Untitled DocumentIndia’s services PMI shows modest growth in July
India’s dominant services industry bounced back to growth in July, a private survey showed on August 5, but the improvement was modest and unlikely to change expectations that the Reserve Bank of India (RBI) could cut interest rates again before year-end. For the first time in three months, the Nikkei Services Purchasing Managers’ Index (PMI), compiled by Markit, nudged above the 50 mark that separates growth from contraction, coming in at 50.8 in July. It was 47.7 in June. RBI kept its policy rate on hold at 7.25% on Tuesday, while leaving the door open for further easing depending on the inflation outlook. But as economic growth prospects have dimmed in Asia’s third-largest economy due to delays in key reforms, RBI is predicted to make its fourth cut to interest rates this year in the last few months of 2015. “While it was welcome news to see a return to growth of activity in the Indian service sector during July, we are still looking at a modest improvement at best,” said Andrew Harker, senior economist at survey compiler Markit. “When looking at the manufacturing and service sectors together, weak inflationary pressures and modest growth tend to support a more accommodative monetary policy environment.” A sister survey on Monday showed manufacturing sector growth was also fairly modest. Still, firms reported they were hiring more workers as new orders also returned to growth after two months of decline, contrasting with continued job shedding at factories. The services employment sub-index reached a two-year high of 51.4 in July, up from 50.4. Services companies continued to raise prices, though the rate of change was the weakest since April.
Amazon India opens third customer service facility in Pune
Global e-commerce giant Amazon has launched its third customer service facility in India in line with its commitment in the growing e-commerce industry in India. The centre opened in Pune is third after the ecommerce behemoth had set up two sites in Hyderabad in 2005 and 2014, respectively. The facility will support Amazon.in and Amazon.com with pre and post-order customer service through various mediums like e-mail, chat, phone and social media. It will also host teams that provide support to Amazon’s operations in India in the form of training, workflow etc. The centre will help create employment opportunities in and around Pune. Raj Raghavan, Director Human Resources, Amazon India, said in a statement: “Pune is a fast-growing, vibrant and young city with a great talent pool, infrastructure and growth potential. In line with our vision of building Amazon as Earth’s most customer-centric company, the Pune Customer Service facility will augment our capabilities to serve our customers better and enable Amazon to deliver consistently high levels of customer experience.” Ever since its inception in India, Amazon has been relentlessly inventing on behalf of its customers. In 2014, Amazon.in had launched Hindi language phone support for customers enabling them to select their preferred language option on the Contact Us page or through the Toll free and DID number, the statement said.
ICICI Bank raises $500 mn in dollar bonds
ICICI BANK Ltd, India’s largest private sector bank by assets, has raised $500 million (around Rs.3,200 crore) by selling fiveyear dollar bonds at a coupon of 3.125% to investors in Europe and Asia, four people familiar with the issue said. The issue, the first such dollar bond by the bank in 2015, opened earlier on Wednesday and closed during European trading hours late evening. Investors pledged a total of $1.75 billion for the issue, of which the bank kept $500 million, allowing it to price the bond at 160 basis points above the five year US treasury, down from the initial price guidance of 180 basis points above the five year US treasury. A basis point is 0.01 percentage point. “This is the lowest coupon on dollar bonds ICICI has ever managed. Demand was strong because this was the first dollar issue by the bank this year and there has been no supply of Indian banking paper recently,” said a person closely involved in the deal. The bond issue was originated from the bank’s Dubai branch and was part of its $7.5 billion medium-term note programme. “The bank also did not have to pay a new issue premium, which is rare for Indian paper. The pricing of the issue was around the bank’s secondary market yield which has not even been managed by companies and banks from other Asian countries like Korea and China recently,” the person quoted above said. A second person involved in the deal said ICICI Bank received requests from 151 investors across the globe, 43% of whom were from Asia, 42% from Europe and the Middle East, and 15% offshore US investors. The issue was a so-called regulation S transaction, which meant that it was not open to investors based in the US. Hong Kong and Shanghai Banking Corp. Ltd, Barclays Plc, JP Morgan Chase and Co., Bank of America-Merrill Lynch and Standard Chartered Plc were the bankers to the issue. ICICI Bank did not reply to an email seeking comment. A third banker involved in the deal said the issue was completed this month before the European summer break because it is felt that the US Federal Reserve (Fed) will hike rates in September. The Fed meets on 16-17 September to decide whether it will increase interest rates for the first time since 2008. Banks such as ICICI Bank raise dollar funds to support their overseas loan books which are used to lend to Indian companies abroad. Standard and Poor’s Ratings Services assigned a “BBB-” rating to the issue earlier on Wednesday.
10-time jump in FDI in petroleum and gas sector
Foreign Direct Investment (FDI) in petroleum and natural gas sector witnessed an almost 10-time jump in 2014-15 as compared to the preceding fiscal, touching Rs. 6,473.22 crore, government told the Lok Sabha on August 4. Union Minister Dharmendra Pradhan, while replying to questions, said the government is encouraging foreign investment to supplement domestic investment and technological capabilities. Over the last three financial years, the sector attracted FDI worth more than Rs. 8,375 crore, he said. Giving year-wise break-up, Pradhan said FDI in petroleum and natural gas sector touched Rs. 6,473.22 crore in 2014-15 when the same was Rs. 678.39 crore in 2013-14. Earlier, the sector saw Rs. 1,192.57 crore worth FDI in 2012-13, he said. In the first three months of current fiscal (2015-16), the sector received FDI worth Rs. 31.35 crore, Pradhan said, “there is highest investment in exploration and production of oil and natural gas, followed by refineries and marketing including pipelines network and LNG re-gasification infrastructure. In the petroleum and natural gas sector, 100 per cent FDI is allowed in exploration and production, refining by the private companies and marketing of petroleum products, among other areas. The Plan Capital Investment in the sector has reached Rs. 2,59,278.83 crore during the period from 2012-13 financial year till the end of June 2015. To a query, Pradhan said the government has an ambitious plan for setting up 15,000 kilometres of new gas pipeline. The Centre and Andhra Pradesh governments are working together for new pipelines, including those for villages, he added.
Fiat to make Jeep in India, SUV to cost Rs 15L
It's good news for lovers of the famed American SUV brand Jeep. Fiat Chrysler, the parent of the brand, is planning to make India a hub for a low-cost right-hand SUV under Jeep brand, which could cost you around Rs 15 lakh. However, the SUV will be launched in the second quarter of 2017. At present, if you import an SUV under Jeep brand, it will cost you over Rs 50 lakh. Fiat Chrysler plans to manufacture the new `C SUV' –as it is codenamed now in India to avoid the pinching import duty of 180%. This will help the company keep costs under check. Fiat Chrysler also wants to make India one of the global manufacturing hubs to export the right-hand version to several countries. This will also help the company achieve economies of scale. Company sources said, to start with, C SUV will be exported to South Africa, Britain, Australia and some of the south-east Asian countries. “It begins in 2017, and we will scale up gradually. “Kevin Flynn, president and MD of Fiat Chrysler Automobiles India, said the company will introduce the Jeep brand in India soon via import route. The company will showcase iconic Grand Cherokee and Wrangler mod els at the motor show slated at Greater Noida in February. The Jeep is considered as one of the originators of the SUV and off-road category and is famous world over for its rugged and all-terrain vehicles. Flynn said the company will manufacture C SUV at the Fiat Chrysler-Tata Motors joint manufacturing location at Ranjangaon in Maharashtra. While the two companies had parted ways in joint distribution and sales, they still manufacture cars from a common factory. “It is a great factory and has great capabilities. We will invest $280 million for the Jeep assembly and are confident that this will do justice to the brand.“The company also plans to set up a separate sales network for the Jeep portfolio and Flynn said that this would be targeted at the met ro markets and big towns.“However, we will provide an opportunity to some of our dealer partners when we open Jeep outlets.“The company is identifying suppliers and key component vendors for sourcing the parts for the new product. Flynn, however, said that the C-SUV will also be manufactured at some other locations across the world, but these would be left-hand driven models. The company had earlier deferred plans for launching the Jeep in India around three years back due to the economic slowdown.
Foxconn zeroes in on India as major manufacturing hub
Taiwanese electronics giant Foxconn on August 4 said it was going to invest in India cross verticals like manufacturing, startups, energy and e-commerce portals and was also looking at bringing supply chain companies and major technologies here. Addressing a media conference here, Foxconn chief executive Terry Gou, accompanied by group president Calvin Chih, dismissed numbers in some media reports, clarifying that "while some investments are final, some are not fixed". In reply to a question about investing in making 10-12 manufacturing units, he said: "If we are going to manufacture in India, then the investment figure will be much higher than quoted in the media reports." "Keeping in line with all the digital initiatives started by Prime Minister Narendra Modi, Foxconn is in India for the long run. We want to integrate our hardware strength with India's software strength to help India achieve more exportsand create a better ecosystem for doing business," Gou said. Although Gou highlighted problems like land availability issues, insufficient power, labour laws in ease of setting up plants, he said the $117.5 bn Foxconn is desirous of taking full advantage of the digital wave in the country that has gripped small, medium and large corporations. "We are looking to partner with with several Internet of Things (IoT) companies to bring in automation across various industries. We want to participate in all the digital initiatives that PM Modi has started," he said. Foxconn's entry assumes significance as India operates under current account deficit and after oil, electronics is the biggest contributor of imports. The Modi government has already targeted to bring down imports to a minimum level. Gou also confirmed reports that Foxconn had signed a deal with Adani but said that it was not only in the handset business. "We will work with Adani on various sectors like smart power transmission to make it more efficient," he said, adding Foxconn was looking for more partners like Adani to expand their ecosystem in India. Confirming investment plans in research and development projects, Gou said: "We are not divulging figures or locations as India is too huge to decide. We have had talks with several state governments and each state has a speciality. It is too early to give out numbers as it might destroy the credibility of Foxconn." "We need to be very careful so as to choose a perfect location that will help us to generate economies of scale," he added.
Foxconn top brass on Tuesday had a detailed discussion with federal Communications and IT Minister Ravi Shankar Prasad here. "The minister and Foxconn officials exchanged views. Foxconn is positive on India in various sectors. They have already met the prime minister," a source told IANS. Earlier, Foxconn officials met Telegana Chief Minister K. Chandrasekhar Rao and Andhra Pradesh Chief Minister Chandrababu Naidu in what officials described as an exercise to identify preferred manufacturing hubs. The company has also evinced interest in a host of areas globally including e-commerce and investment startups. India, with its 980 million telecom subscribers base already is home to more than 100 mobile and smartphone manufacturers. Another Taiwanese company Asus and China's Xiaomi are reportedly in talks with Foxconn for contract manufacturing base in India. Foxconn produces devices for Apple, Amazon (Kindle), Cisco, Dell, Microsoft, Hewlett-Packard (HP) as well as mobile handsets, tablets, TVs, routers, set-top boxes and printers.
Indian exports to witness 10% jump on US GSP
With the US renewing generalised system of preferences (GSP) benefits on retrospective basis from July 29, India's merchandise exports can see a 10 per cent jump in the present fiscal of 2015-2016. Of the total exports of $310.57 billion in 2014-2015, US accounted for $42.44 billion. Under the US GSP, 3,500 product lines will be eligible for the benefits. Some of the main ones in these are engineering goods (mechanical machinery, electrical machinery and equipment, tools, agricultural
implements), organic and inorganic chemicals, plastic and copper, among others. "In some of the sectors the GSP benefit is as high as 10-11 per cent. Keeping in mind the sectors that have been covered under the US GSP review this time, we expected
total exports to go up by 10 per cent this fiscal," said Ajay Sahai, CEO, Federation of Indian Export Organisation (FIEO). Export of engineering goods, which constitutes 24 per cent of the country's total exports and US being its biggest market, is expected to jump by 15-20 per cent. The average duty on engineering imports in the US ranges from three to four per cent. "Our exports meant for the US markets are now going to go up by 15-20 per cent on annual basis due to this as we are now expecting a quantitative jump. This will also help in gaining the competitiveness that Indian exporters lost," said Sanjay Budhia, managing director of Kolkata-based Patton International Ltd, engaged in exporting steel stampings, locknuts and other fittings to the US. Budhia, who is also chairman of Confederation of Indian Industry's (CII) National Committee on Exports and Imports, said that the move was long due and delay in renewing the benefits has had an adverse impact on engineering exports. "This renewal has been effected at a very crucial time for India, when exports have dipped for the seventh consecutive month. One of the major reasons for this decline is a slowdown of demand in the US, which has been India's traditional export market. The renewal of GSP will help pick up demand by the US firms, and help Indian exporters regain some of the lost ground," said Chandrajit Bannerjee of CII. According to the Engineer-ing Export Promotion Council (EEPC) engineering exports might see a turnaround from the second quarter itself. In the first quarter of the financial year, engineering exports stood at $15 billion, out of which $1.7 billion accounted for the US. Chemical exports are also likely to see a rise as it will experience a cost saving of two to eight per cent in the US. "It will have a positive impact but it is difficult to quantify because we have seen a decline due to duty barrier, weak demand and volatility in crude prices and currency. But I am definite that chemical sector might see a double digit growth in this financial year," said B R Gaikwad, chairman, Chemical Export Promotion Council (CHEMEXCIL). The US GSP, which expired in July 2013, has been extended with retrospective effect from August 2013 till December 2017.
Mitsubishi, L&T win steel plant order from SAIL
Mitsubishi Corp. (MC) and Larsen and Toubro Ltd (L&T) have won a ¥50 billion contract from state-run Steel Authority of India Ltd (SAIL) to construct a steel plant, Mitsubishi said in its statement on August 5. Under the project, a hot strip mill with production capacity of 3 million tonne per annum will be constructed at SAIL’s Rourkela steel plant in Orissa. The project will start production in 2018. “The consortium of MC and L&T will serve as contractor of the project, with MC undertaking project management, while L&T will undertake civil construction, erection, and local supply,” Mitsubishi said in its press statement. This project would be the first full turnkey steel project for Mitsubishi in India. India produced approximately 90 million tonnes of crude steel in 2014, and the ministry of steel plans to expand that to 300 million tonnes by 2025. However, there are no fresh greenfield project announcements that private steel producers have made since 2012. State-run companies like SAIL are expected to play a bigger role in this planned 300 million tonne capacity addition.
Snapdeal to invest Rs 637cr in R&D
In line with its focus to deploy technology-based solutions to improve the shopping experience on its portal, e-commerce site Snapdeal plans to invest $100 million (Rs 637 crore) in its Bengaluru-based Multimedia Research Lab over the next three years. The lab has come out with its first product Findmystyle.in — a website that uses machine learning and data analysis to help customers pick products. Snapdeal’s chief product officer Anand Chandrasekaran said the company has focused on building in-house technology solutions. “We are a technology company with a focus on building services and products that make lives of our consumers simpler and convenient. Findmystyle. in is powered by advanced computer vision and machine learning algorithms,” Chandrasekaran said. Findmystyle will analyse the customers’ browsing and purchase patterns by using technology solutions, smart algorithms to predict customer needs to offer multiple choices and minimise search. Chandrasekaran added that with the introduction of Findmystyle.in, the company is looking to create an experimental playground and set the base for image modelling, product search and discovery technology. “We will continue to work on developing such innovative technology features and products that will further improve the experience for our customers and sellers,” he said. Chandrasekaran, who recently joined Snapdeal from Bharti was also instrumental in overhauling the mobile and app interface of Snapdeal and had said that the company is looking at technologically integrating its recent acquisitions such as mobile recharge startup Freecharge, digital financial services platform, RupeePower and logistics firm, GoJavas. Snapdeal has over 40 million registered users and more than 1.5 lakh business sellers.The online marketplace raised about $1 billion last year, including $627 million from Japan's SoftBank and has been in news recently for raising another round of investment of about USD 500 million from Alibaba and Foxconn.
E-tourist visa facility for 76 countries likely to give boost to tourism
Hotel chains in India can look forward to a pickup in business in the second half of this fiscal. Experts said more foreign tourists are likely to visit India in the peak season this year mainly because of the etourist visa facility extended to nationals of 76 countries by the Narendra Modi government. The industry is expecting 15 per cent growth in foreign tourist arrivals in the current fiscal over the previous year, compared to the average annual growth of about 10 per cent in the past three years. In 2014-15, foreign tourist arrivals grew 8.2 per cent over the previous year to 77 lakh. The Modi government introduced the e-tourist visa in November last year. Earlier, India offered visa on arrival to nationals of 12 countries. "Given all the push and impetus giv en to tourism by the central government and the fact that overall we are seeing more interest from foreign tourists -both corporate and leisure -the growth might be trumping what you have seen in the past and you could see a 12-15 per cent year-on-year growth in foreign tourist arrivals this year," said Achin Khanna, managing director for consulting and valuation practice at HVS South Asia. According to the tourism ministry, the number of tourists under the ethe number of tourists under the etourist visa scheme grew to 1, 26,214 in the six months to June, compared to 11,953 tourists under the visa on arrival scheme in the year-ago period.Under the e-tourist visa scheme, foreign tourists can apply for a visa by uploading their passport and photograph and paying the visa fee on line. The authorities process the application and send an electronic travel authorisation, or e-visa, through email within 72 hours. India's hospitality industry has been in the doldrums over the past few years due to the economic slowdown that hit both business and leisure veral hotels slipped travel. Several hotels slipped into the red amid falling check-ins and declining room rates. While the occupancy rates declined from 60.6 per cent in 2010-11 to 57.8 per cent in 2012-13, average room rates too declined to Rs 5,531 in 2013-14 from Rs 6,513 in 2010-11. After 2013-14, the industry started seeing green shoots on the back of economic recovery. Another reason for the optimism this fiscal is the reduced supply of new rooms. "The hotel industry is likely to see a highly reduced new supply of 4 per cent in 2015-16 which would result in occupancies showing an increase of 5-6 per cent over last year along with a corresponding gentle increase in average daily rates leading to a top line growth for the hotel industry of 6-7 per cent," said Mandeep Lamba, MD, India, hotels and hospitality group, JLL. Vijay Thacker, director of hospitality consultant Horwath HTL India, said markets such as Chennai and Pune, which were among the worst hit in the past few years in terms of supply, have seen improvement in business. In the first quarter of this fiscal, India received 15.5 lakh foreign tourists. If the projection of 15 per cent growth were to come true, at least 72.7 lakh foreign tourist arrivals are expected between July 2015 and March 2016.
India's central bank leaves interest rates unchanged
India's central bank kept its key lending rates unchanged during its monetary policy review on August 4, sticking to its stand that further cuts will depend on commercial banks passing on the previous reductions to borrowers, among other factors. Reserve Bank of India Governor Raghuram Rajan chose to maintain both the repo rate, or the shortterm lending rate, and the cash reserve ratio, or the liquid money banks have to compulsorily hold, at 7.25 percent and and 4.0 percent, respectively. Accordingly, the reverse repurchase rate, or the central bank's borrowing rate, has also been left unchanged at 6.25 percent. Speaking about the current situation pertaining to growth and inflation, among other issues, Rajan said: "Taking into account all this, and given that policy action was front-loaded in June, it is prudent to keep the policy rate unchanged at the current juncture while maintaining the accommodative stance of monetary policy."
Pramerica buys Deutsche Bank’s mutual fund business in India
Mutual fund house Pramerica has agreed to buy the asset management business of Deutsche Bank in India. While neither party disclosed the size of the deal, industry sources estimate it to be Rs 300-400 crore. The transaction is subject to approval by the Securities and Exchange Board of India and the Competition Commission of India. As of June 30, 2015, Deutsche AMC had assets of around Rs, 720 crore, while Pramerica managed assets worth Rs 2,125 crore. Both fund houses are focussed on liquid and fixed income funds. Pramerica AMC’s proposed 50:50 joint venture partnerships with Dewan Housing Finance Corporation have already been approved by the capital market regulator. The union will be rechristened DHFL Pramerica Asset Managers. “When the transaction is complete, we will have the scale and platform necessary to make our investment strategies available to clients across India and put us within sight of the top 10 asset management businesses,” said Glen Baptist, Chief Executive Officer of Pramerica International Investments, in a statement. Deutsche AMC had been on the block for a while now; both YES Bank and the fund house of Franklin Templeton were reported to have shown interest in acquiring it. The sale by Deutsche Bank is the latest among a slew of foreign asset managers exiting the mutual fund business in India, including Morgan Stanley (acquired by HDFC AMC), ING (Birla Sun Life), Daiwa (SBI) and PineBridge (Kotak). Pramerica Asset Managers Pvt Ltd is a wholly-owned subsidiary of Prudential Financial, Inc of the US, and is the asset management company for Pramerica Mutual Fund here. Ravneet Gill, Chief Executive Officer, Deutsche Bank Group India, said in a statement, that the divestment is in line with its strategy of focusing on our core businesses. “Deutsche Bank Group’s overall India franchise has posted strong financial results, and we remain absolutely committed to further investment and development of our business here given that India is strategically important to the bank’s global growth aspirations,” Gill said.
Nalco seeks to set up $2.6 billion Iran aluminium complex
India’s National Aluminium Co Ltd (NALCO) wants to set up an aluminium smelter and an associated power plant in Iran worth as much as $2.6 billion, its boss said, once sanctions against the country start to be lifted. Tapan Kumar Chand will meet with India’s foreign ministry officials and the ambassador of Iran in New Delhi next week to take things forward, he said in his first interview since being appointed as the chairmancum-managing director of Nalco last week. Chand said he would prefer a local partner who could supply cheap power to run a 1 million tonne per annum smelter in Iran. Nalco would source alumina as raw material for the plant from its refinery in the eastern Indian state of Odisha. Nalco’s plans provide further evidence of how business ties are increasing between the two countries. KIOCL, another Indian state-backed company, last month agreed to sell high-grade iron ore pellets to Iran in a deal potentially worth $200 million annually. India and Iran had maintained a close relationship despite the US-led trade restrictions over Iran’s nuclear programme. Last month, Iran and six world powers reached a nuclear deal, clearing the way for an easing of sanctions on Tehran. Chand said multi-year-low prices for aluminium due to an oversupply would not be a deterrent to the plans. Any new plant would take 2-3 years to complete and by then demand could improve given the nature of such cyclical industries, he said. “Generally producers take the opportunity of such downturns to build up their plant capacities, so that as and when demand picks up they are in a position to cater to that,” Chand said. A consultant appointed by Nalco has also shortlisted Oman and Indonesia as destinations where it could set up a smelter. Nothing has been finalised, Chand said. Demand, diversification India’s per-capita consumption of aluminium is just about 2.2 kg, compared with 25 kg in China, according to industry data in India. But demand in the country is growing at an annual rate of about 11 percent against global growth of 6%. Chand expects Prime Minister Narendra Modi’s plans to expand power transmission networks, build new cities and extend the country’s railway network to drive demand growth. Indian aluminium producers, including Nalco, Vedanta Ltd, and Hindalco Industries Ltd, have the capacity to produce 2.9 million tonnes of aluminium a year. Chand said India’s aluminium output was about 2 million tonnes last fiscal year and could rise to 2.4-2.5 million tonnes in the current year. Aluminium prices are currently under pressure from a supply glut. Benchmark aluminium on the London Metal Exchange, for example, is near its lowest for six years. Nalco, which also wants to diversify into nuclear power production, is nevertheless looking to strengthen its raw material supply chain. It expects Odisha to give it a green light for a new bauxite mine in the next few months that will help it to start work on another 1 million tonne per annum alumina plant at a cost of about $867 million. The company, which has the capacity to produce 2.28 million tonnes a year of alumina from naturally occurring bauxite, is also in talks with officials in Modi’s home state of Gujarat to set up another 1 million tonne a year alumina refinery there, Chand said. “You can’t remain at the same place,” he said. “If you don’t grow, competitors will start growing and you will be squeezed out of the market.”
DISCLAIMER
This newsletter is compilation of news articles from various business-e-newspapers and in no way is an endorsement or reflection of Embassy of India, Berne views.
