FIIs infuse over $26-billion so far in 2014; $6-billion in July alone
Driven by an investment friendly government at the centre, overseas investors have pumped in a staggering $6 billion into the Indian securities market in July -- taking their overall net inflows since beginning of 2014 to more than $26 billion. Foreign investors have poured in $2.18 billion (Rs 13,124 crore) into the equity markets, while they have made net investments worth $3.83 billion (Rs 22,977.65 crore) in debt securities, during July -- the highest inflow for a month so far this year, latest market data showed. With the July figures, the net inflows of overseas funds into Indian capital markets in 2014 had reached about $26.4 billion (about Rs. 1.59 lakh crore). FIIs (Foreign institutional Investors), the main driver of the equity market, have helped in pushing up the benchmark BSE Sensex by over 20 per cent so far in 2014. Foreign investors have purchased securities worth Rs. 8.30 lakh crore while their gross sales have amounted to 6.73 lakh crore, till August 1. Within July, FIIs have made gross purchases worth Rs. 1.30 lakh crore, while they have sold equity and debt securities worth about Rs. 94,647.5 crore, resulting into net inflows of Rs. 36,101.5 crore ($6 billion).
Now, Amazon announces $2 billion investment in India
It’s an all-out war between Amazon and Flipkart, with the American e-commerce giant announcing that it will further invest $2 billion in India. Amazon’s statement comes just a day after Flipkart announced raising $1 billion from new and existing investors. “After our first year in business, the response from customers and small and medium-sized businesses in India has surpassed our expectations. We see huge potential in the Indian economy and for the growth of ecommerce in India. With this additional investment of $2 billion, our team can continue to think big, innovate, and raise the bar for customers in India. At current scale and growth rates, India is on track to be our fastest country ever to generate a billion dollars in gross sales,” said Jeff Bezos, founder and CEO of Amazon.com. Just two days ago, Amazon had announced the expansion of its fulfilment centres. From its existing two in Mumbai and Bangalore, the e-commerce giant will now open fulfilment centres in Delhi, Chennai, Jaipur, Ahmedabad and Tauru (on Gurgaon outskirts). The move will double Amazon’s storage capacity to over half a million sq ft. Fulfilment centres are large warehouses where it ships products to customers. The $2 billion investment comes despite the fact that Amazon (global entity) registered heavy losses in its second quarter. Experts have further stated that the losses in the third quarter could be much worse. Amazon started its operations in Indian about a year ago and currently has over 17 million products across several categories out of which 300,000 are available for next day delivery. In the past few months, Amazon has aggressively promoted its brand in India. It stands as a key challenge to the likes of Flipkart, Snapdeal and other home grown e-commerce companies. With Flipkart’s valuation at an estimated $7 billion post its latest fund-raising, analysts are now comparing Flipkart with global internet companies. Flipkart has made its place in the top ten e-commerce/internet companies (not publically listed) that includes the likes of Uber, Airbnb, Dropbox among others. San Francisco-based online taxi dispatch service Uber had raised $1.2 billion, pushing its valuation to about $17 billion. Similarly, Airbnb, an online service for people to rent lodging, closed its latest round of funding with $500 million, taking its valuation to $10 billion, according to industry estimates. Dropbox, an online free service for sharing photos and documents, is estimated to be valued at over $10 billion.
US-based WL Ross & Co to invest in India’s textile business
US-based WL Ross & Co, which specialises in restructuring financially distressed companies globally, is looking to invest in India’s textile business after the Narendra Modi government laid out proposals in the recent budget to revive the sector. “We have looked at some opportunities here and, in fact, some are from the textiles industry,” David Wax, managing director of WL Ross, told ET. The company currently owns a 94% stake in 90-year-old fabric manufacturer OCM and is exploring other investment opportunities. Wax’s optimism is driven by India’s demographics. “We have a tremendous belief that there are terrific opportunities with 1.25 billion people and a growing middle class in India,” he said. Invesco, the holding company of WL Ross, had a set-up in Hyderabad and was committed to this market, he said, declining to provide details of its strategy and the value of investments proposed. Wax is also optimistic about the new government in India. In the budget, finance minister Arun Jaitley unveiled a host of proposals to boost the textile sector, including a provision of Rs 200 crore for setting up mega-clusters at Varanasi, Bareilly, Lucknow, Surat, Kutch, Bhagalpur, Mysore and one in Tamil Nadu. The textile sector currently contributes 14% to industrial production, 4% to gross domestic product and 11% to India’s export earnings. In the past seven years, WL Ross has brought $350 million into the country. Ross acquired the stake in OCM in 2007 from the SK Birla Group, the second major investment in India after SpiceJet. It sold its 30% stake in SpiceJet in 2010, making a profit of more than 50%. OCM is being revived to become “a customer centric lifestyle brand from being just a fabric manufacturer,” said Nitin Jain, managing director. OCM is expected to see its best quarter ever in terms of financial performance, driven by a slew of initiatives taken to revive the company. These include making international design and distribution tie-ups and creating marketing platforms such as mobile apps and digital characters to connect with the youth. The company has also launched a ready-to-wear range for both men and women, including suits, jackets and saris, besides selling expensive products such as ties, pocket squares and fabrics from Italy.
Piramal, APG to jointly invest in Indian infra firms
Piramal Enterprises on July 30 announced a strategic alliance with the Dutch pension fund asset manager APG Asset Management In line with its stated intention of investing in the country’s infrastructure space, Piramal Enterprises Ltd. (PEL), the diversified company belonging to the Piramal group, on on July 30 announced a strategic alliance with APG Asset Management, the Dutch pension fund asset manager to invest in infrastructure companies in India. The investment, which is one of the largest private sector commitments to the infrastructure sector in India, will be in rupee denominated mezzanine instruments issued by infrastructure companies and the target is to reach $ 1 billion investment over the next three years, a joint statement said. Both partners have initially committed $ 375 million each for investments in the alliance. This strategic pool of capital will focus on operational and near completion projects with limited execution risks and high visibility of cash flows coming from a portfolio of projects. The access to this source of capital will enable infrastructure players in India to retain their equity interest in the assets, while raising long term capital to help them complete their on-going infrastructure projects and enhance shareholder value, the statement said. Speaking to this correspondent, Jayesh Desai, co-Head, Structured Investment Group (SIG), PEL said the ticket size of investment would be between $ 50-150 million (Rs 300-900 crore). “The focus of our investments would be on projects nearing completion and investments would be across all infrastructure projects including education and social sectors. We are looking at an investment horizon of five years or longer and the first investment would be made in the next three to six months.’’ Over US $ 150 billion of equity and mezzanine funding is required to meet government target investment of US $ 1 trillion until 2017 and this is the gap which our strategic alliance seeks to bridge. “Mezzanine investments for infrastructure sector in India offers a compelling investment proposition as it addresses the void in the capital stack, which currently exists in the market place,’’ Mr. Desai said. “This is an opportune time to be creating an aligned pool of capital to target what we believe to be very compelling funding opportunities in the infrastructure sector in India,’’ Ajay Piramal, Chairman, PEL said in a statement. “The alliance is consistent with PEL’s long-term plan and vision of playing a contributing role towards investments that promote growth.’’
Forex reserves rise to near record on steady dollar inflow
India’s foreign exchange reserves have risen to a near all-time high riding on a steady inflow of dollars into the local debt and equity markets from foreign investors looking to increase their exposure to India on the hopes of an improved economy. More than $2.7 billion were added to the nation’s foreign exchange reserves in the week ended 25 July, swelling the total to $320.56 billion, weekly data released by the Reserve Bank of India (RBI) showed. Only marginally below the 2 September 2011-high of $320.78 billion, India’s reserves are now roughly enough to cover eight months of imports, assuming a monthly import bill of about $40 billion. Reserves have also rebounded sharply from the latest low of $274.80 billion seen in the week ended 6 September 2013, a period in which the rupee had plummeted to a historic Rs.68.85 per dollar. Samiran Chakraborty, head macro research, South Asia at Standard Chartered Plc said the sharp rise in foreign exchange reserves provides India with a cushion amid growing uncertainties in the global economy, referring to the recent default in sovereign bond repayment by Argentina. Argentina missed interest payments on $13 billion in restructured bonds on July 31, prompting global rating agency Standard and Poor’s to declare it as defaulter. Krishnamoorthy said the rupee has been well supported by robust inflows from foreign institutional investors, adding he expects the domestic currency to trade in the broad 58 to 62 per dollar range in the next six months. Strong FII inflows have been one of the key factors behind the build-up of reserves in this calendar year. Since January, FIIs have invested $26.64 billion in India’s equity and debt markets, more than three times the $8.31 billion they invested in the same period in 2013. Chakraborty from Standard Chartered said such inflows have helped the RBI shore up its foreign exchange reserves as it had bought the excess supply of dollars in the local market to prevent the rupee from rising sharply. A sharp appreciation in the rupee can hurt exports. While RBI does not target any particular level for the currency, RBI governor Raghuram Rajan had indicated that there is a range of tolerance. In an interview to Mint on 3 April, Rajan had said that he would consider levels of 55/$ to be “too strong.” Apart from the strong inflows from foreign investors, a special swap facility opened by Rajan in September last year has also helped build up reserves. The facilities which offered a discounted swap rate for funds raised through foreign currency non-resident deposits and for overseas foreign currency borrowings by banks raised $34 billion. While some of this was expended on a direct foreign exchange line opened for oil importing companies, the inflows via the facilities added to reserves as well. The two facilities were opened in early September after Rajan took over as RBI governor and closed on November 30.
Textile policy aims to create $300 billion exports
An expert panel constituted by the government on July 28 submitted the draft of the new National Textiles Policy, which aims to achieve $300 billion exports by 2024-25, and creation of additional 35 million jobs by attracting investments. The blueprint termed as the draft ‘Vision, Strategy and Action Plan’ to revitalize the textiles and apparel industry envisages an additional investment of $120 billion. It was presented to textiles minister Santosh Gangwar by chairman of the Expert Committee Ajay Shankar. “The Expert Committee identified basic concerns in textiles sector and identified the national priorities in the form of a Vision & Strategy and the Action Plan for attaining the targets set out in the Vision for exports, investment and employment by the year 2024-25,” an official release said. “The Vision projects Indian textile and apparel exports to grow from $39 billion at present to $300 billion by the year 2024-25. This translates into additional investment required of the order of $120 billion and in the process around 35 million additional job creation is expected to take place,” it added. The key objectives of the new National Textiles Policy include developing a vision statement of the textile sector for the next decade to treble market share from the current 4 per cent in the next decade. Keeping in view the various changes in the textile industry on the domestic and international fronts and the need for a road map for the textile & apparel industry, Ministry of Textiles had initiated the process of reviewing the National Textile Policy, 2000. Accordingly, an Expert Committee was constituted including leading industrialists from the textile sector to make fresh recommendations. The draft Vision, Strategy & Action Plan for Indian Textiles & Apparels (2024) will be put up on the website of Textiles Ministry for inviting online comments/suggestions. It will also be discussed in the forthcoming meeting with state Textiles Ministers. The draft Vision, Strategy & Action Plan for Indian Textiles & Apparels (2024) shall remain open for comments till August 18, 2014 after which feedback will be considered and a final Vision, Strategy & Action Plan would be finalised for seeking approval of Cabinet and adoption. Government aims to formulate a new improved Textile Policy to address concerns of adequate skilled work force, labour reforms, attract investments in the textile sector, and to provide a future road map for the textile and clothing industry.
Eight core industries grow 7.3 percent in June
Eight core industries such as coal, electricity, crude oil, cement and steel, grew 7.3 percent in June this year, compared to 1.2 percent during the corresponding month of last year, official data showed. The index of eight core industries having a combined weight of 37.90 percent in the Index of Industrial Production (IIP) with base 2004-05 stood at 168.7 in the month under review, the ministry of commerce and industry said in a statement. Electricity generation, which has 10.32 percent weight in the IIP, grew 15.7 percent in June 2014 as compared to a standstill growth in the same month of previous year. Cement production grew 13.6 percent, coal production was up 8.1 percent and crude oil output grew 0.1 percent in the month under review. However, two of the eight core industries registered negative growth in June. Natural gas production fell 1.7 percent, fertilizers output was down 1.00 percent. Petroleum and refinery products were higher 1.2 percent and Steel products was down 4.2 percent. The IIP, the barometer for measuring industrial output, had increased by 4.7 percent in May on the back of healthy growth in manufacturing production,. The IIP data for June has not been released yet.
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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
