Finly October 2nd 2013

FINly

Finance Fortnightly Since 2011 October 2nd, 2013 - Issue 30

Economic Slowdown

Effect on various industries

Land Acquisition Bill 2013 An overview

Finzomania For the finance enthusisast.

Finance Fortnightly

Enlighten yourself

Contents

2 Economic Slowdown

Here we examine which industries have been spared by the slowdown

8 Land Acquisition Bill, 2013 Here we give an overview of this landmark bill

passed in parliament recently

10 Finzomania

With the overwhelming response we got for our quiz

competition we have decided to make quizzes a regular

feature in our fortnightly henceforth. As always enlighten yourself!

Contributors Irina Goel Paridhi Dixit Sandeep Jakhate Saurabh Prasannaraj Jay Parekh

Issue 30 - October 2nd 2013 - FINly |

Economic Slowdown Effect on Various Sectors

-By

Jay Parekh

Indian economy is in trouble. Low industrial output, sluggish manufacturing growth, depreciating rupee, policy paralyses, high current account deficit and fiscal deficit, declining GDP growth rate-all these add to the gloom of Indian economy. Even the stock market indices are going nowhere since past three years.

But is this economic slowdown affecting all the sectors? Well, the answer to this question is a big “NO”.

Despite such harsh times, some of the sectors in Indian economy are still booming, they are showing a consistent year on year growth. Let’s focus on these sectors

Information Technology The IT industry in India has today become a major growth driver for the economy; it has substantially contributed in the GDP, urban employment and exports.

Indian firms, across various industries, majorly depend on the IT services to make their business processes more efficient. Indian IT sector grew at a rate of 7.5 % in 2012 compared to 1.2% in 1998. The IT sector also proved to be the major employment provider in the Indian economy. IT sector provided around 2.3 lakh jobs in the Financial Year 2012. TCS, Cognizant, Infosys, Wipro, HCL Technologies are the biggest five IT firms in India. The top five Indian providers grew 13.3 percent to reach $34.3 Billion in 2012. .

3

4 | FINly - Issue 30 - October 2nd 2013

Media & Entertainment Industry: The Rs 83,000 crore (US$ 13.23 billion)-Indian Media and Entertainment (M&E) industry is making high growth strides.

The industry has been largely driven by increasing digitization and higher internet usage over the last decade. Proving its resilience, the Indian M&E sector is on the verge of a growth phase (despite it being a tough period for the economy), backed by rising customer payments and advertising revenues across all sectors.

The size of the Indian M&E industry increased from about Rs 805 billion (US$ 12.84 billion) in 2011 to almost Rs 965 billion (US$ 15.38 billion) in 2012, showcasing a year-on-year growth of 20 per cent, according to PwC India. DB corporation, Sun TV network, Hathway cable & datacom , Viacom 18 media are some of the companies which are performing very well under this segment.

Banking Sector India’s Rs 77 trillion (US$ 1.30 trillion)-banking industry is at par with international standards & practices. Prudent norms & regulatory framework adopted by the India’s central bank i.e. Reserve Bank of India (RBI), have insulated Indian banks from the global financial crisis.

Issue 30 - October 2nd 2013 - FINly |

The country has 87 scheduled commercial banks with deposits worth Rs.71.6 trillion (US$ 1.21 trillion) as on 31 May, 2013. Of these, 26 are public sector banks, which control over 70 percent of India’s banking sector, 20 are private banks and 41 are foreign banks.

Of the total, 41 banks are listed with a total market capitalisation of Rs.9.35 trillion (US$ 158.16 billion) as per the recent statistics. Kotak Mahindra bank, Axis Bank, HDFC bank, ING Vyasya are prominent private sector bank doing extremely well. While, Punjab National Bank, Canara bank, Bank of India are some of the public sector banks performing very well & showing year on year increase in revenues.

Tourism & Hospitality India’s travel and tourism industry is one of the most profitable industries in the country, and it contributes in generating substantial amount of foreign exchange. India's rich cultural heritage, traditions, festivals, food, architectural monuments, hospitality and services are positive strengths for its tourism sector.

The country has received 33 lakh foreign tourists during the period January to June 2013. According to a new research report by RNCOS, “Booming Medical Tourism in India”, the medical tourism market in India has also witnessed a rapid growth over the past few years. India has become a hub for medical tourists due the growing popularity of traditional alternative therapies, such as Ayurveda, therapeutic massage, yoga, and meditation among the tourists.

Moreover, improvements in the medical infrastructure with a growing pool of qualified specialists, is attracting medical tourists from all across the globe. Taj group, Hilton group, Accor group, SOTC tours & travels, Thomas cook India ltd., Cox & kings Ltd. are some of the high performing companies in tourism & hospitality segment.

Healthcare sector The Indian healthcare industry comprises of hospitals, medical services, medical infrastructure, medical devices, clinical trials, health insurance and medical equipment.

5

6 | FINly - Issue 30 - October 2nd 2013

The Indian hospital services sector generated revenue of over US$ 45 billion in 2012. The hospitals and diagnostics center in India received FDI of around US$ 1.9 billion, while pharmaceutical and medical appliances industry saw FDI worth US$ 11.3 billion and US$ 0.6 billion, respectively during April 2000 to June 2013, as per the data provided by Department of Industrial Policy and Promotion (DIPP). Apollo hospital, Fortis healthcare & Poly Medicure are some of the big names in healthcare sectors which are performing very well.

Power generation sector The Indian power sector is one of the most diversified sectors in the world. Power in India is generated from commercial sources like coal, lignite, natural gas, oil, hydro and nuclear power as well as other viable nonconventional sources like wind, solar, agriculture and domestic waste.

India has become the fifth largest producer and consumer of electricity in the world after the US, China, Japan and Russia. The demand for electricity in the country has been growing at a rapid rate and is expected to increase further in the years to come. Due to surge in the sector, the power sector has witnessed higher investment flows than expected.

The power ministry has set a target for adding 76,000 megawatt (MW) of electricity capacity in the 12th Plan and 93,000 MW in the 13th Five-Year Plan (2017-2022). The industry attracted foreign direct investment (FDI) worth Rs 36,200.05 crore (US$ 6.10 billion) during April 2000 to April 2013. National Thermal Power Corporation (NTPC), Indian Hydro Power Generation company (NHPC), Power Grid Corporation of India, Tata power are some of the companies doing very well.

7 | FINly - Issue 30 - October 2nd 2013

Pharmaceutical sector It became 3rd biggest sector globally with respect to volume & 13th biggest with respect to value. Indian Pharmaceutical companies are very successful in export markets with 51.4% of their revenues coming from international markets. Total market size of this sector is currently Rs.1.23 lakh crores. Structural demand drivers for the Indian Pharmaceutical sector include increasing household income, rise in spending for lifestyle related diseases, ameliorating healthcare infrastructure & distribution system, increased penetration in smaller towns & rural regions.

Indian Pharmaceutical industry grew at a compounded annual growth rate of 12.5% in past five years compared to 7% growth rate of global markets at large. India has become a preferred manufacturing & outsourcing location for global drug manufacturers due to huge market (around 1.3 billion population), low cost for clinical trials & low labor costs. Dr Reddy’s Laboratories, Lupin, Torrent pharma, Sun pharma, Biocon are some of the companies which are on the growth trajectory.

8 | FINly - Issue 30 - October 2nd 2013

Land Acquistion Bill 2013

- By Sandeep Jakathe

Right to Fair compensation and transparency in Land acquisition,Rehabilitation and Resettlement bill aka ‘Land Acquisition Bill’ in short was passed successfully in the Lok Sabha and the Rajya Sabha on 29th August and 4th September respectively. The bill was introduced in the Lok Sabha on 7th September,2011 and has 115 clauses in total.

Highlights of the Bill: What it claims to achieve ?

The bill claims that it has provisions to provide fair compensation to those whose land is taken away (either for government or private projects) and to bring transparency in the process of acquisition of land to set up factories, buildings and other infrastructural projects.

] •Land use needs to be clearly stated and cannot be changed after acquisition.

• Land

that has been acquired but not been used for 5 years will transferred to a land bank or returned to the original owners.

•All sales of land require the state’s approval.

What does it say ?

Compensation process :

•Land will be acquired only for the following purposes : Infrastructure projects, Industrial corridors, Mining, Investment and Manufacturing zones, Sports,Healthcare, transport projects and Space programmes.

•Initial stage of the process requires approval from the Land acquisition committee and state government.

•Land Acquisition will need : Approval from 80% of landowners for private projects or 70% of landowners for Public-Private partnership projects(PPP).

•A standard procedure has been established comprising a number of steps to arrive at the final compensation value. This depends on whether the land is in a rural or urban area.

•The various forms of rehabilitation are : o House o One-time allowance o Job •The expected time for the whole process is around 4 years The bill claims to be farmer-friendly in a variety of ways, but has not completely shielded itself from its share of critics.

Critics : •Land owners don’t have much say in the process. Infact Clause 63 prevents them from contesting against the state government’s decisions.

•The Resettlement and Rehabilitation clause gives no guarantee about jobs.

•Compensation calculation process maybe ambiguous.

What Industrial experts say : • CII comments that The bill would lead to major delays to the infrastructure projects as seeking approval from 80% of the land owners is a tedious and time consuming process.

• Crisil Research states that there is a possibility that this would lead to an increase in the price of land as expectations of the land owners would be higher.

• Real estate developers expect the land prices to rise by around 30% in projects where land is yet to be acquired.

Conclusion Though the Land bill comes with a number of promises and benefits associated with it, the bill seems to be more of a burden to the industry players than it is a benefit to the farmers and the low-income groups. Also the government is in a hurry to clear and pass major reforms in the view of the 2014 elections without describing a proper implementation process.

Finzomania 1. In the world of trade and commerce what is special about the commissioning of Monte dei Paschi si Siena in Italy in 1742?

2. Which Bank is promoted by 20th century Finance Corporation and Keppel Tatlee Bank of Singapore in India?

3. Name the term used for depreciating a company's intangible assets?

4. This term is derived from the Greek word 'Oikanomia' means "House Management". What is it?

5. What is known as the cost of living index which represents the goods and services purchased by consumers?

6. How ABN-AMRO bank got it's present name?

7. What is known as "Greenshoe Option" or "Overallotment"?

8. Name the first Indian woman CEO of a Foreign Bank?

9. Royal & Sun Alliance recently re-entered, after 29 years, to Indian financial market and it is the first foreign insurance company started operations here through a joint venture with an Indian company.

Name the company?

10. He is the pioneer in mutual fund industry and often referred as the Father of Index Fund investing.

He created the first S&P 500 Index fund. Identify this famous person?

Answers:: 1.First trading bank in the world 2.Centurion bank 3.Amortizatin 4.Economy 5.CPI- Consumer price index 6.ABN-Algemene Bank Nederland. AMRO- formed after the merger of Amsterdamsche Bank and Rotterdamsche Bank. Created after the merger of ABN & AMRO in 1991.

7.A typical underwriting agreement allows the underwriters to buy upto an additional 15% of shares at the offering price.The term originated from the Green Shoe company which first having this option.

8.Tarini Vaidya of KBC Bank India & South Asia 9.Sundaram Finance 10.John Bogle

FINly Finance Fortnightly

We welcome your valuable feedback

www.finstreet.weebly.com Finstreet, Finance Committee Of SIMSR finstreet.simsr@gmail.com www.finstreet.weebly.com