ALL ABOUT THE ECONOMY OF SWITZERLAND
BY SACHI KHESKANI
THE IBS TIMES November 2014, Issue No. 174
SOVEREIGN WEALTH FUNDS EVERYTHING ABOUT THE GOLDCHESTS OF CASH RICH ECONOMIES OF THE WORLD BY AVIK CHAKRABARTY
ASHOK LEYLAND DIVESTING BY ALISHA SINGH
DEMYSTIFYING MORGAN STANLEY CAPITAL INTERNATIONAL BY NAVJOTH SAHU
ALL ABOUT INDIAN FILM INDUSTRY BY KOLISETTY AISHWARYA
FinStreet, IBS Hyderabad
ISSUE NO.
174
NOVEMBER 2014
What’s Inside 2
3
5
Monetary Policy
Letter from the Editor
Restructuring Ashok Leyland Divesting
RBI acting Reserved
7
10
12
Quarterly Updates
Mobile Applications
Sovereign Wealth Funds
17
20
22
Role of CCI
MSCI Exchanges
24
28
31
Indian Film Industry
Delisting of the Giants
Financial Results
Competition
Economy in Focus All About Switzerland
Business Model
Demystifying
36
Tube Investments Limited
Make in India
Company in Focus
Market Watch
Industry Overview
33
Cover Story
Stock Market
MDP by FinStreet
3
17
5 12
24
INTELLIGENCE BEYOND SUCCESS
“I didn’t feel it necessary to bring a warship myself to keep myself safe at this G20, and I’m sure that Putin won’t be in any danger”- David Cameron, Prime Minister of the United Kingdom at G20 Summit 2014
Letter from the Editor
THE IBS TIMES Faculty Mentor Dr. Ravi Kumar Jain
Dear Readers, Greetings from Team FinStreet !
Cover Picture Source: Pintrest
We would like to extend our heartiest thanks to all our readers for helping us reach over 11,000 views.
Team IBS Times
This issue of The IBS Times continues to follow the path of in-depth research and analysis and presenting the same to our readers in simplistic yet interesting format.
Chaahat Khattar (Editor-in-Chief) Akshay Gupta Atharva Solanki Manisha Mohapatra Nikhil Acharya Nishtha Behl Shivam Tandon Vanika Sharma Alisha Singh Apoorva Anusha Avik Chakrabarty Kaushik Chandell Kolisetty Sai Aishwarya Manjari Navjoth Sahu Priyanka Malik
The cover story of this issue of The IBS Times puts light on the Sovereign Wealth Funds and their investment strategies. In the quarterly financial results update, this time we have analyzed financial results of companies such as TCS and Infosys. The magazine also talks about the recent guideline of SEBI to delist Kingfisher Airlines and UB Engineering. The issue brings out the role of RBI and CCI in the country and their functioning. The magazine discusses the reasons behind Ashok Leyland hiving some of its businesses abroad and the sources of revenue for mobile applications. The magazine also covers industry analysis on the Indian Film Industry. In the section Economy in Focus, Switzerland is the highlight in this issue. The issue includes synopsis of a MDP organized by FinStreet on The Make in India campaign. The magazine includes an exhaustive report from investment point of view on Tube Investments Limited by Team Vriddhi Research. Hope you have an enriching experience reading The IBS Times. Your feedbacks and opinions will help us make it better ! Chaahat Khattar
Rahul Mishra Ripu Daman Tandon Sachi Kheskani Sameena Usman Srishti Karmakar
“The Stock market RUNS on THREE things: Optimism, Skepticism, Criticism.”- Jak Zoudi
Restructuring
Ashok Leyland Divesting
- Apoorva Anusha
mining and construction, distribution trucks, BOSS, Thinking about strong and automobile only one name comes into everyone‟s mind that is Ashok Leyland. It‟s a Chennai based Indian automobile manufacturing company which was founded in the year 1948. It was founded by Raghunandan Saran, a freedom fighter from Punjab. After independence, it was decided to develop India and invest in modern industrial venture. So in 1948, just a year after the independence a company named Ashok Motors was incorporate to assemble and
manufactured Austin
cars
from
England. In 1954 Ashok Motors joined hands with Leyland Motors and the new name became ASHOK LEYLAND.
U- truck, AVIA trucks etc. The past few years saw a continued slow down in the Indian economy with the consequent adverse impact on the commercial vehicles industry. As compared to sales of October 2013 the sale of October 2014 has although increased but the percentage change is very less. The Medium & Heavy Commercial Vehicles (M&HCV) segment has witness decline in its sales of 20.2%. Inspite of increase in fall the company was able to maintain its market shares because of its sustained focus on meeting customer requirements. Apart from this, carefully planned network expansion and new product launches helped the company in
In today‟s day it‟s the second largest manufacturer of commercial vehicle both in Medium & Heavy Commercial
Vehicles
(M&HCV)
commercial
vehicles
(LCV).
and Apart
light from
manufacturing commercial vehicles, buses and trucks it also make spares part and engines for industrial and marine applications. Presently the company is the
maintaining its market shares. Light Commercial Vehicles (LCV) segment also suffered decline in sales volume. There were two main reasons for decline in sales volume of Light Commercial Vehicles (LCV). One is aggressive discounting and the other is unsustainable finance scheme offered by the competition.
market leader in the bus segment. The company claims that if compared to Indian Railways it carries over 60 Million passengers a day which is much more than the entire rail network. They have several extensive ranges of 18 to 80 seater buses. Some are city bus, sub-urban bus, intercity bus, school bus etc.
As the two major segments of the company, that is Medium
and
Heavy
Commercial
Vehicles
(M&HCV) and Light Commercial Vehicles (LCV) both were in loss, the company decided to focus more on research and development activities with specific reference to emission conformance, fuel efficiency,
Talking about trucks earlier Ashok Leyland was only concentrating on 16 tons to 25 tons range of trucks but
vehicular performance and enhancement of safety and right comfort.
now the company has its presence in the entire trucks range which ranges from 7.5 tons to 49 tons. There are different types of trucks which best suites the expectation of its customers. Some are long haul, 3|OCTOBER 2014
The Indian economy was growing. The rate of growth was approx 4.7% in the financial year 2013-14. There was the growth in agriculture sector because the
central government was more focused on it but the manufacturing industry was facing negative growth of -0.2%. Medium & Heavy Commercial Vehicle (M&HCV) were most severely impacted with a drop
not growing as much the investment was made. The
of 25% in 2013-14, on top of a 23% drop in volumes
company has made investment in Albonair GmbH and
in 2012-13 while Light Commercial Vehicle (LCV)
AVIA with a hope of bringing the technology to
had grown 14% in 2012-13, this segment also slowed
India, but it wasnâ€&#x;t successful. Another reason behind
down by 17.6% in 2013-14.
selling off the non core business is to bring in cash so
After a reckoning a deferred tax asset of Rs 121
as to reduce the debt levels.
Crores, profit after tax for the current year, that is
The company has also launched a transformational
2014, it stood at Rs 29 Crores. The earnings per share
process in sells and marketing. Under this process,
also decreased by 93% from 1.63 in 2012-13 to 0.11
substantial focus was given to improve customer
till date. From this fiscal year 2014, the company has
satisfaction. And this was done through some targeted
consolidated 13 subsidiaries on line by line basis and
initiatives across all major hubs. Company has
5 joint ventures on a proportionate consolidation
modified the organizational structure to business
basis.
verticals supported by functional horizontals.
The company was deciding to merge its investment.
Revenues from the spare parts business decline 22%
And the first go Ashley holdings ltd., Ashley
which was due to lower utilization of transport fleets.
investment ltd and Ashok Leyland project services ltd
But the company seized this as an opportunity to
were merged into one group named as Ashley services
streamline the supply chain and rationalized the
ltd. The company is also planning to sell off its
channel partners. The defence business was also
business abroad. For this purpose a merchant banker
impacted because of the budget constraints in the
is appointed which will help the company to sell two
government.
of its overseas companies Albonair GmbH and AVIA. Basically this decision is taken by the company because the company wants to exit from its non core area. And in order to execute this the company has stopped production of its multi- purpose vehicles (MPV), for mean while , to liquidate the existing inventory. The company has played a significant thrust in its expanding its presence across all geographic. The company also upgraded its dealerships to serve its customers more efficiently but still the company was 4|OCTOBER 2014
In short it can be said that the company has converted one of the worst economy crisis in Indian history into an opportunity by focussing on transforming the company into „an agileâ€&#x; player which is going to gear up for sustained growth. The company is listed in NSE and BSE. The stock price on 17th Nov 2014, in NSE and BSE both was 55.30.
Monetary Policy
Reserve Bank of India acting reserved
- Manjari Sharma
In every country there is one organization which
Control on bank credit
works as the central bank and its function is to control
Interest rate control
and monitor the banking and financial system of the country. In India, the Reserve Bank of India (RBI) is the Central Bank. The RBI was established in 1935. It was nationalized in 1949. The RBI plays role of regulator of the banking system in India. The RBI Act 1953 and Banking Regulation Act 1949 have given it the power to regulate the banking system. As we all know, the RBI was constituted to regulate the issue of Bank notes and reserves with a view to secure monetary stability in India and generally to operate the currency and credit system of the country. Implicit in these
In order to implement the objectives of monetary policy there are instruments like CRR, SLR, open market operations, different rates such as repo rate, reverse repo rate, and bank rate. RBI Governor Mr. Raghuram Rajan in his recent interviews is proactively commuting that to foster sustainable growth in the current economy can be achieved through monetary stability -- by bringing down inflation over a reasonable period of time. More specifically, RBI has set an aim to bring CPI inflation down to 8 percent by January 2015 and 6 percent by January 2016.
words are the core purposes of the RBI: to foster monetary and financial stability in order to provide sustainable growth in an economy, and to ensure the development of an efficient financial system. Below, we share some of the major functions of the RBI.
Now the question arises why industrialists favor to cut down rates? The major reason is that they believe a lower policy interest rate today give them more incentive to invest. However economists and RBI think differently. The questions put forward by public
RBI is the Regulator of Financial System and the objectives of these regulations include:
and industrialists are why RBI is not cutting rates? Is it choosing to tackle inflation at the expense of
Control money supply in the system.
growth? On this there is an excerpt where RBI
Monitor different key indicators like GDP and
Governor said, “Many of us believe that there is a
inflation.
short run trade-off between inflation and growth. By
Maintain people‟s confidence in the banking and
increasing interest rates, the RBI causes banks to raise
financial system.
rates, thus lowers demand; firms do not borrow as
Provide different tools for customers‟ help, such
much to invest when rates are higher and people stop
as acting as the “Banking Ombudsman.”
buying goods against credit and instead, start saving.
RBI is the Issuer of Monetary Policy and its main objectives are:
Lower growth in demand leads to a better match between demand and supply, and thus lower inflation for the goods being produced, but also lower growth.
Controlling Inflation
5|OCTOBER 2014
Relatedly, if lower rates generate higher demand and
way for the central bank to generate growth in the long run is for it to bring down inflation. This is the reason why economists are in favor of RBI‟s decision to not cut rates in the upcoming fifth bi-monthly monetary policy review on December 2nd 2014. And if the people start expecting that inflation will keep low, the RBI can cut interest rates by February 2015 once the inflation rate cuts down to 8%, thus encouraging demand and growth. In order to generate higher inflation, people start to produce more in a
sustainable growth, we have to fight inflation first as
belief that they might get more revenues, not realizing
it comes down because of the weak economy and
that inflation reduces the chance of what they can buy
strong food production, the policy rates will become a
out of the revenues. Following the saying, you can
stronger influence on bank interest rate setting, and
fool all the people some of the time, bursts of inflation
will start influencing demand. In the Fourth Bi-
can generate growth for some time. Therefore in the
Monthly
short run, the saying remains, higher inflation leads to
released on 30th September 2014 all the policy rates
higher growth. In the remaining time, I want to
were kept unchanged.
present one more issue that has many commentators exercised – they say the real problem is food inflation, how do we expect to lower it through the policy rates? The simple answer is that core CPI inflation (excluding food and energy), has also been very high, reflecting the high inflation in services. To bring it down is totally within the RBI‟s ambit. But actually this policy is not irrelevant even in controlling food inflation, though clearly, the government also has an important role to play.” From the above excerpt we can make out that as common people gets used to the higher level of inflation, the only way to fool them again is to generate yet higher inflation. Thus, the result is an inflationary spiral which creates tremendous costs for the public. Therefore, economists have argued – and a number of Nobel prizes have been given for the ideas contained in the previous paragraphs – that the best 6|OCTOBER 2014
Monetary
Policy
Statement,
2014-15
Financial Results
Quarterly Updates
- Ripu Tandon
The Rupee continued its trend of see-saw over the
followed the results for Wipro in the IT industry, as
past some time now.
The economy‟s outlook
they did meet their revenue forecasted results. TCS
brightened up with a surprise pick-up on Wednesday
(Tata Consultancy Services), India‟s largest IT
(November 12, 2014) and hence gave a boost to the
services company continued with its strong financial
Prime Minister‟s bid to end the longest slowdown in
performance as it posted 13.6% annual net growth
growth in decades. As per the research by Citigroup,
profit in July-September quarter.
the Indian flow tide has been turned decisively with
revenue rose by 13.5% on year-on-year basis to Rs.
the new government, as it mentioned it as “It‟s high,
238,165 million and a growth of 7.7% on quarter-on-
rising and could well have a long way to go”. As per
quarter basis.
The company‟s
Considering the growth by market,
the group, the retail inflows in the mutual funds of $6 billion in six months sustainable and cited weak performance of other assets and very low equity ownership.
The Foreign Portfolio investors have
invested $15 billion in Indian stocks and $23 billion in debt as far in the year 2014 as per the data by Reuters.
The Citi research says that the foreign
investors are turning aggressively on India and betting more on cyclical and less on defensiveness.
The
research also mentions about domestic investors raising exposure to staples, industrials and energy
Americas still has the major share of 51%, however,
while it also maintained the Sensex target of 31,000
the same has witnessed a decline as compared to
and Nifty target of 9240 for December 2015. The
second quarter in FY14 of 53.2%. Also, a significant
investor‟s positive sentiment and the growth in the
market growth witnessed in Asia-Pacific region from
economy has definitely made an impact towards
7.1% in FY14 to 10.1% in FY15 second quarter. The
Indian incorporations and can be seen in various
major domain in which the company has witnessed
quarterly results as being spelled out by the
growth continuously has been the BFSI (Banking,
companies for the quarter ending September 2014.
Financial Services and Institutions).
The article below gives a glimpse of few of the
factors that have positively influenced the growth
quarterly results for the second quarter for FY1415.
margins for the company has been the depreciation of
This time the investors and shareholders have been curious as they wait for the quarterly results of their followed companies specially with the changed market environment. In the previous edition as we 7|OCTOBER 2014
the Indian Rupee.
Among the
As per the Human Resources are
concerned, the company has already hired around 36,000 employees of its target of 55,000 for the current year and interestingly has no plans of slowing
it down even after automation & platforms which
banks, the State Bank of India also derived a bulk of
require less of human effort. TCS also indicated that
its profits from the Retail Segment.
the third quarter would be seasonally weak due to furloughs and holidays.
TCS has been able to
outpace its peers in the past two to three years, but, itâ€&#x;s rival Infosys Technologies also managed to outperform the expected numbers in the previous quarter. Under the leadership of Dr. Vishal Sikka, the market sentiments for Infosys have been quite positive.
The company posted a 3.1% sequential
growth and 6.5% growth in comparison to the previous year.
Also, in rupee terms the posted a
growth of 4.5% at Rs. 13,342 crores.
However, the rising costs of the deposits have affected the net interest margin (NIM) for the bank which stood at 3.49%. One of the factors that the SBI management has cautioned is that the asset quality improvement would be gradual and not sharp as expected by certain quarters of the market. Another public sector bank, PNB (Punjab National Bank) report net profits for the second quarter of Rs. 575.3 crore in comparison to Rs. 505.5 crore in the previous year. However the bankâ€&#x;s asset quality has worsened with non-performing assets (NPA) at 5.65% in
Geographically, Infosys witnessed an increase in
comparison to 5.48% on quarter-to-quarter basis. The
almost all operations apart from Indian where the
Net NPA was at 3.26% in comparison to 3.02% in the
growth declined by 5.1% sequentially and 4% in
previous quarter. On the other hand, Syndicate Bank
constant currency. Considering these top companies,
had reported a 33% decline in the net profits for the
the IT industry has witnessed growth levels more than
second quarter. As the bank had registered net profits
the expected levels.
of Rs. 470.12 crore during the second quarter ending
In the banking sector as witnessed in the previous edition, HDFC (Housing Development and Financial Corporation) reported a 7.2% growth in the net profits. Bank of India also, reported net profits up by 26% at Rs. 786 crore in the second quarter.
The
State-owned bank reported the rise in profits were due
September 2014, the provisions towards bad loans or non-performing assets increased to Rs. 537.79 crore in comparison to the previous year of Rs. 339.96 crore.
The total income of Syndicate Bank was
increased from Rs. 4,850.35 crore previous year to Rs. 5,680.96 crore during the quarter under review.
to treasury profits, interest earnings and improved
The Cigarettes to FMCG and Hotels major ITC Ltd.
recoveries and growth in the overseas businesses.
matched the expectations and reported the in-line
The banks restructured assets for the second quarter
earnings for the second quarter. The net profit
was at Rs. 1,358 crore in which the infrastructure and
climbed 8.7% on year to year basis to Rs. 2,425 crore
pharmaceuticals sectors contributed the most.
in comparison to Rs. 2,230.5 crore to the previous
The State Bank of India which is the largest bank in India posted a profit of Rs. 3,100 crore for the second quarter as well and was in line with the market expectations. As been the trend with most of the 8|OCTOBER 2014
year. The adjusted profit after tax grew by 15.6% and net sales jumped 14.8% (to Rs. 2,458 crore) where the revenue from the cigarettes segment contributed around 50% of the total revenue. The revenue on the
FMCG segment rose by 11.9% on yearly basis to Rs.
industry as overall has been facing quite a few
2,196 crore wherein the hotels segment grew by 5.9%
challenges.
at Rs. 261.6 crore in comparison to Rs. 247 crore during the similar periods. On the other hand the agricultural business grew at 16.2% at Rs. 2,059 crore with earnings before interest and taxes (EBIT) rising at 4.6% to Rs. 298 crore and the revenue from the paperboards, packaging and paper business grew at 8.9% to Rs. 1,284 crores with EBIT showing a growth of 9.5% at Rs. 242 crores.
In overall, the quarterly results have been pretty positive with most of the companies showing positive signs.
Along with the positive sentiments, the
research by Citi group showcases how the investment sentiments have turned more aggressively towards India and the inflow tide wave would eventually, can be sited as a positive sign for future investments in various development projects in India.
This in
In the airline industry, Jet Airways reported a net
variably showcases that amount of opportunities and
profit of Rs. 69.82 for the second quarter ending
growth aspects that different companies in different
September 2014. This was the first time when the
sectors and sectors in different industries would be
airlines reported profits since 2012 as the company
looking forward to capitalize upon.
was back on gains from the sale of frequent flier programme and higher other income. The interesting factor was that the company came back with a net loss of Rs. 891 crore in the previous year‟s quarter. During the second quarter the sales increased by 16% to Rs. 4,403 crore in comparison to Rs. 3,788 crore corresponding to the quarter in the previous year and Jet Airways reported a surplus of Rs. 305 crore from the sale of the frequent flier program as an exceptional item and the sale. On the other hand, Spicejet, India‟s second largest carrier reported a net loss of Rs. 310 crore for the second quarter even after it saw a growth of 15% in the total revenue. As per SR Batliboi & Associates, SpiceJet's auditor, “company‟s total liabilities exceed total assets by Rs. 1,459.73 crore and the conditions indicate the existence of a material uncertainty that may cast significant doubt about the company‟s ability to continue as a going concern”.
9|OCTOBER 2014
However, the airline
Business Model
Source of Income for Mobile Apps
-Rahul Mishra
Price is what you pay. Value is what you get. Does
Percentage of free app download is way ahead then
this really stand when we are talking about Mobile
paid appsâ€&#x; so advertising model can be taken up as a
Apps? I guess many of us are using apps which are
revenue generator. But, as the market is dynamic so
free so, how these apps are generating revenues?
are the strategies, developersâ€&#x; are using a combination
What is their strategy? Well this is indeed the hardest
of strategies, while free apps are reaching price
decision for an app developer to identify; the means
sensitive consumers there are others who prefer to
for the app to pay for itself.
avoid these ads and are even willing to pay for it so
It is hard enough to get discovered by consumers among thousands and millions of already existing apps, and above that convincing them to buy it. Consumers increasingly prefer free or ad-supported apps for their smart phones and tabs yet many developers are in the dilemma over the free versus paid issue. This is hard because the developers are not able to decide when to charge for their apps and
many apps have a pro version for such customers where the customer can pay for their favorite app and continue without ads. Some of the big players use this multi- strategic approach to cater their vast consumer base like The Guardian, Echofon and so on. The most important thing to consider while choosing the strategy is the feasibility, checking CPCs (cost per click) and CPMs (cost per thousands impressions) and last but, the most important customer satisfaction; ads
when to use the ad-support model.
should not annoy them. There are certain areas which the developers look upon before setting the price strategy like, is the app engaging people or not, are the consumers willing to pay, what are the competitors strategy, is it successful or not and so on. There are various pricing model but the choice sums down to two options: getting paid by
Well the consumers majorly donâ€&#x;t like to pay be it add-ons,
subscription
Freemium Model where the apps are free but money is charged for facilities, functionality or upgrade generally clubbed with advertising or micropayments, etc. The biggest disadvantage that the developers feel associated with this model is that it is good only for a
the consumers or the advertisers.
apps,
Let us now look at the other side of this strategy or the
so
developers
are
interested in experimenting with strategies focusing on ads. This seems to be a perfect picture as both developers and advertisers are trying to market their products thereby correlating.
short duration or may be the growth stage as it helps increase the customer base faster than any other strategy or model, but, for the industry on the longer run it is bad as it sets unrealistic expectations from customer side that is the customer in future will expect everything to be free which will create an uphill task for the developers and they will have to
Recently received facts and figures show that a major
provide such digital offerings without charging
percentage of apps in android market are free and
anything.
around
eighty
percent
10 | O C T O B E R 2 0 1 4
relied
on
advertising.
When the developers set the expectation that the
versions this provides the developer a chance to
customer must pay for something in return, it
showcase its value product and once the customer is
becomes much easier and more effective and now
inclined then they can be hooked for subscription and
they can earn from their asset. However, when
other features thereby adding on to the revenues.
compared to the Freemium Model, this approach usually results in a user base that does not grow as fast. For whatever reason, this is usually associated with some level of failure. So if they really want to generate revenue then they should concentrate on the customer base they are creating through their
One time paid: This type of model as the name suggest makes the customer pay for once with expected features and updates to be free throughout. If creating such kind of app then it needs to be an irresistible one preventing sampling from customerâ€&#x;s side. These apps are generally utility apps.
strategies for example there is a difference between having a customer base and having a customer base that will pay, like the iOS user base is though smaller than android but monetizes three to five times more effectively than android.
Paid and repaid apps: In this kind of model the customer first purchases the app and then repays for the features of the app. It seems to be an unfair approach or a tricky one but with value proposition it can help generate revenue. Its example is a flight
So, we see that a customer base had already been
tracker app which is among the top hundred apps.
created here due to unpaid models which are definitely going to create obstruction for developers in future startups so what monetization strategy comes next is yet to be seen but this time it should not be an after thought leaving advertising as the only option for developers. As already discussed that monetization of apps can be done in two ways; let us now more clearly see what the price models are. To name them there are four models i.e., the Freemium Model, one time paid apps, paid apps with added paid features and free apps with advertising Freemium Model: This as already discussed is the most popular revenue generator model providing revenue up to 76 percent in The US and about 90 percent in the Asian market. In this model the download of the app is free with limited features and the app can be then upgraded with premium or pro 11 | O C T O B E R 2 0 1 4
Apps with advertising: This is the model where the customer doesnâ€&#x;t pay at all and revenue is generated through ads. This kind of model works when the number of downloads is huge and prolonged. There can be various models to generate revenue but creating a customer base is the most important issue to
continue
to
grow,
because
the
customer
engagement decides the life and value of an app.
Cover Story
All About Sovereign Wealth Funds
- Avik Chakrabarty
Sovereign wealth fund is a state own investment fund
economic national account as in the case of many of
or entity that is commonly established from balance of
the Asian SWFs.
payments operations,
surpluses, the
official
proceeds
foreign of
currency
SWFs- Who Are the Shareholders?
privatizations,
governmental exports. The definition of sovereign wealth fund excludes, among other things, foreign currency reserve assets held by monetary authorities for the traditional balance of payments or monetary policy purposes, state –owned enterprises (SOEs) in the traditional sense, government-employee pension funds (funded by employee/ employer contributions), or assets managed for the benefit of individuals.
It is commonly agreed, that SWF shareholders are the governments and the entire citizenship of the sponsor country and that all the citizens have equal rights to access this wealth. Obviously, this doesn‟t always happen, but most of the SWFs are claiming to manage an important part of the national wealth on behalf of the entire citizenship and for their benefit, even though it is very difficult to measure and to demonstrate the level of accomplishment of this goal
Among the various definitions of Sovereign Wealth Funds the most complete and exhaustive and the only
and whether a distribution of revenues is really equal and equally distributed.
one that, actually, takes into consideration aspects such as shareholders and liabilities is the recently coined definition by Clark, Dixon and Monk in 2013 which says-
However, it is generally agreed and discussed that SWFs‟ shareholders could and should be the citizens of the sponsor countries as in the case of Australia, Alaska, and others, as well as future generations,
“Sovereign Wealth Funds are government-owned and controlled (directly and indirectly) investment funds that have no outside beneficiaries or liabilities (beyond the government or the citizenry in abstract) and invest their assets, either in the short or long term, according to the interests and objectives of the
governments, and others. When SWFs are not properly managed the shareholders become the ruling party that manages the Sovereign Wealth Funds according to its personal benefits and interests, without considering the wealth of the citizens or of the Country. At the domestic level, it is possible to
sovereign sponsor.”
assess Sovereign Wealth Funds‟ beneficial effects on
SWFs, in fact, are settled for obvious macro-
their shareholders through the comparison of how
economic reasons but, as well, in order to fully
much of their financial revenues actively contribute to
accomplish their shareholders‟ expectations and
the domestic sustainable development and to the
rights. Normally, SWFs‟ shareholders are the
improvement of their citizens‟ quality of life. This
government and the citizens of the sponsor countries
process could be highly influenced by the existing
to whom belong the revenues generated from natural
level of democracy and the type of government of the
resources as well as those produced by a favorable
Sovereign Wealth Fund‟s sponsor country as well as
12 | O C T O B E R 2 0 1 4
and account $3.784.4 billion, while Non-Commodity SWFs represent 41% and account $2,498.4billion. Commodity and Non Commodity SWFs Among the Commodity Sovereign Wealth Funds, the by the ethical conduct and the income redistribution, as it has been evident during the recent "Arab Spring".
most important ones according to their assets under management are: the Government Pension FundsGlobal of Norway, the SAMA Foreign Holdings of
SWFs- When Did It All Start
Saudi Arabia, the Abu Dhabi Investment Authority of
Sovereign Wealth Funds have been created less than
Abu Dhabi, and the Kuwait Investment Authority of
sixty years ago and they made their first steps in the
Kuwait. Among the Non-Commodity ones, instead,
international environment with caution by adapting
there are the China Investment Corporation (China),
their internal structures and organizations to the
the Safe Investment Company (China), and the Hong
evolution of international markets. Even if Sovereign
Kong monetary authority investment portfolio (China-
Wealth Funds have existed since the 1950s, their total
Hong Kong). Even if SWFs are not a new
size worldwide has dramatically increased over the
phenomenon, they have gained in prominence and
past 10-15 years. The Kuwait Investment Authority
visibility only recently.
(KIA) was the first SWF to be created in 1953 and
SWFs- Where Are They Found
two of the largest funds were founded over 30 years ago: the Abu Dhabi Investment Authority (ADIA) in 1976
and
Singaporeâ€&#x;s
Government
Investment
Corporation (GIC) in 1981. SWFs are national financial vehicles, independently managed from other national monetary reserves. The majority are owned by emerging countries. They have been created in order to manage the excess of reserves in foreign exchange, originated both from the revenues of the commercial balance as in the case of the NonCommodity Sovereign Wealth Funds, most of which belong to Asian countries, and from the revenues originated by natural resources as in the case of the
SWFs' are mainly concentrated in Asia, Middle East, and Europe and are often sponsored by emerging countries that are in the position to seek a greater role in decision-making on an international level. This corresponds with their increasing economic power. Nowadays, emerging countries are playing an increasingly large role in the global economy and according to the Organization for Economic Cooperation and Development (OECD) they will represent 60% of global GDP by 2030. This growth could represent both a challenge and an opportunity for the OECD countries.
Commodity Sovereign Wealth Funds, most of which
To
belong to Gulfâ€&#x;s countries. According to the SWF
geopolitical role and their capacity to support national
Institute, nowadays, Commodity Sovereign Wealth
and regional socio-economic development, it is
Funds represent 59% of the overall number of SWFs
important to consider their geographical distribution.
13 | O C T O B E R 2 0 1 4
better
highlight
Sovereign
Wealth
Funds
to be, by far, the largest global Sovereign Wealth Fund, with assets of $818 billion, followed by the Abu Dhabi Investment Authority with $773billion of assets under management and the Saudi SAMA Foreign Holdings with $675.9 billion of assets under management. The scenario is completed by the African Sovereign Wealth Funds, which represents the 3% of the total and account for $156 billion, and the American Sovereign Wealth The
Sovereign
Wealth
Funds‟
landscape
is
Funds, which represent as well 3% of total Sovereign
dominated, considering the total value of the assets
Wealth Funds‟ assets. This distribution can clearly
under management, by two Regions: Asia and the
indicate which countries will be the major actors of
Middle East.
the future, mainly emerging countries, and also how the wealth will be governed by Countries with very
SWFs by Region
different level of democracy requiring a major focus Asia registers the highest concentration of Sovereign Wealth Funds' assets representing roughly 40% of the total assets of SWFs, with $2.474 billion. The major
and attention on the structure and governance of the SWFs in order to avoid political manipulation and misuse of the SWFs.
Asian players are SWFs from China and Singapore, namely
China
Investment
Corporation
($575.2
SWFs- WHERE ARE THE INVESTMENTS
billion), SAFE Investment Company ($567.9 billion),
Since their foundation, SWFs have mainly invested in
Hong Kong Monetary Authority Investment Portfolio
the financial sector, but after the losses registered
($326.7 billion), and Government of Singapore
during the 2008 financial crisis, they started
Investment Corporation – GIC ($285 billion). The
diversifying sectors of investment in order to reduce
Middle East Region with $2.297 billion of Sovereign
risks and to increase the internationalization of their
Wealth Funds' assets is the second largest region. The
portfolio.
main players are the Abu Dhabi Investment Authority
automotive, infrastructures, energy, real estate, and
($773 billion) followed by the Saudi SAMA Foreign
luxury. The diversification of the portfolio, coupled
Holdings ($675.9 billion) and the Kuwait Investment
with the increase of the number of the investments
Authority – KIA ($410 billion). The third largest
domestically directed, fostered national development
region is Europe that accounts for 17% of total SWFs‟
among sponsor countries through the implementation
assets thanks to the presence of the Norwegian
of infrastructural projects as in the case of the Gulf
Government Pension Fund – Global that is estimated
and of the African Countries. There is a new trend of
14 | O C T O B E R 2 0 1 4
New
sectors
of
investment
became
SWFs
sponsored
by
Resource-Rich
Emerging
with $85.0 billion of investment accounts for the 16.5% and Canada with $12.2 billion for the 2.4%. SWFs Target Countries in 2013 In terms of sectors of investment the year 2012 registered for the first time a significant increase in the investments in real estate and concurrently a noteworthy decrease in the investments directed toward the financial sector as well as those in the field of transports. This data could be easily coupled with the increase of investments in Europe, that resulted the first area of interest for SWFs, as the effects of the credit crunch have dramatically affected the European Countriesâ€&#x; Economies, with specific reference to Portugal, Italy, Greece, Spain, and Ireland resulting in a decrease of prices in many sectors such as Real
Countries, which have the mandate of investing domestically
in
order
to
support
national
development.
Estate, Industrial, and Manufacturing. Real Estate has resulted as the first sector of investment for SWFs in 2012, followed by Finance and Precious Metal and Industrial Mining. In terms of trophy assets, Luxury
SWFs Target Regions of Investment 2012
and Fashion became important targets, especially for
In 2012, in fact, Europe resulted as the most targeted
the SWFs of the Gulf. It is noteworthy to mention that
Region for SWFs investment. Within the region, UK
this year, for the first time, Qatar Investment
totalized $70.6 billion, a number that represents the
Authority signed
13% of the overall value of SWFs investment
government for an investment to support the
estimated to be of $513.7 billion. Switzerland follows
improvement of poor neighborhoods of Paris where
with $22.3 billion that represents the 4.3% of the total,
the majority of the population is Muslim. It is possible
while France with $20.7 billion, and represents the
to consider Sovereign Wealth Funds as important
4.0%. Asia was the second best place where to invest
actors of the global economic imbalances and as well
for SWFs with China holding the first position among
of the movement of capital from emerging countries
all the countries accounting SWFs investments for a
to developed ones with specific reference to the
value of $97.9 billion that represents the 19.1% of the
Countries that present a slow recovery from the
overall SWFs investments while Singapore registered
financial crisis and a high necessity of liquidity in
$14.8 billion that represents the 2.9%. United States
order to stimulate economic growth and avoid
15 | O C T O B E R 2 0 1 4
an
agreement with
Franceâ€&#x;s
stagnation that is often the result of austerity
conditions and period. In this regard, one of the most
measures.
important outcomes of this study is the need to
IF MANAGED WELL
explore the opportunity of using a mix of the two models of redistribution of revenues, the direct and
Sovereign Wealth Funds, if correctly structured and managed, can become a perfect tool for fostering the sustainable development of sponsor countries, with specific reference to emerging countries. There is a need to evaluate not only SWFs‟ transparency but also their sustainability, in order to assess if they could represent an opportunity, both at the domestic and at the international level. Thanks to their two fold nature, institutional in the structure and private in the behavior, in fact, Sovereign Wealth Funds can achieve at the same time financial revenues and social goals enabling sponsor countries to export best practices around the world through investments in companies that adopt behavior compatible with the protection of human rights and the environment, and
indirect ones, with specific reference to emerging countries which face a high level of poverty. In the case of emerging countries where a natural resourced based economy doesn‟t have a deep beneficial impact on employment and is not favoring the reduction of the huge gap between the majority of the population who lives in condition of high level of poverty and a minority who holds the majority of the revenues, the partial direct redistribution of revenues, can support the poorest part of the population. Even if this combined model hasn‟t been tested yet by SWFs, it could offer an important addition in value in the performance of the SWF‟s mandate with specific reference to the reduction of the level of poverty of the sponsor country.
divest from those who behave with no respect for these criteria. Many SWFs have already started including in their portfolio sustainable investments in various fields such as education, infrastructures, and renewable energies. As a consequence the number of Private and Public Partnerships have dramatically increased as well as the awareness of the necessity of a more efficient way to manage public wealth and a more cautious way of managing private interests, considering the social wealth and the importance of shareholders and stakeholders. In this regard, SWFs should accomplish at the same time public goals and financial returns and they should equally benefit their shareholders through the most efficient model of redistribution of revenues, according to the different
16 | O C T O B E R 2 0 1 4
Sovereign Wealth Funds, indeed, and with them many other long term investors such as banks, mutual funds, pension funds and others, should raise their awareness of their great potential for supporting sustainable development
and
investments.
Sustainable
development will be the criteria by which to judge SWFs in the future, empowering shareholders and stakeholders to ask the tough questions.
Competition
Role of Competition Commission of India
-Alisha Singh
Henry Ford once quoted “Competition is the keen
M&A), which causes or likely to cause an appreciable
cutting edge of business, always shaving away at
adverse effect on competition within India.
costs”. In today‟s dynamic world, cut throat
The Main Objectives of C.C.I
competition among businesses is the only way to survive in the market. India as a country has taken various steps to promote healthy competition among the businesses offering a wide range of goods and services to the people at pocket friendly prices. This leads to the introduction of Competition Commission of India Act.
The objectives of the Act are sought to be achieved through the Competition Commission of India (CCI), which
has
been
established
by
the
Central
Government with effect from 14th October 2003. CCI consists of a Chairperson and 6 Members appointed by the Central Government. The main objectives are as follows:
What is Competition? Competition is the best means of ensuring that the „Common Man‟ or „Aam Aadmi‟ has access to the broadest range of goods and services at the most competitive prices. With increased competition, producers will have maximum incentive to innovate and specialize. This would result in reduced costs and wider choice to consumers. A fair competition in market is essential to achieve this objective. The main aim of Competition Commission of India (C.C.I) is to create and sustain fair competition in the economy
• It is the duty of the Commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade in the markets of India. • The Commission is also required to give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake
competition
advocacy,
create
public
awareness and impart training on competition issues.
that will provide a „level playing field‟ to the
Vision & Mission of C.C.I
producers and make the markets work for the welfare
The vision of C.C.I is as follows “To promote and
of the consumers.
sustain an enabling competition culture through
The Competition Act
engagements and enforcement that would inspire
The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, follows the philosophy of modern competition laws. The Act
businesses to be fair, competitive and innovative; enhance consumer welfare; and support economic growth.”
prohibits anti-competitive agreements, abuse of
Their mission statement states the following:
dominant position by enterprises and regulates
Competition Commission of India aims to establish a
combinations (acquisition, acquiring of control and
robust competitive environment through:
17 | O C T O B E R 2 0 1 4
• Proactive engagement with all stakeholders,
• How to File Information
including consumers, industry, government and
• Leniency
international jurisdictions Powers and duties of C.C.I • Being a knowledge intensive organization with high The powers and duties vested in the hands of C.C.I
competence level
are as follows: • Professionalism, transparency, resolve and wisdom in enforcement.
• It shall be the duty of CCI to sustain competition in markets, protect freedom of trade and interests of
Major Functions of C.C.I:
consumers in markets.
The Commission has been active in undertaking advocacy
with
ministries,
regulators,
state
government and other authorities. For instance:
• To sustain competition in markets, CCI has power to make inquiries in case of any certain agreement, abuse of dominant position or any combination by any
• The Commission has given its opinion on the draft
person or body corporate on its own or on receipt of
of Petroleum and Natural Gas Regulatory Bill, 2005.
complaint by consumer or by reference of government
• Warehousing (Development and Regulation) Bill,
or any authority.
2006
• The CCI has powers to inquire into any of acts
• Indian Post Office (Amendment) Bill, 2007, and
outside India that causes adverse impacts on
• The Shipping Trade Practices Bill, 2007 • The Commission has also given its views on regulatory policies and practices in the fields of banking, telecommunications and intellectual property rights.
competition within India. • The Chairperson shall constitute benches to exercise powers of CCI and a bench shall consist of at least 2 members include at least 1 judicial member (qualified to be a judge of High Court. The Bench where Chairperson presides is known as Principal bench and
• Presentations on Competition law and policy to
others are known as additional benches.
Ministries.
• The CCI has power to make inquiry (either Suo
Other advocacy initiatives taken by C.C.I:
Motto or on request of any person, consumer or trade
• An Overview of the Competition Act
association) and pass order for any certain agreement,
• Cartels • Bid Rigging
abuse of dominant position or any combination that cause adverse effect on competition within India. •The CCI can impose penalties on enterprises or on
• Abuse of Dominance
persons which shall not be > 10% of turnover of
• Combinations
enterprise or person in case of any offence as
• Competition Compliance 18 | O C T O B E R 2 0 1 4
provided under this act. Also CCI can order to any
enterprise or person to pay compensation to person or
Act requires all agreements relating to RTPs to be
enterprise who suffered from acts of that person or
registered with the Director-General of Investigation
enterprise.
and Registration (DGIR), which reflects a more
• The CCI can advise central government for division
intrusive regime. There is no such requirement in the
of a dominant enterprise to ensure that it does not abuse its position. Consequently, government can take action either same as advised by CCI or in other form
• The CCI has power equivalent to a civil court while its
relies on alert stakeholders to lodge complaints with the CCI. Under the MRTP Act, most RTPs are treated as deemed (per se) violations, and the burden of proof
as case may be.
discharging
Competition Act, which governs by exception and
functions
in
matters
such
as
that the agreement is eligible to make use of the gateways in Section 38 of the MRTP Act, lies on the party.
summoning, producing evidences etc. Also has power to regulate its own procedure such as place of sittings, timings etc. • Any person or enterprise can appeal to Supreme Court against order of CCI within 60 days from date of order. But no appeal shall be allowed if order
On the other hand, in the Competition Act, 2002, most agreements are subject to the rule of reason, and it is up to the CCI to establish that the agreement has an “appreciable adverse effect on competition” based on an effects analysis. The approach to dominance under Section 4 of the Act is also entirely different with the
passed by CCI involves consent of both parties.
CCI treating only “abuse” of dominance as a violation
• No Civil court can exercise jurisdiction on any
and not frowning at dominance in general as in the
matter under this act or any matter on which CCI is
MRTP regime.
empowered to exercise jurisdiction. How C.C.I is different from MRTP?
CONCLUSION Hence,
in
a
nutshell,
CCI
provides
basic
The MRTP Act categorises trade practices into
standardisation for businesses to function in the
monopolistic trade practices, restrictive trade practices
market and promote a spirit of competition among the
(RTPs) and unfair trade practices. Of these, both
business in a healthy way.
monopolistic trade practices and restrictive trade practices would come under the CCI scanner whereas cases pertaining to unfair trade practices are to be transferred to the National Commission constituted under the Consumer Protection Act, 1986. The MRTP
19 | O C T O B E R 2 0 1 4
Demystifying
Morgan Stanley Capital International
-Navjoth Sahu
In 1968, the first set of global stock market indexes
price performance. The MSCI India Index is
for non-United States markets were published, by the
constructed based on the MSCI Global Investable
name of Capital International Indices. In the same
Market Indexes Methodology, targeting a free-float
year, Morgan Stanley a American multinational
market capitalization coverage of 85%. The index has
financial service firm licensed the rights to the
a base date of December 31, 1992. During the last
indexes from Capital International. after which the
week MSCI India marked the company's 10 years of
indexes were known by the name of Morgan Stanley
operation in the country. Their present Indian location
Capital International (MSCI) indexes in the year
being based in Mumbai, where the office is much
1986. By the end of 1969, the first Capital
bigger than the corporate office, which not only
International equity index products are made available
serves in India but covers most of the markets in
to the public. After which the MSCI Inc. was so
Europe, the Middle East, Africa and Asia. According
formed and operated by Morgan Stanley and Capital.
to Mr. Baer Pettit, Managing Director, MSCI Inc. the
But later in the year 2009, it got fully separated from
office at based at Mumbai is the fastest growing than
Morgan Stanley. Today MSCI is a leading provider of
compared to rest of the 26 countries in which similar
investment decision support tools to over 6,000 clients
offices are located. Of the 3100 employees in 26
worldwide, ranging from boutique hedge funds to
nations the Mumbai based office which accommodate
large pension plans. They offer a range of products
more than 700 employees is the largest office, but
and services - including indexes, portfolio risk and
recently when Mr. Baer Pettit visited India to mark 10
performance analytics, and ESG data and research -
years of operations in India announced his next plan
from a number of internationally recognized brands
of acquiring a plot of land in Goregaon which would
such as Barra, Risk-Metrics and IPD. They are located
accommodate more than 1100 employees. In India
in 26 nations with 3100+ employees worldwide.
there is about 43% of the Indian focused global
MSCI India
exchange traded funds (ETFs) that are benchmarked against the MSCI indices. According to Pettit, the
The MSCI India a subsidiary of MSCI Inc. is a freefloat adjusted market capitalization weighted index that is designed to track the equity market performance of securities floated in India listed on the Bombay Stock Exchange and the National Stock Exchange. The MSCI India Total Return Index takes into account both the price performance and the income from dividend payments, while the MSCI India Price Return Index only takes into account the 20 | O C T O B E R 2 0 1 4
perception that investing in emerging markets can carry a high degree of environmental, social, governance (ESG) and political risk has changed dramatically in the past few years because of the availability of much larger, liquid emerging market products. Investment in emerging markets is now more structural and permanent in nature rather than something that comes and goes. India could benefit the most from emerging market allocations as the
essential Index Funds that are listed and traded on exchanges like stocks. Globally, ETFs have opened a huge market for investment opportunities to Retail as well as Institutional Money Managers. They enable investors to gain broad exposure to entire stock markets in different Countries and specific sectors with relative ease, on a real-time basis and at a lower cost than many other forms of investing. An ETF is generally a basket of stocks that reflects the composition of an Index, like S&P CNX Nifty or BSE SENSEX. The ETFs trading value is based on the net global perception on the country has changed with the
asset value of the underlying stocks that it represents.
announcement of various reforms by the Narendra
Think of it as a Mutual Fund that you can buy and sell
Modi government. The reforms include diesel price
in real-time at a price that change throughout the day.
deregulation, labour rule relaxations and others with
Morgan Stanley Capital International is generally to
more measures set to follow. As of now MSCI India
trade mostly in the form of ETFs which also plans to
has risen 22% so far this year against the 1% rise in
upgrade countries like Korea and Taiwan from the
the MSCI Emerging Market Index. The SENSEX has
Indian
risen 32% so far in 2014. The MSCI India index is
realignments would be positive for India in the
tracked overseas with several passive funds allocating
medium term. The Indian market, which has a
sums in line with the weight accorded to them in their
weightage of 7.3% in MSCI Emerging Market Index,
portfolios. These funds buy or sell the stocks if the
may see upwards of $1 billion inflows once the
index weights are changed.
change becomes effective. Moreover In case both are
Currently there are about 67 licensed securities under the MSCI Indexes ranging from various sectors like Information technology being the highest holding of about 22.56% followed by Financials at 19.36%, Energy at 11.54%, Health Care and so on. The detailed information of the various holding of MSCI with respect to Sector as well as Industry Group can be seen in the tables.
Markets,
which
according
to
experts
upgraded, India may see $2.7 billion dollars of net inflows over a period of time. If only Taiwan gets upgraded, we expect $1.4 billion inflows according to Gopal Agrawal, CIO at Mirae Asset Global Investments. But is it really going to make any new profits is still a question to be found only in the future, whose scope remains disguised in the black and white economy of the nation. The fate of the MSCI should be proven only once it starts performing, conditioned
Benefits to India Presently, India lacks the system of ETFs, that is Exchange Traded Funds. Exchange Traded Funds are 21 | O C T O B E R 2 0 1 4
the infrastructure are provided on time for the operations and development in this new government.
Market Watch
Booming Markets
-Kaushik Chandell
It‟s been a trend in India to start something on a
Hero MotoCorp, Bajaj Auto, Ultratech cement are all
positive note. So for the shubhaarambh here, Sensex
trading above the price of INR 2,000 per share.
closed today at 28,178 points (132↑) whereas Nifty was trading at 8431 points (40.85↑). The record breaking spree which started just after the change in administration continued to break its own record, eventually setting up a new benchmark of closing above 28,000 points for the first time on 12th November 2014 with Nifty touching down the score of 8,400. With 1% increase in Mid-cap and small-cap indices of BSE, sectors making the most out of it are automobiles, durables, power, reality indices whereas FMCG, healthcare banking, oil and gas indices, metals and capital goods can be termed as losers for the while. OVERPRICED or UNDERPRICED
Talking about the exports, after a gap of 6 months, exports entered into the negative zone as it declined by 5.04 percent due to a dip in shipments from major sectors such as engineering (-9.18%), pharma (8.33%), Fabrics (-13.83%), gems and jewellery (2.25%) and petroleum products (-0.16%). It was March when the export took a dip in negative zone last time with a decline of 3.15 percent. Exporters have attributed that this dip in exports is due to subdued demands in US and European markets. However, with such a dip in exports, the trade gap is lower than that of previous month when it was 14.24 billion. Overall imports have grown by 3.62 percent to USD
As stock market has continued record breaking its
39.45 billion. As a result, India‟s trade deficit has
rally, price of many unit shares has become equivalent
increased by 26.06 percent at $13.35 billion from
to that of a smartphone, a television and even a split
$10.59.
AC. With the new government reforms and growing
MARKET SCENARIO
expectations for a better economic scenario the foreign funds have been on a buying spree in stock market. 37 companies out of top-100 listed firms in India has cost of INR 1000+ apiece, as per the stock exchange data. Leading from the front is the engineering giant BOSCH with the share price of INR 16,571 a share, followed by Eicher Motors and Shree Cements at 14,001 and 9,077 respectively. Companies like Nestle and GSK consumers are also trading between the range INR 5000-6000 whereas Maruti Suzuki, Grasim, Infosys are trading between INR 3,000-4000. Talking about the blue chips TCS, SBI, 22 | O C T O B E R 2 0 1 4
Rupee fell for thirst consecutive session on 17th November 2014 trading near its lowest for the month. Evidences of Japan slipping into the hands of recession has sparked fear in the global economy even though foreign inflow in India has been strong. Dollar‟s recent strength has pushed rupee down by 0.6 percent whereas domestic indexes has hit record high. Conversion rate on 17th November 2014 was INR 61.73/74 versus the dollar however close to ₹61.72/73 which was the lowest for this month.
Tata steel fell more than 2 percent ahead of the
• Focus on Domestic cycle, like financial public
second quarter earnings, even though after market
banks: The optimism about India‟s long term growth
hours the steel giant manufacturer said that its
story is due to a pro-reform government coming into
consolidated profit grew by 36.8 percent year on year
the power in the central. Public sectors are on a strong
to INR 1254 Crore for the July-September quarter led
footing now. Expectation is that the balance sheets
by income from land sale in Mumbai.
which have been on hit due to issue of bad loans will
Auto stocks like Tata motors, Hero MotoCorp and Bajaj auto has rallied up by 1.5-2 percent followed by
strengthen from hereon and interest rates will soften, if low inflationary trend is maintained.
Maruti with a success rate of 0.8 percent. However,
On the flip, IT sectors will have a slower rate growth
things have not been well for Mahindra & Mahindra
in the next couple of years whereas chances are good
as the stocks fell by 0.6 percent. Reports have further
commercial and passenger car space.
suggested that there may be an increase in price of
• UBS picks gainers from imminent tax reforms in
commercial vehicles citing the increase in input costs.
India: Winter session of parliament expects some new
Cigarette and tobacco giant ITC was up by 1.5 percent
introductions
whereas sad news for the shareholders of Cipla, Tata
Government may introduce the bill for goods and
Power, Sun Pharma, NTPC and L&T as the shares
service tax (GST). If so, top preferences by UBS
were down in-between the range of 1-3 percent.
analysts are Kajaria Ceramics, Bajaj Electricals,
State-run Oil India lost more than 2 percent after reporting a 32.7 percent decline in net profit at INR 608.3 crore in July-September quarter on lower revenues and operational income. Private Sector lenders such as ICICI Bank and Axis
from
the
Finance
Minister
as
Havells India, TTK Prestige, Britannia Industries, Dabur India, Raymond and Exide. Saying is even that GST will likely result in tax revenues of over 1 percent of GDP. • Go long in NIFTY with tight stops around 8350
Bank rallied 1.3 percent and 3 percent respectively
• JP Morgan bullish cyclical: JP Morgan expects an
with HDFC also showing a rise of 0.5 percent. In
acceleration in GDP growth to 6 percent by next fiscal
housing finance sector, SBI gained about 0.2 percent
year from the estimated 5.1 percent on the back of
whereas HDFC climbed over a percent.
combined backdrop of low inflation, improved
Bajaj Hindustan in an effort, reduced its loss
confidence and continued policy support.
significantly from ₹509.5 crore to just ₹131 crore in With the rise in domestic market about 1524 shares the July-September quarter gaining the upper hand
advanced while 1521 shares declined on the Bombay
with a rise of 6 percent.
Stock Exchange
EXPERT’s ADVICE
23 | O C T O B E R 2 0 1 4
Economy in Focus
All About Switzerland
-Sachi Kheskani
While you import world's finest cheese and chocolates
activities which aid in determining how scarce
or probably book your honeymoon tickets to the
resources are allocated." as per Investopedia.
world's most romantic place, this article shall provide an overview of Swiss economy-- Status, drivers and structure as of 2014. Banks are nerves of any economy, and Swiss banks for that matter of fact are hot favourite for investors all over world for saving "Hard earned"
black money! Swiss Banking
regulations are strict in terms of protecting their customer's confidentiality. Recently Prime Minister Narendra Modi has taken plenty of steps including setting up of a special investigation team to ask for disclosures of Indians as Swiss bank account holders. Due to mounting Global pressure Switzerland has
The history of Switzerland is interesting as it has always maintained a stance of being a neutral nation, while
other
nations
engaged
in
world
wars
Switzerland abhorred destructive activities. This is purported from the very fact that the people here are peace loving and accommodative. Taking about the Structure of economy, Switzerland is a federal state established in 1848. In those times rural regions of Switzerland were poor and under developed, later weaving, tourism, banking, manufacturing of watches, metals, pharmaceuticals etc caught pace due to Industrial revolution.
agreed to co-operate with India and also signed a revised tax treaty with India in 2011 to facilitate greater flow of information on tax evaders. It has now also agreed to enter into discussions with India on automatic information exchange as per globally accepted models. India is one of the early adopters of the new global information-exchange regime.
In 1990s, Switzerland's economy saw a down fall as it had the weakest economic growth in Western Europe. During 1991-1993 economy contracted by 2%. Switzerland's economy averaged no appreciable increase (only 0.6% annually) in gross domestic product (GDP). After having unemployment rates lower than 1% prior to 1990, the 3-year-recession also
The world "Economy" implies allocation of scarce resources. Assuming that resources are limited and the best use shall be made out of it. Therefore, in terms of macro economics economy means "The large set of
caused the unemployment rate to rise to its all-timepeak of 5.3% in 1997. And thus, as of 2008, Switzerland was at the second place among European countries with populations above one million in terms of nominal and purchasing power parity Gross Domestic Product per capita, behind Norway. In early 2000s, due to recession of western Europe and U.S, Switzerland too was affected. Due to 9/11 terrorist attacks the world wide stock market crashed. All this led to contraction of GDP, Unemployment
inter-related economic production and consumption 24 | O C T O B E R 2 0 1 4
rose and domestic consumption decreased. The
Switzerland's economy benefits from a highly developed service sector, led by financial services, and a manufacturing specializes
industry in
that
high-technology,
knowledge-based
production.
Its
economic and political stability, transparent legal system, exceptional infrastructure,
efficient
capital
markets, and low corporate tax rates also make Switzerland one of the world's most competitive economies. The
Swiss
have
brought
their
exports of goods and services in the EU and the USA
economic practices largely into conformity with the
decreased as a result of the Swiss Franc's appreciation
EU's to enhance their international competitiveness,
in value which caused an increase in prices of
but some trade protectionism remains, particularly for
exported goods and services. On the other hand
its small agricultural sector. The fate of the Swiss
Switzerland's tourism sector faced a downfall.
economy is tightly linked to that of its neighbors in
These measures were applied with successful results along with the government's policy of the Magical Hexagon which consists of full employment, social equality, economic growth, environmental quality, positive trade balance and price stability. The rebound which started in mid-2003 saw growth rate growth rate averaging 3%.
the euro zone, which purchases half of all Swiss exports. The global financial crisis of 2008 and resulting economic downturn in 2009 stalled export demand and put Switzerland in a recession. The Swiss National Bank (SNB) during this period effectively implemented a zero-interest rate policy to boost the economy as well as prevent appreciation of the franc, and Switzerland's economy began to recover in 2010.
At present, the economy of Switzerland is one of the world's most stable economies. Because of the country's small population size and high labour specialization, industry and trade are the keys to Switzerland's economic livelihood. Switzerland has achieved one of the highest per capita incomes in the world with low unemployment rates and a balanced budget.
The sovereign debt crises currently unfolding in neighbouring euro-zone countries pose a significant risk to Switzerland's financial stability and are driving up demand for the Swiss franc by investors seeking a safe-haven currency. The independent SNB has upheld its zero-interest rate policy and conducted major market
interventions
to
prevent
further
appreciation of the Swiss franc, but parliamentarians have urged it to do more to weaken the currency. The
25 | O C T O B E R 2 0 1 4
franc's strength has made Swiss exports less
banking, insurance and tourism, employing more than
competitive and weakened the country's growth
70% of Switzerlandâ€&#x;s work force. About another
outlook; GDP growth fell below 2% per year during
quarter of the working population makes up the
2011-13. Switzerland has also come under increasing
secondary sector, i.e. industry, trade, and crafts. The
pressure from individual neighbouring countries, the
machine, metal, watch, and textile industries play a
EU, the US, and international institutions to reform its
significant role here, as do the chemical and
banking secrecy laws. Consequently, the government
pharmaceutical industries. This sector relies heavily
agreed
on import and export.
to
conform
to
OECD
regulations
on
administrative assistance in tax matters, including tax evasion. The government has renegotiated its double taxation
agreements
with
numerous
countries,
including the US, to incorporate the OECD standard, and is considering the possibility of imposing taxes on bank deposits held by foreigners. These steps will have a lasting impact on Switzerland's long history of
The primary sector employs only about 3% of the workforce. Although many foreigners associate Switzerland with peaceful Alpine meadows, happy cows, and home-made cheese, the life of Swiss farmers isnâ€&#x;t all that romantic. The Swiss agricultural industry depends to a large extent on government subsidies.
bank secrecy. The Gross Domestic Product (GDP) in Switzerland Switzerland has produced several large companies known all across the world, for example NestlĂŠ, Adecco, UBS, Zurich Financial Services, Credit Suisse, and Swatch. However, small to medium-sized enterprises (e.g. traditional manufacturers) play a significant role in shaping the Swiss economy.
stagnated 0 percent in the second quarter of 2014 over the
previous
quarter.
GDP
Growth
Rate
in
Switzerland averaged 0.42 Percent from 1980 until 2014, reaching an all time high of 1.90 Percent in the second quarter of 1989 and a record low of -2.20 Percent in the fourth quarter of 2008. GDP Growth
Unsurprisingly, for a country with a sophisticated
Rate in Switzerland is reported by the State
manufacturing industry but little natural resources,
Secretariat
foreign trade generates a major share of the GDP.
consumption expenditure and that of non-profit
Most trade is done with the EU, but the USA, China,
organizations increased by 0.2 percent compared with
and Japan are also among the major Swiss trading
the previous quarter. Positive contribution came in
partners. The most important trade goods, both for
particular from housing and recreation and culture.
export and import, are chemicals,
Expenditure
machinery,
for
on
Economic
healthcare
Affairs.
delivered
Household
negative
precision tools, watches, jewellery, agricultural
contributions. General government and social security
products, vehicles, textiles, leather, rubber, plastic,
consumption expenditure fell for the second time in
and energy.
succession (-0.3 percent). Gross fixed investments
Of the three main sectors, the tertiary sector is the most important for the Swiss economy. It includes 26 | O C T O B E R 2 0 1 4
remained at the same level as in the first quarter (0.0 percent). Investments in equipment rose by 0.7
percent, driven by investments in IT and vehicles
Unemployment Rate in Switzerland increased 3.10
while investment in construction reported a fall (0.7
percent in October of 2014 from 3.0 percent in
percent).
September of 2014. Swiss consumer prices were
Exports of goods (excluding precious metals, jewellery and gems as well as works of art and antiques) increased by 0.7 percent in the second quarter. Sales of
jewellery made a positive
contribution to growth while those of chemical and
unchanged year-on-year in October, following a 0.1 percent fall in September. On a monthly basis, consumer prices were also flat. Switzerland recorded a trade surplus of 2452.00 CHF million in September of 2014.
pharmaceutical products also made a small positive
Switzerland trade surplus widened to CHF 2.45
impetus. In contrast, the remaining categories such as
billion in September of 2014 from CHF 2.25 billion a
mechanical/electrical engineering showed a reduction.
year earlier, above market expectations, as exports
Exports of services (including tourism) increased 0.6
expanded at a faster pace than imports. Things for the
percent and imports of services also showed a positive
Swiss are not that bad in comparison to rest of the
trend (+2.4 percent).
world, but surely improvement is the way!
Imports
of
goods
(excluding precious
metals,
jewellery and gems as well as works of art and antiques) increased by 0.7 percent in the second quarter of 2014, with imports of chemical and pharmaceutical products in particular showing a rise. Imports of machinery/electronics as well as metals also showed a positive trend, whilst imports of precision instruments/watches/jewellery were lower. On the production side, many sectors reported virtually no change in value between the the first and second quarters. Industry, energy and water supply made an overall small positive contribution to GDP growth. In contrast, the value added in the financial sector and some public sector economic areas showed a stagnating to slightly falling trend. Year-on-year, the economy advanced 0.6 percent in the second quarter of 2014, after growing a revised 2.1 percent in the previous quarter.
27 | O C T O B E R 2 0 1 4
Industry Analysis
Indian Film Industry
-Kolisetty Aishwarya
The entertainment industry is growing leaps and
• The multiplex and screens are expected to double
bounds today and one of the main contributors of this
from 9000 to1,775 screens in the next 5 years.
industry is our film industry that has been minting
• By 2015, 90 per cent of India‟s projected 187
money lately. What has the industry not to give its participants? They are bestowed upon with fame,
million broadband subscribers will access the film and media via wireless connections.
glamour, and dazzle and of course it rains money. Thus analyzing the film industry of India we unveil the secret behind its growing profits. Industry 2014:
SWOT Analysis: The scope of the film industry is ever growing. To look at it closely and getter a better future picture we have the following SWOT analysis.
The Indian film industry has managed to pave its way up to registered revenue from $5 billion in 2014 from $3.2 billion back in 2010 at a compound annual
Strength: • Our films have become an international brand having its global presence in Asia, Africa,
Europe,
America
and
Australia. • We have more than fourteen million viewers who visit theatres daily to watch Bollywood movies all over the world. growth rate of 14.1 per cent. Having had the pleasure of being the largest film industry with speeding up growth rate, some of the features of the industry are: • The industry produces more than 1000 films every year covering 52 languages and selling around 3.7
• Indian films compete with Hollywood movies for their slots in theatres • The volume of Indian films released worldwide has become twice the number of Hollywood movies
billion tickets annually.
• Bollywood gives employment to many lacks of
• It has more than 400 production houses and 32
people around the world
corporate houses in the business of film production.
• Low budget movies have generated more revenues
• It provides employment to more than 60 lakh people
in box office hit
having a current turnover of more than rs.12000 crores.
28 | O C T O B E R 2 0 1 4
• The media penetration is poor among the poorer sections of the society, offering opportunities for expansion in the area. • The nascent stage of the new distribution channels
offers
an
opportunity
for
development. • Rapid de-regulation in the Industry • Rise in the viewership and the advertising Weakness:
expenditure.
• The Media and Entertainment sector in India is
•
highly fragmented.
multiplexes, etc and new distribution channels like
• Lack of cohesive production & distribution
mobiles and Internet have opened up the doors of new
infrastructure, especially in the case of music
Technological
innovations
like
animations,
opportunities in the sector.
industry.
Threats:
• The lack of efforts for media penetration in lower
• Piracy, violation of intellectual property rights poses
socio-economic classes, where the media penetration
a major treat to the Entertainment companies and
is low.
production houses.
• Many movies fail to make even a little impact to the
• Lack of quality content has emerged as a major
audience as the movie release per month is very high
concern because of the 'Quick- buck' route being
• Repetition of story script and duplication of music
followed in the industry.
tracks seldom makes people to lose interest for
• With technological innovations taking place so
movies
rapidly, the media sector is facing considerable
Opportunities: • International brands like L‟Oreal prefer Indian celebrities to be their brand ambassadors for their global market. • Reliance Big entertainment has signed deals with production companies of Brad Pitt, George Clooney,
uncertainty about success in the marketplace. • Government and sensor board regulations are becoming high due to the increase of adulthood and violence scenes in movies • Many movies face legal issues and threats from political parties during their releases
Tom Hanks, Nicholas Cage, and Jim Carrey etc.
• Negative reviews on websites and social media are
• The increasing interest of the global investors in the
major threats
sector. 29 | O C T O B E R 2 0 1 4
Revenues from the outside land: Appreciation for the Indian cinema just keeps rolling towards India even from countries far and wide. The revenues generated from the views outside our country also hold a large portion in the total collections in the industry. Moreover the growth of the viewership outside India of Indian cinema is recorded as 9.4 per cent and contributes up to 7 per cent of the total revenue. Typically, only a few star driven movies have witnessed theatrical success in the overseas market and the films are normally watched by persons of Indian origin. In most countries where theatrical audience is weak, films are distributed directly on home video platform. The main platforms for us from the outside land today are countries like North America, U.K., the Middle East and their total contribution stands around 80 per cent of the total overseas revenue. The Middle East Market showed a growth of around 30 per cent whereas the U.S. markets are growing at around 10 to 12 per cent. The Indian cinema currently is acquiring immense demand from markets like Japan, South Korea, Peru etc. where even translations of the films or the films with subtitles are being purchased. During the last year leading production house Yash Raj Films entered into a partnership with the Nikkatsu Corporation, a 100 year old Japanese production and Distribution Company, to increase the number of Hindi movies accessible in Japan. The partnership has resulted in the release of films such as „EK Tha Tiger‟, „Don2‟, „3 Idiots, and „Jab Tak Hai Jaan‟ across 9 major cities in Japan including Osaka, Kyoto, Sapporo and Kobe.
30 | O C T O B E R 2 0 1 4
Conclusion: The projected figures of the industry promise a great potential for the future of Indian cinemas. The industry has been on a growth spree for the last decade and continues to do so in the future as the potential of the industry is immense. It is the industry that brought to us Sholey and it is the industry that promises us new entertainment every Friday. Good days are here and will keep coming for the Indian film industry.
Stock Market
Delisting of the Giants
-Priyanka Malik fate of delisting because of
mismanagement in the
businesses. Delisting of the securities refer to permanent removal of securities of a listed company from the stock exchange wherein the trading of the respective stocks are barred. The delisting might be done voluntarily for expansion purposes or it might be imposed as a penalty measure for non compliance of the listing agreement over a period of time. Due to the violation of listing agreement inclusive of minimum share By failing to prepare, you are preparing to fail. -Benjamin Franklin In the era of cut-throat competition, there is hardly any escape from the mistakes committed in the business. Not only the repercussions will haunt you but also the opportunists around are capable of efficiently using the loophole or the wrong decisions in their own favor. The delisting of the giants like Kingfisher Airlines and UB Engineering group
prices has led to the suspension of trading. The other major reason contributing to the same is violation of the clause relating to the timely preparation and disclosure of the financial results of the firm consecutively for two quarters. The shares of kingfisher airline were traded at all time low for Rs 1.85 at BSE, after tumbling by 4.64%. The shares of UB Engineering also fell by 4.96% to hit the lower circuit limit of Rs 7.67.
seconds the same. One of the most luxurious airlines
Other stocks from the UB group also saw a decline
of its time lost the market share to the economic
although not close enough for the suspension. UBHL
airlines. Because of Mallya faltering on the strategic
was trading lower by 3.24% whereas Mc Dowell
decision making, ever mounting debts, rise in petrol
Holdings Ltd. And United Breweries trading lower by
prices,
inadequate use of the acquisition of Air
2.74% and 0.44% respectively. The entire promoter
Deccan, decline in the passenger traffic and salary
share holding has been frozen from November 7,
cuts resulted in the closing down of the venture
2014 along with trading getting suspended from
whereas his liquor business is doing just fine. The
December 1.
inability to revamp the business has finally led to the
looked up as a youth icon preaching the message of
delisting of the stocks of Kingfisher Airlines from
„Live life king size‟ has now set an example of
BSE and NSE. Not just the Kingfisher Airlines but
mismanagement and faulty decision making, leading
also, the UB Engineering group has faced the same
to the disastrous end of once luxurious airline-
Mr. Vijay Mallya who was once
„Kingfisher Airlines‟.
31 | O C T O B E R 2 0 1 4
months.” It would be no less than a miraculous situation where in the company is able to turn around the situation by paying the fine and restoring the lost trust of the investors. Further, the recent tightening of the delisting policies by SEBI wherein the company requires 25% participation for the approval on the day of board meet might provide the Airlines a slight ray of hope which if utilized by fresh pair of eyes might help the escape. The firm‟s status has deteriorated to an extent wherein from the valuation being Rs 10,000 Cr, the market capitalization remains just Rs 150 Cr. By March 2013, the amount of loss the company bore was Rs 4,301.12 Cr with the cash inflow accounting for only Rs 683.46 Cr. Also, a consortium of 17 banks has an outstanding debt of amount Rs 6,521 Cr. While for the UB Engineering group the market cap accounts for Rs 14 Cr. Considering the holdings, in Kingfisher Airlines the major chunk is allocated to public holdings with 91.46% while the promoter share holding accounts only for 8.54% stake. The non-promoter shareholding accounts for more than two-lakh small investors, over 6000 HNIs, over 2000 NRIs and 13 FIIs. Whereas, considering the UB Engineering the holding is more balanced in nature. It has 59.26% stake allocated to public holding and 40.74% for promoter holding. The only way out from this sinking and chaotic situation of delisting is to comply with the regulations of the Listing Agreement by November 25, 2014. According to the BSE notice, after 15 days of suspension, “trading in the shares of the non-compliant companies would be allowed on trade-for-trade basis in Z group only on the first trading day of every week for 6 32 | O C T O B E R 2 0 1 4
Vriddhi Research’s Corner
Company in Focus: Tube Investments Limited
- Vighnesh P.
Company Overview
outlets and 664 exclusive stores. Asset light, scalable
Tube Investments of India Limited is an India-based
and profitable bicycle division has high ROE (52% in
company
FY 14 and 56% in FY13).
engaged
in
the
production
of
bicycles/components/electric scooters, engineering
Engineering: Engineering division is the largest
and metal formed products. It operates in three
manufacturing business division of TI India with 46%
segments:
Scooters,
and 18% revenue contribution to its standalone and
Engineering and Metal Formed Products. The
consolidated business respectively during FY 2013-
Bicycles/Components/Electric scooters division of the
14.The product portfolio consists of Cold Rolled Steel
Company consists of bicycles of the standard and
Strips and Precision Steel Tubes (Cold Drawn Welded
special variety, including alloy bikes and specialty
Tubes, Electric Resistance Welded Tubes and
performance bikes, bicycle components sold as
Stainless Steel Tubes). The company is market leader
spares, fitness equipment and electric scooters. The
in Cold Drawn welded tubes and a preferred supplier
Engineering division of it consists of cold rolled steel
to major automobile companies in India and abroad.
strips and precision steel tubes, cold drawn welded
Apart from automobile companies, TI India‟s
tubes (CDW), electric resistance welded tubes (ERW)
products are sold to power, pharmaceuticals and food
and Stainless Steel tubes. It has presence in
processing companies. The division is asset light and
automotive and industrial chains, fine blanked
profitable with ROE of 25% during FY 2013-14 and
products, roll-formed car doorframes and cold rolled
commands decent operating margins (9% in FY 2013-
formed sections for railway wagons & passenger
14) on its products.
Cycles/Components
/E
coaches. Metal Formed Products: TI India manufactures metals Company has good consistent profit growth of
formed products for Automotive clients (car door
63.51% over 5 years.
frames, window and guide channels, impact beams,
Cycles: TI India is one of the major players in the
hydro-formed parts, chains, fine blanked products,
Indian bicycle market with sales of 3.8 million units
stamp products and motor casting frames) and
with 22% market share during FY 2013-14. TI India‟s
Railways (roll formed sections for wagons, sub-
bicycle portfolio consists of four major brands- BSA
assemblies of sidewalls, end-walls and roof). The
(Premium Bicycles), Hercules (Standard Bicycles),
company has leadership position in Industrial chains
Track & Trail (Off Road Segment) and Montra
and doorframes for Automotive Industry. The
(Specialty Performance Bicycles). The company also
business segment recorded revenue of Rs 851 Cr
manufactures
elliptical,
during FY 2013-14 as compared to Rs 850 Cr during
recumbent bikes for fast growing fitness segment. It
the previous year. The segment has decent operating
motorized
tread
mills,
has fairly large distribution network of 940 retail
33 | O C T O B E R 2 0 1 4
profit margins (8% in FY 2013-14) and healthy return
standalone revenue during FY 2013-14. Vehicle
on capital employed (14% in FY 2013-14).
financing business accounted approximately 77% of
Its P/E ratio is low as compared to its peers and the
total disbursements of Cholamandalam Investment and Finance Company during FY 2013-14. During
industry average, has a good ROE of 15.07%
same period, Motor Insurance premium contributed Key Highlights:
approximately 67% of total premium to Chola MS
Revenue of Rs 9,108 Cr and PAT of Rs 518 Cr during
General Insurance Company. Being a cyclical
FY 2013-14.
industry, automobiles sales tend to fluctuate with
Leading Indian Bicycle Manufacturer and Retailer
business and economic cycle. Due to Industry
with market share of 22% during FY 2013-14. The
concentration risk, TI India‟s fortunes are tied up with
Company owns BSA and Hercules bicycle brands.
well being of Auto Industry.
Market leader in key auto ancillary products such as
Competition: TI India operates in highly competitive
Precision Tubes, Metal formed Door Frames and
industries (Auto Ancillaries, Financial Services). Price competition among industry players could erode
Automotive/Industrial Chains.
the industry margins. Preferred supplier to major automobile companies and Conclusion:
their tier 1 vendors.
Tube investments india would be a good BUY for a
Major group companies of TI India
medium to long term of Rs 390 - 400 seeing the Shanthi Gears- The leading power transmission producer of gears, gear boxes, gear motors and gear assemblies.
Cholamandalam
and
Finance
offering vehicle finance, home loans, home equity loans, SME loans etc private sector general insurer is a JV between TI India (74% stake) and Mitsui Sumitomo Insurance Company of Japan. Dependency on Automobile Sector: TI India has significant exposure to Automobile sector through its Auto Ancillary, Financial Services and General contributed
business.
Auto
approximately
34 | O C T O B E R 2 0 1 4
into cycles would also boost its revenue as the world is movin towards a greener environment. Its finance division would also benefit TI because of the increase in demand of automobiles. Its revenue has been
Chola MS General Insurance Co Ltd: 7th largest
Insurance
being a cyclical sector is generally benefited during an economic upturn. Tube investments diversification
Investment
Company Ltd: The financial services company
current economic scenario. Auto components sector
ancillary 50%
of
products TI
India‟s
constanly increasing over a period of time and less P/E and P/BV compared to its peers.
35 | O C T O B E R 2 0 1 4
Event’s Corner
MDP: The Make in India Campaign
- Arihant Jain
On 13th November 2014, Finstreet Family held a
But there are many problems in doing business in
Management Discussion on the topic “MAKE IN
India such as Red tapism. India ranks 142 in ease of
INDIA”. We saw a huge turnout of students debating
doing business out of 189 countries. Time taken to
with Zeal and sharing their thoughts on this topic.
register a new business is minimum 64 days with all
MAKE IN INDIA is an international marketing event promoted by our honourable Prime Minister Shri Narendra Modi on 25th Sept 2014 to attract businesses from around the world to invest and manufacture in India. Objective of this programme is
13 procedures completed India ranks 158th in starting a new business. In India there are wide variations in government regulation and policies across cities and state in the country that restrain business activities. Other problems included are:
to focus on medium and heavy industries or
Lack of communication to public.
enterprises to convert the country into global
Registering property in India.
manufacturing hub, generate employment and boost
Getting an electricity connection is very difficult.
economic growth. The Government has chosen
Problems in getting credit and paying taxes.
manufacturing sector
because
majority of
the
country‟s workforce consist of unskilled labour and offers employment to millions of them. Also our contribution of Industrial sector with respect to GDP is only 21.5% while Services and Agriculture contribute 64.8% and 13.8% respectively. Tools used by government to attract investments are setting up a facilitation cell at FICCI (Federal of Indian Chambers of Commerce and Industry), Labour reforms, and increasing FDI limits. The programme emphasises on 25 sectors which include: automobile, chemicals, IT, pharmaceuticals, textiles, aviation, railways, defence etc. In railway sector FDI has been increased to 100% with high speed train projects coming up through PPP and railway electrification and dedicated freight lines to be maintained. The possible impacts of MAKE IN INDIA could be growth in Index of industrial production (IIP) and GDP, increase in employment, reduction in fiscal and current account deficit, better credit rating and overall welfare of the society. 36 | O C T O B E R 2 0 1 4
However, the positive light is Corporate are showing interest after Make In India campaign was introduced. Examples are Honda Motors is planning to invest around INR 4000 crores to build automobile manufacturing plant in Gujarat with capacity of 1 lac cars a year. Also Lava Mobiles is shifting their plant from China and will spend around Rs. 500 million in next three years on domestic production and operations. The session was interactive and audience showed interest in discussion. Finstreet Perspective which was shared at the end was that The Make In India Campaign must be successful as government is taking initiatives by increasing FDI limits in defence and insurance sector, focusing on digital India process and skill development, new industrial policy (labour reforms and GST implementation). This would lead to reduction in Fiscal deficit to ideal 3% and increase in economic growth to 7-8% a year in future.
The IBS Times is an academic print and is not for any commercial sale. Reliability and Responsibility for sources of data for the articles vests with the respective authors. Please feel free to drop in your suggestions or any feedback at editor.ibstimes@gmail.com Š IBS Times – FinStreet, The Official Capital Markets Club of IBS Hyderabad. All Rights Reserved
37 | O C T O B E R 2 0 1 4