MAGNUM Blog

Market Size Battery Industry in India is 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 & E Vehicles could be the game changer for these companies.

BENEFICIARIES :  AMARA RAJA, EVERADY, PANASONIC ENERGY, INDO NATIONAL.

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 growing demand for power, light and communication has kept a high demand for cables and wires, which constitute roughly 40% of India’s electrical industry. Wires and cables play a vital role in every aspect of infrastructural growth and finds extensive usage and applications across a number of industries.

Wire and cables demand directly dependent on the growth of the manufacturing industry and infrastructure in the power, telecommunications, residential and commercial sectors. The government’s initiatives on various fronts like – Renewable power, Housing, Automobile, infrastructure and digitization (Railways, Roadways, Warehousing, Logistic Parks, Smart Cities) are sure to generate a lot of business for the wire and cable industry in foreseeable future.  The Transmission and Distribution sector continues to remain in focus, especially, with the outlay of Rs. 2.6 lakh crore announced by the Government for the five-year period ending FY2022. There is also a sharper focus on high voltage transmission lines along with the Government’s aims to provide 24×7 power, which is opening up opportunities in the sector. DISCOMS which have joined the UDAY scheme are expected to improve their T&D infrastructure through renewed investments. The government’s target of generation of 100 GW of solar energy by 2022 and measures such as excise duty exemption for ferro-silicon magnesium used for manufacturing components for wind-operated electric power generators have augmented the demand for electrical wires and cables.

The Indian power sector has an investment potential of INR 15 trillion (USD 225 billion) in the next 4–5 years. Also, the government is planning to achieve targets of tripling per capita power consumption in India which would require an additional 455 GW of installed capacity along with significant investments and operational improvements in T&D networks.

The Govt. plans to spend INR 850,000 crore in the next five years to modernize Indian Railways. The Cabinet cleared the INR 82,000 crore (USD 12.3 billion) dedicated freight corridor for decongesting existing network. Further, rapid urbanization, is boosting demand for wires and cables in the residential & commercial buildings and power distribution sectors.

Indian automotive sector is one of the world’s biggest. Around 7.1% of the gross domestic product (GDP) in the country is in the sector. India is also a major car exporter and has powerful expectations of export growth in the near future. The rising demand for low-voltage wires in electrical installations of automobiles is another factor adding to the growth of the market.

Road Ahead

The growth going forward can be expected to grow at 13-15% over next 5 years. The Development pace in INDIA to outperform so would this sector benefit from the same.

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

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.

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.

India fourth largest auto market in 2019 displacing Germany with about 3.99 million units sold in the passenger and commercial vehicles categories. India is expected to displace Japan as the third largest auto market by 2021.Passenger vehicles & 2-wheeler segment dominate the domestic Indian auto market. Passenger car sales are dominated by small and mid-sized cars. Two wheelers and passenger cars accounted for 80.8% and 12.9% market share, respectively, accounting for a combined sale of over 20.1 million vehicles in FY20. Automobile export reached 4.77 million vehicles in FY20, In October 2020, MG Motors announced its interest in investing Rs. 1,000 crore (US$ million) to launch new models and expand operations in spite of the anti-China sentiments. In October 2020, Ultraviolette Automotive, a manufacturer of electric motorcycle in India, raised a disclosed amount in a series B investment from GoFrugal Technologies, a software company. In January 2020, Tata AutoComp Systems, the auto-components arm of Tata Group entered a joint venture with Beijing-based Prestolite Electric to enter the electric vehicle (EV) components market.

Morris Garages (MG), a British automobile brand, announced plans to invest an additional Rs. 3,000 crore (US$ 429.25 million) in India. Audi India planned to launch nine all-new models including Sedans and SUVs along with futuristic E-tron EV by end of 2019. BMW already announced its Top end and mid segment launch recently.

PARLIAMENTARY PANEL ON AUTO SLOWDOWN –

10% GST REDUCTION CAN OFFSET PRICE INCREASE AND GENERATE DEMAND || REDUCE GST ON USED CARS FROM 12-18% TO 4% TO CREATE DEMAND || SCRAPPAGE POLICY WITH FINANCIAL INCENTIVES TO BOOST DEMAND || STRICT GUIDELINES TO LINK REPO RATE TO INTEREST ON LOANS || MODERATE COLLATERAL NORMS FOR WORKING CAPITAL NEEDS OF DEALERS || EFFECTIVE DEPRECIATION RATE OF 25% ON A PERMANENT BASIS 12:21.PARLIAMENTARY PANEL ON AUTO SLOWDOWN – SLOWDOWN IN AUTO SECTOR HAS LED TO LOSS OF 3.4 LAKH JOBS || OEMS HAVE SLASHED PRODUCTION BY 18-20% || AUTO SECTOR COULD FACE TWO CONSECUTIVE YEARS OF CONTRACTION || AUTO SECTOR NEEDS A FOCUSED STIMULUS PACKAGE

Road Ahead

Economy recovery would benefit this sector with rising demand in this sectorGrowth rate of 7-9% could be assumed going forward for this sector.

BENEFICIARIES : MARUTI, TATA MOTORS, M&M.