Thursday, 27 January 2022

Current Market Outlook

Foreign portfolio investors have pulled out more than $2 bn from Indian equities so far in January. In the preceding three months outflows from FPI's were close to $5 bn.

Domestic Institutional Investors continue to show their conviction in Indian equities and have bought more than Rs 7000 cr in January so far.

The systematic investment plan SIP for December 2021 hit its highest level ever at Rs 11305 cr crossing Rs 11000 cr mark for the second consecutive month.

 Markets are looking forward to the Union Budget next week on Tuesday. The market is also anxious about geopolitical tensions between Russia and Ukraine and its impact on crude oil prices.

 In the current Q3FY22 earnings season, one of the major concerns voiced by companies is the rising input costs as well as higher energy costs. However most companies remain optimistic that input costs have peaked in Q3.

At current levels of 16877 we believe Nifty trades at 23 times FY23(E) EPS. We believe Nifty can drift till 16280 levels which could be a good opportunity to accumulate quality stocks like Infosys TCS Reliance Industries ICICI Bank.

 Latin Manharlal Group

Friday, 15 January 2021

Budget Expects Scrappage Policy, PLI Scheme to Boost Automotive Sector

The domestic commercial vehicle (CV) segment witnessed a steep volume contraction of 29% in FY2020, as it battled multiple headwinds. Challenges such as overcapacity in the trucking system, subdued freight availability due to a weak macroeconomic environment, cost increases due to new emission norms (BS-VI), financing constraints, and stress on the cash flows of fleet operators, have all aggrevated with the onset of the pandemic, and the lockdowns imposed to contain the same. Accordingly, fleet operators cut back new vehicle purchases, resulting in the 85% and 55% contraction in CV retail volumes witnessed in Q1 and Q2 FY2021 respectively.


The Scrappage Policy, relevant for the CV industry, has been long overdue after its initial draft was proposed in May 2016 and actions may be expected this year. The benefit of the Scrappage Policy to the industry will depend on a) the age qualification for the scrapping vehicles and b) the extent of the incentive offered. In case the age qualification is kept for vehicles older than 15 years, the impact will be muted as only a limited number of vehicles would qualify for the scheme. The CV parc older than 15 years is estimated to be around 650,000 units only. Such older trucks are generally used in hinterlands for short-haul operations by the SFOs; hence, are unlikely to be replaced, without significant commercial incentives.

A well-defined vehicle scrappage policy in India can help create an industry of its own with a business opportunity of $6 billion (Rs 43,000 crore) a year. It could generate fresh employment and trigger economic growth, and also act as a critical factor to revive the automobile market that has been hit by a prolonged slowdown. The government expects recycling of metals like steel, copper and aluminium from the scrapped vehicles to help reduce their imports. Getting the roads rid of old vehicles would also help lower pollution and the government’s oil bill, as the new vehicles replacing the old ones would be more fuel efficient.

The policy can be a win-win for all as the consumer would benefit from the scrap value, GST savings and discounts, while a dealer would gain from demand for new vehicles. For a vehicle maker, recycled metals would be available at a cheaper rate, and the government could save forex because of lower imports of these raw materials as well as get tax revenue from new vehicle sales. Already the likes of Maruti Suzuki and Mahindra & Mahindra have ventured into the recycling business and there are another half a dozen companies in queue to enter the space, say people in the know. The challenge is that scrap yards will take time to build.

The automobile industry wants the policy to cover all segments, including cars and two-wheelers and not just commercial vehicles, to create a significant scale for new players to participate in this new market. A recent study has estimated the market for vehicle scrappage and recycling at $6 billion. According to it, if the policy is defined well, 9 million vehicles could go off roads by fiscal 2021 and 28 million by 2025, largely comprising two-wheelers. It would reduce carbon dioxide emission by 17% and cut particulate matter in air by 24%. Also, if half the Bharat Stage-II and III vehicles go off the roads, it would save 8 million tonnes of oil a year.

The other factor which has a significant bearing on the automotive industry over the medium-to-longer term is the recently announced PLI scheme. The scheme aims to make India a part of the global value chain in manufacturing and plans to attract fresh investments. It has allocated Rs 57,000 crore for the auto segment and another Rs 18,100 crore for the advanced chemistry cell batteries (Li-Ion battery). These incentives have the potential to kickstart significant investments in the coming years and help the industry achieve globally competitive scales in the chosen segments. The operational details of the scheme, however, would be known only in the coming years.


Exemption from import duties on coking /anthracite coal: The Basic Customs Import Duty on Anthracite/Coking Coal is 2.5%. Since it plays a vital role in the manufacturing of Steel, it is necessary to make coking /anthracite coal available at international competitive price to make Indian steel mills more competitive. It is therefore recommended that Customs duty on Anthracite/Coking Coal as mentioned above to be reduced to NIL.

Enhancement of export duty on pellets: There is severe shortage of Iron Ore in the country due to various reasons, impacting the production of Steel in the country. This exemption from export duty on pellets is causing further shortage of iron ore in the country due to enhanced export of pellets. Therefore, in order to conserve the iron ore / pellets for the domestic consumption, it is necessary that pellet exports are discouraged by imposing the same export duty as in case of iron ore i.e., 30% on the export of pellets having Fe Grade 60% or higher

Exemption from import duty on steel grade limestone and dolomite: While cement grade limestone reserves are adequate, SMS, BF and Chemical grade limestone (required by the steel industry) are not adequate and occur in selective areas. Increase in steel production in the country, has led to rising demand for SMS and BF grade limestone. Therefore, the limestone imports have been increasing consistently. So, it is requested to exempt the Customs Duty on the limestone (CTH 2521) and dolomite (CTH 2518) from 2.5% to NIL imported for Metallurgical use in line with similar imports from ASEAN countries, without any technical condition.

Alignment of rate of GST on services provided by Govt.: it is suggested that the tax structure relating to supply of services by Govt. in respect of mines be aligned with the rate of services under SAC 997337 @5% which is applicable to ores instead of 18% at present.

Latin Manharlal Group

Thursday, 8 October 2020

What are 5G Networks?

When 5G mobile networks come to India, they will use a new radio technology and a different network architecture to deliver higher bandwidth and lower latency than 4G (LTE) and 3G networks we have today. 5G promises peak data speeds of up to 10 Gbps – up to 100 times faster than the 100 Mbps of 4G. Latency, a measure of the time it takes data to travel from the phone to the distant server, could be less than a millisecond in 5G networks, or 60-120 times better than 4G

·        *  Digital networks would need expansion to connect half of world’s population

·         * Nearly half of the world still remains un-connected in 2020

·        *  India still needs to connect 55% of its population

·         * Significant investment in digital network quality is required to support new applications

·         * 1.8 bn connections of 5G needed by 2025 for 20% penetration

·         * The digital network will need to reach everyone at scale and quality

·         * 4-5X Internet Mobile traffic more digital kilometres more digital lanes - With high capacity fibre cables, 5G

·         * Millions of new users - more digital kilometres - Connect every home, every enterprise

·         * 3X Mobile Data speeds – superior speeds, response – Using software to manage network traffic (copper + wireless --à Fibre)

All Network Creators Investing Heavily in Digital Infrastructure

·         * May 2020 - China mobile to invest $14 Bn in building digital infrastructure enabling faster 5G Connectivity

·         * May 2020 - BT to invest $12 Bn in building 5G and next generation full fibre broadband across the UK

·         * March 2020 - Verizon to invest $18.5 Bn to accelerate its 5G plans globally

·         * June 2020 - Airtel to double its fixed line penetration in next three years

Cloud Companies

·         * May 2020 - Microsoft to invest $15 Bn to accelerate digital transformation in Italy including its first data center region.

·         * March 2020 - Google to invest $10 Bn in US offices and data centres in 2020 - Sets up a us $10 billion for India

Large Enterprises

·      * Enterprise spectrum sees huge demand in US, UK, Germany.

·     *  Many companies have applied to set up local 5G networks.

Citizen Networks

·         * Indian Govt. aims to provide 5,00,000 FTTH connections by Sept 2020 (part of BharatNet) FCC, US launched rural digital opportunity fund worth $20 bn.

PE Investment

·         * KKR in partnership with Telecom Italia to invest $7-8 Bn in Open Fibre deal.

       * EQT in partnership with OMERS to invest $4 Bn to acquire a fibre optic internet access company in Germany.

5G Network Rollouts Have Accelerated

Telcos continue to be bullish about 5G spend

·         * T-Mobile, US announced plans to spend $ 60 bn. on deploying 5G networks over the next 5 years

·        *  Chinese telecom companies have announced massive tenders for 5G rollouts in this Quarter (~ 10bn USD)

·        *  As of May 2020, there are approx. 300 operators investing in 5G commercial services

5G Rollouts have accelerated

·         * 11 operators have launched 5G in 2020 (till May).

·         * Bell Canada launched 5G in June.

·         * T-Mobile, Poland and Three, Sweden launched 5G in June.

·         * In HongKong, 3 operators have rolled out 5G post April 2020.

Customers are adopting 5G at unprecedented rates

·        *  Deutsche Telekom has reached 16 mn subscribers.

·        * Chinese Telecom Companies added 22mn 5G subscribers in 1 month (June 2020).

·        * South Korea has added more than half a million 5G subs in 1 month (May 2020).

Currenly, 5G is launched in few countries and under testing in many countries. According OpenSignal survey, US and Switzerland top the chart in 5G speed. U.S. users with 1,816 Mbps 5G speed which 2.7 times as fast as 4G users’ fastest speed. Switzerland came to the 2nd place with its early 5G adopters seeing speeds up to 1,145 Mbps which is 2.6 times fast than regular 4G users. Recently many smartphones makers has launched their 5G devices which are quite expensive.

How are Indian operators preparing for 5G

Reliance Jio launched its 4G service in 2016, skipping over the 2G and 3G technologies offered by rivals Airtel, Vodafone Idea and BSNL. Now it’s counting on its modern network infrastructure to make it one of the first to offer 5G service. Jio has the network and backhaul in place, needing only to invest in spectrum and equipment. Jio is also the only operator with an all-IP network, an important requirement for launching 5G services. It will conduct 5G trials with Samsung, the supplier of its 4G network, and has said it will extend its partnerships for 5G trials to include Huawei, Ericsson, and Nokia.

In July 2020, Google said it would invest Rs 33,737 crore  (USD 4.5 billion) in Jio to support the operator’s upgrade. Jio also has support from Qualcomm and Intel for its 5G plan. The latter two are Jio’s hardware enablers: Chipmaker Qualcomm is expected to offer deep technology know-how and insights to drive the 5G vision. Intel has advanced edge computing offering across processors and access to this technology can help Jio pace the 5G rollout. Google and Jio have come to a commercial agreement, where they would work together on an entry-level Android smartphone with 4G and possibly 5G capabilities.

Jio has designed its end-to-end 5G solutions from scratch using homegrown technologies. While it hasn’t given out details of its 5G solution, it expects to position itself to be an exporter of 5G systems as complete managed services in the near future.According to telecom experts, Jio could theoretically have a 15% cost advantage in 5G rollout if it uses self-built software. But there is a high possibility that Jio will extend partnerships with existing Indian providers in the 5G space to offer these solutions.

Airtel has said it will work with Huawei, ZTE, Ericsson, and Nokia on its trials. It has deployed 100 hops of 5G technology transmission equipment supplied by Huawei, improving its backhaul capacity by a factor of four, and has struck deals withCisco and Ericsson to speed up its core network in readiness for 5G service.

Vodafone Idea will conduct its trials with Huawei, ZTE, Ericsson, and Nokia, and is already using 5G AI technology from Huawei to boost the capabilities of its 4G network

Several Indian companies across software and technology solutions have already been rolling out their own global 5G solutions. From Tech Mahindra, Cyient, ITI Ltd to Sterlite Technologies Ltd and Saankhya Labs, these companies have built 5G expertise across core telecom solutions such as virtual radio access networks (VRAN), Open RAN (ORAN), chipsets and hardware, which Jio can possibly tap into for its homegrown solutions.

In fact, Jio’s Japanese peer Rakuten is already in talks with a number of Indian providers for their 5G solutions and experts estimate Jio will also onboard additional solutions from these companies.According to a UBS Evidence Lab survey from December 2019, 59% of telcos were already using network virtualization and 51% were willing to work with non-traditional vendors, suggesting these trends are opening ways for niche players, such as Jio, to get a share of global telco capex spend.

Network virtualization solutions can only work with a strong optical fibre cable (OFC) backbone. One of the leading OFC manufacturers globally, Sterlite Technologies Ltd (STL), has evolved from core manufacturing to digital networks services through acquisitions across software solutions over the past years to include solutions for virtualized access, network software products and system integration services.

Another homegrown company, Saankhya Labs, also owns intellectual property and provides radio units and chipsets for VRAN deployments

Tech Mahindra has a 17% stake in telecom software provider Altiostar, which is already rolling out cloud-based solutions for Japanese telco Rakuten. Globally, the company has been offering solutions across software-defined and cloud native networks, adoption of disaggregated networks and VRAN, among others, across markets in US, Europe and Japan.

Recently, Tech Mahindra announced a partnership with ITI, which has large manufacturing facilities, to enable manufacturing of 4G equipment and work on building capabilities for 5G equipment for the Indian market.

Another Indian company that has been present in this space is Cyient which provides intelligent network solutions for global telcos and is closely involved in 5G rollouts across Australia, South Korea, US and Europe among others apart from multiple telecom carriers globally.

Tuesday, 9 June 2020

How Reliance Industries Plans to become Debt Free

8th deal for Jio Platforms in less than seven weeks – Successfully Cruising Towards Zero Debt Status –Tieups to accelerate the process of Digitization

Jio, with 388 million users, combines all of RIL’s digital and telecom initiatives, including Jio digital services, mobile and broadband, apps, tech capabilities such as artificial intelligence, Big Data, and Internet of Things, and other investments such as in Den Networks, Hathway Cable, and Datacom. Reliance’s plans are not just instruments for clearing debt and the company has now opened up to a host of global investors.For instance, the tie-up with Facebook may help accelerate the process of digitising Reliance’s retail businesses.By bringing together JioMart, which is Jio’s business initiative with Whatsapp, Facebook plans to connect people with businesses, shops and purchase products, giving them a chance to discover new products.
The collateral benefits of the Reliance Jio-Facebook deal are many.
Firstly, Facebook, which includes WhatsApp and Instagram, caters to about 400 million users. Reliance Jio also has about the same number of clients, with some overlap. But since JioMart has been formed by RIL, the company is planning to enter in a big way to start the e-commerce business and e-payment services.The Jio-Facebook combine can compete with others in the e-commerce and e-services areas for which the vast WhatsApp and Instagram subscribers will add to JioMart’s reach to compete, reduce margins, and, therefore, prices for the consumers.
Secondly, already JioMart has begun trial runs in Navi Mumbai, Thane, and Kalyan besides RIL ownership in 6,700 big and small cities of 10,900 retail stores, employing 1,25,000 people. WhatsApp is also connected to small businesses, taking orders from customers, and promoting offerings through internet and cellphones. Thus, Facebook and Jio combined will have huge market reach and consumer convenience.
Thirdly, households will be able to reach by cellphones the nearest kirana stores and place orders for home delivery, Here too, Jio-Facebook can reach this way millions of traders and kirana merchants on the cellphones and internet and thus save consumers from having to make the trip physically for purchase.
Fourthly, the Jio-Facebook combine can now easily explore, with government concurrence, the introduction of a cryptocurrency network. The government of India has already approved block chain technology. The final step of digital currency may have to wait because the regulatory infrastructure has not yet been set up. When that happens, black money will become impossible to use as legal currency in circulation. Illegal transactions via cryptocurrency and block-chain will be impossible without detection.

The potential investors will not only help in bringing down the company’s debt but also offer technological advances that can be integrated for better monetization. Therefore, it is safe to say that the company's 'zero-debt' strategy, involving leading technology companies is part of a larger plan in progress -- a technology-first vision that allows the company to expand in future.
With the recent ADIA investment, Jio Platforms has raised Rs 97,886 crore from leading global investors including Facebook, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala and ADIA in less than seven weeks.

How Reliance Industries Plans To Become Debt Free
Name Of The Investor
% stake
Amt (Rs crore)
Silver Lake Partners
Silver Lake Partners
Vista Equity Partners
General Atlantic Partners
Mubadala Investment Co
Abu Dhabi Investment Authority
Total Stake Sale In Rel Jio
Stake Sale In Fuel Retailing Unit

Rights Issue (Rs 53125 cr)

Cash Profit Generation FY21 - Exp

Total Amount To Be Generated

Net Debt Of RIL 31.03.2020


The pursuit of 5G: Reliance Jio's ‘AatmaNirbhar’ self-dependent plan Launch of 5G-enabled technologies will unlock various disruptive new technologies; Reliance Jio has been making all-out efforts to step-up its 5G game in India. Reliance Jio has sought the government's permission to undertake 5G trials in India using its own technology and design. With this, Jio has emerged as the first Indian telecom major to seek 5G trials based on self-designed technology.

Apart from Reliance Jio, three global telecom service providers, Huawei Technologies, Ericsson, and Nokia Networks, are also vying to cash in on India's 5G plan. If trials are successful, this will also end Reliance Jio's dependence on Samsung, which was earlier its sole equipment supplier for 4G technology.

The development comes amid Reliance Jio's long-drawn plan to solidify its design and technology base in the country. From Rancore Technologies to US-based Radisys -- Reliance Jio has been making all-out efforts to step-up its 5G game in India.

The launch of 5G-enabled technologies is expected to be transformative in the telco and other industries by unlocking various disruptive new technologies. Global investment in the 5G industrial chain over 2020-2035 is likely to reach $3.5 trillion.

On the 5G front, the biggest roadblock for Jio, or for that matter any operator, is going to be steep spectrum prices. The base price of the 5G spectrum (in 3,300 megahertz to 3,600 megahertz band) is highest in India. At TRAI's recommended reserve price of Rs 492 crore per MHz, operators will have to pay around Rs 50,000 crore for 100 MHz pan-India spectrum - that's the minimum spectrum required to deliver 5G services (in sub-6000 MHz bands) as per global body ITU. The government has also said that it's not planning to reduce the base price for the 5G spectrum.

Latin Manharlal Sec. Pvt. Ltd.
Image & Data Source: Google

Wednesday, 26 February 2020

Several Ways Coronavirus Will Impact Retail – From Luxury to Chinese Shopping Tourism

The coronavirus disease 2019 (COVID-19) - an epidemic that could become a global pandemic - emerged in a densely populated manufacturing and transport hub in central China and has since spread to 29 other countries and regions carried along by Chinese New Year and international travel.

In contrast to the Western Africa Ebola emergency of 2013-2016 – more deadly but less contagious, arguably more isolated, and eventually contained in part by richer countries putting money into Africa – COVID-19 presents larger, more interdependent economies with management dilemmas. It has also surfaced at a time of eroding trust within and between countries – with national leadership under pressure from growing societal unrest and economic confrontations between major powers.

  •   China’s economic growth expected to slow to 4.5% in the first quarter of 2020 – the slowest pace since the financial crisis, according to a Reuters poll of economists.
  •  "Global oil demand has been hit hard by the novel coronavirus," says the International Energy Agency.
  •  Factory shutdowns are slowing the flow of products and parts from China, affecting companies around the world, including Apple and Nissan.

Falling oil demand
China is the world’s biggest oil importer. With coronavirus hitting manufacturing and travel, the International Energy Agency (IEA) has predicted the first drop in global oil demand in a decade.

Disruption to commerce
The shortage of products and parts from China is affecting companies around the world, as factories delayed opening after the Lunar New Year and workers stayed home to help reduce the spread of the virus.

As China grapples with the coronavirus, the economic damage is mounting around the world.There are around 70,000 confirmed cases of COVID-19, the new coronavirus that emerged in Wuhan, China, in December and is spreading around the world.

Businesses are dealing with lost revenue and disrupted supply chains due to China’s factory shutdowns, tens of millions of people remaining in lockdown in dozens of cities and other countries extending travel restrictions.

A recent commentary speculated that Apple would be the “canary in the coalmine for the economic impact of Covid-19, the novel coronavirus wreaking havoc in China and increasingly beyond. While it is true that Apple has a very strong reliance on Chinese manufacturers for its supply chain, it is still ultimately a brand manufacturer that has a lot of finished goods in its supply chain, which can theoretically weather at least the month’s worth of disruption that we’ve seen so far. And should that disruption extend beyond a month, it will still take a few more months before most consumers really feel it.

Most luxury brands would be pummeled if they did not have a well-articulated strategy for how to reach the Chinese market. For many, China is not just a source of growth, it is the only source of growth. Upscale Chinese consumers have a high appreciation for global luxury brands, and perhaps even more-so than Chinese-native brands serving the middle class, luxury brands coming into China are feeling the immediate impact of closures and social distancing. This impact will hit global luxury brands in Q1 2020. A month of lost sales, or longer, is unlikely to be made up in time to help a quarter, or possibly the year.

Luxury companies including Burberry, Ralph Lauren, Coach, and Capri Holdings—which owns Michael Kors, Versace, and Jimmy Choo—have already warned of lost sales amounting to tens or hundreds of millions of dollars due to the spread of coronavirus. Now a survey of top luxury executives estimates the total hit to the industry’s sales could reach as high as €40 billion ($43.4 billion).

The main concern is business in China, where sales are plummeting due to widespread store closures and shoppers hunkering down in their homes. The survey estimates as many as 10 million to 15 million products originally destined for China could go unsold, forcing companies to redirect those items to other parts of the world. Luxe outerwear company Moncler, for instance, said on a recent earnings call with investors and analysts that it had frozen shipments to Greater China and sent them instead to regions such as Europe.

Just as luxury retailers have made it a core strategy to penetrate the Chinese retail market, there are many Chinese brands and sellers that have a core strategy of selling to Western markets. A good example: Shein, long-time lurker on Pinterest. The company operates fairly opaquely, with only a few hints that it is headquartered in China. Their US site offers total business as usual currently, with recent new blog posts and no mention that operations may be disrupted by measures protecting against Covid-19. The impact won’t be felt immediately – most of these companies slow-boat their shipments to Western markets anyway – but give it a month, and the impact will start to be felt.
Cities like Melbourne, Milan, Mexico City, Munich and Las Vegas all have seen enough Chinese shopper tourism that retailers there actively advertise their services and Chinese shopper friendliness. That has undoubtedly come to a screeching halt in the last month. Most companies can absorb that much impact, but should the travel restrictions into and out of China continue, the long-term impact of the lack of Chinese tourist shopping will start to hit home in cities that have benefitted from the activity in the past.

Finally, a month of factories sitting idle means a month less of inventory in the pipeline. For most Western retailers, this won’t impact the shelves next week, but it could impact inventory any time over the next month to six months. Should disruptions continue past the current month, Western consumers will certainly see impact at the shelf as soon as April or May for those retailers that rely heavily on Chinese imports.

Latest Updates

A viral outbreak that began in China has infected more than 80,000 people globally. The World Health Organization has named the illness COVID-19, referring to its origin late last year and the coronavirus that causes it.The latest figures reported by each government's health authority as of Wednesday in Beijing:

Mainland China: 2,715 deaths among 78,064 cases, mostly in the central province of Hubei
Hong Kong: 81 cases, 2 deaths
Macao: 10 cases
South Korea: 1,146 cases, 11 deaths
Japan: 861 cases, including 691 from a cruise ship docked in Yokohama, 5 deaths
Italy: 323 cases, 11 deaths
Iran: 95 cases, 15 deaths
Singapore: 91 cases
Thailand: 40 cases
United States: 57 cases
Taiwan: 31 cases, 1 death
Australia: 23 cases
Malaysia: 22
Bahrain: 26
Vietnam: 16 cases
Germany: 17
United Arab Emirates: 13 cases
United Kingdom: 13
France: 14 cases, 1 death
Canada: 11
Kuwait: 12
Iraq: 5
Philippines: 3 cases, 1 death
India: 3
Spain: 6
Russia: 2
Israel: 2
Oman: 2
Austria: 2
Lebanon: 1
Belgium: 1
Nepal: 1
Sri Lanka: 1
Sweden: 1
Cambodia: 1
Finland: 1
Egypt: 1
Algeria: 1
Afghanistan: 1
Croatia: 1
Switzerland: 1
Greece: 1

Latin Manharlal Group
Image Courtesy: Google