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.

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.

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 Abrasives industry in India currently has two major players offering a full range of Abrasives products. In terms of value and volume, the metal fabrication segment of the end-use industry is projected to grow at the highest CAGR during next financial year as government thrust to develop infrastructure in our country is promising.

The metal fabrication segment is the fastest-growing end-use industry segment in the abrasives market. This growth is attributed to its usage and demand in the metal fabrication for cutting-off and grinding, removing welds and excess material, surface blending, finishing, and polishing.

Industrial demand is weak in the domestic market and likely to persist. While exports are seeing some green shoot in this industry. Despite the bleak environment, expects not to lose volumes and in-turn take this opportunity to gain.

Asia Pacific is the fastest-growing market for abrasives due to its increasing economic growth. owing to the rapid growth in industries such as automotive, machinery and metal fabrication in the region. The growth of this region is supplemented by the increase in the consumption and production of industrial products in developing economies such as India and China. Augmented demand for automobiles is expected to indirectly drive the growth prospects of the abrasives market in the coming years.  The rise in the sales of electronic devices is likely to boost the demand for coated abrasives in the electronic industry during the forecast period, especially in the consumer goods sector.

Abrasives Market is the emerging market, and it is expected to grow at CAGR of 5-6 % during the period (2020-2024)Abrasives are used in automotive, electronics, construction, and manufacturing industries to provide a superior polished surface finish during manufacturing. Beyond this, they are used to shape materials through grinding and remove surface layers of paint or corrosion, cut hard materials made of steel or concrete, and polishes finished products. Furthermore, investments in R&D activities to produce innovative and less hazardous abrasives are expected to provide opportunities for growth in the future.

Road Ahead

Robust growth of the Infrastructure sector is expected to drive the market and also due to rising environmental concerns, leading automobile manufacturers are manufacturing low-weight automobiles, which are economical, emit low carbon dioxide, and yet provide superior performance. Customer centric approach to give a specific finish, speed of cutting and stock removal or cutting requirements.

BENEFICIARIES : GRINDWELL NORTON, CARBORANDUM UNIVERSAL, WENDT INDIA.

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

Gas sector is among the core industries in India and plays a major role in influencing decision making for all the other important sections of the economy. India’s economic growth is closely related to its energy demand, therefore, the need for gas is projected to grow more, thereby making the sector quite conducive for investment.

The Government has adopted several policies to fulfil the increasing demand. It has allowed 100 per cent Foreign Direct Investment (FDI) in many segments of the sector, including natural gas, petroleum products and refineries among others. Today, it attracts both domestic and foreign investment as attested by the presence of Reliance Industries Ltd (RIL) and Cairn India.

India has been the fourth-largest Liquefied Natural Gas (LNG) importer since 2011 after Japan, South Korea, and China. Gas pipeline infrastructure in the country stood at 16,981 kms at the beginning of April 2020. Government of India is planning to invest Rs 70,000 crore (US$ 9.97 billion) to expand the gas pipeline network across the country.

A gas exchange is planned in order to bring market-driven pricing in the energy market of India and the proposal for the same is ready to be taken to the Union Cabinet according to Mr Dharmendra Pradhan, Minister of Petroleum and Natural Gas, Government of India.

The Oil Ministry plans to set up bio-CNG (compressed natural gas) plants and allied infrastructure at a cost of Rs 7,000 crore (US$ 1.10 billion) to promote the use of clean fuel. As on March 01, 2020, Gas Authority of India Ltd. (GAIL) had the largest share (71.61 per cent or 11,411 kms) of the country’s natural gas pipeline network (16,324 kms).

With 8,748 kms of refined products pipeline in India, IOC was leading the segment with 51.25 per cent of the total length of product pipeline network as on March 01, 2020.Under City Gas Distribution (CGD) network, 86 Geographical Areas constituting 174 districts in 22 States / Union Territories are covered.

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 to 1,516 Mtoe by 2035 from 753.7 Mtoe in 2017.  Moreover, the country’s share in global primary energy consumption is projected to increase by two-fold by 2035.Natural Gas consumption is forecast to increase at a CAGR of 4.31 per cent to 143.08 million tonnes by 2040.

BENEFICIARIES :   GAIL, IOC, MGL, IGL.

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