem customers that their experience in terms of
privacy and safety would be in danger after the transaction due to Uber’s spoiled reputation.
In order to assure them, Careem’s representatives stated, “We will not compromise on the
brand’s identity, customer care policy or independence at any cost. Customer care is what
brought Careem this far, and that will be our motivation ahead.”56

Besides challenges, Nelson Chai, the CFO of Uber, addressed that Uber had invested in “high-
potential markets in India and the Middle East where we continue to solidify our leadership
position.”57 While sharing his views on the Middle East market, Khosrowshahi stated, “We are
going to be, I believe, the winning player in those markets [India, the Middle East and Africa]
and we’re going to control our own destiny.”58

On the other hand, according to Shahid Mansuri, Co-founder of Peerbits, an US based leading
App Development Company, “Uber-Careem deal is not finalised yet. However, if it takes place
then it will have huge impact on the Taxi Hailing eco-system of MENA region… However, the
silver lining is that the merger will cause a void in the MENA region Taxi Hailing ecosystem. This
void would be a humungous opportunity for the local taxi hailing providers to enter in the
arena of taxi services. The major advantage of these firms will be that they can offer less Fare
Rates than the Uber-Careem joint venture. Moreover, they can also play the ‘local card’. They
will have an advantage as the new firm to emerge as a new local indigenous firm… Only time
will tell what would happen in the future, whether the deal will take place or not? If it takes
place then will be a success or not? What impacts it will have on the customers and existing
employees? And what it will mean to the emerging taxi hailing services in MENA region?”59

Annexure I
The Presence of Careem in the MENA Region

Source: Marx Paris, “Not so Fast: the Uber-Careem Merger Isn’t Done Yet”,
https://medium.com/radical-urbanist/not-so-fast-the-uber-careem-merger-isnt-done-yet-

c8b859f293f7, March 28th 2019

56 Jahangir Ramsha, “Careem to continue operation after acquisition by Uber”,
https://www.dawn.com/news/1472134, March 27th 2019
57 “Why Uber may buy its big rival in the Middle East”, op.cit.
58 “Uber prefers acquisition of Careem to merger”, op.cit.
59 Mansuri Shahid, “How will Uber-Careem deal affect the start-up ecosystem in MENA region?”,
https://www.peerbits.com/blog/uber-careem-deal-affect-middle-east-startup-ecosystem.html

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Video Gaming
Will the Original Console Gaming Spell Magic
on Consumers Again?

Case Study

This case was written by Krupa Kalsy and reviewed by K. Bhagyalakshmi, Amity Research
Centers Headquarter, Bangalore. It is intended to be used as the basis for class discussion
rather than to illustrate either effective or ineffective handling of a management situation. The
case was compiled from published sources.

© 2019, Amity Research Centers Headquarter, Bangalore.

Website: www.amity.edu/casestudies/

No part of this publication may be copied, stored, transmitted, reproduced or distributed in
any form or medium whatsoever without the permission of the copyright owner.

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1st Edition, Issue-1 Video Gaming: Will the Original Console Gaming Spell Magic on Consumers Again?

Author: Krupa Kalsy

Video Gaming: Will the Original Console Gaming Spell Magic on
Consumers Again?

Abstract: Classic video games never really ceased to exist. Be it in the late 20th century or in
the 21st century, video games were a popular hobby for gamer lovers and alike. Games like
Pac-Man, Super Mario, Tetris mind game and so on, were played either on the traditional
hand-held gaming gadgets, consoles, smartphones or digital gadgets. With technology, these
gaming devices also changed but for old gamers, who grew up playing on original hardware
and retro console video games, holding a console in their hand and playing games like Super
Mario and Pac-Man brought nostalgia in the smart phone era. Cashing in on the popularity of
retro games, many video games publishers and companies began to bring back the old charm.
Since then, there were debates about which medium of gaming was better – classic console or
modern emulators. While many voted for retro gaming, few gamers believed nostalgia was a
bubble that would burst and hurt the future of video gaming. Amid the controversies, it
remained to be seen whether the retro gaming devices would manage to spin the nostalgia in
its favour yet again.

Case Study

“People remember the colors and shape of the console and the feel of the controllers from
their childhood, and they have a visceral reaction when they first fire up their favorite NES or
Super NES games.”1

– Reginald Fils-Aimé, President & CEO,Nintendo America

“I think retro gaming actually has little to do with the specific games one is nostalgic for.”2
– Clay Routledge, Assistant Professor, Psychology, North Dakota State University

Rewind to the year 2001. Sam is sitting in his Math class, eagerly waiting for the school to end
so that he can rush home to play his PlayStation that his father gifted him on his birthday
recently. He is restless and wanted to hold the console in his hand and play the brand new
“Harry Potter and the Philosopher's Stone” game that had just released. The clock hanging on
the wall indicates that he needs to wait only a couple of minutes before the bell rings. The
anxiousness increases... “Uufff.. When will the bell ring...,” whispers impatient Sam to his
friend. Finally, the bell goes off Sam rushes out, not interested in what parting instruction the
teacher giving; he is already out of the door... and before we can even bat an eyelid, he hops

1 Schmidt Gregory , “The Future Is Bright for the Video Games of Yesterday”,
https://www.nytimes.com/2018/12/02/business/retro-video-games.html, December 2nd 2018
2 McFerran Damien, “Crippled by Nostalgia: The Fraud of Retro Gaming”,
https://www.eurogamer.net/articles/2012-09-12-crippled-by-nostalgia-the-fraud-of-retro-gaming

“© 2019, Amity Research Centers HQ, Bangalore. All rights reserved.”

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into the bus. Once home, he wastes no time and plonks down onto the living room floor, right
in front of the TV to play his video game.

Cut to 2019, when Sony launched its latest and sleeker version “Sony PS4 Slim 1TB Console”
with wireless consoles, people like Sam, who grew up graduating the innovatory and classic
video game consoles, are both beguiled and confused... and a tad nostalgic!

It all began in the 1950s, when video games were treated as novelties designed by academic
computer scientists. In the 1960s, Massachusetts Institute of Technology educators and
students started designing games like “3D tic-tac-toe” and “Moon Landing” on the IBM 1560
computers as part of their research work. Until then, the concept of video game had not
reached the mainstream market.3 Before 1970s, when video games were treated as novelties
designed by academic computer scientists, these games were only limited to programmers and
technicians who had access to computers at either research institutions or large companies.4
Later companies like Microsoft and Sony came out with various versions of video games
devices which had evolved with time.

In the modern days, games were changing how people played and connected with each other.
Many classic console games were still being played by video games enthusiasts on their
emulator software. Some of the licensed games like the classic ‘Mario Bros.’, ‘Legend of Zelda’
and ‘Mortal Kombat’, still retained their popularity.5

Video Gaming – The Evolution and Growth

The commercial video game came into being at a science fair and since then it had grown into
one of the most lucrative entertainment businesses in the world.6 Riad Chikhani (Riad), co-
founder and CEO of gaming social network Gamurs, said, “The first recognized example of a
game machine was unveiled by Dr. Edward Uhler Condon at the New York World’s Fair in 1940.
The game, based on the ancient mathematical game of Nim, was played by about 50,000
people during the six months it was on display, with the computer reportedly winning more
than 90 percent of the games. However, the first game system designed for commercial home
use did not emerge until nearly three decades later, when Ralph Baer and his team released
his prototype, the ‘Brown Box,’ in 1967. The ‘Brown Box’ was a vacuum tube-circuit that could
be connected to a television set and allowed two users to control cubes that chased each other
on the screen. The ‘Brown Box’ could be programmed to play a variety of games, including
ping pong, checkers and four sports games. Using advanced technology for this time, added
accessories included a lightgun for a target shooting game, and a special attachment used for a
golf putting game.”7

By early 1970s, it was ‘Spacewar’ and ‘Pong’8, the two video games that gained huge attention
of the mainstream gamers and gave a new dimension to the gaming world. While 1500
individual arcade machines of Spacewar was sold it failed to make a mass appeal due to its

3 “History of video games”, https://www.revolvy.com/page/History-of-video-games
4 “History of Video Games”, https://retroconsole.xyz/history-of-video-games/
5 Ranker, “The Best Classic Video Games”, https://www.ranker.com/crowdranked-list/best-classic-video-games,
2019
6 Chikhani Riad, “The History Of Gaming: An Evolving Community”, https://techcrunch.com/2015/10/31/the-
history-of-gaming-an-evolving-community/, 2016
7 ibid.
8 The groundbreaking electronic game, consisting of one-dot and two-paddle, that mimicked table-top tennis was
released in 1972 by the American game manufacturer Atari, Inc.

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complexity.9 As recalled by the National Museum of American History, Ralph Henry Baer, a
German inventor, game developer and engineer once said about ping-pong10, “The minute we
played ping-pong ), we knew we had a product. Before that we weren’t too sure.” 11 Meanwhile
Pong, went on to become a huge hit among gamers and sold over 20,000 machines.12

Looking at Pong’s popularity, many restaurants around the US installed video games machines to
cash-in on the hot trend.13 According to gaming experts, “More than 8,000 Pong stand-up arcade
cabinets were sent out into world in the two years following the games release in 1972. These
addicting consoles brought kids in groves to the stores and restaurants that had the game. With
pockets full of scavenged quarters, these youngsters played at the rate of $35-$40 per day, per
machine. From those innocent early days, the world has grown to 2.2 billion gamers, and 50
years of gaming has brought video game companies revenues close to $109 billion.”14

In fact, it was ‘The legend of Pong’ that augmented the commercial video game boom. It also
inspired the creation of the infamous Atari by Nolan Bushnell15 and Ted Dabney in 1972, which
became a major player in the video and arcade game industry. Atari broke new grounds in
arcade games, home video game consoles and home computers, which led to the creation of
the mass-marketed game consoles. 16,17

Dawn of the Home Console

By 1977, Atari become a part of the ‘accessible home video game’ industry as it used television
as display monitor with cartridge-style loading mechanism and hand-held consoles.18 “By the
late 70s, video game consoles for the home were becoming more commonplace, with both the
Intellivision and ColecoVision competing in toy stores and introducing many titles... (including
the original Donkey Kong and Space Invaders).”19

In 1983, the video game industry experienced market infiltration as huge number of
companies making poor-quality and cheaper versions began popping up in the market. This led
to the crash of the video games market, which suffered huge losses and was desperately
yearning for change.20 In the meantime, Apple Macintosh Computer designed a graphical user
interface for home computers, while Atari launched a 16-bit external bus and an internal 32-bit
system for home computers in 1985.21 “These home computers had much more powerful
processors than the previous generation of consoles; this opened the door to a new level of
gaming, with more complex, less linear games. They also offered the technology needed for
gamers to create their own games with BASIC code,” said Riad.22 (Exhibit I).

9 “The Best Classic Video Games”, op.cit.
10 The original table tennis game that inspired Pong.
11 “The History Of Gaming: An Evolving Community”, op.cit.
12 “The Best Classic Video Games”, op.cit.
13 ibid.
14 Robin, “The Evolution Of Video Games In One Epic Timeline”, https://www.dailyinfographic.com/evolution-of-
video-games-in-one-epic-timeline, January 9th 2018
15 Known as the godfather of gaming.
16 “The Evolution Of Video Games In One Epic Timeline”, op.cit.
17 “About Us”, https://www.atari.com/about-us/
18 “Atari”, https://www.techopedia.com/definition/6055/atari
19 “The Best Classic Video Games”, op.cit.
20 “The History Of Gaming: An Evolving Community”, op.cit.
21 “Atari”, op.cit.
22 “The History Of Gaming: An Evolving Community”, op.cit.

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Exhibit I
The Video Game Industry in the 70s and 80s
Milestones of The video game industry (the late 1970s and early 1980s)

 The release of the Space Invaders arcade game in 1978

 The launch of Activision, the first third-party game developer
(which develops software without making consoles or arcade
cabinets), in 1979

 The introduction to the United States of Japan’s hugely popular
Pac-Man

 Nintendo’s creation of Donkey Kong, which introduced the world
to the character Mario

 Microsoft’s release of its first Flight Simulator game

Source: “Video Game History”,
https://www.history.com/topics/inventions/history-of-video-games, April 3rd 2019

Later, Pac Man and Mario Brothers, which went on to become breakthrough creations in the
history of console, gave video gaming device a whole new meaning by capturing the hearts of
every little kid on the block. These games were played on the Nintendo Game Boy23 and
brought to stores in 1989, followed by the Super Nintendo in 1991.24 The BASIC code program
designed by Bill Gates paved way for multiple players gaming trend that elevated the gaming
community to the next level. The multiple-player gaming revolution became the stepping
stone in making interactive gaming on a large-scale in future. 25

“Real advances in ‘online’ gaming wouldn’t take place until the release of 4th generation 16-
bit-era consoles in the early 1990s, after the Internet as we know it became part of the public
domain in 1993. In 1995 Nintendo released Satellaview, a satellite modem peripheral for
Nintendo’s Super Famicom console. The technology allowed users to download games, news
and cheats hints directly to their console using satellites,” explained Riad.26 (Annexure I).

Gaming Market –The Changing Trends

The year 2000, despite being termed as the ‘modern era’ of gaming27, saw many ups and
downs. In 2000, it was Sega Dreamcast, the world’s first Internet-ready console that brought in
the real advancement in the online gaming by making internet-based gaming, a center-stage.
But it also caused huge failure, ending the Sega console legacy. “Accessing the Internet was
expensive at the turn of the millennium, and Sega ended up footing huge bills as users used its
PlanetWeb browser around the world,” Riad said. In the early 2000, the rapid evolution of the
internet-driven technology and personal computers took over the monopoly of the console
market. Despite the challenging phase, Dreamcast inspired the launch of next generation of
consoles like the Xbox and thus the online functionality once again became the core of the
gaming industry.

23 The first 8-bit handheld video game console developed and manufactured by Nintendo Entertainment System.
24 “The Evolution Of Video Games In One Epic Timeline”, op.cit.
25 “The History Of Gaming: An Evolving Community”, op.cit.
26 ibid.
27 “The Best Classic Video Games”, op.cit.

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In 2001, massively multiplayer online role-playing game - MMORPG Runescape, was released
and it changed the dynamics of the game. It brought players from around the world on one
platform to play, connect and compete with each other. “The games also include chat
functions, allowing players to interact and communicate with other players whom they meet
in-game. These games may seem outdated now, but they remain extremely popular within the
dedicated gaming community,” Riad said.28

The Digital Gaming Era: Gamut of Platforms

According to the Entertainment Software Association (ESA), which represented companies that
publish computer, emulators and video games, “Digital video game sales overtook physical
sales for the first time in 2014. Trends have continued to push toward digital, with smaller
games seeing digital-only releases, and the bulk of game profits being made from digital
purchases and DLC. If things continue as they are now, we may see the physical game go the
way of the dinosaur in another generation or so.”29 By 2015, as many as 1.5 billion gamers
played video games online, said ESA.

Soon, the rapid developments in the mobile phones segment began to shape the gaming
industry yet again. In 2015, mobile gaming started overtaking the console-based gaming. Riad
said, “This huge shift in the gaming industry toward mobile, especially in Southeast Asia, has
not only widened gaming demographics, but also pushed gaming to the forefront of media
attention... More complex mass multiplayer mobile games such as Clash of Clans are bringing
in huge sums each year, connecting millions of players around the world through their mobile
device or League of Legends on the PC.”30

However, by 2015-end, mobile gaming began to mature and observed a slowdown. Atul Bagga,
CFO for Zynga Asia, said, “Mobile game revenue of six public listed companies combined
(DeNA, EA, Glu, Gree, King, and Zynga) grew a paltry 1 percent from a year ago during the
second quarter of 2015, compared to 25 percent during the second quarter of 2014 and 367
percent during the second quarter of 2013. Not only has revenue growth slowed down, but the
cost of doing business has also risen substantially over the last few years... The story of slowing
growth and rising costs for mobile game companies shouldn’t be a surprise, as we have seen
this story play out several times in the past.”31

But soon the fever began to catch up. According to NPD, a market research company, “Sales of
hardware, software and accessories in the United States reached $14.6 billion in 2017, an 11
percent increase over 2016.”32 In April 2017, it was estimated that $46.1 billion would be
generated just from mobile gaming– which amounted 42% of the global market.33 By 2018,
around 43% of games were being played on mobile devices, while 31% gamers used home
console and 23% made use of Personal Computers. Even the mindset of parents, who banned
their children from playing video games in the past, have changed, with about 71% of parents

28 “The History Of Gaming: An Evolving Community”, op.cit.
29 D'Argenio Angelo M, “Data Vs Hardcopy: Paradigm Shifts In The Digital Gaming Age,
https://www.gamecrate.com/data-vs-hardcopy-paradigm-shifts-digital-gaming-age/14799, November 21st 2016
30 “The History Of Gaming: An Evolving Community”, op.cit.
31 Bagga Atul, “What happened to the growth in mobile gaming?”, https://venturebeat.com/2015/09/18/what-
happened-to-the-growth-in-mobile-gaming/, September 18th 2015
32 “The Future Is Bright for the Video Games of Yesterday”, op.cit.
33 Franklin Nathan, “Why Retro Gaming is Still in Business”, https://nitchigamer.com/2017/09/19/retro-gaming-
still-business/, September 19th 2017

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believed video games made a positive impact.34 In 2019, video games had become a $100
billion global industry. “It’s really no wonder: Video games have been around for decades and
span the gamut of platforms, from arcade systems, to home consoles, to handheld consoles
and mobile devices. They’re also often at the forefront of computer technology,” said gaming
experts.35

Revival of the Retro Games

But no matter how modern the gamers became, there were many who were still collecting the
original retro gaming machines and cartridges. Andy Aldred, an avid retro-gamer who had a
collection of 19 consoles, eight hand-held devices and over 1,000 games, said, “There is
something special about the older genre. For a lot of people there is an element of nostalgia
and being able to own all the games they wanted to play growing up.”36

Instead of giving away their license, video game publishers began to re-master and re-pack
their masterpieces. 37 Publishers like Activision, a maker of retro Crash Bandicoot package, re-
made a series of games that featured Spyro the Dragon in them. Steve Young, Executive Vice
President and Chief Revenue Officer at Activision, said, “It’s probably better to say we remade
these games. Because of advances in the processing power of consoles, studios are able to
rebuild games from the ground up with high-definition graphics.”38

Soon other console manufacturers realised the potential and came up with better versions and
flexibility like consoles with 6 buttons for more complex games. According to Thomas Turner
(Thomas), writer and gaming enthusiast, “These are gorgeous, glorious consoles that actually
manage to recapture the wonder of nostalgia, all packed up with user friendly modern
conveniences... For the budding cartridge collector - the ’80s and ‘90s collecting market are at
an all time peak right now, so get in there before everything vanishes - the Retron 5 offers a lot
of bang for the buck. At just $150, there is no better mix of moderately priced broad
functionality and emulation quality... The Atari Retro Handheld Console from Blaze is a great,
easy pick... It's packed with a massive library of 50 Atari 2600 games. For around $35, it's
perfect for a last minute stocking stuffer, and bound to delight hoary devotee of the 8-bit
era.”39

Looking at the upcoming trend, gaming companies and passionate players began trying to bite
into the classic retro times by chasing the nostalgic craze.40 A psychology research in 2018
revealed that video games of the yesteryears had positive influence on people as they made
them feel closer to their past. The research further stated, “The results of this work suggest
that games can be nostalgic, and that this nostalgia can be therapeutic... Players’ relationships
with the characters they’ve played in the past — Mario, Sonic, and scores of others — can play
an important role in invoking nostalgia. One reason for this is players have complex social
relationships with those characters, either by seeing them as their friends forms or even as
extensions of themselves. For example, we already know that playing games at work can aid in
psychological recovery from stress; it might be that playing nostalgic games could intensify this

34 “The Evolution Of Video Games In One Epic Timeline”, op.cit.
35 “Video Game History”, https://www.history.com/topics/inventions/history-of-video-games, April 3rd 2019
36 Scott Jennifer, “Retro gaming: Why players are returning to the classics”, https://www.bbc.com/news/uk-
40427838, June 28th 2017
37 “The Future Is Bright for the Video Games of Yesterday, op.cit.
38 ibid.
39 “The best retro game consoles in 2019”, op.cit.
40 ibid.

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process. It could also be possible to use the popular video games of yesterday as health
interventions to delay the onset of dementia, following a line of research showing video games
to have cognitive and physical health benefits for older populations. As gamers age,
understanding gaming nostalgia will help us better examine the wide range of experiences that
they have with one of the most profitable and popular forms of entertainment media today.”41

Can the Console Gaming Market Cash on the Consumer Nostalgia?

Some of these nostalgic classic gold diggers (video games makers) redesigned the old versions
to cater to the next gen gamers. Toy makers like Scott Bachrach, who collected licenses for his
favorite games, recreated the retro experience for the next generation by reproducing the
classic video games. He said, “This was a passion project that turned into a significant business
for us.”42

However, he was not alone in trying to cash in on the nostalgia. Even top brands like Nintendo
and Sony helped popularising the retro gaming trend.43 For instance, Nintendo released a mini
version of their classic console -- the full sized hardware 8- and 16-bit device into a compact
device, without losing the nostalgic essence.44 Later, Sony came up with a new version of its
classic PlayStation, by encoding some 20 games into a mini console device. Thomas said,
“Playstation and Nintendo’s Classic Minis are both signs that the video game industry thinks
there’s still money to be made from elder millennials.”45

Further, retailers, car manufacturer and music industries were also trying their hand on it.
While retail companies like Amazon and Target created dedicated space for classic video
games and their merchandise, Tesla, electric-car maker, added Atari games in its latest
vehicles. Mat Piscatella, a Video Game Industry Analyst for NPD, said, “In the past, we thought
games were more disposable entertainment. There is a lot of intrinsic value that old games can
provide. One in five new consoles sold in the United States this year has been a retro plug-and-
play device, contributing to the overall growth in the video game industry.”

Despite the constant evolving gaming industry, there was a huge market for retro gaming.
Nathan Franklin, writer and gamer said, “The most recent example of how retro gaming’s
popularity is still alive and well is in the sales of the ‘mini-consoles’. The NES Classic Mini was
released in November 2016 and sold out on pre-orders while the remaining few that made it
to the shelves were quickly swiped. Only until recently has Nintendo declared it will resume
NES mini-consoles next year. If that wasn’t enough, the SNES Mini also experienced a similar
fate – high demand for the 16-bit classic console has convinced Nintendo to continue to ship
more in 2018. If Nintendo’s efforts to retrieve the past weren’t enough, then there’s the Sega
Genesis/Mega Drive Classic Console which boasts an impressive library of 80 built-in games.
This is joined by Atari’s upcoming Ataribox, which will be a console optimised for both retro
and modern forms of gaming. It’s as though past and present are existing side-by-side. Retro

41 Bowman Nicholas and Wulf Tim, “Psychology Study Reveals How Nostalgia Made Retro Video Games Popular
Again From 'Donkey Kong' to the Super Nintendo”, https://www.inverse.com/article/48459-finding-nostalgia-in-
classic-retro-video-games, August 28th 2018
42 “The Future Is Bright for the Video Games of Yesterday, op.cit.
43 ibid.
44 Bradley Alan, “The best retro game consoles in 2019”, https://www.gamesradar.com/best-retro-consoles/,
February 22nd 2019
45 Turner Thomas, “Welcome To The Second Wave Of Nostalgic Gaming”,
https://studybreaks.com/tvfilm/welcome-to-the-second-wave-of-nostalgic-gaming/, September 25th 2018

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games may be old, but they are not past their heyday. In fact, retro games seem to be timeless
as opposed to a thing of the past.”46 (Exhibit II).

Exhibit II
Different Versions of the NES Consoles

Source: Aernout, "NES Classic Edition Compared To Original 1985 NES In This Comparison Shot",
https://wccftech.com/nes-classic-edition-compared-original-1985-nes-comparison-shot/, July 22nd

2016

With the increasing popularity of retro games catching up, the future of emulators began to
look doubtful. According to Austin Breakwell, writer and gamer, “After decades of rapid
improvement from pixelated side-scrollers to the technological marvels of today, gaming
would always come to a point when players looked back and wanted to return to a simpler
time. Until now, companies have largely neglected fans of older games, which forced them to
port them to modern systems themselves through emulation. A community has therefore
formed around sharing otherwise unplayable or restricted classics, but as remasters, remakes,
and re-released systems become increasingly popular, the future of emulation is uncertain.”47

However, a few gamers believed that the obsession with nostalgia was just a bubble and
feared that it was hurting the future of the gaming industry. Rachel Kaser, a Texas-based writer
and game critic, said, “Gaming (and gamers, for that matter) seem to be obsessed with reliving
the past. The nostalgia bubble is strong right now, but when it bursts, it might harm the
industry as a whole... I suspect the industry’s retro-infused calendar has more to do with
milking a nostalgic audience for cash rather than consistent demand from the players. So what
would the gaming industry look like if the audience as a whole lost interest in remasters, re-
releases, and sequels? I’m not doom-saying by any means — gaming does get its fair share of
fresh blood. My fear is that a preoccupation with the hits of yesteryear will leave future
gamers with nothing to call their own. If I had a ten-year-old child right at this moment, what
kind of games would they be playing that they’ll still be nostalgic for twenty years from now? I
can tell from experience that it’s hard to summon that kind of devotion for franchises you
enter in the middle. As for us adult gamers — how long until we realize that reliving the past
gives us limited returns?”48

46 “Why Retro Gaming is Still in Business”, op.cit.
47 Breakwell Austin , "Retro Revival — Why Classic Games are Making a Return”, https://www.onlysp.com/retro-
revival-classic-games-making-return/, November 28th 2018
48 Kaser Rachel, “Nostalgia isn’t doing the gaming industry any favors”,
https://thenextweb.com/gaming/2017/08/17/nostalgia-gaming-industry-favors/, August 18th 2017

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Gamers felt that video games makers had forgotten that games used to be designed for the
future and not vice versa. Thomas said, “The fact that this sort of phenomenon is happening
again, and with a generation that arguably has a greater appreciation for video games, makes
me wonder if there is a cyclical nature to the ‘nostalgic gamer’ as generations of gamers
become older and want to relive their respective glory days of gaming. It also makes me think
about what the next wave of nostalgic gamers will look like in the face of a future gaming
industry. Will the kids playing ‘Fortnite’ today look back in 15 years after trying some insane,
revolutionary game and think, ‘Wow, this is a lot different than what I played as a kid’? I’d like
to think so.”49

When it came to advancement and freshness of the content, gamers argued that retro mania
was limiting innovation as developers were concentrating more on restoration and less on
innovation. However, Matt Phillips, creator of video game ‘Tanglewood’, said, “I don't think it
limits innovation, I think it promotes it by means of restriction. Innovation has come on leaps
and bounds in graphics, audio, networking, and the whole ecosystem in which we buy, share,
and talk about games. But a game is still only as good as its design, and nothing about these
old systems prevents clever thinking.”50

But despite the pessimism, the nostalgia of retro games was enormously rising. An enthusiastic
gamer said, “I find myself constantly drawn to the past. I garner more enjoyment from
securing a mint Japanese Mega Drive game than I do when the latest cutting edge all-singing,
all-dancing Xbox 360 game drops onto the doormat. However, this longing for games I've loved
and lost is curiously unfulfilling; no matter how much cash I throw at my obsession and how
many dusty cartridges I acquire, it never seems to scratch the itch. I don't think I'm alone in my
condition, either.”51 Vintage video game fan Richard Colhouer said, “The reason for the revival
is simple... Video games are kind of like books, you know there are good books and bad books,
but whenever you find a really good book you're able to connect with it... It's really just the
memories you have connected to the different games.”52

Thought the next phase of gaming was still uncertain, there was more to be seen in the future.
Riad said, “Throughout its progression, gaming has seen multiple trends wane and tide, then
be totally replaced by another technology. The next chapter for gaming is still unclear, but
whatever happens, it is sure to be entertaining.”53

49 “Welcome To The Second Wave Of Nostalgic Gaming”, op.cit.
50 Gordon Lewis, “Nostalgia Is Gaming’s Biggest Trend”, https://theoutline.com/post/6053/tanglewood-sega-
genesis-nostalgia?zd=1&zi=euoni2n7, August 27th 2018
51 “Crippled by Nostalgia: The Fraud of Retro Gaming”, op.cit.
52 Wilson Mark, “Vintage gaming makes a comeback just in time for Christmas”,
http://www.fox13news.com/consumer/vintage-gaming-makes-a-comeback-just-in-time-for-christmas,
December 12th 2018
53 “The History Of Gaming: An Evolving Community”, op.cit.

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Annexure I
Evolution of Different Gaming Consoles

Commodore Amiga, 1985: A rare
sighting of a Commodore Amiga
500 doing something other than
playing Cannon Fodder

Sega Mega Drive, 1988: The
original Japanese Sega Mega Drive
Photograph: Evan Amos/public
domain

Super Nintendo Entertainment
System, 1990: An original SNES or
Super Nintendo Entertainment
System, also known as the Super
Famicom

Sony PlayStation, 1994: The Sony
PlayStation in its initial form
Photograph: Evan Amos/public
domain

Sega Dreamcast, 1999: The Sega

Dreamcast in all its idiosyncratic

glory Photograph: Evan

Amos/public domain

Nintendo Game Cube, 2001: The
GameCube being shown off at a
Nintendo games event in Tokyo,
2000 Photograph: YOSHIKAZU
TSUNO/EPA

Source: Keith Stuart, "The six best retro consoles for modern gamers",
https://www.theguardian.com/technology/gamesblog/2014/feb/04/the-six-best-retro-consoles-for-

modern-gamers, December 12th 2017

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1st Edition, Issue-1 E-waste Recycling in India: A Sustainable Initiative?

E-waste Recycling in India
A Sustainable Initiative?

Case Study

This case was written by Sushree Das and reviewed by Dr. A. Saravanan Naidu, Amity
Research Centers Headquarter, Bangalore. It is intended to be used as the basis for class
discussion rather than to illustrate either effective or ineffective handling of a management
situation. The case was compiled from published sources.

© 2019, Amity Research Centers Headquarter, Bangalore.

Website: www.amity.edu/casestudies/

No part of this publication may be copied, stored, transmitted, reproduced or distributed in
any form or medium whatsoever without the permission of the copyright owner.

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1st Edition, Issue-1 E-waste Recycling in India: A Sustainable Initiative?

Author: Sushree Das

E-waste Recycling in India: A Sustainable Initiative?

Abstract: E-waste was the fastest growing stream of rubbish in the current global scenario.
India was ranked fourth among the top five e-waste producing countries such as, the US,
China, Japan and Germany. India not only generated tremendous amounts of e-waste, it was
also one of the biggest dumping grounds for e-waste, among developing nations. Moreover,
while only 20% of the global e-waste was formally recycled, most of the e-waste in India was
illegally recycled by workers in the informal sector. Besides, the absence of an updated
inventory of e-waste generated made it difficult to quantify the e-waste actually recycled and
disposed. While there were legislations to prevent production of e-waste, as well as disposal
through illegal and unethical means, not much was followed in India. Even though e-waste
could be processed properly to extract precious elements out of it, which could then be
reused, workers in the informal e-waste dismantling markets adopted the most hazardous
methods, irrespective of the harmful effects on their health and the environment. Experts
emphasised on the need for collective action by consumers, businesses as well as governments
to prevent generation of e-waste, and encourage recycle and reuse of e-waste for future
purposes. However, factors such as change in user perception, enhancing lifespan of the
electronic product, cost analysis pertaining to recycling, awareness about the effects of
recycling of hazardous wastes were a few factors that could boost sustainable recycling of e-
waste in India and worldwide. While the informal sector was actively involved in recycling of e-
waste, can India adopt a sustainable approach to e-waste recycling?

Case Study

“More than 95% of India’s e-waste is processed by a widely distributed network of informal
workers of waste pickers. They are often referred to as ‘kabadiwalas’ or ‘raddiwalas’ who
collect, dismantle and recycle it and operate illegally outside of any regulated or formal
organisational system. Little has changed since India introduced e-waste management
legislation in 2016.”1

– Miles Park, Senior Lecturer, Industrial Design, The University of New South Wales

India was one of the biggest producers of e-waste in the world. The Global E-waste Monitor
2017, published by the United Nations University, stated that India generated almost 2
million tonnes (MT) of e-waste per annum and ranked fourth among e-waste producing
countries, including the US, China, Japan and Germany. However, there was no government

1 Park Miles, “India’s two-million-tonne e-waste problem has deadly consequences”,
https://qz.com/india/1553483/indias-two-million-tonne-e-waste-problem-has-deadly-consequences/, February
19th 2019

“© 2019, Amity Research Centers HQ, Bangalore. All rights reserved.”

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data on the actual volume of e-waste generated in the country. Out of the 50 MT of e-waste
generated worldwide, it was estimated that, half of this included personal devices such as
personal computers, screens and monitors, smartphones, tablets and televisions, while the
remaining included large household appliances and heating and cooling equipments. Out of
this, reports suggested that, only 20% of global e-waste was recycled each year, which meant
that, 40 MT of e-waste was either disposed in landfills, incinerated or illegally dismantled and
traded in a half-hazard way in the informal sector. This was despite the coverage of 66% of the
world’s population by e-waste legislation. Analysts identified consumers as the key to the
effective management of e-waste. This strategy aimed to encourage consumers to
appropriately dispose their e-waste, so that with rise in reuse and recycling rates, consumers
could adopt sustainable habits to facilitate a smooth transition towards a circular economy.
Though some organisations adopted ethical e-waste recycling policies, and attempted to
bridge the gap between formal and informal sectors, sustainable recycling of e-waste
remained a tough step.

E-waste Crisis: A Curtain Raiser

According to a report titled ‘Global E-waste Monitor 2017’, prepared with the combined effort
of the United Nations University (UNU), the International Telecommunication Union (ITU) and
the International Solid Waste Association (ISWA),2 the world produced almost 50 MT of
electronic and electrical waste (e-waste) every year, whose weight exceeded the weight of all
the commercial airliners ever made. They termed it as a ‘tsunami of e-waste’. The report
further stated that, if the per capita generation of e-waste was weighed individually, then
every individual on the planet could be responsible for producing atleast 6 kg of e-waste per
annum. Out of this, 80% of the waste was either disposed in landfills or were informally
recycled, subsequently exposing workers to harmful substances and contaminating soil,
groundwater and the entire food supply chain. This alarm was signaled jointly by seven
agencies of the UN at the World Economic Forum (WEF) in Davos, Switzerland in January 2019.
The Forum appealed for an overhaul of the existing system of disposing and recycling of e-
waste, so that environmental impacts could be minimised and sustainable jobs could be
created. Besides, since only 20% of the total e-waste was formally recycled, their report titled,
‘A New Circular Vision for Electronics - Time for a Global Reboot’ warned that the global e-
waste generation could easily stretch to 120 MT per year by 2050, considering the ongoing
trends.3

While e-waste grew at a faster pace than other wastes globally, the UN’s report ‘Global E-
waste Monitor 2017’ and WEF’s ‘A New Circular Vision for Electronics 2019’ reported
production of 44.7 MT in 2016, which was equivalent to nearly 4,500 Eiffel towers. E-waste
accumulation was estimated to be 48.5 MT by 2018, around 52 MT by 2021 and 120 MT by
2050.4 (Exhibit I).

2 Sreedhar Nitin, “A second life for digital debris”, https://www.livemint.com/mint-lounge/features/a-second-
life-for-digital-debris-1553850642444.html, March 30th 2019
3 Vishwa Mohan, “Globally 80% of e-waste either ends up in landfills or being informally recycled, says UN
agencies”, https://timesofindia.indiatimes.com/india/globally-80-of-e-waste-either-ends-up-in-landfills-or-being-
informally-recycled-says-un-agencies/articleshow/67694429.cms, January 26th 2019
4 “A second life for digital debris”, op.cit.

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Exhibit I
E-waste Generation Across the World

Source: Sreedhar Nitin, “A second life for digital debris”, https://www.livemint.com/mint-
lounge/features/a-second-life-for-digital-debris-1553850642444.html, March 30th 2019

Besides, experts also provided an estimate of e-waste generation in different geographic
regions of the world. In 2016, majority of the e-waste was generated in Asia which was around
18.2 MT or 4.2 kg per person. Approximately 2.7 MT were apparently collected and recycled.
Oceania, on the other hand, generated the lowest quantity of e-waste in 2016 at 0.7 MT, in
contrast the per person consumption was the highest at 17.3 kg and could only collect and
recycle 6% of its e-waste that was equivalent to 43 kilotons (kt). In addition, experts also
provided data for the European, African and the American continent.5 (Exhibit II).

Exhibit II

E-waste Generation in Different Regions

Indicator Africa Americas Asia Europe Oceania
13
Countries in region 53 35 49 40 39
17.3
Population in region (millions) 1,174 977 4,364 738 0.7
0.04
WG (kg/inhabitant) 1.9 11.6 4.2 16.6 6%

Indication WG (Mt) 2.2 11.3 18.2 12.3

Documented to be collected and recycled (Mt) 0.004 1.9 2.7 4.3

Collection Rate (in region) 0% 17% 15% 35%

Source: Balde C.P., et al., “The Global E-waste Monitor 2017”,

http://collections.unu.edu/eserv/UNU:6341/Global-E-

waste_Monitor_2017__electronic_single_pages_.pdf, 2017

5 Balde C.P., et al., “The Global E-waste Monitor 2017”, http://collections.unu.edu/eserv/UNU:6341/Global-E-
waste_Monitor_2017__electronic_single_pages_.pdf, 2017

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Taking into account the rapid accumulation of e-waste, experts classified e-waste into six
broad categories. This included, temperature exchange equipment, commonly known as
cooling and freezing equipment; screens and monitors; lamps; large equipment such as
washing machines; small equipment such as vacuum cleaners; and small IT and
telecommunication equipment such as mobile phones (Exhibit III).

Exhibit III
Categories of E-waste
Temperature exchange equipment – included refrigerators, freezers, air conditioners, heat
pumps.
Screens, monitors – included televisions, monitors, laptops, notebooks, and tablets.
Lamps – included fluorescent lamps, high intensity discharge lamps, and LED lamps.
Large equipment – included washing machines, clothes dryers, dish-washing machines,
electric stoves, large printing machines, copying equipment, and photovoltaic panels.
Small equipment – included vacuum cleaners, microwaves, ventilation equipment, toasters,
electric kettles, electric shavers, scales, calculators, radio sets, video cameras, electrical and
electronic toys, small electrical and electronic tools, small medical devices, small monitoring
and control instruments.
Small IT and telecommunication equipment – included mobile phones, Global Positioning
Systems (GPS), pocket calculators, routers, personal computers, printers, telephones.

Source: Compiled by the Author from – Balde C.P., et al., “The Global E-waste Monitor 2017”,
http://collections.unu.edu/eserv/UNU:6341/Global-E-

waste_Monitor_2017__electronic_single_pages_.pdf, 2017

Further, as far as factors driving the consumption trends of electrical and electronic
equipments (EEE) was concerned, analysts claimed, faster networks, new applications and
services delivered at high speeds, offered new opportunities to users, particularly in the areas
of commerce, education, health, government, and entertainment. In addition, higher levels of
disposable income, urbanisation, and industrialisation in many developing countries facilitated
the growth of EEE, thereby leading to accumulation of e-waste. In terms of weight, the
products that continued to grow in consumption in 2016, included flat panel TVs, washing
machines, electric centralised heating units, electric furnaces and refrigerators. This was
expected to grow more, as owning these products represented a higher standard of living.
During the same time period, some technologies became obsolete and were replaced by new
ones. Products such as portable audio and portable video were replaced by flat panel displays,
while single functionality devices were replaced by laptops or mobile phones. Besides, falling
prices of mobile broadband services, IT equipments, affordable smartphones also enabled
purchase of new technologies and disposal of old devices, thereby driving growth of e-waste.
Some other trends that boosted the rise of e-waste included, growth in ownership of multiple
devices, growth in cloud computing services, increasing number of data centres, and faster
replacement cycles. The ‘throwaway society’ apparently characterised by consumerism and
the tendency to throw something and buy a new one, instead of repair and reuse it, was
severely criticised by experts. People perceived owning a new thing as a status symbol and a
mark of social recognition.6

Reports highlighted that, as consumers and businesses disposed their devices and other
household appliances, the amount of e-waste produced due to this could be worth $62.5
billion (€55 billion). They further stated that, a small percentage of the waste, which contained
reusable materials such as metals and rare earth elements used for electronics, was recycled.

6 “The Global E-waste Monitor 2017”, op.cit.

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Of late, the UN along with the WEF and the World Business Council for Sustainable
Development (WBCSD), launched the first global call for action to deal with the rapid growth of
e-waste. In the words of Ruediger Kuehr (Kuehr), Programme Director at the UNU and an
expert in e-waste, “This is needed because if things don't change by 2050 we will have 120
million tonnes per year of e-waste.”7

Meanwhile, amidst reports of rise in volume of e-waste, very little was recycled. While 66% of
the world’s total population had national e-waste management legislations, experts
emphasised, more efforts had to be made to enforce and implement e-waste policies and
encourage more countries to develop such policies. To address these challenges, the UN
agencies collaborated in January 2017 and launched the ‘Global Partnership for E-waste
Statistics’. The objective was to help countries prepare statistics on e-waste and build a global
database to track its progress over time. The sub-regions where e-waste legislation was most
effectively developed were in Europe, where the volume of e-waste officially collected and
recycled was also the highest. Other regions which implemented e-waste recycling and
collection laws were Northern America, Eastern Asia, and Southern Asia. In many other
regions, national e-waste legislation did not exist, such as in several parts of Africa, Caribbean,
Central Asia, Melanesia, Polynesia, and Micronesia.8

The WEF report further revealed that, almost 67 countries globally had legislation to deal with
e-waste. This normally referred to the principle of ‘Extended Producer Responsibility’ (EPR).
But while EPR monitored the e-waste produced within a country, it failed to implement a
restriction on the export of e-waste to developing countries like India.9 Moreover, EPR was
generally seen as a policy principle that necessitated manufacturers to accept responsibility for
all the stages in a product’s lifecycle, including end-of life management. The principle behind
EPR was that, most of the environmental impacts were predetermined in the design phase
itself.10

Furthermore, export to developing countries was regulated under the ‘Basel Convention on
the Control of Transboundary Movements of Hazardous Wastes and Their Disposal’. It was a
multilateral treaty intended at ‘suppressing environmentally and socially detrimental
hazardous waste trading patterns’. Signed by 186 countries, the Convention acknowledged
that, in order to protect the wellbeing of humans and the environment, it was necessary to
prevent free trading of hazardous waste unlike ordinary commercial goods. Therefore, a
written notification and approval process was mandatory for all transboundary movement of
hazardous wastes. The hazardous waste had to be packaged, labelled and transported in
accordance with international rules and standards. Nevertheless, the Basel Convention’s
regulatory exemption on re-usable equipment was at par with its environmental objective to
prevent waste generation, since reuse extended the lifecycle of the equipment and hence
minimised the generation of hazardous waste. By extending the functionality of electronics,
reuse enabled natural resource conservation as well as diverted the need for disposal or
recycling to a certain extent. However, experts highlighted that, the clarification on whether
something could be categorised as waste or not, and could be re-used, remained an ongoing
discussion under the Basel Convention. The latest Conference-of-Parties (COP13) failed to
reach at a final consensus.11

7 Galey Patrick, “War declared on world's growing e-waste crisis”, https://phys.org/news/2019-01-war-declared-
world-e-waste-crisis.html, January 24th 2019
8 “The Global E-waste Monitor 2017”, op.cit.
9 “A second life for digital debris”, op.cit.
10 “The Global E-waste Monitor 2017”, op.cit.
11 ibid.

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Is Managing E-waste a Herculean Task for India?

Moving on, the report titled ‘Global E-waste Monitor 2017’, revealed that the total e-waste
generated in Asia in 2016 was 18.2 MT, and India’s share was around 2 MT. The report added
that besides generating large amounts of e-waste, India even imported undisclosed amounts
from developed countries. The Monitor further stated that, over “one million poor people in
India are involved in manual recycling operations.” A report prepared by Assocham-EY in
January 2019 on urban waste management solutions in India observed that, according to the
Central Pollution Control Board (CPCB), India had around 214 authorised recyclers/dismantlers.
In 2016-17, the recyclers treated only 0.036 MT of India’s 2 MT of e-waste. Several other
studies and reports estimated that, almost 90% of the e-waste in India was collected and
processed by a widely distributed network of workers in the informal sector.

Despite global rules seeking to regulate the export and import of e-waste, a new WEF report ‘A
New Circular Vision For Electronics: Time For A Global Reboot’ released in January 2019
suggested that large amounts of e-waste continued to be shipped illegally. They cited the
instance where e-waste generated in Western Europe was exported to India and China, among
other countries. In fact, among developing nations, India was one of the biggest dumping
grounds of e-waste. The report further added that in total, 1.3 MT of electronic products which
were apparently undocumented and discarded were exported from the European Union every
year.12

Further, while 20% of the e-waste was formally recycled, the remaining usually ended up in
landfills or was recycled informally in developing countries. In India, there were waste pickers,
also termed as ‘kabadiwalas’ or ‘raddiwalas’ who operated illegally, away from any regulated
or formal organisational system. They collected, dismantled and recycled the waste. Experts
observed that even after India introduced its e-waste management legislation in 2016, the
scenario had not changed. Researchers cited the instances of Delhi, which already had high
levels of air and water pollution and yet witnessed some of the informal e-waste dismantling
operations. One such place was Seelampur in the outskirts of Delhi, where truck loads of e-
waste were dumped every day. Seelampur was the largest wholesale e-waste dismantling
market in the country. Here people of all ages were engaged in dismantling and sorting
varieties of electronics, electrical as well as household appliances without any safety gear. The
list included, air conditioners, washing machines, personal computers, phones, circuit boards,
capacitors, metals and many other components, so that these could then be sold to other
traders for recycling.13 (Exhibit IV).

Experts claimed that in many other advanced industrialised economies, e-waste collection was
low and very less was recycled. However in India, e-waste collection and recycling rates were
notably high. It had severe impacts on the human health. People living in the surrounding
areas often suffered from respiratory problems resulting in death.14 Speaking on the electronic
waste sector in India, Satish Sinha (Sinha), Associate Director at Toxics Link15, highlighted, “The
movement of waste in the informal sector in India and its 78ability to access waste from both
institutional and individual generators is significant. When this waste enters the informal

12 “A second life for digital debris”, op.cit.
13 Park Miles, “Electronic waste is recycled in appalling conditions in India”, https://phys.org/news/2019-02-
electronic-recycled-appalling-conditions-india.html, February 15th 2019
14 “Electronic waste is recycled in appalling conditions in India”, op.cit.
15 Toxics Link was a Delhi-based environmental group that has been working on the policy side of waste and
chemical management for over two decades.

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sector, it does not come back to the clean channels.” He added that, the situation turned
dangerous when the e-waste was recycled in ways that were harmful for the workers and the
environment. When dumped in landfills, e-waste produced contaminated leachates which
ultimately polluted the groundwater. On being incinerated, e-waste produced toxic fumes that
could damage the skin, the human respiratory system as well as the air quality. Even if the e-
waste reached the recycling stage, improper methods of recovery and recycling had significant
impacts on the environment. Some e-waste components were also considered carcinogenic.16

Exhibit IV
Seelampur and Mandoli E-waste Dismantling Market
 Each day e-waste was dumped by the truckload for thousands of workers using crude
methods to extract reusable components and precious metals such as copper, tin, silver,
gold, titanium and palladium. The process involved acid burning and open incineration,
creating toxic gases with severe health and environmental consequences.
 Workers come to Seelampur seeking work. They earned between 200 and 800 rupees
(A$4-16) per day. Women and children were paid the minimum while men who were
involved with the extraction of metals and acid-leeching were paid more.
 Income was linked to how much workers dismantled and the quality of what was
extracted. They worked 8-10 hours per day, without any concern for their own well-
being. Respiratory problems were reportedly common among those working in these
filthy smoke-filled conditions.
 As a result of the fear of police raid and subsequent shut down due to spread of toxic air,
e-waste burning and acid washing were often done in the desolate outskirts of Delhi and
the neighbouring states of Uttar Pradesh and Haryana, or done at night when the risk of
a police raid was less.
 Mandoli was another region near Delhi where e-waste burning took place. After some
reluctance, locals showed some narrow, rutted laneways to an industrial area flanked by
fortified buildings with large locked metal doors and peephole slots not dissimilar to a
prison.
 Among the swirling clouds of thick, acrid smoke, some women were seen burning
electrical cables over a coal fire to extract copper and other metals, although they were
aware of the effects on their health.
 Most of these units were illegal and operated at night to avoid detection. Pollution levels
were often worse at night and affected the surrounding residential areas and even the
prisoners at the nearby Mandoli Jail.

Source: Compiled by the Author from – Park Miles, “Electronic waste is recycled in appalling
conditions in India”, https://phys.org/news/2019-02-electronic-recycled-appalling-conditions-

india.html, February 15th 2019

Considering the growing situation of e-waste, the WEF report suggested that a circular
economy model in the electronics sector could not only stretch the longevity of the products
but also create better and safe employment for workers in the informal sector. In contrast to
the existing linear economy, a circular economy was considered as a system where all
materials and components were retained in good shape and in working condition, at all times
and were used for as long as possible. The report emphasised that to build a circular economy
for electronics, it was necessary to design products that could be reused, was durable and
could be safely recycled.

16 “A second life for digital debris”, op.cit.

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Eventually it was observed that, leading multinationals such as Xiaomi (the Chinese mobile
maker) and Apple clearly adhered to the 2016 rules. In the words of Muralikrishnan B., Chief
Operating Officer, Xiaomi India, “We have partnered with Karo Sambhav to set up over 1,100
e-waste collection points at Mi Homes and Mi authorized service centres in over 500 cities
across India... We have collected over 60,000kg of overall e-waste in 2018 alone.” Apple also
had a recycling program in place. Pranshu Singhal, Founder of Karo Sambhav17, was of the
opinion that, the introduction of EPR had resulted in quite a few solutions. He added “The
focus has been on how to ensure that the collection is done by the informal sector, since it’s a
livelihood issue, in a safe manner, but ensuring that the waste moves to responsible recyclers
once it is collected.”18 (Exhibit V).

Exhibit V
E-waste Recycling Initiatives by Tech Companies and Partner Firms
 Xiaomi had a “Take-back & Recycling Programme” that adhered to the 2016 rules.
Launched in October 2017, the programme allowed users to fill up an e-waste
recycling form after logging into their Mi account. An authorised recycler then picked
up the e-waste. Users could hand over mobile phones, chargers, power banks,
headphones and other electronic products sold in India, irrespective of the brand. For
every pick-up request, users also got a discount coupon that could be used for future
purchases.
 According to Gartner research data, Apple had a “GiveBack” programme that allowed
users to ship their old devices to a recycling partner. The company recorded global
iPhone sales of 64.5 million units in Q4 of 2018.
 Karo Sambhav worked with around 28 brands to meet their collection targets and
conducted awareness programmes on their behalf.
 Since 2003, EnSYDE continued to work with NGOs, companies and institutions
throughout India to help reduce their environmental footprint. The company
designed and implemented solutions that improved resource-use efficiency,
particularly in the areas of energy, water and waste. One of EnSYDE India’s recent
initiatives was the “bE-Responsible E-Waste” programme, for which it partnered with
Saahas, a non-profit working in the field of waste management, which handled the
logistics for the initiative. Started in November 2016, the aim was to encourage
people to manage their e-waste responsibly. The programme covered around 40
wards in Bengaluru so far, reached out to more than 600,000 citizens and collected 29
tonnes of e-waste. Saahas also collaborated with recyclers authorised by the
Karnataka State Pollution Control Board to ensure that the e-waste collected was
disposed of responsibly.

Source: Sreedhar Nitin, “A second life for digital debris”, https://www.livemint.com/mint-
lounge/features/a-second-life-for-digital-debris-1553850642444.html, March 30th 2019

Although the e-waste extraction and recycling process was tricky, experts claimed that e-waste
had immense economic value, largely from metals such as copper, gold, platinum, silver and
palladium. According to the WEF report, a tonne of smartphones contained 100 times more
gold than a tonne of gold ore. However, extracting these elements was not easy. In the opinion
of Akshay Jain (Jain), founder of e-waste management company Namo E-waste, “Processing e-
waste is really difficult because of the presence of different elements. For instance, when you
are trying to extract gold through hydrometallurgy (using a leaching agent), then you have to
leave the other things out. Sometimes the cost of recovery is higher than the recovered

17 Karo Sambhav, was a producer responsibility organisation based in Gurugram, NCR.
18 “A second life for digital debris”, op.cit.

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value.”19 According to Kuehr, “If recyclers are tasked with recycling close to 100 percent of
materials in electronics they will do their best to do so. At the moment they don't because
there's no demand for it—resource prices do still allow for mining in the ground.
Technologically it's doable to recycle nearly all (metals in phones and computers) but it's not
economically feasible yet and we need economies of scale.”20

Further, some business owners such as Jain, who also owned a recycling unit in Faridabad, on
the outskirts of Delhi, perceived refurbishing as a safer and economical method for recycling a
product. He stated, “Refurbishing is the best method and least polluting way of recycling.
These refurbished products, the IT goods specifically, are available for 30% of the price of a
new product. In turn, it’s also making technology accessible to the underprivileged.” However,
India lacked the proper infrastructure to manage e-waste. Commenting on this, Manvel Alur
(Alur), founder of the Bengaluru-based non-profit EnSYDE India, was quoted saying, “We don’t
have the infrastructure to handle the amount of e-waste that’s hitting us, either in India or
globally. That’s a big problem. We also have a set of manufacturers who are manufacturing for
use and dispose.” In addition Alur claimed that, the short life of electronic products, also
technically known as ‘planned obsolescence’, hindered the management of e-waste. She
further added, “We basically go and sensitize the community—schools, RWAs (resident
welfare associations) and households—through different campaigns and formats. Once the
stakeholders are on board, we start off with the collection system. We have a pick-up truck
that goes to different locations. The second option, which is really popular, is the public drop-
off boxes. We currently have these e-waste drop boxes in 32 locations across Bengaluru.”21

Experts also agreed to the use of refurbished products as a solution to e-waste. The Ellen
MacArthur Foundation in a research paper confirmed that, up to 50% of users were fine with
using refurbished products. Commenting on the significance of factors such as user perception
choosing a refurbished product, Sinha claimed, “The trust in a refurbished product is
important. I need the assurance that I’ll get equally good service from a refurbished product as
I would from a new one. What is the kind of warranty that I am being provided? Can I flaunt it?
These are some of the things that need to be addressed.” Gradually, organisations also started
to recognise e-waste’s hidden economic value and reusability. Experts cited the instance of the
2020 Olympic Games in Tokyo, where all the medals were planned to be made from precious
metals collected from recycled e-waste. A nationwide scheme was launched across Japan by
the Tokyo 2020 Organising Committee in April 2017. As a result, over five million used phones
were collected from among 47,488 tonnes of discarded electronic devices. In Delhi, the Prakriti
Metro Park near the Shastri Park Metro station featured 12 sculptures constructed from 20-25
tonnes of waste by artists from all over India.

Besides, the WEF report suggested the need to implement advanced methods for recycling and
recapturing. A paper titled “Circular Consumer Electronics: An Initial Exploration” published in
2018 by the UK-based Ellen MacArthur Foundation highlighted, if certain industry actions could
be implemented, it could drive the shift towards a circular economy. The application of
automation in the disassembly and refurbishment processes could be a key step. The paper
added, “Improved automated processes can increase the number of products that can be
treated and reduce the time they require to be treated.” A similar recycling procedure was
launched in Australia in 2018 by Prof. Veena Sahajwalla (Prof. Sahajwalla), who headed the
Centre for Sustainable Materials Research and Technology (SM@RT) at the University of New

19 “A second life for digital debris”, op.cit.
20 “War declared on world's growing e-waste crisis”, op.cit.
21 “A second life for digital debris”, op.cit.

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South Wales, Sydney. It was the world’s first e-waste microfactory, endowed with the
capability to transform components from e-waste items into valuable materials for reuse.
Small machines and pre-programmed robots were used to identify different components from
a large variety of e-waste items such as printers, mobile phones and computers. Prof.
Sahajwalla highlighted the procedure as she said, “These microfactories can operate on a site
as small as 50 sq. m... and can be located wherever waste is stockpiled. This can be done at
remote and regional locations and is perfectly suited to the systems that are already in place in
India.”

In India, the E-Waste (Management and Handling) Rules, 2011, were the first set of
regulations. Prior to this, e-waste was covered under the Hazardous Waste Management
(HWM) Rules, 1989. The 2011 rules, which were implemented in May 2012, introduced the
concept of EPR, which made the manufacturer or the producer accountable for the life cycle of
the product. In 2016, under EPR, producers in India were given specific e-waste collection
targets, which were implemented in October 2017. The rules were amended in 2018, and
included some changes in collection targets. According to Sinha, “The moment cost is
externalized to waste, it becomes a challenge. If you internalize the cost, it becomes easier to
handle. This is the significant difference and that is why EPR exists.”22 Besides, the Hazardous
and Other Wastes (Management and Trans-boundary) Rules, 2016, banned the import of e-
waste for disposal in India. For recycling, the government had to approve it first. But since
then, the government had given no such permission, as it was allowed only for refurbishing of
second-hand products. Moreover, the Central Board of Excise and Customs lacked the human
resource and the infrastructure to separate e-waste from a second-hand product. Besides,
there was no penalty for violation of rules. In the view of Priti Mahesh, the Chief Programme
Coordinator of Delhi-based non-profit Toxics Link, “The law looks good only on paper. But lack
of monitoring and poor implementation has made a mockery of the law.”23 Although India was
one of the biggest producers of e-waste in the world, it didn’t have data and monitoring
mechanisms to manage e-waste.

The problem of e-waste had been spoken about in many levels, but not at a significant scale,
especially in the unorganised sector. E-waste if stored and not dismantled was not hazardous,
rather the problem lied in improper handling. Unfortunately, India was still ill-equipped in
skilled labour to handle e-waste recycling. Sonia Garga, Project Manager, Sahaas Zero Waste, a
startup that converted waste into resources, summed up saying, “Considering the India’s e-
waste generation estimates and the lax of capacity with the urban local bodies, the future
doesn’t look bright. The rules mandate an individual to drop the e-waste at an authorised
collector, but do not provide any incentive against it. This forces e-waste to end up with
informal sector and loses track on further recycling.”24

22 “A second life for digital debris”, op.cit.
23 Kaur Banjot, “Can India manage its toxic e-waste?”, https://www.downtoearth.org.in/news/waste/can-india-
manage-its-toxic-e-waste--60974, July 19th 2018
24 Bandela Dinesh Raj, “E-Waste Day: 82% of India's e-waste is personal devices”,
https://www.downtoearth.org.in/blog/waste/e-waste-day-82-of-india-s-e-waste-is-personal-devices-61880,
October 15th 2018

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