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The assessment by KSRSAC

   The assessment done by KSRSAC has given a detailed overview about the status of Karnataka's forests as on 2000. The broad indicators of this assessment compare fairly well with the indicators of the assessment done by Forest Survey of India and published in the State of Forest Report 2017. The difference in forest cover between the two assessments (1999-2000 and 2015-16) is reasonable considering the time gap of about fifteen years between the assessments. A clearer picture will emerge if another assessment similar to the KSRSAC assessment is carried out by using satellite imageries of recent years (say 2015 or 2016).    As regards the overall status of the state's forests, it is apparent that our forests are under tremendous pressure, more so in the maidan and semi-malnad regions. The forests of the malnad region appear to be in satisfactory condition. However, the focus of the department should shift from planting to overall protection in respect of the forests of all the three regions. To summarize, what have been narrated and observed in the foregoing paragraphs are briefly reiterated below:1. In the semi-malnad and maidan regions of the state (including all taluks of Belagavi and Hassan districts other than Khanapur and Sakleshpur taluks, Kadur taluk, parts of Tarikere, Chikkamagaluru, Shivamogga, Bhadravathi, Shikaripura, KR Nagara, Mysuru, Nanjangud and T Narsipur taluks), the principal focus should be on overall protection and conservation of the existing forest blocks through eco-restoration providing for rigid protection, soil and moisture conservation and fire protection. This model should be implemented in the forest blocks year after year. Dibbling of seeds of native species annually just before the commencement of the rainy season should be an integral part of the eco-restoration model.2. In the above regions, the ongoing plantation programme of the department should be continued in very limited and selected areas where soil conditions are good. Number of seedlings should be not more than 200 per hectare. Focus should be on the quality of the seedlings rather than on their numbers. The quality of the seedlings should be as good as the seedlings which are being used in road-side and urban area plantations.3. There should be concerted efforts at converting the old eucalyptus plantations into natural forest by planting seedlings of indigenous species. Some of these plantations in the semi- malnad area have better soil profile even now. All out efforts, including uprooting of old eucalyptus stumps, should be made.4. The recorded forest area of the above regions is much below the national goal of one third area under forest or tree cover as stipulated by the National Forest Policy, 1988. The condition of the natural forests in the region is very poor and is fast deteriorating due to relentless biotic pressures. It is therefore necessary to include the remaining relatively better natural forests into the protected area (PA) network for bio-diversity conservation. 5. As the recorded forest area of the semi-malnad and maidan regions is very low, it is impossible to increase their forest or tree cover to one third of the land area only by taking up planting or eco-restoration activities in the forest areas. The only possible way of reaching the national goal in these regions is to increase the tree cover through farm forestry. Farm forestry is necessary both for increasing the tree cover and for making the ongoing agricultural activities environmentally and economically sustainable. Agricultural activities together with farm forestry activities can provide better security to the farmers, especially in situations of deficient rainfall or drought. 'Krishi Aranya Protsaha Yojane' should be the flagship programme of the Forest department in the regions both in terms of attention and investment.6. As a matter of fact, agro-forestry, dry-land horticulture and tree-mulberry cultivation must cover substantial portions of agricultural lands in the semi-malnad and maidan regions of the state. These are the most vulnerable areas of the state which have been affected by frequent and prolonged droughts. The severity of the climate change related vagaries of nature is likely to intensify during the coming years which may result in further degradation of the areas besides food scarcity and socio-economic stress. Extensive tree planting in any form will have to be carried out in these areas if the adverse effects of climate change are to be contained effectively. There are indications that desertification has already been taking place at an alarming rate in the arid tracts of the state.7. In the malnad region, the focus should shift from planting to overall protection. The present practice of general under planting in the moist deciduous forests should be done away with. However, the ongoing practice of overall protection coupled with cultural operations and diffused soil and moisture conservations should be continued. Planting, if at all required, should be restricted to only open areas with suitable species in very limited numbers (say, 50 seedlings per ha).8. The evergreen and semi-evergreen forest areas of the malnad region are included either in the protected area (PA) network or in the protection working circles of the respective working plans. These areas need to be provided utmost protection as per the prescriptions of the management plans or working plans. However, land management in the non-forest areas in the Western Ghats region is a matter of serious concern. Rapid urbanization around the towns and villages in the region and haphazard construction of roads (triggered by the demands of tourism) need to be controlled and monitored for the overall conservation of the highly eco-fragile area.9. There are large extents of Acacia auriculiformis plantations in the malnad region. As and when these plantations are harvested, the first priority should be to consider indigenous species for replanting. The possibility of thinning these plantations and progressively introducing indigenous species such as saldhupa, mango, cane, etc. should also be explored.10. The dry deciduous forests of the malnad region should be treated in the same manner as suggested for the dry deciduous forests of the semi-malnad and maidan regions. In other words, eco-restoration providing for dibbling of seeds, rigid protection, soil and moisture conservation and fire protection should be the principal focus. However, in limited areas with better soil, planting of indigenous species may be done with lesser number of seedlings (say 200 per ha). Teak, medri bamboo and sandal should be encouraged in these areas. The adjoining dry deciduous forests of Dharwad, Haveri and Davanagere districts may also be treated similarly.(Source: This is an abstract taken from the book, 'Status of forests in Karnataka'. The author is Mr. Dipak Sarmah.)

The forests of the Malnad region

   Historically, the forests of the malnad region were brought under organized management earlier compared to the forests of the other regions. This was motivated primarily because of the presence of hardwood timber, mainly teak. However, the governments of the time were conscious of the requirement of sustainable production of timber. This resulted in relatively more organized and scientific working of the forests through preparation of working plans. Another positive step taken was with regard to the reservation of large expanses of forest areas in the region. In retrospect, it appears to be a very farsighted decision taken by the administrators of the time who had realized the ecological importance of these forests for the overall well being of the entire region which now is Karnataka.   The forests of malnad Karnataka were worked primarily under the following silvicultural systems: in the moist deciduous zone, clear felling was resorted to in relatively flat areas and was followed by stump planting of teak. Selection felling was adopted in slope areas which were allowed to regenerate on their own through coppice and seeds; at times selection-cum improvement system was adopted in which case some follow-up regeneration operation mainly through dibbling of seeds in the felled and opened up spots and cultural operations in the entire coupe were carried out. The evergreen and semi-evergreen areas were worked under selection or selection-cum-improvement system mainly for plywood and matchwood timber. The dry deciduous forests were worked under clear felling system followed by stump planting of teak. The system of coppice or coppice with standards was also in vogue in the teak pole areas of Haliyal and Mundgod taluks. By and large, teak was the main species for planting in the moist deciduous and dry deciduous forests of the region. Teak performed quite well in the entire region except in Dakshina Kannada district (including present Udupi district) where other species such as Hopea parviflora (bogi), Ailanthus malabarica (halmaddi), etc. were introduced with encouraging results.(Source: This is an abstract taken from the book, 'Status of forests in Karnataka'. The author is Mr. Dipak Sarmah.)

Dry deciduous forests

   In view of the rapid reduction and eventually possible decimation of the dry deciduous forests from the semi-malnad and maidan regions, it is necessary to ensure protection of the remaining pockets of these forests by any means. One way of ensuring this is to declare some of these areas as protected areas. The objective is primarily to protect the bio-diversity which includes both the flora and fauna existing in these forests. This will automatically help in conservation and development of the natural forests within the protected areas. This process has already begun with the notification of a number of protected areas such as Jogimatti wildlife sanctuary (Chitradurga district), Gudekote sloth bear sanctuary (Ballari district), Rangayyanadurga four horned antelope wildlife sanctuary (Davanagere district), Ramadevara Betta vulture sanctuary (Ramanagar district), Yadahalli chinkara wildlife sanctuary (Bagalkot district), Chincholi wildlife sanctuary (Kalaburagi district), Thimlapura wildlife sanctuary (Tumkur district), Kappathgudda conservation reserve (Gadag district), Thimlapura conservation reserve (Tumkur district), etc. In addition, a number of dry deciduous forests of Bengaluru (Rural), Ramanagara and Mandya districts have been added to the existing protected areas such as Bannerghatta national park and Cauvery wildlife sanctuary. It is necessary to continue this process and include more and more natural forests into the protected area (PA) network. Priority should be given to those districts from which the natural forests have practically vanished. The existing remnant natural forests such as Kammasandra and Royalpadu in Kolar district, Narasimhadevarabetta and Ittikaldurga Blocks (NDB and IDB) of Chikkaballapura district, forest blocks of Manvi and Deodurga ranges in Raichur district, Agoli-Benakal forest blocks of Koppal district, Changler and Shahabad forests of Bidar district, Devarayanadurga and Siddarabetta forests of Tumkur district, etc. are examples of such forests. The forests of Sandur in Ballari district, which were adversely affected by large-scale mining of iron ore during the recent years, also need to be given utmost protection. Sandur forests stand out as an outstanding example of how a forest eco-system can retain its unique bio-diversity in harsh climatic and soil conditions. The erstwhile rulers of Sandur state were successful in managing these forests ensuring the least biotic interference.(Source: This is an abstract taken from the book, 'Status of forests in Karnataka'. The author is Mr. Dipak Sarmah.)

Plantations in forest areas

   As regards plantations in forest area, 5,25,398.72 hectares of plantations have been found in the state. These comprise of mixed plantations (1,32,188.92 ha), forest plantations (10,162.92 ha), teak (82,795.68 ha), eucalyptus (2,11,958.84 ha), acacia (54,915.69 ha), casuarina (4,125.33 ha), bamboo (1,401.79 ha ) and cashew (27,849.55 ha). Out of the above, in the malnad districts there are 2,53,151.41 hectares of plantations comprising of mixed plantations (39,939.12 ha), forest plantations (6,141.39 ha), teak (82,308.15 ha), eucalyptus (42,182.56 ha), acacia (49,708.16 ha), casuarina (4,125.33 ha), bamboo (897.15 ha ) and cashew (27,849.55 ha). In the semi-malnad region, there are 1,73,492.58 hectares of plantations comprising of mixed plantations (53,180.13 ha), forest plantations (681.47 ha), teak (487.53 ha), eucalyptus (1,15,397.9 ha), acacia (3,240.91 ha) and bamboo (504.64 ha). In the maidan region, there are 98,754.73 hectares of plantations comprising of mixed plantations (39,069.67 ha), forest plantations (3,340.06 ha), eucalyptus (54,378.38 ha) and acacia (1,966.62 ha). Thus, 48.18% of the state's forest plantations are in the malnad region, 33.02% in the semi-malnad region and 18.80% in the maidan region.    With regard to teak plantations, most of these plantations are in the malnad region, notably, in the districts of Uttara Kannada (48,593.39 ha), Shivamogga (9,750.41 ha), Chikkamagaluru (5,296.54 ha), Kodagu (12,900.93 ha) and Mysuru (2,713.83 ha). The total extent of teak plantations in the state is about 1.6 lakh hectares out of which about 1.2 lakh hectares were raised before 1984 as pure plantations. Subsequent to 1984, the system of raising pure teak plantation had been given up and teak was planted in combination with other species. Therefore, the plantations raised after 1984 will not have the appearance of a teak plantation. Such plantations are likely to be captured as natural forest or mixed/forest plantations in the satellite imageries. As regards the plantations raised before 1984, thinning of teak plantations in wildlife areas was discontinued because of an order dated 14-02-2000 of the Hon'ble Supreme Court of India prohibiting removal of any forest produce, including grass, from protected areas. Thinning and other cultural operations were also not carried out regularly in the plantations of some regular forest divisions for one reason or the other. This resulted in resurgence of miscellaneous species in these plantations. Such plantations give the appearance of natural forest or mixed/forest plantations. In view of this, the figure of 82,795.68 ha of pure teak plantations assessed by the KSRSAC for the entire state appears to be reasonable. Apparently, most of the pure teak plantations of Uttara Kannada district have been captured in the satellite imageries, an indication of the fact that these plantations were by and large thinned and maintained regularly as per the schedule of prescriptions.   Eucalyptus plantations covering 2,11,958.84 ha happen to be the largest segment among plantations of various species. Some of these plantations, especially in Bengaluru (Rural), Bengaluru (Urban), Tumkur and Kolar districts, are private plantations. Some plantations in forest areas have been raised and managed by the Karnataka Forest Development Corporation and Mysore Paper Mills (MPM) Limited. Although the tempo of planting of eucalyptus by the Forest department came down since the mid 1980s, the species is quite visible in the forest areas because of its tenacity and coppicing vigor. In the malnad districts, its presence is mainly in the drier taluks of Belagavi, Shivamogga, Chikkamagaluru, Hassan and Mysuru districts where agro-climatic conditions are quite favorable for eucalyptus. It had been planted quite extensively in the semi-malnad districts where similar agro-climatic conditions prevail and these plantations are visible even now. In the maidan-districts, although eucalyptus was planted widely, its presence does not appear to be very dominating now partly because of hostile climatic conditions, which inhibited vigorous growth of the species, and partly because of high biotic pressure which resulted in frequent removal of whatever had grown. As already mentioned, it became a popular species for planting in farmlands in a number of districts around Bengaluru.(Source: This is an abstract taken from the book, 'Status of forests in Karnataka'. The author is Mr. Dipak Sarmah.)

The IPO Price and the S1

In my What Is Going To Happen In 2019 post, I wrote: I expect we will see IPOs from big names like Uber/Lyft/Slack, although I also expect those deals will get priced well below the lofty expectations they have in mind right now. Some of that will be because of weak equity markets in the US, but it is also true that most of the IPOs in 2018 also priced below the lofty “going in” expectations of founders, managers, boards, and their bankers. The public markets have been much more sanguine about value than the late stage private markets for a long time now. And now we are starting to get the data from these IPOs. Lyft is on the road raising roughly $2bn at a post-deal valuation range of $16bn to $20bn ($62 to $68 per share). When I see an IPO price range, I like to go look at the S1 that the issuer has filed with the SEC prior to the road show. Here is Lyft’s S1. Here are the things I like to look for in a S1: 1/ The total shares outstanding. You can go to the table of contents of the S1 and look for the section called “Description Of Capital Stock”. In Lyft’s S1, it says there are ~240mm shares of Class A common stock plus some amount of Class B common that is not yet detailed. The Bloomberg article I linked to above says the company is going to sell 30.8mm shares at $62 to $68 per share. So there will be at least 270mm shares outstanding plus the Class B shares. The Bloomberg folks seem to be using a post deal share count of 288mm share so that is close enough. You get to fully diluted post deal valuation by multiplying the share count (288mm) by the range ($62/share to $68/share). 2/ Revenues and earnings/losses. You can go to the table of contents of the S1 and look for the section called “Selected Consolidated Financial And Other Data” and you will find the audited financial data. I like to find the quarterly numbers because that will give you a good idea of current growth rates. These are the numbers for Lyft: As you can see the quarterly revenues are growing at roughly $80mm a quarter so a back of the envelope guess on revenues for 2019 are [$750mm, $830mm, $910mm, $990mm] for a total of ~$3.5bn, up from $2.1bn in 2018 (yoy growth of 65%). You can also see that the contribution (net of cost of goods sold) has been about 45% over the past few quarters so if that ratio holds in 2019, there would be contribution of roughly $1.6bn in 2019. For the operating costs, you can look at the difference between contribution and EBITDA, which you can see here: Lyft spent ~$1.85bn on opex in 2019 ($921mm of contribution plus $943mm of EBITDA losses). That number grew from $1.1bn in 2017. I would expect Lyft’s operating expenses to be at least $2.25bn to $2.5bn in 2019. Which gets you to this possible P&L for 2019: Revenues – $3.5bn Gross Margin – $1.6bn EBITDA (loss) – $600mm to $900mm 3/ Valuation Ratios: At the mid-point of the offering range $18bn, the price to revenue multiple is roughly 5x (18/3.5) and the multiple of gross margin (what Lyft keeps after paying significant COGS) is roughly 11x (18/1.6). 4/ Time to cash flow breakeven. This is harder because you have to make some assumptions about growth rates beyond 2019 and opex growth rates. But if Lyft can grow revenues at 60% per annum for a few more years and keep opex growth rates to 25-30% per annum, then it could get profitable by sometime in 2021. This suggests that the $2bn it is raising may be sufficient to get profitable, but it will be close. So what does this mean for other late stage high growth high flyers? To me it says if you have company focused on a big opportunity (like transportation) that is growing at north of 60% per year it is worth in the range of 10-12x net revenues to wall street right now. Because Lyft only keeps about 45% of its revenues after very high COGS, that works out to be 5x revenues. Many late stage private companies are getting financed at valuation ratios in excess of this so they will have to grow into their eventual public market valuations. But that has been the case for quite a while now as the late stage private markets continue to pay higher prices for high growth companies than the public markets do.