Tuesday, 15 January 2019

India poised to become Third-Largest Consumer Market


India is poised to become the third-largest consumer market behind only the US and China. The consumer spending in India is expected to grow from USD 1.5 trillion at present to nearly USD 6 trillion by 2030, a report of World Economic Forum said.

As per the WEP, with an annual Gross Domestic Product (GDP) growth rate of 7.5 per cent, India is currently the world's sixth-largest economy. Domestic private consumption, which accounts for 60 per cent of the country's GDP, is expected to develop into a USD 6-trillion growth opportunity by 2030.

The report further added, "If realised, this would make India's consumer market the third-largest in the world, behind the US and China."

Zara Ingilizian, Head of Consumer Industries and Member of Executive Committee, WEF, said "as India continues its path as one of the world's most dynamic consumption environments, private and public-sector leaders will have to take shared accountability to ensure such consumption is inclusive and responsible. Notwithstanding the significant growth in consumption, critical societal challenges will need to be addressed, including skills development and employment of the future workforce, socio-economic inclusion of rural India, and creating a healthy and sustainable future for its citizens.”

The report 'Future of Consumption in Fast-Growth Consumer Market India' mentioned that growth of the middle class will lift nearly 25 million households out of poverty.

According to the report, growth in income will transform India from a "bottom of the pyramid economy" to a middle class-led one.

As expected the future consumption growth will mainly come from rich and densely populated cities and the thousands of developed rural towns.

WEF said that, "India's top 40 cities will form a USD 1.5 trillion opportunity by 2030, many thousands of small urban towns will also drive an equally large spend in aggregate. In parallel, there will be an opportunity to unlock nearly USD 1.2 trillion of spends in developed rural areas by improving infrastructure and providing access to organised and online retail."

The report was produced in collaboration with Bain & Company builds on consumer surveys conducted across 5,100 households in 30 cities and towns in India, and draws from more than 40 interviews with private and public-sector leaders.

Nikhil Prasad Ojha, Partner and Leader of the Strategy practice at Bain India said, "It's an exciting future for firms that wish to unlock the consumption opportunity in India."

The report identified three critical societal challenges that need to be addressed to unlock the potential of these opportunities and to ensure equitable growth - skills development and employment for the future workforce, socio-economic inclusion of rural India and healthy and sustainable future.


Image Courtesy: Google
Latin Manharlal Group

Sunday, 6 January 2019

Purchasing Managers’ Index signals a Sparkling Continuous Expansion


Purchasing Managers’ Index is an indicator of business activity both in the manufacturing and services sectors. PMI in October 2018 stood at 53.1 as against 50.3 in October 2017. October 2018 is the 15th consecutive month of PMI>50, indicating growth in the manufacturing sector.

The Start-up India is a flagship initiative of the Government of India, intended to build a strong ecosystem that is conducive for the growth of start-up businesses, to drive sustainable economic growth and generate large scale employment opportunities. The Government through this initiative aims to empower start-ups to grow through innovation and design.

DIPP recognized start-ups number touched 14,545 in November 18 as compared to 4610 on October 2017 generating total employment for 130,424 persons.

Number of programmes have been undertaken since the launch of the initiative on 16th of January 2016 by Prime Minister, to transform India into a country of job creators instead of job seekers.

 The 19-Point Start-up India Action Plan envisages several incubation centres, easier patent filing, tax exemptions, ease of setting-up of business, a Rs. 10,000 crore corpus fund and a faster exit mechanism.

The achievements of the Start-up India action plan can be stated as: simplification and hand holding for compliance regime based on self-certification, rolling out of mobile app and portal, setting up of Start-up India hub, legal support and fast-tracking patent examination at lower costs, relaxed norms of public procurement for start-ups and faster exit for start-ups,  providing funding support through fund of funds with a corpus of Rs. 10,000 crore, tax exemption on capital gains, tax exemption to start-ups for 3 years, removal of angel tax, promoting industry-academia partnership and incubation through launch of Atal Innovation Mission, harnessing private sector expertise for incubator setup, building 11 Technology Business Incubators, setting up of 7 new research parks modelled on the research park setup at IIT Madras, promoting start-ups in the biotechnology sectors and launching of innovation focused programmes for students.

Image Courtesy: Google
Latin Manharlal Group

Wednesday, 2 January 2019

India Improves Ranking in Ease of Doing Business


India jumped 23 ranks in the World Bank’s Ease of Doing Business Ranking this year to be ranked at 77. Upward move of 53 ranks in the last two years is the highest improvement in 2 years by any large country since 2011. India now ranks number one in Ease of Doing Business Report among South Asian countries compared to 6th in 2014.

So far, India has improved its rank in 6 out of 10 indicators and has moved closer to international best practices (Distance to Frontier score) on 7 out of the 10 indicators. The most dramatic improvements have been registered in the indicators related to construction permits and trading across borders. India's rank improved from 181 in 2017 to 52 in 2018, in grant of construction permits, an improvement of 129 ranks in a single year. When comes to trading across borders, India's rank has improved by 66 positions, moving from 146 in 2017 to 80 in 2018.

The Department of Industrial Policy and Promotion ,Ministry of Commerce and Industry, in collaboration with the World Bank conducts an annual reform exercise for all States and Union Territories under the Business Reform Action Plan (BRAP) to improve delivery of various Central Government regulatory functions and services in an efficient, effective and transparent manner. States and UTs have conducted reforms to ease their regulations and systems in areas like labour, environmental clearances, construction permits, contract enforcement, registering property and inspections. The States have also enacted Public Service Delivery Guarantee Acts to enforce the timelines on registrations and approvals.

Ease of Doing Business ranking improved, and it has been possible because of the transformative measures taken by the Government of India which includes legislative and regulatory reforms. To support start-ups and lower tax rates for MSMEs quicker environmental clearances from 600 days to 140 days has been implemented, abolition of inter-state check post after implementation of GST has been done, enhanced input tax credit and electronic GST network has been put in place and the creation of commercial courts to fast track enforcement of contracts and faster security clearances has lent support to the start-ups in the country.

Among BRICS countries, India has improved its rank from 5th in 2010 to 3rd in 2018. Various measures were undertaken to ensure this improved ranking is issuance of construction permits where India’s rank is 52, in getting electricity connection India’s rank is 24 and in Trading Across Borders India now ranks at 84. In paying taxes India’s ranking is 121 and in resolving insolvency India’s ranking stands at 108.

For ease of doing business for start-ups Twenty-One regulatory changes have been made. For optimization of resource utilisation and enhance the efficiency of the manufacturing sector, DIPP launched the Industrial Information System, a GIS-enabled database of industrial areas and clusters across the country in May 2017. This portal serves as a one-stop solution to the free and easy accessibility of all industrial information including availability of raw material – agriculture, horticulture, minerals, natural resources, distance from key logistic nodes, layers of terrain and urban infrastructure.

IPRS is proposed to be translated into an annual exercise covering all the parks across India. The coverage would be widened and updated to bring in deeper qualitative assessment feedback, bring in technological intervention and develop it as a tool that helps effectively for demand driven and need based interventions both by policy makers and investors.


Image Courtesy: Google
Latin Manharlal Group

Monday, 24 December 2018

The Nuts & Bolts of the ABB Hitachi Deal


Hitachi’s ABB Deal Isn’t Just an Escape Hatch


Whenever a Japanese company acquires an overseas asset, the rationale is typically that it’s finding a way to survive the country's aging demographics and shrinking returns.

But Hitachi Ltd.'s 800 billion yen ($7.06 billion) purchase of ABB Ltd.'s power-grid business is bigger than that. The deal, while on the expensive side, is high-margin for the Japanese industrial conglomerate, and could catapult it into the big leagues of power equipment globally. 

Hitachi is nearing an agreement to buy 80.1% of Swiss engineering giant ABB Ltd.’s power-grid unit, in a deal that values the entire business at $11 billion. ABB has an option to sell its 19.9% stake three years after the current deal — Hitachi's largest-ever purchase — is completed. ABB noted that Hitachi would help provide access to new markets as well as financing.

Combined with the Japanese conglomerate’s other industrial-equipment business, ABB’s power grids will allow Hitachi to compete neck-and-neck with General Electric Co. and Siemens AG. With ABB’s power grids under its belt, Hitachi also could avoid the fate of so many other global industrial companies, which have struggled to turn their businesses around. As Japanese conglomerates increasingly talk about reforming to extract more value and shed the Japan discount, Hitachi has been ahead of the pack — selling units that no longer fit its strategy and putting more cash to work.

Buying ABB brings Hitachi closer to its consolidated operating margin target of more than 10% by 2022, compared with 8% for the group and 6.5% for the power business currently. Other targets loom, too: The Japanese company is looking to almost double the sales in its power segment to more than 800 billion yen by March 2022 from around 450 billion yen.

Hitachi has almost 800 businesses spanning everything from construction machinery to nuclear power plants and healthcare. It’s now cutting its subsidiaries by 40% to 500 companies, as the Nikkei reported earlier this year, and aims to focus on four core areas, of which power and energy is one.

ABB Management Commentary - “Power Grids will strengthen Hitachi as global leader in energy infrastructure and Hitachi will strengthen Power Grids’ position as a global leader in power grids. With this transaction, we are realizing the value we have built through the transformation of Power Grids over the last four years. Our shareholders will directly benefit through the return of the proceeds of the divestment. Building on our existing partnership announced in 2014, the initial joint venture will provide continuity for customers and our global team’’

ABB investors have long been underwhelmed by the power-grid business, which is low-margin compared with the Zurich-based firm’s robotics and factory automation operations.
Announcing the deal, ABB spelt out a road map that would chart a new course in industrial automation, electrification, robotics and automation. Analysts said that in mature markets, the power transmission and distribution (T&D) business has limited incremental growth opportunities both in terms of orders and profits. From a technology-driven solutions business earlier, it is now a converter of raw material into finished goods, where there’s hardly any upside in margins.

ABB Management Commentary – ‘’Our four newly shaped businesses, each a global leader, will be well aligned to the way our customers operate and focus stronger on emerging technologies such as artificial intelligence. The continued simplification of our business model and structure will be a catalyst for growth and efficiency in our businesses. Our businesses will be further supported through the transfer of experienced resources from today’s country organizations’’

ABB: Shaping a leader focused in digital industries
Fundamental actions to focus, simplify and lead in digital industries for enhanced customer value and shareholder returns

Focus of portfolio on digital industries through divestment of Power Grids
  • Divestment of Power Grids to Hitachi expands existing partnership and strengthens Power Grids as a global infrastructure leader with enhanced access to markets and financing.
  • Enterprise Value of $11 billion for 100% of Power Grids, equivalent to an EV/op. EBITA multiple of 11.2x1.
  • Crystallizing value from the transformation of Power Grids including doubling operational EBITA margin since 2014.
  • ABB initially to retain 19.9% in the equity of carved-out Power Grids to ensure transition; pre-defined exit option on 19.9 percent equity at fair market value with floor price at 90% of agreed Enterprise Value, exercisable by ABB three years after closing.
  •  Closing expected by first half of 20203.
  •  ABB intends to return 100% of the estimated net cash proceeds of $7.6-7.8 billion from the 80.1% sale to shareholders in an expeditious and efficient manner through share buyback or similar mechanism.
Simplification of business model and structure
·         Discontinuation of legacy matrix structure
·         Businesses will run all customer-facing activities as well as business functions and territories, fostering ABB’s entrepreneurial business culture
·         Businesses to be strengthened by transfer of experienced country management resources
·         Existing country and regional structures including regional Executive Committee roles to be discontinued after closing of the transaction
·         Corporate activities to be focused on Group strategy, portfolio and performance management, capital allocation, core technologies and ABB Ability™ platform

Shape four leading businesses aligned with customer patterns

 • All businesses global #1 or #2 in attractive growth markets:

* Electrification 


Industrial Automation











Robotics & Discrete Automation



 
Motion



















  •          ABB Ability™ tailored digital solutions will drive customer value in each business whilst capturing synergies through common platform.
  •      Actions position ABB with a leadership role in digital solutions, and evolving technologies such as artificial intelligence.
Latin Manharlal Group

Sunday, 25 November 2018

ICRA pegs India’s Q2 GDP Growth to ease to 7.2%



After registering a robust growth in the first quarter of this financial year, the pace of India’s economic growth is expected to have substantially slowed in the July-September quarter amid higher fuel prices and a weaker rupee.

According to a report by rating agency ICRA, the GDP growth of Indian economy is pegged at 7.2 per cent for the second quarter, dragged down by lacklustre agriculture and industry. The GDP had grown by a higher than expected 8.2 per cent in the first quarter of the fiscal as compared to the year-ago period. 

The report cited higher fuel prices and weakness in rupee as primary factors dragging the industrial growth. Further, the country has been affected by heavy rains in some states leading to massive flooding while the other states are dealing with significantly deficient and drought like situations resulting in to muted agricultural growth.

As per the report, overall, manufacturing GVA (gross value added) growth is expected to ease to 7 per cent in Q2 FY 2019 from the healthy 13.5 per cent expansion in Q1FY2019. The agency said higher commodity prices may support a shallow recovery in GVA growth in mining and quarrying from the marginal 0.1 per cent in Q1 FY 2019 to around 2.5 per cent in Q2 FY 2019, despite a slowdown in volume growth.  

However, services sector growth is expected to rebound to 7.8 per cent in the second quarter from 7.3 per cent in Q1 FY 2019, buoyed by a sharp pickup in the expansion in the Government of India’s non-interest revenue expenditure, a mild rise in growth of bank deposits, air and ports cargo traffic, as well as a moderation in the pace of FII outflows.

Going ahead, the Indian economy is expected to slow down in the second half of the fiscal, partly because of the base effect of higher growth last year. Tighter financial markets, a credit squeeze and the lagged impact of weak currency and high oil prices will continue to weigh on growth.

Latin Manharlal Group

Thursday, 15 November 2018

Companies report strong prospects from Railways Business: Extracts from commentary about Railways Business.


KEC International

Considering strong order book the railway business of the company is expected to close current fiscal with a revenues of about Rs 1500-1600 crore having clocked a revenues of about Rs 734 crore in H1FY19. The company has linked up with various vendors in railway business. With ramp up in railway business the vendor financing have also gone up. But backward integration by the company in Railways has resulted in improved profitability as well as reduction in payable days. Focus on streamlining railway supply chain, vendor base and credit terms.

Cummins Ltd

Within industrial construction sales stood at Rs 100 crore, rail Rs 100 and others form remaining sales. Railways have grown significantly and strong traction exists. Government efforts on infra sector is also helping the overall growth

Kalpataru Power Transmission Ltd

For the Sep 18 quarter, T&D revenues stood around Rs 1100 crore, Oil and gas and Railway together around Rs 450 crore. Margins in railways around 9-10%. Strong orders coming from Pipeline and Railways for next 2-3 years. Strong order inflows from Railways and International T&D in Sep 18 quarter.

SKF Ltd

Within industrials, railways account for around 7% of total sales. Strong traction seen from passenger wagon side, while the demand from freight side bearings will pick up from now.

Escorts

New products launched in Railways. Order book is more than Rs 400 crore will be executed.25% growth in Railways for FY 19 with margins of 18-20%.

lrcon International - Expect revenue of about Rs 4600 crore in FY19

Stand-alone executable order book of the company as end of Sep 30, 2018 was more than Rs 27000 crore up from about Rs 22400 crore as end of March 31, 2018. The executable order book consists of only projects where work has already commenced and if the order waiting for clearance and approvals are included the order book will be approximately over Rs 35000 crore. Since infrastructure projects in sectors like railways take 1-1.5 years to complete investigation/surveys and clearances etc, the company includes only the orders for which work commenced in the order book.

Rites India Ltd

Performance of first half is not representative of full year as typically 60% of the revenue of the company will accrue in second half. For FY19 the company is confident of maintaining/improving the FY18 EBITDA margin levels. The EBITDA margin for FY18 was 9.86% and for H2FY18 was 14.51%.
Consultancy business has contributed about 67% of the operating turnover and income from the consultancy has increased by 83% to Rs 292 crore in Q2 FY19 against the corresponding last quarter revenue of Rs 160 crore. Company's standalone Order Book stands at Rs 6183 crore as of 30.09.2018 which is expected to be executed in the next 1 to 3 years. This order book also includes export order book of Rs 1284 crore as on 30.09.2018. The present export order book is likely to be executed in 2 to 2.5 years time. As per delivery schedule Company will start exporting in the second half of FY19.

Tuesday, 30 October 2018

India Tops Asia’s Most Investment-Driven Economy

Over the years, India has emerged as one of the fastest growing economies in the world and an attractive investment destination driven by economic reforms and a large consumption base. Factors including government’s policies on the liberalization of most sectors for foreign investment, growing opportunities across sectors, skilled human resource, cost-effective production facilities and strong domestic demand have played a major role.

According to a new Standard Chartered study, India has emerged as Asia’s most investment savvy economy and over two-thirds of the country’s affluent class prefer to use various investment products to achieve their financial goals and greater social mobility.

While the number of people climbing the social ladder in the west, when it comes to invest, save and spend, is slowing down, there is an increase in new group of people in Asia, Middle East and Africa who are accumulating wealth and improving their personal well being rapidly and this group of people have been named in the study as ’emerging affluent’. The study examined the views of emerging affluent consumers from 11 markets across Asia, Africa and the Middle East.

As per the report of 11,000 emerging affluent consumers across Asia, Africa and the Middle East, 68 per cent of Indian people belonging to this segment are using investment products to achieve their financial goals, as compared to an average figure of 57 per cent.

About 63 per cent of these people in India prefer investing in financial products as part of their long-term financial plan to meet financial goals and boost their personal wealth. On the other hand, another popular strategy adopted by these people was career progression and increment in salary (44 per cent), followed by starting a new business (25 per cent) to increase their wealth.

Saving for their children’s education, which is also the top savings priority across the markets, was the number one financial goal for India’s emerging affluents, the study showed.

Investment products, according to the company for this particular study, refers to fixed income investments, equities, stocks, unit trusts, mutual funds, self-invested pension funds, investment-linked insurance, real estate property funds and real estate investment trusts (REITs).


As per the study, new technology has made it easy to manage money effectively anywhere in the world. Online banking tools are playing a key role in effective money management today as the stock investments, transfers, payments and financial advice is just a touch of a button away today.

Latin Manharlal Group