MAGNUM Blog

The Indian auto-components industry has experienced healthy growth over the last few years. The auto-components industry reaches US$ 49.3 billion in FY20. India’s export of auto components increased at a CAGR of 7.6% during FY16-FY20 as the value increased from US$ 10.83 billion in FY16 to US$ 14.5 billion in FY20.Auto-components industry account for 2.3% of India’s Gross Domestic Product (GDP) and employs as many as 1.5 million people directly and indirectly. A stable government framework, increased purchasing power, large domestic market, and an ever-increasing development in infrastructure have made India a favourable destination for investment.

In October 2020, Japan Bank for International Cooperation (JBIC) agreed to provide US$ 1 billion (Rs. 7,400 crore) to SBI (State Bank of India) for funding the manufacturing and sales business of suppliers and dealers of Japanese automobile manufacturers as well as providing auto loans for the purchase of Japanese automobiles in India. In September 2020, off-highway tyre-maker Alliance Tire Group (ATG), owned by the Japanese major Yokohama Group, announced plans to set up its third plant in the country in Visakhapatnam, with an investment of US$ 165 million (Rs. 1,240 crore). The proposed plant will add over 20,000 tonnes per annum (55 tonnes per day rubber weight) capacity to the 2.3-lakh-tonne annual production from two India plants and will be commissioned by the first quarter of 2023.In September 2020, Toyota Kirloskar Motors announced investments of Rs. 2,000+ (US$ 272.81 million) aimed towards electric components and technology.

As per Automobile Component Manufacturers Association (ACMA), automobile components export from India is expected to reach US$ 80 billion by 2026. The Indian auto components industry is expected to reach US$ 200 billion in revenue by 2026. Indian Automobile industry is expected to achieve a turnover of US$ 300 billion by 2026 and will grow at a CAGR of 15% from its current revenue of US$ 74 billion.

Road Ahead

Contribution of auto industry in the country’s GDP will rise to over 12%.Around 65 million incremental number of direct and indirect jobs will be created.

End of life Policy will be implemented for old vehicles (Scrap Policy).The Indian auto-components industry is set to become the third largest in the world by 2025.

BENEFICIARIES : GNA AXLES, VARROC ENGG, RANE BRAKE, BOSCH, SUNDARAM CLAYTON, AUTOMOTIVE AXLES, ZF STEERING, RANE MADRAS.

INDIA’s logistics segment has achieved 75 per cent normalcy and is almost near pre-lockdown levels. There are hopes that it will be normal in the next couple of months. Even during the lockdown, the roadways and the railways had been less affected when compared to the airways and waterways. The major impediment had been the disruption in services due to the absence of truck drivers.

We can expect that the logistics industry in India stands to benefit in the coming days, with opportunities ironically arising from a difficult environment brought forth by the COVID-19 crisis. The Major change in culture of online purchasing and WFH saga have been key to the growth of logistic segment worldwide.

Major trends observed has been the substantial rise in e-commerce segment, leading the market players to re-evaluate their logistics footprint and seek a decentralised approach that can offer greater flexibility and proximity to major centres, to insulate supply chains in a better manner against such unprecedented scenario.

The larger macro trend for 2021 is around the speed of deliveries, on which consumer happiness hinges. Another trend is managing customers during deliveries. Shippers will look for increased reliability from carriers. Companies will want easy communication and complete visibility across all legs of the supply chain. “Incumbent carriers will face increasing competition from niche players in the last and middle-mile transportation movement, which, in turn, will drive incumbents to adopt new operating models.

Last mile deliveries are more preferred so-called End-to-End logistics. Robotics and technology such as drones are set to occupy the space in the future of the logistics arena in offering new-age solutions driving cost reduction, convenience, and delivery cycle. E-Vehicles carries are also projected as next generation Commercial Vehicles for absolutely pollution free vehicles.

The government is currently working on a National Logistics Policy in order to promote seamless movement of goods across the country, the implementation of which is expected to augment investment in the sector significantly. Thus Ensuring better quality of services in remote areas.

BENEFICIARIES : TCI EXPRESS, AEGIS LOGISTICS, CONCOR, VRL LOGISTICS, GATEWAY DISTRIPACKS

Welding is reliable, cost-effective and high-tech method for joining materials in manufacturing industries. Electrodes are heart for manufacturing to join metals and alloys efficiently to add value to their products. Welding today is applied with advanced technologies as lasers and plasma arcs & Submerged arcs. The future of welding holds even greater promise as methods are devised for joining dissimilar and non-metallic materials, and for creating products of innovative shapes and designs.

Welding is most critical operation of any manufacturing process and right electrodes to use for quantity and quality of welding has direct impact on quality of final product. Prior labor intensive but now semi auto & fully automated systems have been developed to counter human errors.

Welding consumables market is expected to grow at a CAGR 10-11% over next five years. Continuous electrodes would witness higher growth compared to Manual Electrodes. Stick electrodes are losing its market share to wires and fluxes to growing usage across the end-use industries and their advantages such as high deposition rate, strong welds, and suitability for outdoor work.

With expected growth in Automobile, Shipbuilding & Repairs, Railways, Infrastructure Developments like Bridges Tunnels construction etc. we anticipate the growth of Welding consumable also to grow.

Robotic Welding for TUBE to FIN Welding, Automated welding system for manufacturing of bifurcate components. GMAW process established for welding of hand holed pipe to dished end (header), GMAW / FCAW technology for welding of piping joints for boiler & turbine at site. TIG welding for high wall thickness tubes.

However, increasing price of steel is expected to impact the prices of welding consumables and thereby the revenue. This could be passed to the consumers easily.

Road Ahead

OEM business growth would directly trigger growth in this segment. Overall Government spending on Infra would be added advantage. Overall Growth of 9-11% in this segment achievable.

BENEFICIARIES : ESAB INDIA, ADOR WELD, DE NORA INDIA, PANASONIC CARBON.

Indian consumer durables market is broadly segregated into urban and rural markets and is attracting marketers from across the world. The sector comprises of a huge middle class, relatively large affluent class and a small economically disadvantaged class. Appliances and consumer electronics industry is expected to double to reach US$ 21.18 billion by 2025.Electronics hardware production in the country increased from Rs. 4.58 trillion in FY19 to Rs. 5.46 trillion in FY20. TV penetration in India stood at 69%, driven by the DTH market. The total count of DTH subscribers in the country stood at 70.58 million in the country in 2020. Electronics, domestic appliances and air conditioner market in India was approximately around Rs. 5,976 cr, Rs. 17,873 cr and Rs. 12,568 cr respectively. Smartphone shipments in India increased, making the fastest growing among the top 20 smartphone markets in the world.

According to India Cellular & Electronics Association (ICEA), India has the potential to achieve a value of US$ 100 billion in manufacturing of laptops and tablets by 2025. According to DPIIT, between April 2020 and October 2020, exports of electronic goods from India stood at US$ 5.05 billion.

In November 2020, three private equity funds—Investcorp, Norwest Venture Partners and Gaja Capital together invested ~Rs. 800 crore to acquire ~ 31% stake in Xpressbees, the e-commerce focussed end-to-end supply chain solutions provider. In November 2020, Pegatron Corp., an iPhone assembler in Taiwan, announced its plans to invest US$150 million in building a plant in India. In October 2020, the Karnataka government approved a Rs. 3,540 crore  investment by Aequs SEZ Private Limited to develop a consumer electronics and durables goods (CEDG) cluster in Hubballi—about 430 kms from Bengaluru. In October 2020, Amazon India launched new specialised fulfilment centre with a storage capacity of 1.2 million cubic feet in Bengaluru, which is specialised to store and manage customer orders from the large consumer appliances and furniture categories in their portfolio.

The Government of India has allowed 100% Foreign Direct Investment (FDI) under the automatic route in Electronics Systems Design and Manufacturing sector. FDI into single brand retail has been increased from 51% to 100%; the government is planning to hike FDI limit in multi-brand retail to 51%.On November 11, 2020, Union Cabinet approved the Production-Linked Incentive (PLI) scheme in 10 key sectors (including electronics and white goods) to boost India’s manufacturing capabilities, exports and promote the ‘Atmanirbhar Bharat’ initiative.

Road Ahead

Indian appliance and consumer electronics (ACE) market is expected to increase at 8-9% CAGR to reach Rs. 3.15 trillion in 2022. Demand growth is likely to accelerate with Work from Home concept and easy access to credit. Increasing electrification of rural areas and wide usability of online sales would also aid growth in demand.

BENEFICIARIES :    JOHNSON CONTROLS-HITACHI AIR CONDITIONING INDIA LTD, BLUE STAR LTD, VOLTAS, BAJAJ ELECTRICALS, AMBER ENTPRISE, GANDHIMATI APPLIANCE, DIXON, TTK PRESTIGE, POLYCAB, HAVELLS, IFB IND.

The Indian Gems and Jewellery sector is one of the largest in the world, contributing around 29% to the global jewellery consumption. The sector employs over 4.64 million employees and is home to over 300,000 gems and jewellery players. The sector contributes 7% to the Gross Domestic Product (GDP) of the country.

In November and December, gems and jewellery exports achieved pre-COVID peaks as demand picked up in all major markets, including the US, where Thanksgiving Day spending improved by almost 22%, according to GJEPC. India is the most preferred country in terms of gems and jewellery export. The overall net export of gems and jewellery stood at US$ 29.01 billion in FY20, whereas import was at US$ 26.05 billion during same period. India exported US$ 18.66 billion worth of cut and polished diamonds in FY20P. It contributed 64% to the total gems and jewellery export. India’s top export destinations for gems and jewellery are US, Europe, Japan and China. US accounts for nearly one-fourth of the country’s total gems and jewellery export. India is the world’s largest centre for cut and polished diamonds and export 75% of the world’s polished diamonds. As per reports 14 out of the 15 diamonds sold in the world are either polished or cut in India. India exported cut and polished diamonds worth US$ 18.66 billion in FY20; this accounted for 52.4% of the total gems and jewellery export.

India is the world’s second largest gold consumer. India’s demand for gold reached 690.4 tonnes in 2019. The Government has permitted 100% Foreign Direct Investment (FDI) in the sector under the automatic route. The Rs. 250,000 crore (US$ 35.77 billion) household jewellery industry is probably going to get a major lift through the Government’s decision for FDI in retail. The Bureau of Indian Standards (BIS) has revised the standard on gold hallmarking in India from January 2018 to include a BIS mark, purity in carat and fitness, as well as the unit’s identification and the jeweller’s identification mark on gold jewellery. The move is aimed at ensuring stringent quality check on gold jewellery. The Government has made hallmarking mandatory for gold jewellery and artefacts and a period of one year is provided for its implementation (till January 2021).

Road Ahead

The growth is significant in terms of Exports & the demand cycle to pick-up going forward.

The Domestic Jewellery demand is yet to pick-up, Gold & Gold jewellery are seen as investment in India.

BENEFICIARIES :   TITAN COMPANY, RENAISSANCE GLOBAL LTD, VAIBHAV GLOBAL, RAJESH EXPORTS, THANGAMAYIL, GOLDIAM INTERNATIONAL

Food processing is simply a method by which agricultural products are transformed into food products that are fit for consumption. It involves different ways of processing such as, grinding grain to make raw flour, home cooking, and industrial methods to produce convenience foods including noodles, pasta, Biscuit, Namkeen, Ketchup, Sauce and chips etc. The food processing industry forms a major part of India’s economy owing to the variety of food products that the country harvests and further processes for consumption. India is the largest producer of milk, bananas, mangoes, guavas, papaya, ginger, okra; second-largest producer of wheat, rice, fruits, vegetables, tea, sugarcane and cashew nuts and the third-largest producer of cereals, coconut, lettuce, chicory, nutmeg, mace, cardamom and pepper worldwide. Rising incomes and a growing demand for healthy, packaged food ensure that this industry is likely to sustain all seasons and never fear a recession. The industry also receives growing support from the government.

India’s food processing sector is one of the largest in the world and its output is expected to reach US$ 535 billion by 2025-26. This sector is expected to generate 9 million jobs by 2024.The Indian food industry is expanding at a CAGR of 11% and the food processing sector accounts for 32% of the total food industry. There is growth in the organized food retail sector and increase in urbanization. MSME’s are playing a vital role in India’s food processing chain through various advancements in skills and technology. The online food ordering business in India is witnessing an exponential growth. There is high demand for packaged, healthy and immunity booster snacks such as roasted nuts, popcorns, and roasted pulses. There is a shift in focus from loose to branded packaging.

The Indian Government, in the ‘Make in India’ campaign, has prioritized the food processing sector and promotes investments in the sector. In addition, the government has established 18 mega food parks and 134 cold chain projects to develop the food processing supply chain. These initiatives are likely to boost food processing companies. Also, the recent government initiatives—such as Rs. 10,000 crore (US$ 1.35 billion) scheme rolled out by the Finance Minister, Mrs. Nirmala Sitharaman, to support this industry—have placed the food processing sector on a high growth trajectory.

Road Ahead

Various factors, such as rise in health issues, busy lifestyles and increase in food adulteration, have witnessed demand for ready-to-cook, ready-to-eat meals and healthy, immunity boosting snacks. Safe and processed food categories such as biscuits and snacks have seen a growth amid the COVID-19 crisis.

The growth for this industry is seen growing in double digit going forward. Innovation of new product and easy to use application would be preferable for next generation.

BENEFICIARIES :   GODREJ INDUSTRIES, PARLE AGRO, ITC LTD., AGRO TECH FOODS, DABUR INDIA LTD., BRITANNIA INDISTRIES LTD, HERITAGE FOODS, NESTLE, HATSUN AGRO, VARUN BEVERAGES, TASTY BITE, PRATAAP SNACKS.

India’s total online video market is anticipated to expand to US$ 4.5 billion in revenue over the next five years, growing at a compound annual growth rate (CAGR) of 26% between 2020 and 2025, SVoD market will accelerate by 30% CAGR and reach US$ 1.9 billion by 2025.

The video on demand (AVoD) advertisement segment is expected to rise at a CAGR of 24% over the next five years to reach US$ 2.6 billion by 2025.In 2020, India’s online video industry reported an estimated revenue of US$ 1.4 billion, while advertising and subscription contributed 64% and 36%, respectively. Key services which accounted for a combined ~85% share to the total revenues in 2020 were YouTube (43%), Disney+ Hotstar (16%), Netflix (14%), Amazon Prime Video (7%) and Facebook (5%). He stated that in India and Southeast Asia, the average number of subscription for video-on-demand (SVOD) services subscribed by users is 2.8.

In 2020, OTT content investment in India reached US$ 700 million as domestic and global platforms continue to invest in the emerging opportunity for SVoD in India. OTT content cost is projected to grow at a CAGR of 18% to reach US$ 1.6 billion between 2020-2025.

As the commercial roll-out of 5G is expected to begin in 2021, India’s mobile broadband penetration is projected to reach gradually to 66% by 2025. The new private telecommunications investment has boosted India’s fixed broadband market, which has so far been underpenetrated by only 6% of households. India’s fixed broadband market will expand to 45 million subscribers with over 82% of subscribers via fibre by 2025 at a CAGR of 18%. (Source Media Partners Asia MPA)

Road Ahead

Channels like TV18, ZEE, NETFLIX, AMAZON PRIME, YOUTUBE, etc are setting standards, Educational & Marketing are taking advantage of this viewership.

The growth is phenomenal and can give good opportunity going forward.

BENEFICIARIES :  ZEEL, TV18, UTV, ENIL, SHEMAROO.

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.

The Indian glass industry has been growing across all segments. Sheet and float glass have recorded good growth. This growth has been driven primarily by India’s automotive glazing, and construction sectors. Exports of glassware from India have been growing at a rate of 7% CAGR over the period. The global market for Indian glassware is fragmented and spread across several countries, with no dominant market. USA is the biggest market for Indian glass products. UAE & Poland are the other key markets.

The growth in India’s glass industry is being driven by user segments such as manufacturing, construction, automotive and petrochemicals. These segments are highly competitive, demanding and well-integrated with global trends.

Supplying to key players in these segments will require the glass manufacturers to be capable of developing technically advanced products and customer specifications to user requirements. Hence, technological capability is a key success factor in the industry today.

The glass industry is highly energy intensive and energy consumption is a major cost driver. Energy costs include power consumption and running costs of furnaces. Safety and environmental requirements are also key drivers of costs in this area. The average energy cost as a percentage of manufacturing cost is 30 per cent.

Amid these constraints, glass manufacturers need to find innovative ways for improving energy efficiency and also explore alternate sources of energy. Energy saving strategies such as higher temperature refractories could be adopted. Re-using waste heat to pre-heat new batches is another option that has been estimated to yield upto18% savings in energy. The recycling of glass also leads to an estimated savings of 15-35%.

Road Ahead

Demand in Housing Automobile and Manufacturing segments are seen rising therefore the demand of glass also will rise going further. We expect 6-7% growth in the sector forward.

BENEFICIARIES : ASAHI INDIA, LA OPALA RG, BOROSIL, EMPIRE IND, SAINT GOBIAN.

Oil and gas sector among the eight core industries in India and plays a major role in influencing decision making for all the other important sections of the economy. The need for oil and gas is projected to grow more as expansion in gas-based plant are finding more traction and cheap productivity, thereby making the sector quite conducive for investment.

India’s oil refining capacity stood at 249.9 million metric tonnes (MMT), making it the second-largest refiner in Asia. Private companies own about 35.29% of the total refining capacity in FY20. India’s consumption of petroleum products is almost come back to Pre-Covid levels. Export of petroleum products from India has shown tick down due to current environment.

State run energy firms, Bharat Petroleum, Hindustan Petroleum and Indian Oil Corporation, plan to spend US$ 20 billion on refinery expansions to add units by 2022. Disinvestment in BPCL is ongoing. With 8,748 kms of refined products pipeline in India, IOC was leading the segment with 51.25% of the total length of product pipeline network as on March 01, 2020The Government is planning to set up around 5,000 compressed biogas (CBG) plants by 2023. The Government is planning to invest US$ 2.86 billion in the upstream oil and gas production to double natural gas production to 60 bcm and drill more than 120 exploration wells by 2022. Government of India is planning to invest Rs 70,000 crore (US$ 9.97 billion) to expand the gas pipeline network across the country.

The energy trade between India and US is likely to cross US$ 12 billion in FY22. As on April 01, 2020, there were 24,670 LPG distributors (of PSUs) in India. The total number of OMC retail outlets at 66,817 at the beginning of April 2020.Private players like Reliance Essar are also expanding their foot print day by day to compete with OMCs.

Road Ahead

Energy demand of India is anticipated to grow faster than energy demand of all major economies on the back of continuous robust economic growth. India’s energy demand is expected to double by 2035. Primary energy consumption is projected to increase by two-fold by 2035Growth of 7-8% can be projected going forward.

BENEFICIARIES : IOC, BPCL, HPCL, ONGC, RELIANCE, GAIL