IMF backs India’s growth story; reforms bearing fruits

India has been declared the sixth largest economy in the world supported by major reforms undertaken in the recent past, including the implementation of the GST, which will help reduce internal barriers to trade, increase efficiency, and improve tax compliance. 

According to the database of the International Monetary Fund’s World Economic Outlook (WEO) for April 2018, India’s Gross Domestic Product (GDP), the worth of the economy, clocked in at $2.6 trillion for 2017, which is well over the $2.5 trillion milestone that separates big economies from pretenders.

India is now the world’s sixth largest economy, displacing France. The five economies ahead are the United States, China, Japan, Germany and United Kingdom.

The IMF in its report has projected India to grow at 7.4 per cent in 2018 and 7.8 per cent in 2019, lifted by strong private consumption as well as fading transitory effects of the currency exchange initiative and implementation of the national goods and services tax.

According to both the World Bank and IMF reports and projections, India has finally overcome the adverse impact of the both demonetisation and introduction of unified system of taxation for goods and services, no matter how disruptive they were.

Expressing that the Indian economy is on the right track toward recovery, the IMF said that India’s combined gross debt, both at the central and state level, is set to decline by roughly 9 per cent to 61.4 per cent of the GDP by 2023-24. The global organisation explained that this would not only support the scenario for lowering interest rates but can also lead towards a significant rating upgrade for the country.  

The IMF suggested that the fiscal target is more or less in line with the central government’s target of bringing down the debt-to-GDP ratio to 40 per cent by 2024-25. The committee on fiscal discipline had earlier called for a combined debt-to-GDP ratio of 60 per cent by 2022-23 (40 per cent for centre and 20 per cent for state governments). A mix of high nominal GDP growth and gradual reduction in the overall deficit would pave the way for a lower debt-to-GDP ratio.  

However, the IMF has warned India against the recent frauds and bad loans, which can lead to a higher fiscal deficit. India also faces a high risk of inflation from rising prices in several sectors but the IMF has still shown its faith in the Narendra Modi-led BJP government, considering the government’s focused spending in the all-important infrastructure sector, which had encountered a slowdown in past years.  

Healthy Economic Data Underpins India’s Revival

Broad-based economic recovery and lower inflation are helping in painting a bright outlook picture of the Indian economy that is retaining the fastest-growing Asian economy tag, on the back of GST and banking reforms.

According to the data released by the statistics office, consumer inflation, the benchmark price gauge of the RBI, cooled to 4.28 per cent in March from 4.44 per cent in February, easing to a five-month low. 

          

As per the latest data, this is the third consecutive month where inflation softened after hitting a 17-month high of 5.2 per cent in December. Asia’s third-largest economy is facing a decline in inflation amid cooling food prices as food inflation or CPFI numbers saw a negative growth of 0.44 per cent in March.

While inflation has stayed above the Reserve Bank's medium-term target of 4.0 per cent, March’s data is an indication that prices are at a safe distance from the apex bank’s upper tolerance level of inflation at 6 per cent India’s monetary policy committee, in its bi-monthly meeting last week has kept rates steady since a cut of 25 basis points in August, and it is widely expected to maintain rates at their current level in the next review due on June 6.

Last week, the RBI brought down its January-March (2017-18) inflation projection to 4.5 per cent from 5.1 per cent. It also slashed CPI inflation for 2018-19 to 4.7-5.1 per cent in April-September 2018-19 and 4.4 percent in the next half of the year, including the impact of house rent allowance.

However, economists expect that the inflationary pressure is likely to remain tilted to the upside and may hover around the 5 per cent mark in the current financial year. Expected risks may arise from fiscal slippage, higher input costs and MSP (minimum support price) hikes, while financial sector volatility with respect to the normalization policy in the US is expected to cause further tension.

Meanwhile, the CSO data revealed that the Index of Industrial Production (IIP) rose to 7.1 per cent in February 2018 from 7.5 per cent in January.

As per the IIP data, the sequential slowdown in factory output was mainly on account of lower production in the mining sector. On a year-on-year basis, the manufacturing sector expanded by a healthy 8.7 per cent, while the mining sector's output dipped by (-) 0.3 per cent and the sub-index of electricity generation increased by 4.5 per cent.

Economic indicators continue to reflect the Indian growth story. Going forward, improvement in private consumption, increase in capacity utilization and private capex cycle revival will be driving higher growth for the Asia’s third largest economy. Rising farm output, coupled with higher minimum support prices announced by government are likely to improve both farm incomes and rural consumption.

Latin Manharlal Group

The Wild Race for Content

INDIA ENTERTAINMENT INDUSTRY

The Indian media industry has tremendous scope for growth in all the segments due to rising incomes and evolving lifestyles. Media is consumed by audience across demographics and various avenues such as television, films, out of home (OOH), radio, animation and visual effect (VFX), music, gaming, digital advertising, and print.

The Media & Entertainment industry is anticipated to grow at a Compound Annual Growth Rate (CAGR) of 13.9% during 2016-21 to reach US$ 37.55 billion. The industry provides employment to 3.5-4 million people, including both direct and indirect employment as of 2017.

Advertising expenditure in India is expected to grow 13 per cent year-on-year to Rs 69,346 crore (US$ 10.71 billion) in 2018 and Rs 1.07 trillion (US$ 16.70 billion) by 2020. The Indian digital advertising industry is expected to grow at a CAGR of 32 per cent to reach Rs 18,986 crore (US$ 2.93 billion) by 2020. India is the second largest television market in the world with US$ 9.62 billion in revenue in 2016. The Indian film industry is expected to grow at a rate of 10.4 per cent to become the third largest cinema market, after US and China by 2021.

The Government of India has supported this sector's growth by taking various initiatives such as digitizing the cable distribution sector to attract greater institutional funding, increasing Foreign Direct Investment (FDI) limit from 74 per cent to 100 per cent in cable and Direct-to-home (DTH) satellite platforms, and granting industry status to the film industry for easy access to institutional finance.

Second largest TV market

Household televisions increased to 183 million in 2017* from 181 million in 2016 with 780 million TV viewing individuals.  In 2016, television market generated revenue of US$ 9.62 billion.

One of the largest broadcasting market

As of 2016, India had one of the largest broadcasting industries in the world with approximately 892 private satellite television channels. As of 2016, there are 243 FM radio channels and 190 operational community radio networks. 

The Ministry of Information and Broadcasting (MIB) has officially completed all the four phases of digitization, As of March 2017, a total of 64.4 million set-top boxes (excluding Tamil Nadu) were set up in Phase 3 and Phase 4 areas. 

Total of 243 FM channels (21 from the Phase - I and 222 from Phase – II) are operational. Under the phase III, the Cabinet has already given permission to 135 FM channels in 69 cities to operate. 

Telecom Regulatory Authority of India (TRAI) plans to introduce a policy for broadcasting sector with a vision of 2020. The policy aims to usher a new era in the brodcasting sector where MRP of the TV channel will be declared by broadcasters directly to the consumers, and will bring more transparency and choices to the consumers.

Fast growing animation industry

The animation and Visual Effects (VFX) industry showcased a growth of 16.4 per cent, largely led by a 31 per cent growth in VFX industry. 

During 2016-21, the segment is expected to grow at a higher CAGR of 17.2 per cent, largely led by the continued growth in outsourced services and the swelling use of animation and VFX services in the domestic television and film space, respectively.

Exceptional growth in film industry

The Indian film industry in expected to grow at a rate of 10.4 per cent to become the third largest cinema market, after US and China by 2021. Digitalization has played the major role in the growth of Indian film industry. By 2019, cinema exhibition industry in India is expected to have over 3,000 multiplex screens.

Rising no of subscribers

Total subscriber base for Indian television industry is expected to increase to 195 million by 2019 from 183 million in 2017.  As of December 2016, registered DTH subscriber base in India stood at around 97.05 million. As of September 2017 active DTH subscriber base in the country stood at around 66.09 million.

ARPU (Average Revenue per User) Bullish post Digitization

                

With higher scope of introduction of new and niche channels with digitization, ARPU levels are expected to increase in the coming years. 

ARPU for DTH subscribers has seen an increase of around 2.84 per cent in 2016. The more promising trend is that DTH operators are able to increase collections from customers by providing additional services such as HD channels, premium channels and other value added services. 

HD adoptions continue to drive ARPU growth for DTH players with the average ARPU of a HD subscriber at ~1.5 to 2 times more the ARPU of non HD subscribers. 

Digital cable on the other hand, has not seen any significant ARPU increases as compared to the DTH ARPU. For digital cable, deployment of different channel packages will be the key driver to raise ARPUs As of December 2016, total number of DTH subscribers stood at around 97.05 million. As of September 2017, active DTH subscribers stood at 66.09 million.

Reliance Industries Limited to acquire stake in Eros International PLC

Announces Joint Partnership with Eros India to set-up a INR 1,000 crore (USD 150 million) fund to co-produce and consolidate content

Jyoti Deshpande to head RIL’s media and entertainment business as President of the Chairman’s Office

Reliance Industries Limited (“RIL”) and Eros International PLC (“Eros”), through a subsidiary, has agreed to subscribe to a 5% equity stake in NYSE listed Eros at a price of USD15 per share, which represents an 18% premium to last closing price. The transaction is subject to customary regulatory and other approvals.

Furthermore, RIL and Eros International Media Limited (“Eros India”) announced that they have agreed to partner in India to jointly produce and consolidate content from across India. The parties will equally invest up to INR 1,000 crores in aggregate (approximately USD150 million) to produce and acquire Indian films and digital originals across all languages.

About Eros International Plc

Eros International Plc (NYSE: EROS) is a leading global company in the Indian film entertainment industry that acquires, co-produces and distributes Indian films across all available formats such as cinema, television and digital new media. Eros International Plc became the first Indian media company to list on the New York Stock Exchange. Eros International has experience of over three decades in establishing a global platform for Indian cinema. The Company has an extensive and growing movie library comprising of over 3,000 films, which include Hindi, Tamil, and other regional language films. The company also owns the rapidly growing OTT platform Eros Now.

In her new role at RIL, Ms. Deshpande will lead the company’s initiatives in Media and Entertainment to organically build and grow businesses around the content ecosystem such as Broadcasting, Films, Sports, Music, Digital, Gaming, Animation etc., as well as integrate RIL’s existing media investments such as Viacom and Balaji Telefilms with a view to build, scale and consolidate the fragmented USD 20 billion Indian M&E sector.

RELIANCE INDUSTRIES LIMITED ANNOUNCES STRATEGIC TRANSACTION WITH

SAAVN TO FORM INDIA’S LARGEST PLATFORM FOR MUSIC, MEDIA & ARTISTS

INTEGRATION OF JIO MUSIC AND SAAVN IN A TRANSACTION VALUED AT OVER US$ 1 BILLION

RELIANCE TO FURTHER INVEST UPTO US$ 100 MILLION FOR GROWTH SAAVN FOUNDERS TO DRIVE GROWTH OF THE COMBINED ENTITY

Reliance Industries Limited (“RIL”) executed definitive agreements for combination of Saavn, a leading global music OTT platform, with its digital music service, JioMusic. The combined entity is valued at over US$1 billion, with JioMusic’s implied valuation at US$ 670 million. The integrated business will be developed into a media platform of the future with global reach, cross-border original content, an independent artist marketplace, consolidated data and one of the largest mobile advertising mediums.

                  

 Reliance will also invest upto Rupee equivalent of US$100 million, out of which Rupee equivalent of US$20 million will be invested upfront, for growth and expansion of the platform into one of the largest streaming services in the world. The company will continue to operate the over-the-top media platform available on all app stores. The three co-founders of Saavn, Rishi Malhotra, Paramdeep Singh and Vinodh Bhat, will continue in their leadership roles and will drive growth of the combined entity.

In addition, Reliance is acquiring partial stake from the existing shareholders of Saavn for US$104 million, while these shareholders retain their balance stake. The shareholder base of Saavn includes Tiger Global Management, Liberty Media and Bertelsmann among others.

JioMusic has been India’s fastest growing music streaming app for over 60 consecutive weeks. JioMusic has sourced content from all the major Indian and international labels, with over 16 million HD songs across 20 languages. The exhaustive content library, customer experience functionalities and the differentiated Jio digital ecosystem have enabled the rapid growth of the JioMusic platform. Saavn is the only streaming service to make Top Grossing App charts in multiple markets, including India, US, UK, Canada, UAE and Singapore, among others.

The deal will combine the streaming media expertise of Saavn with the connectivity and digital ecosystem of Jio. With a massive addressable market opportunity of over 1 billion users in India and globally, the combined entity plans to invest aggressively to accelerate growth that would benefit all aspects of the ecosystem, including users, music labels, artists and advertisers.

About Saavn

About Saavn Founded in 2007, Saavn is one of South Asia's leading digital music streaming services, transforming how people around the world access and experience music on a daily basis. Saavn is currently accessed across the globe and offers 36 million tracks in 15 languages. The company has 900+ label partnerships and growing, including Universal, Sony, T-Series, Tips, YRF, Saregama, Eros and Warner Music. Saavn’s investors include Tiger Global Management, Liberty Media, Bertelsmann, Steadview Capital, Ward Ferry Management, Senvest Management, Tree Line Investment Management, Quilvest, Mousse Partners, Wellington Capital Management, William Morris Endeavor and a number of strategic individuals, including former Vodafone CEO, Arun Sarin, and Guy Oseary, Chairman of Maverick and manager of global artists including Madonna and U2.

In 2016, Saavn expanded its content offering into Saavn Original Programming, a slate of original, non-music audio programs that range from Bollywood to comedy and storytelling to cricket. In early 2017, Saavn introduced Artist Originals, an original music program releasing and marketing tracks and albums by South Asian artists, songwriters and producers from around the world. With its headquarters in New York, Saavn also runs offices in Mumbai, Gurgaon, Bangalore and California.

Reliance Jio acquiring stake in Balaji Telefilms Ltd.

Reliance Industries Ltd (RIL), India’s biggest company by market value, acquired a 24.92% stake in film and television production house Balaji Telefilms Ltd in a deal worth Rs413.28 crore. The board of Balaji Telefilms approved the investment by RIL, which will buy 25.2 million equity shares at Rs164 each, subject to shareholder and other approvals.

The stake purchase will give RIL access to content generated by Balaji Telefilms for use by its telecom arm, Reliance Jio Infocomm Ltd. This investment in content production (including digital content) is in line with RIL’s commitment to invest and grow in telecom, digital and media businesses.

Balaji Telefilms is a content producer operating across television, films and digital platforms. In April 2017, it launched an ad-free, subscription-based online streaming service, ALTBalaji, with 32 original shows in Hindi, Bengali, Tamil and Gujarati. ALTBalaji has garnered over 11 million downloads across 90 countries and more than 2 million web viewers.

This transaction is significant for the Indian OTT industry and is expected to further accelerate the growing trend of media consumption on the go. The number of video-capable devices and connections are expected to grow 2.2 times between 2016 and 2021, reaching 800 million, according to the Ficci-KPMG Media and Entertainment Industry Report 2017. India has about 30 OTT companies.

This content would be enjoyed by all the subscribers of Reliance Jio, one of the leading telcos in India, as part of the Digital Services eco-system offered by Jio.

Latin Manharlal Group

India to be a $5 tn Economy by 2025

After a year of disruptions in the Indian economy following the cash purge and the Goods and Services Tax, Asia’s third-largest economy is now well poised to achieve new heights of growth, despite the obstacles like rising debt and the trade protectionism. According to Finance Ministry, Indian economy is on track of doubling its size to $5 trillion by 2025, with greater focus on start-ups, MSMEs and infrastructure investment.

Finance Ministry, at the CII Global Industry Associations Summit, exuded confidence that India is on course to recording a growth rate of 7-8 per cent and it can achieve even higher rates of expansion by focussing on producing goods and services and generating demands for next 7-8 years. India’s GDP in value terms currently stands at $2.5 trillion—making it the sixth largest economy in the world.

India is now home to one of the fastest growing start-ups ecosystem in the world, thanks in large part to government efforts to remove barriers to entrepreneurship and extend support for tech start-ups. As the government’s economic reforms continue to materialize, we can expect many more companies to make commitment in India’s business community, supporting its growth story.

To ensure these start-ups continue to scale up, the country need to continue promoting a favorable business environment where start-ups can afford to innovate and access capital.

As far as MSMEs are concerned, India has seen a strengthening MSME segment in the past few years. Significant progress has been made on few challenges that had been the major obstacle to the growth of MSMEs. One can draw an inference that concerns such as government regulations, bureaucracy, availability and cost of land, and certain labour-related challenges have reduced to some extent. Though, the key challenges such as access to finance; availability of infrastructure; availability of skilled labour; power supply and technology-related issues continue to plague the sector. While demonetisation and GST have had an impact, they have also created a framework for majority of MSMEs to join the organised segment.

Further, the rising income levels and economic prosperity is likely to drive demand for infrastructure investment in India. According to Economic Survey issued earlier, around USD 4.5 trillion worth of investments are required by India till 2040 to develop infrastructure to improve economic growth and community well being.

With regard to inflation, the ministry said that its trajectory is well within the RBI’s target of 4 per cent, plus/minus 2 per cent.  The wholesale price index based inflation fell to a 7 month low of 2.48 per cent. The consumer price based retail inflation was also at 4 month low of 4.44 per cent in February. The RBI takes into account retail inflation while formulating its monetary policy.

Undoubtedly, the Indian economy is on higher growth trajectory. While there are some sectors which are growing at a higher rate, there are others which are struggling with various policy measures and challenges. Even so, the strong spirit and commitment to develop is noticeable. 

Latin Manharlal Group