MAGNUM Blog

The building materials industry is the second largest employer in the country. Not only does the sector employ a large number of people, but also contributes significantly to the nation’s economy. It accounts for 8% of India’s GDP and is valued at approximately $126 billion; industry reports forecast building materials to record a CAGR of 13% y-o-y to reach $750 billion by 2023. Major developments are expected in Infrastructure development sectors, Affordable Housing segment, Airport development, Port, solar park development, strengthening of logistics and warehousing segments and metro rail network expansion. hospitality, retail, entertainment, education, SEZs, FTWZs etc. have largely contributed to the growth.

The backbone for the overall economic development of the country has been our developing infrastructure market. Building infrastructure requires cement, ceramics, steel, aluminium & lot of other material materials which make the future of building material industry more promising. The launch of numerous ambitious building schemes in the recent past by the Indian government including industrial parks and corridors, smart cities, logistics networks, Housing for All 2022 scheme etc are strong contributing agents to the growth of the industry.

This will also increase the focus on industries like coal and steel, natural gas, windows, ceramics, crude oil, refinery products, fertilisers, water supply, cement, electricity and sanitation. which will, in turn, lead to the growth of the building materials. Framework for policy such as GST, RERA, Benami Act, REIT, steps to reduce approval delays Solutions for thermal proofing, water proofing, sound proofing, fire proofing, corrosion proofing, building automation including security, access regulation, climate control etc. are going to strengthen the future of the construction industry in India. The Order size would vary from project to project, the products are co-related and have demand.

Road Ahead

The major development in metros, Tier 2 & 3 cities would be visible going forward. Government spend would be key to the sector, we estimate Infra development in India is necessary and all major steps in this direction would reflect going forward.

BENEFICIARIES : SHANKARA BULIDING PRODUCTS, EVEREST IND, INDIAN HUME PIPES, ASTRAL, PRINCE PIPES, KAJARIA CERAMICS, HIL, JSW STEEL, TATA STEEL, ACC, AMBUJA

India has huge demand for Carbon black market. Superior reinforcing properties make carbon black a suitable material for use in diverse applications ranging from tyres, plastics, electronic equipment to inks, dyes and coatings. The report reveals that the expansion of tyre and rubber industries in the southern region of India is boosting the demand for carbon black in the country. The shift in manufacturing base of automobiles and tyre industries is expected to be a major driver for the carbon black market over the coming years. Additionally, the use of carbon black has increased in specialty segments such as inks, conductive plastics and high-performance coatings, which has led to diversification in product range offered by key industry players. In the past, Indian carbon black industry faced stiff competition from cheaper imports coming from China, which adversely affected the sales and profit margins of domestic players. However, various duties and taxes imposed by the Indian government on these imports have provided a respite to domestic industry players in the country.

The country’s carbon black industry has been undergoing consolidation as various domestic players have been establishing joint ventures in India and abroad, thereby creating a synergy in their operations and strengthening their footprint in the market. India imports bulk of carbon black from other countries including China, Thailand and Russia to address its growing demand.

Carbon black market in India will in the next five years on account of various favourable developments in the country Majorly to reduce import, Major players have started backward integration to counter the fluctuation in prices of feedstock and volatility in crude oil prices.

Specialty carbon black is a refined form of carbon black which comprises lesser level of ash, sulphur, metals and several other contaminations. Carbon black particles are made from the four processes such as Thermal black, furnace black, acetylene black and lamp black. Carbon black comprises >95% of pure carbon with smaller amount of hydrogen, nitrogen and oxygen and it is recognized as the commercial form of solid carbon. These carbon blacks are used as supplement for the enhancement of execution of conductivity, viscosity of materials. Specialty carbon black has characteristic properties, like protection from ultraviolet rays, increases the conductivity of plastics, and intensify the visual application of several products.

Road Ahead

This Industry is volatile and have past record of high swings in price of raw material which impact the profitability of companies. The growth rate can assumed at 6-7% CAGR for next five years.

BENEFICIARIES: PHILLIP CARBON, GOA CARBON, HIMADRI SP CHEMICLAS, RAIN INDUSTRIES.

The specialty chemicals market in India has been flourishing, owing to the rise in demand from various end-user industries. The specialty chemicals market in India was valued at INR 2,650.92 Bn in FY 2019 and is expected to reach INR 4,527.36 Bn by FY 2024, expanding at a compound annual growth rate (CAGR) of ~11.9% during the FY 2019-FY 2024 period. Unlike basic chemicals, the price of specialty chemicals is determined depending on their unique features and utilities rather than composition.

Despite of uncertainties environmental concerns and sharpening cost focus, the sector has sufficiently sustained the growth as demand for this product from end-user industries, Demand from export and import substitution opportunities due to the clampdown on chemicals manufacturing in China. While these drivers create a conducive.

However, current scenario may impact the growth for limited time span. Structural positivity & right chemistry & involution of new chemicals, we remain positive bias on this sector An increase in demand in end-user industries like food processing, personal care, and home care is propelling the development of the different segments of the Indian specialty chemicals market.

Due to busy work schedules, people lack the time to cook and prefer consuming processed and packaged foods. Edible oils find application in the food processing market.

Therefore, growing consumption of processed and packaged food is leading to the rise in demand of edible colours, flavours and Agents. The premium home care and personal care segments also see lot of demand for non-greasy detergent, Skin friendly Hygiene etc

Road Ahead

Rising demand for better Homecare solutions, Food Industry, Perfumeries, Oil Substitute etc. would remain, thus giving opportunity for this sector to grow at rate of 11-13% Y-o-Y.

India Sourcing would be the key advantage for this sector as china will be choice for later with importer around the globe.

BENEFICIARIES: PIDILITE, AARTI IND, GALAXY SURFACTANT, SUMITOMO.

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.

The Indian E-commerce market is expected to grow to US$ 200 billion by 2026. Industry growth been triggered by an increase in internet and smartphone penetration.

The ongoing digital transformation in the country is expected to increase India’s total internet user base to 829 million by 2021, India’s E-commerce revenue is expected to jump to US$ 140 billion by 2021, growing at an annual rate of 45%, the highest in the world.

Online retail sales in India primarily led by Flipkart, Amazon India and Paytm Mall has seen significant growth. In August 2020, Reliance Industries (RIL) acquired 60% stake in Netmeds, an online pharmacy, for Rs 620 crore (US$ 84.61 million). This acquisition gives RIL’s retail unit, Reliance Retail, entry into a vertical e-commerce space.

In January 2020, Divine Solitaires launched its E-commerce platform, Future Retail also acquired by Reliance Industries. Government e-Marketplace (GeM) signed a Memorandum of Understanding (MoU) with Union Bank of India to facilitate a cashless, paperless and transparent payment system for an array of services in October 2019.

In order to increase the participation of foreign players in E-commerce, Indian Government hiked the limit of FDI in E-commerce marketplace model to up to 100% (in B2B models).

E-commerce segment is also growing in terms of Foods business, grocery supply & small vendors like Retail vegetable seller, Manufacturer of Designer clothes, Furniture vendors are also joining the chain.

Indian E-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second largest E-commerce market in the world by 2034.

Road Ahead

E-commerce growth can be projected at more than 20% going forward.

E-commerce sector will also boost employment, increase revenues from export.

BENEFICIARIES: RELIANCE INDUSTRIES, V MART RETAIL, D MART, TRENT.