MAGNUM Blog

Battery Industry in Indiahas market of more than Rs. 20,000 Cr, Amara Raja Batteries, Exide Industries, Panasonic Energy, Indo-National have good market share in this industry in India. In this industry, 60%-65% of the market share is of the organized players and the rest 35%-40% is of the unorganized players.

Earlier, there was a difference of 30% in the prices of batteries between organized and unorganized players. But post GST, this difference has come down to 10%-15%. After the implementation of GST, the unorganized players faced a lot of problems.

The opportunities for the battery industry, specifically to the organized players like are the Electronic Vehicles (EV). E-vehicles are the next big thing. This opportunity will open up in the next decade, that is by 2022. The OEM’s have planned on shifting to e-vehicles as soon as possible. Mostly all the companies have started working towards it with the R&D procedure being run with full speed. Many major companies have the timeline to start the rollout of the e-vehicles by 2022.

Thus, this new e-vehicles market looks like a major opportunity which can be grabbed by these 2 companies.

New horizon ahead (e-vehicle market)

The companies have started their preparations for this market. These companies too have R&D running at great speeds to benefit from this market. For this, Exide Industries has found a foreign partner to help them out. Amara Raja Batteries already has foreign partner. Johnson Controls hold 26% stake in the company. Johnson Controls have the uniqueness to provide technology support and gain stake in the company.

Road Ahead

These companies majorly have lead based batteries, which are also the main products of the companies. And in the last 3 years the prices of lead have increased significantly. As a result of this, the Net profit margins of these companies have gone down.

Auto sector has seen downturn in the recent times. This has directly impacted the auto-ancillary companies, battery companies included. But the auto sector will reach a consolidation in the next couple of quarters after which it may experience a revival.

The cycle of the auto sector will take turn toward the positive side and E Vehicles could be the game changer for these companies.

AMARA RAJA, EVERADY, PANASONIC ENERGY, INDO NATIONAL.

Forging is traditionally considered as the back bone of manufacturing industry. It is a major input to the sectors which support economic growth of the nation, such as, Automobile, Industrial Machinery, Power, Construction & Mining Equipment, Railways and General Engineering.

The Indian forging industry is well recognized globally for its technical capabilities. With an installed capacity of around 38.5 lakh MT, Indian forging industry has a capability to forge variety of raw materials like Carbon steel, alloy steel, stainless steel, super alloy, titanium, aluminium and so forth, as per the requirements of user industry. Over the years, the Indian forging industry has evolved from being a labour-intensive industry to capital-intensive manufacturing sector.

The current investment in the plant and machinery by Indian forging companies is worth of INR 27,833 Crore. Based on their installed capacity, the forging units may be classified as very large (capacity above 75,000 MT), large (capacity above 30,000 to 75,000 MT), medium (capacity above 12,500 to 30,000 MT), small (capacity above 5,000 to 12,500 MT) and very small (capacity up to 5,000 MT). Based on this classification it is seen that about 83% of the total number of units are small and very small, while only about 8% can be classified as very large and large units; the balance of about 9% constitute the medium sized units. Current share of auto sector is about 58% of total forging production while the rest is with the non-auto sector.

Changes in Indian automobile industry directly impact Indian forging industry, because the forging components form the backbone of the Indian automobile industry. Since the automobile industry is the main customer for forgings the industry’s continuous efforts in upgrading technologies and diversifying product range has enabled it to expand its base of customers to foreign markets.

The Indian forgings industry has made rapid strides and currently, not only meets almost all the domestic demand, but has also emerged as a large exporter of forgings. Defence Sector is also creating demand for forging parts, as a result, the industry has been making significant contributions to country’s growing demand. In order to reduce the impact of cyclicality and dependence on auto sector, the industry plans to diversify into non-automotive sectors.

Road Ahead

Overall the forging industry will witness a flat rate of growth this year, but there are enough positive indications in the long term which will put the industry back on the growth track.

BENEFICIARIES: BHARAT FORGE, MM FORGING, RAMKIRSHNA FORGING, MAHINDRA CIE, INVESTMENT AND PRECISION CASTINGS LTD.

India accounts for more than 60% of the global outsourcing market. Outsourcing of information technology (IT) services, India has good preposition in the world. India has got probably highest skilled professional in this sector. With technology penetrating into every aspect of human lives, the world is witnessing revolution in the field of information technology.

Evolve with the evolving technology is become the New mantra of this Industry. Innovative Ideas to simplify, De-bottle necking, smooth Functioning, Cloud based infra, Integration, Process Engineering, are enabling different aspects to Individual, Industry, whether it is healthcare, automotive, banking, beauty, travel, or any other industry, IT department is must and advance tech always in demand.

To resolve problems, IT would offer solutions and create a new dimension with solution of the problem. Now-a-day, Cyber-security is also become important part of the systems to protect the technology and data. New IT hubs in emerging tier II and tier III cities.

Government has given In-principle nod to WFH for this sector, So time spend on travelling, Extra Miscellaneous expense have been curbed and Man-Power utilization has seen its peak in recent times.

According, to National Association of Software and Services Companies (NASSCOM) – IT exports from India will exceed the US$330 billion by 2020. This accounts for nearly 14% of the projected world-wide spend if India maintains its current share of the global offshore IT market.

India has a strong mix of young and technically trained professionals. Government institutes such as the Indian Institute of Technology (IIT), the Indian Institute of Management (IIM), and the Indian School of Business (ISB) are known to produce high quality STEM (science, technology, engineering, and math) talent with diverse business skills.

Road Ahead

Growth prospect good for this Industry, always rising demand curve. Going forward would witness both International & domestic project execution.

Innovation would drive the leadership board. Ticket size of different magnitude available for small & large organization.

BENEFICIARIES: TCS, WIPRO, INFY, ZENSAR, INTELLECT, HCL TECH, TECH M, LTI.

Air conditioning systems comprise the largest share of total HVAC system demand globally. Growing urbanization is fueling the construction of retail, hospitality and commercial properties and, in turn, expanding the market for air conditioning systems in India.

Vaccine for COVID-19 requires negative temperature of -30% & more, So companies in this sector are trying to get first advantageous move by developing refrigeration systems to transport such highly perishable life saving drugs & Vaccines.

Sudden spurt in mercury levels in the country have increased month-on-month sales for most manufacturers. The market is mainly driven by the increasing demand of air conditioners in residential and commercial areas. Most of the current market for air conditioning systems is concentrated in Tier-I and Tier-II cities where construction activity is the highest. As a result of the growing momentum towards smart cities, it is expected that the demand for air conditioning systems will continue to grow.

Air Conditioning manufactures are betting high on Institutional sales for their Products. Commercial retail, rental-business again showing some positive activities will have added advantage to this sector.

Air conditioning industry in India consists of a range of product categories such as central plant systems, VRF systems, packaged/ducted systems as well as room air conditioners. Room air conditioners account for more than 50% of the market, followed by central plant systems. The AC business is split into multiple segments: Room air-conditioners that are sold through multi-brand retailers and dedicated dealerships; Variable Refrigerant Volume (VRV) and duct ACs, which are used in commercial spaces such as offices and restaurants; and chillers for large building projects like airports and shopping malls.

Road Ahead

With lot of Infrastructure development like Smart cities, Railwagons, Airports, Ship Building, etc…The sales of this Industry would grow. We expect the growth rate of 8-10% for this industry.

BENEFICIARIES: VOLTAS, BLUESTAR, AMBER.

Fragrance products & Flavour for food in the form of perfumes, Food Colour, Food Essence Flavouring Agents, colognes and deodorants have gained prominence as essential personal care products & food Industry, in recent years.

The fragrance & flavouring market in India is anticipated to reach INR 160 billion by 2024, expanding at a compound annual growth rate (CAGR) of ~14%. Based on type, the fragrance products market is segmented into perfumes, deodorants and other fragrance products, Flavours, one of the leading and fastest-growing segment in India. Food flavours that underpin food, beverage, and pharmaceutical brands globally. Food flavouring to create innovative and sustainable solution as per requirement of clients.

Food flavours the ingredients are natural, nature-identical, and artificial ingredients that help create flavours as required. Whereas, in Fragrance also natural, Skin sensitive and alcohol based wearable perfumes or aftershave lotion are added.  Butter nowadays are flavoured for better taste. Tea, Pizza, coffee, Cake Chocolates, etc. all contain natural colour and flavouring agents. On the other hand, Aftershave, Detergents, Bathing Soaps, Hair Dyes etc. all contain colouring agents, Fragrance and flavouring agents.

With a rise in standard of living and improved awareness regarding personal hygiene, people are not hesitating to splurge on fragrance products, & also branded food products. Increased adoption of smartphones and the Internet, especially in tier II and tier III cities, has made e-commerce websites accessible to customers, thus facilitating online shopping & Food ordering & grocery. Further, in recent years, Indians have been exposed to global trends, resulting in higher demand.

Newer fragrance & flavours are key to the growth in this sector.

Road Ahead

Growth is significant and new product launch, natural & technically advance production for different customers need.

The Industry is part of FMGC Industry so growth of 13-17% can be assumed going forward.

BENEFICIARIES: SH KELKAR, MANORAMA INDUSTRIES.

Hydraulic oils and transmission fluids transmit power in hydraulic equipment and are used in power transmission applications. They are incompressible fluids that are used as the power transmitting media in hydraulic systems. Hydraulic power systems involve a series of tubes or elastomeric hoses for transmitting pressurized fluid, a pump (as a power source), and some type of control (typically a series of valves, actuators, or cylinders) as the power transmission media, hydraulic fluids are indispensable in these systems. Transmission oils are essential to clean and protect the surface, condition gaskets, rise temperature range, increase rotational speed, and improve cooling function, and reduce high temperatures. They are used to lubricate, transfer energy, ensure smooth transmission in motor vehicles, agriculture equipment, construction, and mining equipment. Hydraulic fluids are used as a medium for transferring power and energy in hydraulic systems. Additionally, they are used for heat transfer, sealing, contaminant removal, and lubrication. The majority of the hydraulic fluids are based on mineral oils. The applications of these fluids include excavators, hydraulic brakes, lifts, flight control systems, power steering systems, excavator booms, dippers, hydraulic brakes, power steering systems, mechanical transmission systems, lifts, and general industrial machinery.

The Indian lubricants market

  Product Type :

֍ Engine Oil

֍  Transmission and Hydraulic Fluid

֍ Metalworking Fluid

֍ General Industrial Oil

֍ Gear OilGrease

֍ Process Oil

  Application:

֍ Power Generation Automotive and Other Transportation

֍ Heavy Equipment

֍ Food and Beverage

֍ Metallurgy and Metalworking

֍ Chemical Manufacturing

Automotive and Other Transportation:

India is the second largest lubricant consumer in the region and third in the world, after the United States and China. The country is the fourth and sixth largest producer of commercial vehicles and passenger cars, respectively. The country’s automotive industry accounts for around 7.1% of the country’s GDP, in which the two-wheeler segment accounts for a share of around 81% share, owing to the growing young and middle-class population. Additionally, the government’s initiatives, such as the Make in India campaign, are helping the local and state-owned manufacturers to provide their products to consumers and offer stiff competition to the international players. However, India’s automotive industry has been declining from the past one year due to a continuous slump in demand, slowing economic activity, and an increase in vehicle ownership costs. The outbreak of COVID-19 has further affected the economy at present, as all the manufacturing sectors has been stopped due to lockdown. Thus, the aforementioned factors are expected to impact the automotive industry, which in turn will affect the growth of the lubricants demand in the country.

Road Ahead

We expect growth to remain stable for now but would increase going further. The Growth rate of 4-5% YoY can be forecasted for this sector.

BENEFICIARIES: CASTROL, BPCL, HPCL, IOC, GULF OIL.

India becomes the second-largest steel producer in the world, overtaking Japan, with a growth rate of 4.9%. India is also expected to become the world number two in steel consumption. The sector would be driven by strong government thrust for infrastructure development and housing for all. Government initiatives such as ‘Smart Cities’ and ‘Affordable Housing’ as well as building of industrial corridors will boost India’s steel demand. Rail Infra, Supply Chain Management, Heavy Engineering & Defence, Gas Pipelines etc would also add to demand of this sector.

Transforming India into a global manufacturing hub for pharma, with sectors along the industrial and freight corridors. To set up automotive and ancillary industries to make India global hubs for manufacturing & exporting cars & Two wheelers.

Further improving Steel demand as China becomes net importer of Steel. Moody’s changing “steel outlook” for all regions which include the US, Europe, Russia, Brazil and Asia to stable. Increase in price of around 3000-4000 per tonne added advantage. vSteel-making capacity is expected to reach 300 million tonnes per annum by 2030–31. vCrude steel production is expected to reach 255 million tonnes by 2030–31, at 85% capacity utilisation. vProduction of finished steel to reach 230 million tonnes, assuming a yield loss of 10% for conversion of crude steel to finished steel – that is, a conversion ratio of 90%. vWith 24 million tonnes of net exports, consumption is expected to reach 206 million tonnes by 2030–31. (source PWC report)

Port connectivity through the Sagarmala programme envisages port-led industrial development covering all major maritime zones in India. Oil and gas sector, the Urja Ganga Gas Pipeline Project aims to develop a 15,000-km gas pipeline network. Advance Warehousing & Logistic Hubs. National Investment and Manufacturing Zones (NIMZs) are being developed across the country, with 14 NIMZs already receiving in-principle approval. In addition, eight investment regions along the Delhi–Mumbai Industrial Corridor Project (DMIC)have also been announced as NIMZs.

Road Ahead

Overall demand visibility remains steady going forward. Industry Growth of around 4-6% can be assumed.

Government’s focus on infrastructure and restarting road projects is aiding the demand for steel. Also, further likely acceleration in rural economy and infrastructure is expected to lead to growth in demand for steel.

BENEFICIARIES: TATA STEEL, JSW STEEL, JINDAL STEEL, KALYANI STEEL, SAIL

Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and now focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads, and urban infrastructure development. With current focus on Bullet Train project, also Road development by NHAI, Railways corridors, Waterways development, Renewable Energy projects, etc have been in focus and also lot of LOIs, Contracts, and Work Orders have been allocated.

In September 2020, Ministry of Petroleum & Natural Gas announced that it aims to operate 50% of fuel stations, which are owned by public sector oil companies, using solar power within five years—under the government’s green energy drive. Electrical charging station for next gen EV cars are all getting Nod for development.

With Surplus current account deficit, Foreign inflows, Stimulus, Incentive the Infra growth in India would be growing exponentially in next 5-10 years. The largest deal was done by Abu Dhabi Investment Authority, Public Sector Pension Investment Board and National Investment and Infrastructure Fund as they made investment worth US$ 1.1 billion in GVK Airport Holdings Ltd.

The Government set a target of constructing roads worth US$ 212.80 billion in the next two years. Indian energy sector is expected to offer investment opportunities worth US$ 300 billion over the next 10 years. NHAI will be able to generate revenue of Rs one lakh crore (US$ 14.31 billion) from toll and wayside amenities over the next five years. Government has given a massive push to the infrastructure sector by allocating US$ 24.27 billion to develop the transport infrastructure. Indian Railways has received an allocation of US$ 10.33 billion in Union Budget 2020–21 and will get more allocation going forward.

Road Ahead

India plans to spend US$ 1.2 trillion on infrastructure during 2020–23 to have a sustainable development of the country.  India’s Northeast states in focus for Development of infrastructure projects for the region.

Growth opportunity in this sector are infinite and companies gets order on performance and capabilities to develop projects with help of finance schemes.

BENEFICIARIES : KEC INTERNATIONAL, LARSEN & TOUBRO, IRB INFRA, IRCON INTERNATIONAL, RIIL, PNC INFRA.

Non-Banking finance companies with assets of over Rs 50,000 crore that meet the RBI’s size criteria to get Bank licenses for corporates or NBFCS owned by large corporates. However, it has left the door open for NBFCs that are owned by corporates if they have been around for 10 years. Payment banks can convert to small finance bank after three years,  A big challenge for the NBFCs to convert into banks will be the cost of investment in technology and setting up branch network. They will also have to face additional cost for complying with the SLR of 18% and the CRR of 4% and not all NBFCs can meet this cost of compliance.

Conversion to a bank could help many NBFCs in terms of sustainability and growth, but would also mean that they would have to follow more regulatory and compliance norms. Many NBFCs have deeper penetration in teir-2 & 3 cities and also in rural India, It could be more advantageous to convert to bank as broader regulations are coming in line with banking norms for NBFCs.

The panel also suggested that the current rule of the promoters of a bank has to hold a minimum of 40% in the lender for the first five years, should continue. The panel, while proposing a hike in promoter holding in private banks to 26% also said that the promoters could voluntarily choose to bring down their holding further after lock-in of five years. Promoters not allowed to pledge bank shares during lock-in period.

Road Ahead

To make definite road map for NBFCs and also NBFCs could penetrate as India grows to 5 trillion Economy Increased corporate involvement into the banking sector may also translate to greater concentration of financial, economic or political might within select business houses.

Overall NBFCs would benefit from internal working group of the Reserve Bank of India (RBI)

BENEFICIARIES : INDIABULL HOUSING FIN, BAJAJ FINANCE, SHRIRAM TRANSPORT FINANCE, LT FINANCE, M&M FINANCE.

The civil aviation industry in India has emerged as one of the fastest growing industries in the country. Growth due to COVID came to stand-still and Industry faced debt issue. India has become the third largest domestic aviation market in the world and is expected to overtake UK to become the third largest air passenger market by 2024.

India’s passenger traffic is slowly picking up and currently passenger load factor is increasing. Low cost carrier SpiceJet announced the launch of its seaplane service between Ahmedabad (Sabarmati riverfront) and the Statue of Unity in Kevadia, Gujarat. The flights will be operated by SpiceJet’s fully-owned subsidiary, Spice Shuttle using a 15-seater Twin Otter 300 aircraft, the airline adding that it has secured 18 seaplane routes under UDAN. In an attempt to connect small cities of India with each other, the Government of India launched a Regional Connectivity Scheme, Udan (Ude Desh Ka Aam Nagrik). The scheme reached its fourth stage as the aviation ministry gave nod to 78 fresh routes under UDAN 4.0 to enhance connectivity to remote and regional areas of the country. In this stage, north east states, hilly areas and islands of India have been given priority. The fresh routes will encourage tourism & local travel in these areas and help strengthen their economies.

Freight is one more vertical of this industry, the freight traffic seems to be slow but gathering pace. The government has allowed 100% FDI under the automatic route in scheduled air transport service, regional air transport service and domestic scheduled passenger airline. However, FDI over 49% would require government approval. Government introduced Krishi Udan scheme on both domestic and international routes to help farmers in transporting agricultural products and improve the product value.

Road Ahead

Lot of Scope available in this sector as huge opportunity untapped, considering that air transport is still expensive for majority of the country’s population.

India would be well placed to achieve its vision of becoming the third-largest aviation market, would push growth automatically. The growth rate of more than 10% could be seen over next 2-3 years.

BENEFICIARIES : INDIGO, SPICEJET.