UBER SHOWS THE WHITE FLAG IN CHINA BY UTSAV CHANGOIWALA
The IBS times
SPECIAL EDITION
COVER STORYY
INDIA’S STRUGGLE WITH NSG AND MTCR BY SNEHA TIBREWAL.
THE CPEC IS ALL ABOUT POWER BY ANTRA BHARATI FDI FLOODGATES
FDI - A BLESSING OR A DEVIL IN DISGUISE BY DEBANJAN PAUL
BLUE ORIGIN, SPACE X AND ISRO
THE NEXT SPACE RACE BY JEET PC
FinStreet, IBS Hyderabad
ISSUE NO. 191, AUGUST 2016
What’s Inside
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INTELLIGENCE BEYOND SUCCESS LETTER FROM THE EDITOR
TEAM IBS TIMES ISHAN GUPTA (EDITOR-IN-CHIEF) ROHIT TILLU (MANAGING EDITOR) ABHINAV BANERJEE
ANUPAMA KUMARSWAMI CHESTHA KUMAR EYAMINI N
Dear Readers, Greetings from Team FinStreet. We wish you a very Happy 70th Independence Day. Thank you everyone who has contributed and made us where we stand today. We look forward to continue our work of making available all the latest happenings round the globe with all your gracious support. Team FinStreet is proud to present the 191st edition of The IBS Times.
HEMLATA HAJONG JATIN SHARMA PRATEEK PANDEY RANU SARUPRIA SANDHYA ADHAVAN SWARUPA ROY ANTRA BHARATI DEBANJAN PAUL DIXITA REDDY GAGAN KAPOOR JEET PC RADHIKA GUPTA SHILPAM DUBEY SHREYA RANI SMRITI PATODIA SNEHA TIBREWAL SRUJANA NAIK UTSAV CHANGOIWALA
We would like you all to welcome our new team with open hearts. They are young, passionate, driven individuals exploring the world of writing. We would like you all to extend them the same support as you did to us. On this Independence day, we bring to you a range of articles highlighting the political situation in the region. We bring our COVER STORY highlighting this turmoil in INDIA’S STRUGGLE WITH NSG AND MTCR. We further look into changing dynamics in our articles THE CPEC IS ALL ABOUT POWER and MODI’S AFRICAN SAFARI. On the economic front we bring to you an interesting developing story in THE NEXT SPACE RACE and RELIANCE JIO ENTRY INTO TELECOM. For Sector research we‟ve published a report on INDIAN FMCG INDUSTRY and the Market Watch, SURPRISES AMIDST UNCERTAINTIES will help you understand the movement of market for your future reference. From the investment point of view, this issue also brings to you an exhaustive report on MANPASAND BEVERAGES by Team Vriddhi Research. Do make the most out of it and keep enjoying the experience of The IBS TIMES. Your feedbacks and opinions will help us make it better. Once again, a very happy independence day to all our readers. Ishan Gupta Team FinStreet
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CHINA-PAKISTAN ECONOMIC CORRIDOR THE CHINA-PAKISTAN CORRIDOR IS ALL ABOUT POWER
What is CPEC? CPEC (China - Pakistan Economic Corridor) is a collection of infrastructure projects which was originally proposed by China in May 2013 and was inaugurated in August 2013. The proposed and estimated cost of the project is up to USD 46 billion, USD 34.4 billion of the USD 46 billion announced are for power projects. The Government of Pakistan considers this project as a game changer for its fragile economic structure. The project aims at developing Pakistan‟s economy by improving energy as well as infrastructure resources of the country. Under the project, a 3000 km network of roads, rails and pipelines are proposed to be constructed in order to connect Pakistan‟s Gwadar Port to China‟s Kashgar city which is situated in Xinjiang province, an autonomous territory in north western China. The new route would help China to access world markets easily, and that would be an alternative to China‟s present route (through Straits of Malacca). Benefits to Pakistan from CPEC This project is of great significance to Pakistan. It is an economic breakthrough for the country. If the project is implemented as it is planned and succeeds in providing the projected benefits, it will undeniably infuse life into Pakistan‟s precarious economy and also in energy and infrastructure sectors. And if the project works out, it can generate as much as three to four times the initial $46 billion investment. The corridor will help to
-Antra Bharati
mitigate poverty in Pakistan by creating new business and job opportunities. This partnership would also help Pakistan bring back the foreign investors who fled the country following the 2008 election. Hence, it would help in continued economic development. Under CPEC, the energy sector has been giving priority in the first phase. These will add up to 10,400 Mega Watt of generating capacity to the grid, which the government claimed would resolve Pakistan‟s critical shortage of power. Along with ending the energy shortage, it would also help the economy to combat pollution by cutting down on carbon emissions. CPEC would help to establish modern transport infrastructure in the country to make the economy competitive in the international market. Also, CPEC is focusing on the most backward areas of the country and this change is clearly visible, as human settlements are emerging on the section of the Western route from Quetta to Gwadar. Benefits to China from CPEC CPEC is the revival of China‟s dream of creating “Silk Road,” which would connect with the markets of Middle East, Central Asia, and Europe. And it is the first project which comes under the umbrella of China‟s One Belt, One Road (OBOR) strategy. The Chinese see the endless possibilities that Pakistan has to offer. Federal Minister pakistan 4
Planning & Development observed that Pakistan offers captivating opportunities to Chinese investors in technology, minerals, agriculture, infrastructure, and industrial sector. If Chinese technology and experiences in the industrial sector would get combined with Pakistan‟s location and its low cost of production, it can revolutionize the industrial sector of the country. He said mineral-rich provinces of KPK (Khyber Pakhtunkhwa) and Balochistan are an important destination for Chinese investors in the country. Currently, nearly 80 percent of China's oil is transported by ship from the Strait of Malacca to Shanghai, which requires covering a distance of more than 15000 km and the journey takes long duration up to 2-3 months. But once Gwadar-Kashgar route would become operational the distance will be reduced to less than 2500 km. It would help China to increase influence in the Indian Ocean, which is a vital route for oil transportation between the Atlantic and the Pacific Ocean. It will also give China direct access to the Arabian Sea through which almost 40% of world‟s oil passes. Furthermore, all the oil shipments from the GCC (Gulf Cooperation Council) countries will be shipped via Pakistan to China. Nonoil goods could also be imported to the world using Gwadar as a transit route. That would make Gwadar equally or even more important than the Suez Canal of Egypt. What stands in CPEC’s way?
CPEC is considered as a lifeline for Pakistan, yet few potential obstacles could derail this multifarious project. Provincial Resentment in Pakistan
A lack of domestic unanimity can hinder development in any part of the world, there is no exception for CPEC also. When CPEC was introduced initially, very main political party supported it, including the Pakistan Muslim League Nawaz. However, later the enthusiasm turned to deep concern when political parties which belonged to economically weak provinces felt that their province‟s reservations about CPEC were not being addressed. Prime Minister Nawaz Sharif has already twice led an All Parties Conference to address provincial grievances and has also formed a committee to tackle the related issues. The debate became so heated that China felt it necessary to release a statement urging parties to overcome their differences. Already Pakistan has a troubling history of destroying big projects through political bickering, and there‟s fear that CPEC may have to go through the same fate. One of the prime examples is Kalabagh Dam. The Status of Gilgit-Baltistan Another facet that needs to be given serious consideration is the status of Gilgit-Baltistan. Pakistan claims that it has semi-autonomous control over Kashmir is probably not convincing to Chinese authorities. It was claimed by a top Pakistani government official that “China cannot afford to invest billions of dollars on a road that passes through a disputed territory which seems to be claimed by both Pakistan and India”. Islamabad is now working to make GilgitBaltistan the country‟s fifth province, in order to gain constitution status for it. Giving Gilgit provincial status is a bold as well as a risky step. As mentioned above, the region 5
region is part of the disputed Jammu & Kashmir territory, and thus India also demands claim to it. In order to give it status, would require Pakistan to back off a decadesold stance of plebiscite and would require getting a disputed territory resolution through the United Nations.
Nevertheless the continual and main benefit for China of the friendship with Pakistan has been to fortify its hand against India. However, if this project succeeds, and the “corridor” proves to provide Pakistan with a massive boost, it would help the country to develop even greater strategic asset. Let‟s see what future holds for these two countries with the cordial relation.
Security Vulnerabilities
As we all are aware of the security atmosphere inside Pakistan is weak and could pose numerous of threats or difficulties for CPEC. The project starts from Kashgar and it has to pass through disputed provinces of Pakistan like Gilgit - Baltistan and Khyber Pakhtunkhwa, followed by Balochistan. The last two have complex security challenges. The government has decided to keep 10,000 army personnel under the command of a major-general surrounding the disputed regions in order to protect or safeguard Chinese Engineers also to guide the entire trade route. China is undoubtedly very well aware of these difficulties. Half a century of amiable relations with Pakistan has given China the confidence to initiate this project. However, if we consider Pakistan‟s unpredictable nature, China would not be able to stay at peace, until the project is completed. 6
FDI FLOODGATES FDI - A BLESSING OR A DEVIL IN DISGUISE
A Foreign Direct Investment is an investment made by a company based in one country, into a company based in another country. The following article talks about the latest relaxation in norms of FDI or Foreign Direct Investment in India and all its possible outcomes. The news came out after just two days when the Governor of Reserve Bank of India Raghuram Rajan announced that he would not be serving his second term, and as expected it rattled the market all over. A statement from the PMO came out which said “The centre has extensively liberalized the FDI system, with an objective of providing major drive towards employment and job creation in India. This is the second major change after the last major changes announced in November 2015. With these changes taking place, India has become the most open economy in the world for FDI.”
-Debanjan Paul
Defence Sector: The condition of “state-ofart” technology has been removed by the government to attract investment in the defence sector. Broadcasting Carriage Services: It permits 100% FDI through automatic route in broadcasting carriage services like teleports, DTH and mobile TV. Aviation Sector: Another significant move made by the government is that it will allow 100% FDI in airlines and relaxed norms for overseas investment in Brownfield airports. Private Security: In private security agencies, FDI has been raised to 74% which was 49% earlier. Establishing branch office, or project office: If the principal of the applicant is defence, telecom, private security or information and broadcasting, then for establishment of branch office, project office or any other place of business, it has been decided that RBIs approval or any separate security clearance won‟t be required in cases where FIPB approval by the concerned ministry has already been granted.
Animal Husbandry: The government has relaxed the norms in animal husbandry sector The major changes which have been made are: Food Products: It allows 100% FDI under government approval route for trading, through e-commerce in respect of food products manufactures or produced in India.
Pharmaceutical Sector: Under the new norms, it has been decided to permit up to 74% FDI under the automatic route, which means that foreign investors won‟t require government approval to invest in existing domestic companies
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Single brand retail trading: Organization undertaking single brand retail trading have been given relaxation from local sourcing norms up to 3 years. Moreover, according to the new FDI norms, the role of Department of Industrial Policy and Promotion(DIPP) panel to determine the features which qualifies as a cutting edge technology is no more valid. The decision will now directly come from the lineministries and the Foreign Investment Promotion Board(FIPB) will decide. Possible impact of the latest changes: 100% foreign investment has always been opposed with an idea that it would be unfair for the local businessman as they would not survive the tough competition from the foreigners. However, our Narendra Modi led BJP government clearly does not agree with that. You are not required to understand rocket science to realize the benefits of these changes. Some of the top positive affects that are definitely going to take place are: • Creation of employment • Investment in India means appreciation of rupees • Better production leading to increased GDP(Gross Domestic Product) • More options for Indian customers leading to greater competition • The Indian market has been lagging behind for quite some time. Hence advanced European, American or Chinese player can definitely bring technology Due to the new rules, big hotshot in smartphone industry “Apple Inc.” which currently sells its I Phone, I Mac‟s and I Pads through retailers have an opportunity to open their own shops in India and they might eventually
eventually start manufacturing their product in our country as well which will lead to more employment. Similarly, Swedish furniture retailer IKEA are also setting up new stores in Hyderabad and Mumbai to expand its operations. Meanwhile, the existing FDI policy on Ecommerce which has long been debated and has become a controversial topic has been confined under some guidelines for FDI in Ecommerce sector by DIPP. As per the guidelines, 100% FDI under automatic route is permitted in market place model in Ecommerce. It means that the E-commerce only acts as an IT platform in an electronic network where goods are exchanged directly between buyers and sellers. On the other hand, FDI is not permitted in inventory based model of E-commerce which means the inventory of goods and services are owned by E-commerce entity and sold to the consumers directly. The motive of the guidelines is to provide a level playing field for both the market model going forward. Now let‟s shift our attention to the other side of the coin and as famously quoted by the famous American Biologist “Barry Commoner”, “No action is without its side effects” The new FDI policy isn‟t all clean. I have listed a few of the visible disadvantages below: • Hindrance in domestic investment • Because of the political issue in our country constantly changes, foreign direct investment is a bit risky and most of the risk factors are extremely high • It might result in conflict of codes and laws
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• It might have an effect on local cultural sentiments- Socio cultural effects • Effect on natural environment Now let us see what critics had to say from the policy change Political parties like CPM has claimed that this policy would affect our internal security and the engagements in South China Sea. It is also believed that these policies required further testing before being implemented as for example not allowing 100% automatic FDI in brownfield sector airport development will mean that aviation sector will not see as many as investment we predict that would happen, and that‟s the catch. Meanwhile, in a news interview held recently the Chief Minister of West Bengal Mamata Banerjee aka Didi stated that she would not allow foreign investors in her state as she holds a strong belief that it will kill the local Indian brands. My personal say: In my personal opinion this is the first major step taken by the BJP government to attain the much hype created over the “Make in India” campaign. As per a report published in Financial Times, India has been ranked highest in terms of Greenfield investment. I believe it‟s quite natural to expect high foreign investment in India as we are a developing country. So, instead of taking pride of being at the top, we need to compare ourselves with other countries and realize till what extent our potential lies.
and again we have seen that an economy needs to open up in order to grow strong. While Raghuram Rajan decided to step down, this news came to us as a surprise as it was not expected and has become a bitter-sweet moment for the country‟s economy. To conclude, I would like to say that after a long time Indian government is taking a step to move forward and we must do our level best to support the decision made. It‟s time we show our true potential. Kudos to Modi government for taking this decision. Let‟s hope for the best!
Food for thought: Change is the only thing that remains constant. In order to progress we need to change.
Although the criticism cannot be completely overruled, I believe that being over protective has never helped anyone in the long run. Time
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MONSOON UPDATE THE CURRENT STATE OF MONSOON
India, majorly an agriculture-based economy is dependent predominantly on the monsoon rains because of its water scarcity coupled with power shortage in the country and improper irrigation facilities. It receives more than 80 per cent of the annual rainfall during the four months between June and September. The agriculture sector contributes to 14-15 per cent of India's gross domestic product (GDP) and any material variations in the monsoon outcome in terms of volume as well as spatial distribution will have an impact on the agricultural output directly and a cascading effect on the overall economy and food inflation, which can in turn impact consumer spending and borrowing. In the past few years, Indian economy went through a rough phase and good monsoon became crucial for farm output as over 55 per cent of India's arable land is rain-fed. In the year 2012, a considerable decrease in monsoon had an adverse impact on commodities market being majorly dependent on rain, which resulted to delay in sowing of crops like paddy, oilseeds, cereals, and pulses in central and southern India. Expectations and predictions that the output will be badly hit due to scarcity of rainfall in major producing areas gained ground. The stock of consumer goods witnessed pressure in sales growth and resulted in lower rural income and thus lower income spent. Prices of various agricultural commodities like prices of soya bean, castor seed, rape mustard seed, jeera, turmeric, wheat and corn rose sharply leading to instability in the market
-Smriti Patodia
market and feared inflation. This year the Indian Meteorological Department has announced that monsoon rain is expected to be 106% of the long period average. This is favorable news for the Indian economy, and especially rural India, given its high reliance on rainfall. If this happens, there is every likelihood that farm incomes will see a 20% increase in FY16-17. This, in turn, will trigger demand for agri-related goods and services, consumer durables and textiles. Unlike in 2015, the monsoon in June 2016 had a bad start but the surplus in July rains have completely changed the picture. The latest data from Krishi Bhawan shows cumulative sowing as on July 29 at 799.51 LH, which is higher than the 752.29 LH for this time last year. 28 out of the countryâ€&#x;s 36 metrological departments have seen normal to excess precipitation. Not only rural India but overall economy will have a positive impact of good monsoon. Industries like automobiles, machinery tools, food processing are all likely to get a boost. A good monsoon will not only trigger high demand but also mean a significantly higher income for farmers, especially with governments support through minimum support price (MSP) scheme and subsidies on fertilizers, seeds, and pesticides. With good monsoon this year, a boost in the banking sector is also expected as rural income is expected to grow around 12-13% in FY 16-17. This will decrease farmerâ€&#x;s financial stress to pay back loans and also enable them to take further loans for the next crop 10
crop season. Also more farm related employment leading to higher cash flow in the economy, positively effecting the overall GDP will prove to be a cherry on the cake. In complement to Increase in borrowings, there will be a higher spending by the rural community, while appreciating the balance sheets of banks, directly and indirectly. Experiencing two consecutive years of droughts, even an average monsoon is enough to increase the confidence of investors to invest in the commodities market. The economy will witness higher sowing and increased the level of production this year. With good rainfall, high rural demand, increased level of production, clearance of Goods and Service Tax (GST) bill and increased rural spending and infrastructure, the economy is sure to flourish.
technology. Keeping a check on the volatility of the commodity market, steps should be taken to stabilize the fluctuations in inflation. As things stand, India is looking to have a bumper agricultural year 2016-17. Even if indicators showing improvement, it is too early to conclude that the economy is on the road to full-fledged recovery keeping in view that the improvement is not broad-based. Although with good monsoon we do not see positive impact in exports as it is expected to contract by 1.6 per cent whereas wholesale price inflation is projected to grow at 0.9 per cent for 2016-17. Since the current forecast about the overall economy is totally based on monsoon, its hard to conclude whether the economy has reached the tipping point where positives overweighs the negatives.
Watching the global uncertainties, foreign market participants are expected to show confidence about India and the economy is also expected to attract investment and be a major spot among global economies with robust fiscal parameters and macroeconomics. To add more to the monsoon glory, the fiscal deficit and revenue deficit in FY2016 were contained and targets were achieved. Adequate monsoon this year was the most crucial component of the entire economy. The country can now expect a rapid increase in the agricultural production, farmerâ€&#x;s income, Industries and GDP of the country. Overcoming the short comes of the last 2 years of successive droughts has been a blessing. India is all equipped and ready to grow and grab confidence and foreign investment from all over. The country should now focus more on easing the pressure on farmers with more improved irrigation technolo 11
NSG AND MTCR INDIA’S STRUGGLE WITH NSG AND MTCR
Missile Technology Control Regime (MTCR) is the first step of India to enter into the four export control bodies, including the Nuclear Supplier Group (NSG), the Wassenaar Arrangement and the Australia Group. These four controlling bodies are the leading forums of the global export controls system and are also the oldest multilateral bodies for export controls. Most of the major suppliers of these sensitive technology are members of these regimes. India started the process to join MTCR earlier this year when it agreed to join the Hague Code of Conduct that deals with ballistic missile non-proliferation arrangement and it got accepted on 27th June, 2016. India getting in would end decades of denial of technology by the US and India will now be able to import technology to build capability and become a suitable opponent to China. What Is NSG and MTCR? NSG is a 48 member group of nuclear supplier that seek to contribute to the nonproliferation of nuclear weapons through the implementation of two sets of guidelines for nuclear and related exports. The names of few participating governments are Canada, Germany, France, Japan, Russia, the UK and the US. Similarly, MTCR is a multilateral export control regime. It is an informal and voluntary partnership among 35 countries to prevent the proliferation of missile and unmanned aerial vehicle technology (UAVs), which could deliver chemical and biological weapons and are capable of carrying above 500 kg payload for more than 300 km.
-Sneha Tibrewal
Why India wanted NSG membership? India's need for energy is immense at this point of time and NSG membership would have resulted in getting low cost, clean nuclear energy to meet the demand. Today, India's energy needs are met by conventional fuels like petrol, diesel, and coal which emit greenhouse gases such as carbon dioxide and carbon monoxide, making India one of the major emitters of the hazardous gases. NSG membership would have allowed India to buy nuclear energy from other countries, which is a clean source of energy. NSG membership would had also put India on a firmer footing to propose the idea of plutonium trade for its thorium program that has been waiting in the wings. An early adoption of thorium technology would give India enormous energy independence and security. The Time Flow India in 2008, had applied for the membership of the elite club of countries that control exports in missile technology and unmanned delivery systems of atomic or other weapons of mass destruction. But because of lack of support from other countries and India‟s developing background, it got rejected. The Buzz again started with Barack Obama‟s visited India in 2010. The joint statement was issued that after Indian entities had been removed from the US Department of Commerce‟s entity list and that the United States intends to support India‟s full membership in the four multilateral export control 12
control regimes. Since then India is making efforts to get into the regimes but some or the other factor continuously stopped India. Some factors that pulled India back were opposition came from Italy, which used a bilateral problem with India over the arrest of Italian Marines to block New Delhiâ€&#x;s application. Release of the two Italian marines at the intervention of the Indian Supreme Court led Italy to drop its opposition and agree to the request of the co-chair, the Netherlands, that India be welcomed. The recent NSG bid failure does not require much effort in anticipating who's in opposition to India's. Pakistan and its allweather friends China are key nations opposing India bid. China's argument rested on India not being the signatory to NonProliferation Treaty (NPT). China also hailed Pakistan's bid owing to the argument that if India despite not being signatory to NPT qualifies to be a member; Pakistan should also be treated on similar lines. Impact on India India being the 35th member to get into the MTCR group would benefit in numerous ways. To start off with, it will give Indian Space Research Organisation (ISRO), an access to high-end technologies for developing its cryogenic engines in order to enhance space exploration. Moving on, India will be able to sell the Indo-Russian supersonic cruise missile BrahMos to Vietnam and other countries in a development that would make India a significant arms exporter. Adding on, buying of surveillance drones like the American Predator drones, which will not only serve India but also serve US as dual benefit. Exporting UAVs, Reaper and
and Global Hawk would generate revenue, and on a larger view it will have been key to counter-terrorism efforts in countries like Afghanistan, Pakistan and Yemen. A few other major impacts would include procurement of Israelâ€&#x;s Arrow II missiles and most importantly, a step closer to India's membership to NSG. India has made major changes in its domestic laws in keeping with the requirement of export control regimes over the last 10 years. In June 2005, the Weapons of Mass Destruction and their Delivery Systems Act came into application, which fulfils various obligations under United Nation Security Council Resolution, which required United Nations member states to enact domestic legislation to better account for weapons of mass destruction materials and technology. To add on to the list of changes made by India, special chemicals, organisms, materials, equipment and technologies list, which controls the sale and trade of dual-use technologies, was upgraded to include them in the present NSG and the MTCR lists. As it is said that every coin has two sides, there is a point of concern for India here. There are reports that show that Indiaâ€&#x;s muchhyped attempt to join NSG might be taken up before December-end and that President Obama is keen on ensuring it before he leaves office of the US President in January 2017. This has created a lot of commotion between the countries as to why is the United States supporting India to its benefits and that their internal contracts and increasing relationship might have an impact on other countries in future. What future holds for India and its relationship with other countries is a question to which the answer is undetermined. 13
PM’s AFRICAN TOUR MODI’S AFRICAN SAFARI
“Not all those who wander are lost”; 51 foreign trips on six continents, visiting 42 countries, this is in nutshell- Narendra Modi‟s ongoing foreign visits. Inspite of such hectic schedule „The People‟s Leader-Modi‟ hasn‟t lost his vision of solving the nation‟s problems and working for the well-being of Indian‟s. The foreign visits that Modi is focusing might not look significant when viewed from ground level but definitely it will yield concrete benefits in the long run and is supposed to tie new dimensions. Though we do have some positive happenings from the foreign visits like- Japan to invest 35 billion USD over a term of 5 years, Nuclear deal between India and Australia with 500 tonnes of uranium supply to India, Chinese to invest 20 billion USD ,Iran to increase its export of oil to India. Modi‟s African Safari, a four nation tour, covering Mozambique, Tanzania, South Africa and Kenya focused to deepen the relations between African countries and India, which would help India to be the one in the list of developed nations. The key goal of Modi‟s visit to Africa is across the board, which extends from defence to economic and security. As past history says, that Africa – once a close brother, then a distant cousin has seen an increase in Indian interest. But as the matter of fact this has not evoked as much interest as the much larger, and extensive, China‟s footmarks on the continent. And definitely this African visit was to uplift India‟s profile in Africa. Totally 19 agreements, 3 MOU‟s in ICT, Tourism and science and technology sector were signed along
-Srujana Naik
along with Modi attracting and promoting the Made in India initiative. Looking closely enough we realize that visit to Mozambique will be the first to visit by an Indian PM since 1982 and the first to Kenya since 1981. Modi in South Africa was welcomed by more than 1.3 million people chanting his name with excitement and enthusiasm and were eager for the show stopper speech to begin.. The event was organized to its best by SAWelcomes Modi which also featured some cultural programs like African dance and fusion of music with Grammy Awardee artist along and that made it historic. Also Prime Minister in South Africa paid homage to the two greatest people of all times i.e. Mahatma Gandhi and Nelson Mandela. An agreement was signed between India and Mozambique to import pulses. And this will help India to meet its own food requirements. Also the problem of sudden spurt of price gushing in to the market for pulses would be resolved. The deal also focused on having better agricultural infrastructure and productivity. The health care sector is the one where India‟s capabilities would match the needs of Mozambique so Modi offered to share the expertise and assistance in that sector. Also he offered 500 million USD for water supply connection in Tanzania. Africa also agreed to support for India‟s International Solar Alliance initiative, with the climate changes and its impact on the world, the need for renewable resources is increasing and this project seems to be the best initiative.
As said by Modi “Terrorism is the gravest threat 14
threat to the world”, and every time the terror attacks happen it affects the foundation of any nation. Hence this African visit can be helpful to get saved from one of the biggest threats to any nation. So Modi focused on strengthening the defence security ties between India and Mozambique that includes training of personnel building capacities and institutions, equipment supply. Modi‟s African sojourn was also focused to build a strong relation in the Indian Ocean region. Kenya, Tanzania and South Africa are strategically located on Africa‟s east and as India is aiming to be the Maritime leader in the Indian Ocean so the trade relations between both the countries can serve the purpose. Also Mozambique Channel, with Madagascar at its east is a key Choke post and estimate states that 98% of SA‟s maritime passes through this waterway so Modi‟s decision to invest in Mozambique will give an edge to link their common connect across Indian Ocean.
inspections. The Indian commercial existence in Africa is beyond wrenching industries to the information and communication, manufacturing and pharmaceutical sectors. Africa‟s Pan-African-e networks focuses on to connect medical and education centres in India with counterparts in 53 African countries. Another major element of the African tour is Modi concentrating on building a personal rapport with leaders of Africa and also connecting with the indian diaspora.
After India‟s attempt to enter Nuclear Supplier Group (NSG) was scampered, not only by China but also Switzerland disagreed to support India, South Africa publicly made an announcement to support India. China was major roadblock for India‟s membership of NSG but with Africa supporting India, we stand high chances of having the membership, and this is one among the major tangible outcomes of African Safari. South Africa being India‟s key investment and trade partner, growth in bilateral trade in last 10 years increased up to 380%. And around 150 Indian companies are operating in South Africa. This gives an opportunity to further diversify the trade basket. Modi also spoke about conclusive steps that will be taken to ease the licensing process and vindicate the provisions related to returns, clearances and ins
To sum it up, the whirlwind of five day African safari was substantial and productive that featured a strong emphasis on cultural, emotional and historical ties that binds contemporary India with Africa. Africa to play a role in Indian Strategic Calculus and in its investment and trade expansion plans. Modi seems to have made a good foreign policy start and is still the country‟s most popular politician. But then the substantial outcomes will decide if these foreign visits were actually worth the money spent and were not just a one-off spurt. It is time that will answer “If the man & his aura will get dimmed with time” or “Will he set new standards altogether in Indian bureaucracy”?
Apart from what India is gaining from this visit, Africa is also getting benefits on the defence and security programmes like India to donate 30 ambulances to Kenyan defence force, 44.95 million USD help for development of small and medium textiles and enterprise. Also India to build a Cancer hospital in Kenya with high quality and affordable services.
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RELIANCEJIO RELIANCE JIO ENTRY INTO TELECOM
“If you don’t build your dream, someone else will hire you to help them build theirs” -Dhirubhai Ambani Reliance Jio which is officially known as Reliance Jio Infocomm, a provider of broad band and digital services. It was formerly known as Infotel Broadband Services Limited. It is one of the providers of 4G services. The 4G services by Reliance Jio were started in December 2015 but it was first launched only for its employees. Soon it will be launched commercially in second half of 2016. It was the most awaited player into India‟s competitive telecom segment. Bollywood actor Shah Rukh Khan, brand ambassador of Bharti Airtel, is the brand ambassador of Reliance Jio. Reliance Jio believes to lead the world with its enhanced capacities and innovations. It aims to enable transformations not by just enhanced capacities but also by but also by creating a powerful eco system on which a range of rich digital services will be enabled, a unique green field opportunity. The vision of Reliance Jio for India is that digital services should not be the luxury item. It should be affordable by every citizen of India. The initiative taken by them is aligned with the vision of our nations „Digital India‟. The areas where Jio has focused are: Jio has come up with something new that will provide people affordable and secure digital payments. They want people to use digital currency instead of paper currency. Jio‟s money, Jio‟s currency, Jio‟s digital payments will help in achieving this. They also want that
-Radhika Gupta
that more and more education should be spread among children so to lift the level of education they introduced digital education. Digital Healthcare will be provided through Jio with an expert advice anytime and anywhere. This will improve the quality of life in India. It is not limited to only education and entertainment but is also building a powerful platform on which digital products and services can be enabled - digital healthcare, digital education, digital currency, e-governance. There are two things that are expected from Reliance Jio. One is the affordability and another is the unlike voice. It is trying to create a new challenge for everybody as they are trying to enhance capacities and if today a consumer consumes 700-800 mega bytes than definitely now he would want it to be 10-12 gigabytes. It promises to bridge the urban rural divide. The Reliance Jio launch has increased the competitive intensity. It can bring prices up to 4000 rupees for 4-G compliant devices and voice and data services from 300-500 per month. By seeing the rising competition with Reliance Jio, Bharti Airtel plans to double its network by installation of over 70000 mobile sites. It will also deploy 160000 base stations in next three years. Mukesh Ambani now holds a pan-India license and is the largest holder of spectrum in India. In one of the shareholders meet, Ambani said Reliance Jio is one of the largest „transformational greenfield telecom initiatives‟ anywhere in the world. It will play a key role in propelling India into the Top 10 countries in the world from its current 142nd rank 16
rank in internet penetration, he said.
Reliance Jio will be advantageous to India and will hold a great significance as 3G in India came with a very dull start with maximum 5 MHz of spectrum available to every operator due to which 3G speeds in India was very low but Reliance Jio has recorded one of the best upload and download speeds by proving its performance in stadium of Mumbai.. The operators that were dominating the price from last 3-4 years by forming a cartel, if any of them increased the price others also increased immediately. This led to an increase in 75% of tariff within 3-4 years. So with the entry of Reliance Jio in telecom industry people can expect a change in price because they want that services should be affordable by every citizen of India. Some challenges that will be faced by Reliance Jio will be the market share, as Airtel Idea and Vodafone have a market share of more than 60% but reliance Jio has a market share of only 1.5% as of now. To increase their market share Reliance Jio tied up with Samsung. They have come up with an offer for the customers. It offers the customers to avail unlimited voice, video, data and SMS for a period of three 3 months from the date of activation of the Jio SIM. This is Jio‟s first tie up with some other device maker. For availing this service users have to provide their personal details on MyJio app which will provide them a coupon through which they can go to any of nearest Reliance digital store along with the necessary documentation and get the Jio SIM card. This offer is available for only some selected 4G-enabled Samsung smartphones. The users need to insert the SIM in their smartphone and then verify it by calling 1977 and
and avail the Jio preview offer. Another challenge that can hamper the growth of Reliance Jio is, it is planning to carry voice over their LTE but very few smart phones are currently supporting it. It has come up with a service of one-click payment for its customers through tie up with Federal bank. Through this customers can retain their funds with their accounts. This tie up will help customers to complete their transactions without funding wallet. Reliance Jio is providing legacy free digital services over an end to end all IP network. It has invested over 10,000 crore in this year‟s auction in order to acquire 800 MHz spectrum in 10 circles and 1800 MHz in 6 circles. It has acquired this in a very cost effective manner. It aims at covering 100 nation‟s population by 2018 and has built half a million square feet of cloud data centre‟s and a multi terabit capacity international network. It can bring a change in India by bridging the gap between urban and rural.
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INDUSTRY ANALYSIS INDIA’S FMCG SECTOR
“The FMCG industry has always been bedrock of talent to all other industries. It is one of the largest sectors in India and is a largely a Make-in-India industry.” -CEO of PepsiCo India India is one of the largest economies in the world in terms of purchasing power and increasing consumer spending, next to China. FMCG sector has grown at an average of 11% a year; in the last five years, annual growth accelerated at compounded rate of 17.3%. The Indian FMCG Industry can be broadly segmented into Household care and Personal care, Health care and Food and Beverages with current market shares of 50%, 32% and 18% respectively. The Indian FMCG sector, which is the fourth biggest sector in the Indian economy, has a market size of 49 billion USD with rural India contributing to one third of the sector's revenues as of 2016. The FMCG sector paints a positive picture for this year. Overall the FMCG market is expected to grow at a CAGR of 20.6 % to 103.7 billion USD during 2016-2020. The leading FMCG players in India are ITC, Hindustan Unilever Limited, Nestle India, Parle Agro, Britannia, Marico, Godrej etc Some of the FMCG growth drivers are growing rural market, growth of modern trade, strong distribution channel, desire to experiment with brands, with growing awareness, easier access(online grocery stores and retail stores like Grofers, Flipkart, Amazon), and changing lifestyles being the major ones.
-Dixita Reddy & Shreya Rani
• The Government of India's policies and regulatory frameworks such as relaxation of license rules and approval of 51 per cent foreign direct investment (FDI) in multibrand and 100 per cent in single-brand retail are also some of the major growth drivers for the consumer market. • The Government‟s approval on the Seventh Pay Commission‟s recommendation of an average 23.55 percent hike in salaries and pensions, will put money in the hands of more than 10 million people which will boost consumption • The implementation of GST will also boost the consumption • Some of the initiatives FMCG players are taking on for FY16-17 are improved digital marketing techniques and using advanced tools to analyze consumer‟s consumption patterns better Who can deny that the FMCG sector is a cornerstone of the Indian economy, touching every aspect of human life? Income distribution acts as a crucial barometer for FMCG firms in emerging markets by allowing firms to assess when household incomes reach levels at which discretionary spending takes off. As more households move into middle-class income brackets, aspirational consumers switch purchases from basic food items to FMCG items, as well as labour-saving devices such as washing machines and white goods. Organized market is growing as the share of unorganized market is falling with increased level of brand consciousness. 18
supplier has and how much control it has over the potential to raise its prices, which, in turn, would lower a business's profitability. In addition, it looks at the number of suppliers available, the fewer there are, the more power they have. Businesses are in a better position when there are a multitude of suppliers. Sources of supplier power also include the switching costs of firms in the industry, the presence of available substitutes, and the supply purchase cost relative to substitutes. Porterâ€&#x;s 5 force model is a key to analyze the industry 1) Rivalry among competing firms: In FMCG, the rivalry among competitors is fierce. There are scarce customers because the industry is highly saturated and the competitors try to snatch their share of market. Rivalry is quantitatively measured by the Concentration Ratio (CR), which is the percentage of market share owned by the four largest firms in an industry. For example, the instant noodles market in India is estimated to be Rs 2,000 crore with ITC's Yippee, Nepalbased Chaudhary group's Wai Wai and Patanjali Noodles among major rivals besides Maggi which is trying to counter Patanjali by launching 7 more varieties of instant noodles. 2) Bargaining power of suppliers: This force analyzes how much power a business's power
3) Bargaining power of customers: This force looks at the power of the consumer to affect pricing and quality. Consumers have power when there aren't many of them, but lots of sellers, as well as when it is easy to switch from one business's products or services to another. Buying power is low when consumers purchase products in small amounts and the seller's product is very different from any of its competitors. 4) Threat of new entrants: FMCG industry does not have any measures to control the entry of new firms. The easier it is for a competitor to join the marketplace, the greater the risk of a business's market share being depleted. The resistance is very low and the structure of the industry is that new firms can easily enter and offer tough competition due to cost effectiveness. For example, patanjali 19
Patanjali is looking at foraying into dairy segment this year with the launch of milk, cheese, butter milk and paneer. This might probe a serious threat to Amul India in future which is the leading player in the dairy segment. 5) Threat of substitute products or services: It looks at how many competitors there are, how their prices and quality compare to the business being examined and how much of a profit those competitors are earning, which would determine if they have the ability to lower their costs even more. The wide range of choices and needs give a sufficient room for new product development that can replace existing goods.
areas, providing them with the education, working for a social cause, one of such efforts is made by Dabur and many such companies conduct education program and provide training program facilitating employability. This is one of the best times for technology to make a difference to the FMCG sector. If FMCG could get through 2016 fairly well, then itâ€&#x;s a smooth ride till 2020.
Impact of FMCG sector in India 1) Employment generation: Retail stores approximately accounts for 12-13 million retail stores in India, out of which 9 million are FMCG kirana stores. Thus it can be well said that the sector provides livelihood of almost 13 million people 2) Cascading Multiple Taxes (Import duty, service tax, CST, income tax). 3) Social contribution: Apart from creating employment it also contributes in raising the standard of living, creating awareness in rural areas 20
SPACE BUSINESS SPACEX, BLUE ORIGIN, ISRO : THE NEXT SPACE RACE
Race? The standard definition of Race can be given as compete with another or others to see who is fastest at covering a set course or achieving an objective, put some Space – not the spacing between words that I am talking about, but the boundless three-dimensional extent in which objects and events have relative position and direction. Three different organisation with totally different style of working are competing this race, where they aim not only at completing the course but also designing the vehicle that they are going to use to run this race. SpaceX, the first competitor was founded by Tesla Motors owner and probably the most diversified entrepreneur Elon Musk. Blue Origin is the second competitor which is owned by Amazon cofounder Jeff Bezos is a commercial aerospace firm that is ambitious about sending people on suborbital and orbital space trips. ISRO (Indian Space Research Organisation), the dark horse of this race is the third competitor, a brain child of the visionary Dr. Vikram Sarabhai is an Indian space agency, founded in 1969 to develop an independent Indian space program.
- Jeet PC
Now that the competitors are introduced, what is the space race is about ? The space race is building a viable „reusable rocket‟ for space journey, that may have the possibility of carrying humans in the long run. Rockets typically are destroyed on their maiden voyage but what if they can make an firm landing and can be refuelled for another trip, this is where the reusable rocket comes into picture setting the stage for a new era in spaceflight. Over the years thousands of rockets have flown down in space , but what if one return like this : it comes down upright on a landing pad, steadily firing to control it‟s descent, almost as if a movie on its launch is being played backward. If this can be done and rockets can be refuelled over and over, spaceflight could become a hundred times cheaper. The curiosity in each one of us would ask what is the big fuss about having reusable rockets for space travels when the relative probability of the entire space mission is very low. Spaceflights is a costly affair and every time a space shuttle is sent in space, the monetary risk associated with it is huge. The three competitors are totally different when it comes 21
comes to their motives behind having reusable launch rockets. Blue Origin has their own very ambitious space tourism plan wherein tourists in capsules are taking on space rides. SpaceX launches satellites and space station supply missions for NASA. ISRO being a state-funded body that‟s expected to meet national academic, geopolitical and strategic goals, is limited by budgets allotted by the government for its space mission and it becomes quite important for them to make the entire space mission economically viable. Three players, with different motives with a common goal of building a perfect reusable rockets to improve the economics of spaceflight. The real question is will reusable rockets really reduce the price of space travel? For example : There is a direct competition between two companies for launching space shuttles. Both of them charge about $90 million per launch. Let‟s assume both of them are under a 12-launch contract that provides them with a fixed price per launch, let‟s say $100 million. Now somehow company A develops a way to recover the most expensive part of the rocket (the engines, per launch $9 million in R&D, $650,000 in maintenance, and $6.25 million in amortization) on the other hand company B just uses a rocket that is cheap (ISRO does it pretty often). This way company B saves $5 million per launch by using a cheaper expendable rocket. But company A ends up losing $2 million per launch by recovering their lower stage and reusing it. The first stage can be reused 6 times with a great level of reliability. So the actual cost to company B for launch is $75 million and for company A it‟s $90 million when you add in the extra cost of recovery
recovery. That‟s still okay, because the launch contract is for $100 million per launch. This clearly illustrates that the reduction of costs in space travels that a reusable launch rocket brings in is quite relative and the real reason why SpaceX and Blue Origin are running this race is driven by profits and their own, private ambitions that step in with objectives of space tourism and paid contracts from government agencies and industries for launching satellites. Two ambitious tech billionaires and a company with immense motivation and faith in their creative abilities run the Space Race. Blue Origin took the entire world by surprise when the company revealed it had accomplished a rocket landing of its own. After launching the “New Shepard” rocket to the edge of space, the vehicle gently touched down on the ground at Blue Origin‟s test facility. SpaceX successfully landed the “Falcon 9” it‟s drone ship during a space mission. ISRO doesn‟t have a reusable launch vehicle (RLV) yet. What it has is a prototype technology-demonstrator (TD) for testing its various components, then use their takeaways to build an actual Reusable launch rocket. Finally who is winning the race? SpaceX and Blue Origin are in the final lap to complete their course, while ISRO is just behind to cover up when markets open up in India and the Asian countries where it will likely be competing with private entities offering PSLV-class launchers of their own.
Until then watch, for it is always a treat to see an Indian entity giving stiff competition to probably the best private space research company out there.
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MARKETWATCH SURPRISES AMIDST UNCERTAINTIES
-Shilpam Dubey & Gagan Kapoor
The recent changes that the Government is trying to achieve are the ones which will prepare India to do justice with names that it has got globally like being the next China. For any economy to attain a sustainable and inclusive growth, its fiscal, monetary and structural changes should be in sync with each other. So, if the government has come up with increase in FDI limits in various sectors it has to be supported by providing a systematic and convenient environment for doing
GST – ‘Better late than never’
doing business. The passage of the GST bill is one step towards this goal. GST which can be seen at best as the proposition to remove „tax on tax‟ system and make the process of taxation simpler, will definitely make India a more promising „host‟ for FDI. This sentiment was easily evident as the Sensex jumped 364 pts and closed at 28078 pts, Nifty closed 15 month high at 8683 pts on 5th August, Friday after the announcement of the passage of bill from Rajya Sabha.
with sector-specific problems, then to set its co-ordination with the tax and trade departments, there is a lot to be done.
GST is likely to cause radical changes in the economy. It is expected to increase the revenue of central and state governments. Some analysts suggest that GDP can increase by a substantial 2% after the implementation of GST. But the picture is not as rosy, GST has to cross a lot of impediments, first being its implementation. But, before that the bill has to get a formal nod from all the state legislatures, then to shape it in accordance with
If the tax rates become higher than 17-19% which is proposed by the Arvind Subramanian Committee, there might be inflationary impact in the economy. States are also fearing that their revenue dip due to fall in tax can cause them to fail on their already committed responsibilities to the state.
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Commodities - Oil
In June oil prices reached a peak of 52 USD per barrel (on 8th June) and were stabilizing at around 50 USD per barrel. Oil supply nosedived due to increase in production cost and high project costs. Weakened US dollar further enhanced the prices in exchange terms. The scenario in July seems to be in stark contrast with that of June when the prices slackened and reached below 45 USD on July 18th. This happened majorly due to uncertainties prevailing in the global economy after Brexit and the strengthening of the US dollar. Currently, one of the major threats to the price structure of oil is the stocks rising beyond optimum levels. For a commodity for which the demand is already uncertain, elevated stock levels is not a good news. Also, apprehensions borne out of Brexit would continue to cause volatility in the oil prices.
warn that the prices can fall as positive results regarding US jobs data can bring markets on track. But, on the domestic front as the demand for gold is intact, jewelry will keep the prices on the higher side. Silver was quite volatile in the month of July. The prices are inflated after Brexit and touched even Rs48000. Awaiting for the Federal Reserve‟s decision on whether or not there would be any rate hike, silver remained investors‟ safe option. Domestically too, sale of silver coins kept the rally on. Forex Rupee-Dollar exchange rate has remained at 67.13 on an average. On 5th August, Rupee closed at 66.8 against USD due to selling of dollar by exporters and banks. Rupee maintained at 94.17 on average against Pound. Bank of England‟s decision to cut the interest rates and restart its bond purchase program rendered the pound weak. Pound slumped by 1.6 pc to 1.3113 USD and to a low of 1.177 EUR. Policy Review
Commodities - Gold & Silver
Bank of England has come up with a strategy to boost the economy which has become a bit unsettled after its decision to leave European Union. It cuts interest rates to 0.25%. This rate cut has been first since 2009.
Gold surged nearly 2.8 percent to 1357.5 USD per ounce on 11th July but has remained below 1345 USD in second half of July. Since Brexit, gold prices have rose to its two year high as the investors run for safe-haven. Though some analyst suggest that gold prices will mostly remain on the higher side but few
The third Bi-Monthly monetary policy which is also Raghuram Rajan‟s last monetary policy maintains the status quo and keeps the interest rates unchanged at 6.5%. This decision is in line with the RBI‟s commitment in keeping the inflation under control and within 6%. 24
According to predictions, inflation can exceed 6% this quarter. But, better than average monsoons might bring the food inflation down. Expectations would be high from the next RBI governor. India has set on an ambitious journey, whether its increase in FDI limits or implementation of GST or keeping an inflation target as low as 4%, to what extent would these be achieved, only time will tell.
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UBER’s CHINA FORAY UBER SHOWS THE WHITE FLAG IN CHINA
It seems like ages since I swished my hands in the air to stop a taxi passing by. All credits to the innovative car hailing industry. They have been a saviour as earlier we had to wait on the streets for an empty taxi to arrive whatever be the weather conditions, be it sunny or raining heavily but it is not the case anymore. Booking a taxi is just a click away and it picks you from your door step. It is not even a decade since the wave of car hailing has hit the market and it has totally uprooted the traditional taxi companies. Talking about car hailing services reminds me of the tussle and now the merger of Beijing based Didi Chuxing Technologies and Uber China in China. China having the second largest economy with bundles of opportunities for business makes it a lucrative place for any entreprenuer. It is that market in the world where biggest of the biggest technological giants like Facebook,Google,Amazon and Ebay saw failure due to reasons varing from censorship to IP Theft to government regulations favouring the domestic champions.Now was the turn for Uber Technologies. China's thirst for transportation is what lured Travis Kalanick to expand its operations.Another reason for the aggresive entry could be beacuse Uber wanted to exploit the fact that there was no regulations on ride sharing or on car hailing services in China. Didi Chuxing had become a set player in the chinese market as its operations had started 2 years earlier to Uber China's entry in the market and their rivalry to tap the market was bound to happen here.Billions of Dollars w
-Utsav Changoiwala
were poured in by both the companies to capture the market but unfortunately none of them were able to make profits out of it. Didi Chuxing Technologies a chinese car hailing service provider to 400 major cities in China is the largest mobile based transportation platform,offering full range of commuting options.It had a valuation of USD 28 Billion prior to acquisition of Uber China. It always had the upper hand in the chinese market covering almost 80%of the market share.It started to pose a threat for uber in a step by step process.Firstly it was backed Alibaba.com and Tencent. Secondly it got merged with its domestic rival Kuaidi. Later Didi Chuxing started to grow outside china by forming an alliance with Uber's major competitors outside, including Lyft in USA, Ola in India and Grab in southeast asia. Didi has also asked its backers to invest in these companies too. The final blow was when recently Apple made USD 1 Billion investment in Didi Chuxing. Uber is one of the fastest growing app that covers 506 cities all over the world. Today, it is highest funded start up of all time which is currently valued at USD 62.5 Billion. It was February 2014 when Uber China had its formal launch in the chinese market and back then, Uber was at its nascent stage when Travis and his team had planned to set up its operations in China. It had around 100 employees, was operating in 10 countries and had raised USD 50 Million cumulatively from all its investors.Uber had also got the local search gaint Baidu to back its chinese subsdiary Uber China. China was Uber's bigges 26
biggest bet, it was also its largest and toughest markets. Travis was ambitious in entering the market in which he had personally invested for its success at much greater scale than in any other country. He was actively working as the chief executive of Uber China that you could find him one out five days there. It is truly said that 'All successful people don't do different things but they do the same things differently ', but in this case it did not stand right as Uber entered the Chinese market with its local subsidiary company Uber China. It was mainly done to avoid some regulations that restricted free flow of operation for a foreign company. Uber China had to make many tweeks in the existing services of its parent company Uber as per the convenience of its target customers, so that they could easily peneterate into the market. It allowed its customers to pay through Alipay , It bought in new varieties of categories of vechiles depending on the market trends, it allowed drivers to use their private vehicles and it also bought in alot of subsidies to attract both customers and drivers. Evenafter doing so much Uber was not able survive the chinese tide accounting to the facts that it was still using Google maps which has been banned in China, Drivers making fake trips to make personal profit out of it, it had occassional raids on their officies in China which used to disrupt their operations, many of its drivers even thought Uber was illegal, the company was not allowed to market itself in China's biggest social network Wechat, as the internet gaint Tencent was an investor in Didi and the government had legalised the ride hailing services which meant Uber will be bound by reg
the regulations and for a start up that runs to enjoy the gray zone it was like a finishing move of a wrestler on its opponent. For Uber China to not swallow up all the profits its parent company had been making in other countries it had formulated another strategy that will give the industry sustainable growth which was - 'if you can't beat them join them'. After all the talks and 2 years feirce battle both companies reached to an agreement where in Uber China will disolve to form a part of Didi Chuxing making it a USD 35 Billion Dollar Company. The agreement had further conditions where Uber will get a total of 17.7% share in Didi Chuxing making it the largest shareholder in Didi , while Baidu and other investors of Uber China will receive 2.3% share in Didi. Along with this Didi will be investing USD 1 billion in Uber. They have decided that Didi will run both as separate brands though Didi will take over all the managerial functions. Mr.Cheng Wei, CEO of Didi Chuxing and Mr.Travis Kalanick, CEO of Uber will join as a member in each other's boards. 'Didi Chuxing and Uber have learned a great deal from each other over the past two years in China's burgeoning new economy' was Cheng Wei's take on the whole scenario, Travis Kalanick knew that it was necessary for price war between the 2 to end for a healthier industry that would benefit all. Now that he is free from the Chinese market, he can focus on other markets and invest in places that can give a sustainable growth. Now that the battle is over ,does it mean starting of a monopoly or do you think there is another rival eyeing its prey and waiting for the moment to pounce on it?
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VRIDDHI RESEARCH MANPASAND BEVERAGES
FMCG Industry: Soft drink • Food and Beverage (F&B) segment is one segment, which would get affected most with the increase in retail players • With around 63% of the share, this category accounts for a bulk of the Rs 14110 billion retail market in India • However, with a turnover of just Rs 70 billion, the category accounted for 13% of the organized retail market and a minuscule 1% of the total F&B retail market. • Soft drinks represent significant market opportunity in FMCG industry • The Indian juice industry was pegged at INR132b in 2015, with 77% being offtrade (INR101b) i.e via grocery shops, hypermarkets etc. and the remaining ontrade vis-à-vis restraunts, outlets etc.. The juice market is divided into three categories: 100% juice, nectars and Juice drinks. • Under off-trade, the juice drink market was the largest segment at 71% in value terms and 81% in volume terms in 2015. Mango by Manpasand Beverages being the largest sell
-Natasha Anand
selling flavor contributing 85% to off-trade volumes and Maaza by Coca Cola led the off-trade market in valur with a 22% share in 2015 • The Indian soft drinks market was pegged at 12b liters in volume terms and INR524b in value terms in 2015, implying a CAGR of 17.9% and 18.7%, respectively, over 2010–15. • Soft drinks market to post 11% CAGR and MANB‟s target category (juice drinks) is projected to increase 23.6% in volume and 21.8% in value 2015-2020 Porter’s five forces Threats of New Entrants: Threat of a new entry is considerably low in today‟s soft drink market, though it has been gradually increasing over time. Threats of Substitutes: This industry has large numbers of substitutes like water, beer, coffee, juices etc. The soft drink companies diversify by offering substitutes to shield from competition. This threat is countered by advertising, brand 28
equity, and distribution for consumers, which most substitutes cannot match. Bargaining Power of Suppliers: In this industry, the bargaining power of suppliers is low, as there are many suppliers in this industry. And required commodities like flavor, caffeine or additives, sugar, and water are basic goods that are available quite easily. So, producers have no power over the pricing hence the suppliers in this industry are weak. But, in case of product suppliers for firms with dominant position and that is only viable source for the supply of a product in the market, their bargaining power is strong Bargaining Power of Customers: Large buyers are particularly powerful in this industry, including major retail channels like Supermarkets (32.9%), fountain outlets (23.4%) and vending machines (14.5%). The profitability in each of these segments clearly shows the buyer power and how different buyers pay different prices based on their power to negotiate. Competitive rivalry: The competitiveness in the industry has moved from low to medium in the past few years. However, the soft drinks segment is still captured by two players i.e. Coca-Cola and Pepsi. With more people becoming health conscious and switching to fruit juices, that segment is also expected to become more competitive. About the company Manpasand Beverages (MANB) is leading player in beverages segment through its flagship product Mango Sip, a mango-based fruit drink launched in 1997. The product contributed 80% to revenues in FY16 (97% in FY14).
To diversify the portfolio, MANB launched Fruits Up in FY15, a premium fruit drink (Carbonated and non-carbonated) in mango, litchi, guava, apple, orange and mixed fruit flavors. In 2015, it raised INR 4b through IPO to set up a manufacturing facility in Haryana (INR.1.5b), modernization of existing plants and repay the entire long-term debt (INR1b).
2015 IPO In 2015, it raised INR 4b through IPO to set up a manufacturing facility in Haryana (INR.1.5b), modernization of existing plants in Vadodra & Varanasi plants, new corporate office in Vadodra, repayment/pre-payment of certain borrowings and general corporate purposes upto INR1bn. MANB turned debt-free in 4QFY16 by repaying the long-term debt of INR1b from IPO proceeds. The balance proceeds are expected to be utilized for modernization of facilities at Vadodara and Varanasi (INR0.4b), and setting up a corporate office at Vadodara (INR0.2b). Going forward, management expects working capital-related borrowings to be the only debt. Growth prospects MANB had three manufacturing facilities at the end of FY16: two at Vadodara and one in Varanasi; the second unit at Vadodara commenced production in April 2015. The company is also setting up a facility in Haryana (expected to be commissioned by June FY17) to cater to markets in north and northeast India. Another facility in Dehradun is scheduled to start production by Q4FY17. Management has highlighted plans to commission a facility in South India as well frot 29
towards end of FY18. MANB to clock 49% revenue CAGR and 63% PAT CAGR over FY16-18E Within overall soft drink market size of INR524b (as on 2015), MANB participates in fruit juice category, an INR132b size market with expected growth of 19% CAGR over 2015-18. Manpasand expected to grow at 49 percent CAGR driven by new product launches, increased distribution reach and increased capacities leading to increase its market share to 7.5 percent by 2018 from 5 percent in 2016. Financials • Manpasand Beverages reported a 47.63 % jump in net profit at Rs 25.54 crore for the quarter ended March 31 on account of higher sales whereas had posted a net profit of Rs 17.3 crore during the corresponding quarter last year. • Its net sales grew 90.97 percent to Rs 230.39 crore in the quarter ended March 2016, as against Rs 120.64 crore in the fourt
fourth quarter of 2014-15. • For the full fiscal, the company's net profit increased to Rs 50.56 crore from Rs 29.94 crore in the previous fiscal. • Net sales stood at Rs 556.7 crore in 201516 as against Rs 359.74 crore in the previous financial year. • A stellar improvement in the Cash Flow from Operating Activities shows how the company has been operationally doing good and not only making profits but those are also getting converted to cash flows. • The increase in Financing Activities Cash Flow is majorly due to the IPO proceeds Verdict Though this might not be an immediate buy as we can see from the charts that the stock has recently had its glamour days and is facing a consolidation phase as of now. However, looking at the commendable financials of the company, it is suggest to buy the same on dips. A long position can be taken at 640-650 levels with a target price of around 750 and a stoploss of 620, with 1-year horizon.
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FINANCIAL TRIVIA On 9th March 2015, The British government finally repaid its first world war debt in full. The Government repaid some £1.9billion still owed to more than 100,000 people who held 'War Bonds', issued in 1917 to help fund the military effort.
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