MAGNUM Blog

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

Telecom equipment forms a critical and strategic element of building a secured telecom infrastructure and India aspires to become a major original equipment manufacturer of telecom and networking products. The PLI scheme is expected to attract large investments from global players and help domestic companies seize the emerging opportunities and become big players in the export market. The PLI scheme announced on 11th Nov 2020 approved financial outlay of Rs 12195 cr. over five year period.

Telecom Products

1.Core Transmission Equipment

2.4G/5G, Next Generation Radio Access Network and Wireless Equipment

3.Access & Customer Premises Equipment (CPE), Internet of Things (IoT) Access Devices and Other Wireless Equipment

4.Enterprise equipment: Switches, Router.

India is the world’s second-largest telecommunications market. The Indian mobile economy is growing rapidly and will contribute substantially to India’s Gross Domestic Product (GDP). With situation of lockdown the sector saw highest usage of data & digital economy. India’s active internet user base to hit 639 mn by Dec 2020, Rural user base to hit ~300 mn by Dec’20. India has the world’s highest data usage per smartphone at an average of 9.8 GB per month. In March 2020, the government approved the Production Incentive Scheme (PLI) for Large- scale Electronics Manufacturing. The scheme proposes production-linked incentive to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components including Assembly, Testing, Marking and Packaging (ATMP) units. The policy intended to attract investments worth US$ 100 billion in the sector by 2022.The Department of Information Technology intends to set up over 1 million internet-enabled common service centres across India as per the National e-Governance Plan. FDI cap in the telecom sector has been increased to 100% from 74%; out of 100%, 49% will be done through the automatic route and the rest will be done through the FIPB approval route. FDI of up to 100% is permitted for infrastructure providers offering dark fibre, electronic mail and voice mail. The Government of India has introduced Digital India programme under which all the sectors such as healthcare, retail, etc. will be connected through internet. Telecom tower sector driven by 5G and IoT will boom in India. Indian telecom tower companies are well placed to tap in on new opportunities that represent a revenue potential of Rs 200 bln – Rs 300 bln in 2023.

Road Ahead

Growth rate of 8-10% expected for next 5 years Country could become major manufacturing Hub in many sectors like Pharma, Auto Ancillaries, Electronics, Defence, Logistic & Transport.

BENEFICIARIES : Bharti Infratel, ITI ltd, Route Mobile, Nelco Ltd

The glass industry in India is quite old and well established. The glass makers employed methods such as moulding, folding, twisting, double-stripping and wire-winding to manufacture glass. It remained largely a cottage industry for a long time. In recent years, the industry has transformed and developed. From rudimentary mouth blown and hand-working processes, the industry has evolved to adopt modern processes and automation in a large way. However, mouth blown processes and handcrafted glassware continue to play a role in developing innovative designs in decorative and table glassware products that are exported in large quantities.

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.

The Indian home textiles supported by growing household income, increasing population, rising income levels, increase in organized retail and growth of end use sectors like housing, hospitality, healthcare.

India accounts for 7% of global home textiles trade & 2% of India’s GDP and 15% of the country’s export earnings. Superior quality makes companies in India a leader in the US and the UK, contributing two-third to their exports. One of the major productions and export centres for home textiles.

Traditional craftsmanship along with its distinctive appeal is being effectively used for producing value-added home textile items leading to India’s growing recognition as a preferred sourcing destination for these products.

The rich and diverse geographical conditions in India and availability of raw material such as cotton, wool, silk, etc. is in abundance wherein it provides an inbuilt platform for manufacturers the business prospects in India. To add to it, the labour is relatively cheap and skilled artisans are in plentitude which makes home textiles in India a favourable market.

Fashion sensitivity towards household furnishing has increased as fast-fashion has hit not only the apparel market but the home market as well.

Home fashion has become a separate segment as consumer consciousness towards high-quality living has increased. Bed linen includes bedspreads, blankets, mattress, mattress cover, pillows, duvets, duvet covers, and bed covering, and others. Bath linen includes bath robes, bath towels, and bath mats, and others. Demand from Hotels, Motels, Airplane, Shipping (Cruiseliner), Hospitals etc. added advantage to this sector.

Road Ahead

Factor like uneven rainfall, climatic change hampers the pricing of raw material.  Going forward the growth could be expected to be in range of 15-20%.The Industry is consumer centric and demand has to remain forever.

BENEFICIARIES: WELSPUN, TRIDENT, ARVIND LTD, VARDHMAN TEXTILES LTD, HIMATSINGKA SEIDE LTD.

The gems and jewellery sector contribute around 7% to country’s GDP and 15% to India’s total merchandise export. It employs over 5 mln people. One of the fastest growing sectors, export oriented and labour intensive.  India is the world’s largest cutting and polishing centre for diamonds because of its low costs and availability of high-skilled labour.  India exports more than 70% of the world’s polished diamonds as per statistics from the GJEPC. India’s Gems and Jewellery sector has been contributing in a big way to the country’s foreign exchange earnings. Government has viewed this sector as a thrust area for export promotion. The Indian Government presently allows 100% FDI in the sector through the automatic route.

However, India’s gems and jewellery sector is one of the largest in the world, contributing 29% to the global jewellery consumption. The sector is home to more than 300,000 gems and jewellery players. Its market size will grow by US$ 103.06 billion during 2020-2023.

Online purchase of Gold & other jewellery have shown significant growth, Hallmarking of this jewellery have given confidence to buyers and end users. Gold monetization and investments schemes are floated from time to time for end users. Investments with lesser value & digital form also becoming popular for small & medium size investors.

India’s demand for gold reached more than 600 tonnes in 2020. India’s gems and jewellery export stood at US$ 29.01 billion in FY20P. During the same period, India exported US$ 18.66 billion worth of cut and polished diamonds, thereby contributing 64% of the total gems and jewellery export.

Organised Retail player have created brand for awareness and grown bigger in terms of footfall & customer confidence.

Road Ahead

This is one of the Sector people stay invested for a long term & traditional values are also driving this sector.

Growth in current scenario would be flattish, but going forward would see growth rate of more than 5 – 6% from FY22 onwards.

BENEFICIARIES: THANGMAYALL, RENAISSANCE GLOBAL, VAIBHAV GLOBAL, RAJESH EXPORTS, TITAN.