MAGNUM Blog

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.

• Steel-making capacity is expected to reach 300 million tonnes per annum by 2030–31.

• Crude steel production is expected to reach 255 million tonnes by 2030–31, at 85% capacity utilisation.

• Production 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%.

• With 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

Indian dairy & dairy products industry holds an inimitable space in the country for its high employment potential and for ensuring the availability of nutritious yet affordable food for India’s vast population. India is the largest producer as well as largest consumer of milk in the world. It contributes ~19% to the world milk production and consumes almost whole of its milk production by itself.

The profit margin and value chain analysis of dairy processing companies involved in the business segments of ice-cream, milk powder, cheese, butter, cottage cheese, yoghurt, flavoured milk and probiotic dairy products industry, Sweets like Cadbury, Khoya Sweets, Condense Milk.

The milk processing industry in India is expected to expand at a compound annual growth rate (CAGR) of ~14 to 15% between FY 2012 and FY 2023, the market size of butter is expected to grow by 14.5%, curd by 14.4%, paneer by 14.1% and ghee by 14.1%, among others.

Dairy farming is an important way for farmers to increase their earnings and access to more nutritious food for their families. While dairy farming provides not only fresh milk and a source of basic income, value-added products, such as yogurt and cheese provide a higher source of revenue. Dairying is an important source of subsidiary income to small/marginal farmers and agricultural labourers. The manure from animals provides a good source of organic matter for improving soil fertility and crop yields. Dairy farming is now taken up as a main occupation around big urban centres where the demand for Organic milk & milk product is high.

Road Ahead

We expect growth of 14-15%. The Industry has Organised & Unorganised player but branding and other marketing strategies have proved Organised sector gaining market share.

The Sector remains under essential category & commodity, so slowdown impact does not hamper the growth.

BENEFICIARIES :   NESTLE, HATSUN AGRO, PARAG MILK, BRITANNIA, VADILAL

The Indian liquor market in the third-largest in the world. The percentage of Indian population consuming liquor around 30-35%. The Industry mainly of 4 segments IMFL, BEER, COUNTRY LIQUOR, & WINE, there is one more Luxury Segment which at top of pyramid with very low volumes.

IMFL Segment is largest segment of the Indian liquor industry in terms of value, due to the price per bottle, making up ~50-55% of the total market by value. It is further bifurcated into Whisky, Rum, Brandy, Vodka, and Gin. It is expected the market valuation to touch INR 3,000 billion by 2026, with a projection of CAGR of 5% -5.5%.Beer is also one of the segments which is become popular and gaining markets share. Consolidated beer market is also growing at 6-8%, going forward due to new product launch which are nowadays healthier and also of great importance according to todays lifestyle are gaining momentum. Country liquor are low quality drinks which are very local and cheap, Labour, contractors, middle class workers, drivers etc. generally consume this product and sale is also equally near beer market in value terms beer would have edge over country liquor, but market is growing at 10-15%.WINE is all together smallest of the segment in India till now, generally wine is home made product and also lot of house in western parts of India make at home. There are big players in this segment to but compare to other very little and growth rate can be assumed between 15-20%.Drawback of Industry: High taxed Industry, Price sensitive, Addictive in Nature, Restricted Marketing.

Branding plays important role in growth, Online ordering in current scenario have change the outlook for this sector. Going forward online business would lead to the growth of this Industry. Typically like grocery, Fashion product customers would be able to order online and get delivery as and when required with no hassle.

Road Ahead

The Online retail sale would lead to added growth going forward and direct selling would give boost to better margins to companies. Growth of 8-10% expected going forward.

BENEFICIARIES : UNITED BREWERIES, RADICO KHAITAN, GM BREWERIES.GLOBUS SPIRITS, UNITED SPIRITS, ASSOCIATED ALCOHOL

India being one of world’s largest producers & consumers of most metals. Base Metals may outperform post H2, second half is turning positive. Demand from china have slowly started rising. The GDP in China have shown significant turnaround. Prices have seen gradual rise since July 2020. However, demand in Zinc, Nickel & Lead are still slow but demand in Copper, Aluminum, Steel are encouraging.

The ongoing recovery in economic activities is seen supporting industrial metals consumption. Stimulus packages around the globe would see base metal shinning in near term. Positive macroeconomics, liquidity surplus, and surge in demand makes metal sector buoyant.

Inflation ticking up so are the prices in metals, Prices in base metals are at multi- months high. Major players are expanding their capacities buy small or big acquisition, debottlenecking and smoother process alignment.

Through several cycles it is witnessed when the rest of the world slows, China tends to be a buyer of these commodities, and this time it’s no different. As of now, it appears that China is in the midst of a V-shaped recovery, and it’s stimulating its economy with infrastructure spending that’s positive for base metals in bulk, and is helping hold commodity prices up.

Electric Vehicles to be future of the Automobile Industry, copper & steel would play important role in this sector, Grids would require copper & Iron steel extensively. Auto Scrap Policy would add fuel to demand going further.

Road Ahead

Second wave of Covid19 may impact the demand curve, Overall cycle to remain stable and would yield returns for manufacturing units.

Growth rate at 4 to 5 %, but price rise should add to the margins going forward

BENEFICIARIES : TATA STEEL, VEDANTA, HINDALCO, JINDAL STEEL, SAIL.

The textiles and apparel industry in India has strengths across the entire value chain from fiber, yarn, fabric to apparel. It is highly diversified with a wide range of segments ranging from products of traditional handloom, handicrafts, wool and silk products to the organized textile industry. The organized textile industry is characterized by the use of capital-intensive technology for mass production of textile products and includes spinning, weaving, processing, and apparel manufacturing.

The domestic textiles and apparel industry contribute 2.3% to India’s GDP, 7% of the country’s manufacturing production and 13% of the country’s export earnings.

The textiles and apparel industry in India is the second-largest employer in the country providing employment to 45 million people. It is expected that this number will increase to 55 million by 2020.India has also become the second-largest manufacturer of PPE in the world. More than 600 companies in India are certified to produce PPEs today, whose global market worth is expected to be over $92.5 bn by 2025, up from $52.7 bn in 2019.FDI in the textiles and apparel industry has reached up to $3.4 bn during 2020Exports in the textiles and apparel industry are expected to reach $300 bn by 2024-25 resulting in a tripling of Indian market share from 5% to 15%Further, the domestic consumption of $100 bn was divided into apparel at $74 bn, technical textiles at $19 bn and home furnishings at $7 bn. While exports comprised of textile exports at $20.5 bn apparel exports at $16.1 bn and handlooms at $3.8 bn.

Cabinet approves MoU between India and Japan for cooperation in the field of good quality textiles.

GROWTH DRIVERS: ֎ Abundance of raw material ֎ Presence of entire value chains ֎ Competitive manufacturing costs ֎ Availability of skilled manpower ֎ Large and growing domestic market ֎ preferences for brands ֎ Organized retail landscape & e-Commerce ֎ Increased focus on technical textiles due to growth of end-user industries such as automotive, healthcare, infrastructure and oil and petroleum.

Road Ahead

Make in India advantage for companies. The growth in near term would be flat but once the Economy starts normalizing the growth could be expected between 6-7% going forward. Huge opportunity for Exports and domestic consumption, Sustainable outlook for this sector.

BENEFICIARIES : KEI Industries Limited Polycab India Limited Finolex Cables Limited V-Guard Industries Pvt. Ltd. KEC International Limited Havells India Ltd. Sterlite Technologies Ltd.

The term pesticide covers a wide range of compounds including insecticides, fungicides, herbicides, rodenticides, molluscicides, nematicides, plant growth regulators and others. Pesticides are substances or mixtures of substances that are mainly used in agriculture or in public health protection programs in order to protect plants from pests, weeds or diseases and humans from vector-borne diseases, such as malaria, dengue fever, and schistosomiasis. Insecticides, fungicides, herbicides, rodenticides and plant growth regulators.

The primary benefits are the consequences of the pesticides’ effects – the direct gains expected from their use. For example the effect of killing insects, bacteria, virus etc feeding on the crop brings the primary benefit of higher yields and better quality of crop.

Benefits : ֎ Improving productivity ֎ Protection of crop losses/yield reduction ֎ Vector disease control ֎ Quality of food

Pesticides Effects

Residues of pesticides can be found in a great variety of everyday foods and beverages, including for instance cooked meals, water, wine, fruit juices, refreshments, and animal feeds. Furthermore, it should be noted that washing and peeling cannot completely remove the residues. In the majority of cases, the concentrations do not exceed the legislatively determined safe levels. However, these “safe limits” may underestimate the real health risk as in the case of simultaneous exposure to two or more chemical substances, which occurs in real-life conditions and may have synergistic effects. Pesticides residues have also been detected in human breast milk samples, and there are concerns about prenatal exposure and health effects in children.

This creates need for protection against pests is a given and has its roots in antiquity, when both organic and chemical substances were applied as pesticides. Since then, numerous chemical pesticides have been produced, and now multinational agrochemical companies, which mostly control global food production, apply new chemical substances with pesticide properties and implement biotechnological advances, thus diverging from traditional agricultural methods. Furthermore, current agricultural practices are based on the wide use of chemical pesticides that have been associated with negative impacts on human health, wildlife, and natural environment.

Current agriculture has to deal with important factors, such as population growth, food security, health risks from chemical pesticides, pesticide resistance, degradation of the natural environment, and climate change.

Road Ahead

Constant R&D and new pesticides with organic substance has got growth future in our country as our country is more than 60% agri based. The company’s average growth rate is projected at  8-9%, thus the sector looks sustainable in long run.

BENEFICIARIES : BAYER CROP, MOSANTO, SYNGENTA, SUMITOMO CHEMICALS, UPL, PI INDUS, FINE ORGANICs, BASF.

The ‘Defence’ sector, considering its importance, is identified as one of the key sectors for ‘Make in India’. Defence sector would be given priority be it for capital acquisition, manufacturing or technology development. By 2025, turnover of USD 25 billion (including export worth USD 5 billion) is expected to be achieved in the Aerospace and Defence sector. Govt.  announced separate budget allocation (in defence manufacturing) for procurements from domestic vendors, a mechanism must be laid forth to enable participation not only from domestic players but also foreign players in this sector. To increase foreign participation, the government recently enhanced the foreign investment limit in the defence sector from 49% to 74% under the automatic sector for companies seeking new industrial licences. Investments beyond 74% will require government approval.

As per the Union Budget for the financial year 2020-21, the total allocation for Defence is around USD 62.85 Bn.  Around 1/4th of this amount is allocated for capital expenditure. India is among the top five countries with the highest military spending. Favourable government policy which promotes self-reliance, indigenisation, and technology upgradation. The policies also aim at achieving economies of scale, including the development of capabilities, for exports in the defence sectorIndia’s requirements on defence are catered largely by imports. The opening of the Defence sector for private sector participation will help foreign Original Equipment Manufacturers (OEMs) to enter into strategic partnerships with Indian companies. This will enable them to leverage the domestic markets as well as aim at global markets. Besides helping in building domestic capabilities, it will also bolster exports in the long term. Preference has been given to ‘Buy (Indian)’, ‘Buy and Make (Indian)’ and ‘Make’ categories over ‘Buy (Global)’ and ‘Buy and Make (Global)’ categories. A clear and unambiguous definition of indigenous content is provided.

The defence ministry on Thursday approved procurement of weapons and military equipment worth Rs 28,000 crore for the three services. All the weapons and military hardware approved for procurement will be acquired from domestic industry. “The Defence Acquisition Council (DAC) headed by Defence Minister Rajnath Singh approved proposals to procure equipment worth Rs 27,000 crore from domestic industry,” the defence ministry said in a statement.

Total of seven acquisition proposals were approved by the DAC, the defence ministry’s highest decision-making body on procurement. “Six of the seven proposals, that is, Rs 27,000 crore out of Rs 28,000 crore for which AoNs (Acceptance of Necessity) were granted will be sourced from the Indian industry to give a boost to the ‘Make in India’ and ‘Atmanirbhar Bharat’ initiatives,” the ministry said.

Road Ahead

The Defence Sector may witness demand in near term and also government focus would create edge for the manufacturer going forward. Growth stable and also forward growth to sustains as further orders in pipeline.

BENEFICIARIES : BHARAT FORGE, BEL, BHEL, BHARAT DYNAMICS GARDEN REACH, MAZGAON DOCK, HINDUSTANAERONAUTICS LTD, MISHRA DHATU NIGAM LTD. (MIDHANI)

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 colors, 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.

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.