Energy, economy to top PM’s G-20 agenda
Energy and economy will be the key issues at the G-20 summit, Prime Minister Narendra Modi’s point person, or ‘Sherpa,’ Suresh Prabhu said. Describing key environment and clean energy concerns that India will take up at the summit in Brisbane from November 14 to 16, Mr. Prabhu said India would seek “energy efficiency laws as well as changing the energy mix to push for renewable energies.” Prabhu said the prime minister would also make a pitch for bringing down worldwide cost of remittances to India. “India is the world’s largest recipientof remittances at $71 billion. We will urge G-20 nations to take steps to reduce the cost of sending money,” he said.
FIIs raise holdings in telecom, auto, banking firms
Foreign institutional investors (FIIs) have raised their exposure to sectors expected to benefit from a pickup in domestic growth, taking their ownership in Indian shares to new highs. A Mint analysis of 438 of the BSE 500 companies, for which shareholding data for the July-September quarter is available, shows that FIIs have increased their stakes to 16.02% of total shares—the highest in 25 quarters. The analysis looked at companies for which data was available for at least 25 quarters. A separate analysis of 30 Sensex companies, for which data was available for the last 16 quarters, revealed that FII shareholding in these companies rose to 19.2%—the highest since December 2010. It was 18.5% at the end of June quarter. Economic growth in Asia’s third-largest economy rebounded to 5.7% in the quarter ended June, the fastest pace in two-and-a-half years, sparking hope of better times ahead. In October, the Narendra Modi government decided to decontrol diesel prices and put in place a new gas pricing regime, triggering expectations of more economic reforms, after laying out a roadmap for the auction of coal blocks the Supreme Court deallocated in September. “The resolve and the renewed enthusiasm the government has shown in pushing through the long-anticipated reforms and spelling out the exact mechanism of putting the coal blocks for auction is a clear indication the government is now accelerating reforms,” said Ajay Bodke, head of investment strategy and advisory at Prabhudas Lilladher Pvt. Ltd. Investor expectations from the winter session of Parliament and the Union budget are high. The winter session will begin on 24 November and last for a month. In the quarter ended September, FIIs increased holdings in telecom, banking, financial services, automobiles and capital goods companies. Sectors where FIIs have trimmed their exposure are healthcare, mining, and real estate. Telecom saw the sharpest spike, as FII shareholding rose to 15.71% at the end of the September quarter from 12.96% in the preceding one. Foreign institutional ownership in banks and financial institutions rose to 22.83% at the end of September, the highest in two years. “Within banks, FIIs have been preferring private sector banks to public sector banks. The disparity in the level on interest is due to asset quality. It is the single biggest factor. The NPAs (non-performing assets) aren’t going away any time soon,” said Gautam Trivedi, managing director and head of equities (India), Religare Capital Markets Ltd. Public sector banks have seen bad loans surge as the downturn in economic growth, which slumped to below 5% in each of the previous two financial years, and stalled projects crimped corporate profits and made it difficult for borrowers to repay loans. In absolute terms, FIIs have the highest exposure to real estate, banks and financial institutions. They hold 23.3% of the total shares in realty companies. Interest in the realty sector, however, has dwindled. FII ownership in realty companies in the analysis dropped from 24.72% at the end of June. FII holdings in makers of automobiles and auto ancillaries rose to the highest in 25 quarters to 20.09% from 18.94% at the end of June quarter, while that in capital goods rose to 16.34%—the highest since the quarter ended September 2011. Repco Home Finance Ltd (RHFL) saw the highest spike in interest from FIIs, as they upped their stake by 12.8 percentage points in the Chennai-based company. RHFL went public in March 2013. Anil Ambani-led Reliance Communications Ltd saw FII ownership rise by 10.6 percentage points. Recent filings with the BSE show that Vanguard Funds and BlackRock Funds hold 1.2% and 1.1%, respectively, in the communications provider, while in the previous quarter they did not figure in the list of shareholders holding more than 1%.
Apparel exports up 16 % in H1
Apparel exports in the first six months of this fiscal April-September this year were 16 per cent more than the corresponding period last year, according to an official of the Apparel Export Promotion Council. Exports of apparels were to the tune of $7 billion during the period under reference as against $6 billion in the same period last year. The European Union and the U.S are the two major markets for Indian apparel exporters and these are showing signs of revival. India is also getting orders from some of the competing countries that are shifting focus from apparel to other sectors, according to the AEPC official.
BRICS bank welcome alternative to fund infrastructure: Suresh Prabhu
The BRICS development bank and the Contingent Reserve Arrangement are seen as a counterweight to the West-dominated financial organisations, the World Bank and the International Monetary Fund. The bloc accounts for over 40 percent of the global population and has a combined gross domestic product (GDP) of $24 trillion. The bank was approved by BRICS leaders at their July summit held in the Brazilian city of Fortaleza, where Brazil took over the rotating chair of the group.
Indian e-commerce market to reach $20 bn next year
The e-commerce market in the country is expected to grow 37% to reach $20 billion by next year on the back of growing internet population and increased online shoppers, a report has said. “E-commerce in India is a $11 billion market, and is estimated to reach $20 billion by 2015, growing at a CAGR of 37% over 2013-15,” Motilal Oswal Securities said in its report on e-commerce. The research firm said there are multiple enablers for this growth which include increase in the number of internet users and an increased proportion of online shoppers within those users, growth in the per-shopper transaction value and continued flow of capital by willing investors. The report said currently online travel dominates the e-commerce market but in the future, e-tailing will drive the growth. Online travel constituted 71% of the e-commerce market in India, followed by e-tailing (16%). Travel has grown at a CAGR of 32% over 2009-13. “However, going forward, e-tailing will be the biggest growth driver, with expected CAGR of over 60% to $7 billion in 2016 from $1.7 billion in 2013. Within e-tailing, fashion is likely to be the driving segment,” it said. Fashion was $559 million in 2013, and estimates peg the growth in fashion e-tailing to anywhere between $3 billion and $6 billion by 2016. The research firm said heavy discount on online sales is a direct reflection of the industry’s competitive intensity.
FMCG companies eye close to Rs 3k cr buyouts
Indian FMCG biggies and private equity funds are eying two large regional buyouts, reviving up action in the personal care market. Emami and Marico, among others, are in talks to acquire ayurvedic hair oil brand Kesh King, owned by Punjab-based SBS Biotech. The brand, with one of the heftiest profit margins in the industry, is seeking valuation of over Rs 2,000 crore, in a process advised by global consulting firm Deloitte, said multiple sources directly familiar with the matter. FMCG majors including Wipro, and a few private equity funds, are also chasing a buyout of Indulekha, another ayurvedic hair oil and soap brand, which belongs to Kerala-based Mosons Extractions. The company has mandated investment bank Anand Rathi to advise on a sale with an asking valuation of more than Rs 600 crore. Kesh King has annualized sales of more than Rs 350 crore with operating profit of Rs 180 crore, while Indulekha’s sales are estimated at Rs 150 crore annually. “I agree with you that there is keen interest by the top-notch FMCG companies to acquire this brand but we would like to retain Kesh King brand with us and build hair care segment further with introduction of hair colour and other SKUs in oil and shampoos,” Sunil Mutreja, executive director, SBS Biotech, said in an email response to TOI. Deloitte declined to comment. A senior executive at Mosons Extractions said he would respond but didn’t revert till the time of going to press. Anand Rathi declined to comment. Emami and Wipro declined comment, while Marico officials were not reachable for comments For Marico, which acquired the personal care business (Set Wet, Zatak, Livon) of Paras Pharmaceuticals from Reckitt Benckiser in 2012, both King Kesh and Indulekha could strengthen its regional presence in respective markets, even though Marico’s Nihar Shanti Amla is already a strong player in the cow belt. Emami, on the other hand, has been trying to grow inorganically across categories, with Emami Biotech recently acquiring Rasoi brand of cooking oil and the FMCG arm acquiring She Comfort to mark a foray into feminine hygiene. The Rs 6,000 crore hair oils market is dominated by Marico and Dabur but a clutch of regional players have been posing challenges for national players. To guard against the vagaries of commodity costs and to spur growth, national companies have over a period of time enhanced their presence in value-added hair oils. Kesh King and Indulekha - with their high margins and ayurvedic wellness branding - could trigger growth for bigger companies which are seeing slackening growth in the fully penetrated hair oil category. The two brands are eying high valuations on the basis of the Paras brands’ sale for which Reckitt Benckiser paid eight times the turnover four years back. Paras’ valuation exceeded Rs 3,000 crore. Regional players, said industry experts, are looking to cash out even as the FMCG industry is going through a phase of slowdown after a good run for almost a decade. The brand sale mandate is an indication of a return of optimism for the industry.
India’s domestic air passenger demand up 26.3 percent
International Air Transport Association (IATA) on November 4 said that India’s domestic market increased by a whooping 26.3 percent last month as a result of price stimulation. “Indian domestic traffic spiked 26.3 percent in September compared to a year ago. Whereas previous improvements in growth rates potentially were attributable to revived confidence over the new business-supportive government, the strong increase in September was owing to market stimulation measures introduced by carriers,” IATA said in a statement. According to IATA, India’s domestic capacity rose 7.5 percent in the month under review compared to September 2013. “Overall, demand for passenger travel is growing in line with expectations. We saw, however, some shifting of the sources of that growth in September, largely driven by economic factors. The strengthening of the US and Asian economies was offset by weakness in Europe and Latin America,” said Tony Tyler, director general and chief executive, IATA “The three big stories in September were Europe, Russia and India.” Data furnished by the civil aviation ministry, showed that the domestic air passenger traffic increased by 27.82 percent in September to 58.22 lakh passengers - up from 45.55 lakh ferried in the corresponding month last year. According to data furnished by the aviation regulator Directorate General of Civil Aviation (DGCA), on year-on-year basis there was an increase of over 7.55 percent in the passenger traffic. “Passengers carried by domestic airlines during Jan-Sep 2014 were 491.47 lakh as against 465.95 lakh during the corresponding period of previous year thereby registering a growth of 7.55 percent,” DGCA said in a statement. The data showed that low-cost carrier IndiGo achieved the highest market share at 32.8 percent followed by SpiceJet at 18.6 percent, Jet Airways at 16.7 percent, Air India at 16.6 percent, GoAir at 9.2 percent and JetLite at 4.1 percent. Regional carrier Air Costa reported a market share of 1.1 percent and AirAsia India at 0.9 percent.
‘Indian economy to grow 6.6 percent in 2016’
Indian economy is expected to log 6.4 percent in 2015 and 6.6 percent in 2016, states the Organisation for Economic Cooperation and Development (OECD). Growth in emerging economies will remain stronger. It will be slow in China, pick up in India and remain sluggish in Brazil and Russia, states the OECD Economic Outlook report released. According to the report, global growth is projected to strengthen but will remain modest by past standards. “There are important differences across countries: the US recovery looks more robust, but the euro area faces an increasing risk of stagnation, and Japan’s escape from deflation is not yet assured,” the report said. According to the report, China’s GDP growth rate will slow down in a controlled fashion to 7.3 percent in 2014, 7.1 percent in 2015 and to 6.9 percent in 2016 due to its rebalancing efforts to have a sustainable growth. On the other hand, India’s growth rate is expected to go up 5.4 percent in 2014, 6.4 percent in 2015 and 6.6 percent in 2016. According to the OECD report, there are substantial downside risks to the outlook. “Risks of financial instability remain high, while volatility may increase, notably for emerging markets, as monetary policy and economic activity differ across the major economies,” the report states. Debt levels are high by past standards and some emerging economies have significantly increased external financial exposure. Because the growth of potential output has slowed in major economies since the crisis, future trend growth may be weaker than anticipated. Modest global growth and the slowdown in potential growth call for ambitious structural reforms to boost investment, trade and job creation, the report states. According to the report global growth has been subdued, but is projected to accelerate from the second half of 2014 onward as improved financial conditions, continued monetary policy stimulus and a slower pace of fiscal consolidation facilitate stronger activity in advanced economies. World GDP growth rates in 2015 and 2016 will nevertheless remain modest relative to the strong pre-crisis expansion and somewhat below the long-term average. Emerging economies will continue to outpace the advanced economies but less than in past decades, the report states. “In India, the pick-up in growth after the sharp slowdown in 2012 -13 will continue despite the tight monetary and fiscal stance. Investment will be the main growth engine, after several quarters of subdued growth,” the report said. According to the report, improved business sentiment resulting from reduced political uncertainty, deregulation, and the government commitment to cut red tape should boost growth.
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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.
