The IBS Times- November 2014

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