MAGNUM Blog

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

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.