MAGNUM Blog

India accounts for more than 60% of the global outsourcing market. Outsourcing of information technology (IT) services, India has good preposition in the world. India has got probably highest skilled professional in this sector. With technology penetrating into every aspect of human lives, the world is witnessing revolution in the field of information technology.

Evolve with the evolving technology is become the New mantra of this Industry. Innovative Ideas to simplify, De-bottle necking, smooth Functioning, Cloud based infra, Integration, Process Engineering, are enabling different aspects to Individual, Industry, whether it is healthcare, automotive, banking, beauty, travel, or any other industry, IT department is must and advance tech always in demand.

To resolve problems, IT would offer solutions and create a new dimension with solution of the problem. Now-a-day, Cyber-security is also become important part of the systems to protect the technology and data. New IT hubs in emerging tier II and tier III cities.

Government has given In-principle nod to WFH for this sector, So time spend on travelling, Extra Miscellaneous expense have been curbed and Man-Power utilization has seen its peak in recent times.

According, to National Association of Software and Services Companies (NASSCOM) – IT exports from India will exceed the US$330 billion by 2020. This accounts for nearly 14% of the projected world-wide spend if India maintains its current share of the global offshore IT market.

India has a strong mix of young and technically trained professionals. Government institutes such as the Indian Institute of Technology (IIT), the Indian Institute of Management (IIM), and the Indian School of Business (ISB) are known to produce high quality STEM (science, technology, engineering, and math) talent with diverse business skills.

Road Ahead

Growth prospect good for this Industry, always rising demand curve. Going forward would witness both International & domestic project execution.

Innovation would drive the leadership board. Ticket size of different magnitude available for small & large organization.

BENEFICIARIES: TCS, WIPRO, INFY, ZENSAR, INTELLECT, HCL TECH, TECH M, LTI.

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.

Fragrance products & Flavour for food in the form of perfumes, Food Colour, Food Essence Flavouring Agents, colognes and deodorants have gained prominence as essential personal care products & food Industry, in recent years.

The fragrance & flavouring market in India is anticipated to reach INR 160 billion by 2024, expanding at a compound annual growth rate (CAGR) of ~14%. Based on type, the fragrance products market is segmented into perfumes, deodorants and other fragrance products, Flavours, one of the leading and fastest-growing segment in India. Food flavours that underpin food, beverage, and pharmaceutical brands globally. Food flavouring to create innovative and sustainable solution as per requirement of clients.

Food flavours the ingredients are natural, nature-identical, and artificial ingredients that help create flavours as required. Whereas, in Fragrance also natural, Skin sensitive and alcohol based wearable perfumes or aftershave lotion are added.  Butter nowadays are flavoured for better taste. Tea, Pizza, coffee, Cake Chocolates, etc. all contain natural colour and flavouring agents. On the other hand, Aftershave, Detergents, Bathing Soaps, Hair Dyes etc. all contain colouring agents, Fragrance and flavouring agents.

With a rise in standard of living and improved awareness regarding personal hygiene, people are not hesitating to splurge on fragrance products, & also branded food products. Increased adoption of smartphones and the Internet, especially in tier II and tier III cities, has made e-commerce websites accessible to customers, thus facilitating online shopping & Food ordering & grocery. Further, in recent years, Indians have been exposed to global trends, resulting in higher demand.

Newer fragrance & flavours are key to the growth in this sector.

Road Ahead

Growth is significant and new product launch, natural & technically advance production for different customers need.

The Industry is part of FMGC Industry so growth of 13-17% can be assumed going forward.

BENEFICIARIES: SH KELKAR, MANORAMA INDUSTRIES.

Hydraulic oils and transmission fluids transmit power in hydraulic equipment and are used in power transmission applications. They are incompressible fluids that are used as the power transmitting media in hydraulic systems. Hydraulic power systems involve a series of tubes or elastomeric hoses for transmitting pressurized fluid, a pump (as a power source), and some type of control (typically a series of valves, actuators, or cylinders) as the power transmission media, hydraulic fluids are indispensable in these systems. Transmission oils are essential to clean and protect the surface, condition gaskets, rise temperature range, increase rotational speed, and improve cooling function, and reduce high temperatures. They are used to lubricate, transfer energy, ensure smooth transmission in motor vehicles, agriculture equipment, construction, and mining equipment. Hydraulic fluids are used as a medium for transferring power and energy in hydraulic systems. Additionally, they are used for heat transfer, sealing, contaminant removal, and lubrication. The majority of the hydraulic fluids are based on mineral oils. The applications of these fluids include excavators, hydraulic brakes, lifts, flight control systems, power steering systems, excavator booms, dippers, hydraulic brakes, power steering systems, mechanical transmission systems, lifts, and general industrial machinery.

The Indian lubricants market

  Product Type :

֍ Engine Oil

֍  Transmission and Hydraulic Fluid

֍ Metalworking Fluid

֍ General Industrial Oil

֍ Gear OilGrease

֍ Process Oil

  Application:

֍ Power Generation Automotive and Other Transportation

֍ Heavy Equipment

֍ Food and Beverage

֍ Metallurgy and Metalworking

֍ Chemical Manufacturing

Automotive and Other Transportation:

India is the second largest lubricant consumer in the region and third in the world, after the United States and China. The country is the fourth and sixth largest producer of commercial vehicles and passenger cars, respectively. The country’s automotive industry accounts for around 7.1% of the country’s GDP, in which the two-wheeler segment accounts for a share of around 81% share, owing to the growing young and middle-class population. Additionally, the government’s initiatives, such as the Make in India campaign, are helping the local and state-owned manufacturers to provide their products to consumers and offer stiff competition to the international players. However, India’s automotive industry has been declining from the past one year due to a continuous slump in demand, slowing economic activity, and an increase in vehicle ownership costs. The outbreak of COVID-19 has further affected the economy at present, as all the manufacturing sectors has been stopped due to lockdown. Thus, the aforementioned factors are expected to impact the automotive industry, which in turn will affect the growth of the lubricants demand in the country.

Road Ahead

We expect growth to remain stable for now but would increase going further. The Growth rate of 4-5% YoY can be forecasted for this sector.

BENEFICIARIES: CASTROL, BPCL, HPCL, IOC, GULF OIL.

The Indian E-commerce market is expected to grow to US$ 200 billion by 2026. Industry growth been triggered by an increase in internet and smartphone penetration.

The ongoing digital transformation in the country is expected to increase India’s total internet user base to 829 million by 2021, India’s E-commerce revenue is expected to jump to US$ 140 billion by 2021, growing at an annual rate of 45%, the highest in the world.

Online retail sales in India primarily led by Flipkart, Amazon India and Paytm Mall has seen significant growth. In August 2020, Reliance Industries (RIL) acquired 60% stake in Netmeds, an online pharmacy, for Rs 620 crore (US$ 84.61 million). This acquisition gives RIL’s retail unit, Reliance Retail, entry into a vertical e-commerce space.

In January 2020, Divine Solitaires launched its E-commerce platform, Future Retail also acquired by Reliance Industries. Government e-Marketplace (GeM) signed a Memorandum of Understanding (MoU) with Union Bank of India to facilitate a cashless, paperless and transparent payment system for an array of services in October 2019.

In order to increase the participation of foreign players in E-commerce, Indian Government hiked the limit of FDI in E-commerce marketplace model to up to 100% (in B2B models).

E-commerce segment is also growing in terms of Foods business, grocery supply & small vendors like Retail vegetable seller, Manufacturer of Designer clothes, Furniture vendors are also joining the chain.

Indian E-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second largest E-commerce market in the world by 2034.

Road Ahead

E-commerce growth can be projected at more than 20% going forward.

E-commerce sector will also boost employment, increase revenues from export.

BENEFICIARIES: RELIANCE INDUSTRIES, V MART RETAIL, D MART, TRENT.

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. vSteel-making capacity is expected to reach 300 million tonnes per annum by 2030–31. vCrude steel production is expected to reach 255 million tonnes by 2030–31, at 85% capacity utilisation. vProduction 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%. vWith 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

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.

Non-Banking finance companies with assets of over Rs 50,000 crore that meet the RBI’s size criteria to get Bank licenses for corporates or NBFCS owned by large corporates. However, it has left the door open for NBFCs that are owned by corporates if they have been around for 10 years. Payment banks can convert to small finance bank after three years,  A big challenge for the NBFCs to convert into banks will be the cost of investment in technology and setting up branch network. They will also have to face additional cost for complying with the SLR of 18% and the CRR of 4% and not all NBFCs can meet this cost of compliance.

Conversion to a bank could help many NBFCs in terms of sustainability and growth, but would also mean that they would have to follow more regulatory and compliance norms. Many NBFCs have deeper penetration in teir-2 & 3 cities and also in rural India, It could be more advantageous to convert to bank as broader regulations are coming in line with banking norms for NBFCs.

The panel also suggested that the current rule of the promoters of a bank has to hold a minimum of 40% in the lender for the first five years, should continue. The panel, while proposing a hike in promoter holding in private banks to 26% also said that the promoters could voluntarily choose to bring down their holding further after lock-in of five years. Promoters not allowed to pledge bank shares during lock-in period.

Road Ahead

To make definite road map for NBFCs and also NBFCs could penetrate as India grows to 5 trillion Economy Increased corporate involvement into the banking sector may also translate to greater concentration of financial, economic or political might within select business houses.

Overall NBFCs would benefit from internal working group of the Reserve Bank of India (RBI)

BENEFICIARIES : INDIABULL HOUSING FIN, BAJAJ FINANCE, SHRIRAM TRANSPORT FINANCE, LT FINANCE, M&M FINANCE.

Indian pharmaceutical sector supplies over 50% of the global demand for various vaccines, 40% of the generic demand for US and 25% of all medicines for UK. India contributes the second largest share of pharmaceutical and biotech workforce in the world. Pharmaceutical sales grew more than ~9% y-o-y in 2020.

Indian drugs are exported to more than 200 countries in the world, with US being the key market. Generic drugs account for 20% of the global export in terms of volume, making the country the largest provider of generic medicines globally. It is expected to expand even further in the coming years. Pharmaceutical export from India, which include bulk drugs, intermediates, drug formulations, biologicals, Ayush & herbal products and surgical instruments.

With new Production Linked Incentive (PLI) Scheme for promotion of domestic manufacturing of critical Key Starting Materials (KSMs)/ Drug Intermediates and Active Pharmaceutical Ingredients (APIs) In India and Scheme for Promotion of Bulk Drug Parks. Production Linked Incentive Scheme for Promoting Domestic Manufacturing of Medical Devices and Scheme for Promotion of Medical Device Parks. We envisage more FDI investment and new projects & expansion in capacities. The country’s pharmaceuticals exports are on course to cross US$ 23 billion for the first time this fiscal year after rising 14.85% yoy at US$ 11.78 billion in the first half. The growth is driven by drug formulations and biologicals, whose shipment grew a record 21.85% year-on-year to US$ 8.99 billion in the April-September period as countries around the world turned to India to meet a rise in demand in the midst of the Covid-19 pandemic that in many parts of the world triggered lockdowns and production disruptions.

Indian pharmaceutical industry’s export to the US will get a boost as branded drugs will become Off Patent by 2021-23. Companies are launching Generics version as getting approvals from USFDA. Recently India plans to set up a nearly Rs 1 lakh crore (US$ 1.3 billion) fund to provide boost to companies to manufacture pharmaceutical ingredients domestically by 2023.

Road Ahead

Medicine spending in India is projected to grow 9 12% over the next five years, leading India to become one of the top 10 countries in terms of medicine spending. Speedy introduction of generic drugs into the market has remained in focus and is expected to benefit the Indian pharmaceutical companies.

BENEFICIARIES : VIVIMED LABS LIMITED, GRANULES INDIA, MARKSANS PHARMA, SOLARA ACTIVEPHARMA, DISHMAN CARBOGEN

The civil aviation industry in India has emerged as one of the fastest growing industries in the country. Growth due to COVID came to stand-still and Industry faced debt issue. India has become the third largest domestic aviation market in the world and is expected to overtake UK to become the third largest air passenger market by 2024.

India’s passenger traffic is slowly picking up and currently passenger load factor is increasing. Low cost carrier SpiceJet announced the launch of its seaplane service between Ahmedabad (Sabarmati riverfront) and the Statue of Unity in Kevadia, Gujarat. The flights will be operated by SpiceJet’s fully-owned subsidiary, Spice Shuttle using a 15-seater Twin Otter 300 aircraft, the airline adding that it has secured 18 seaplane routes under UDAN. In an attempt to connect small cities of India with each other, the Government of India launched a Regional Connectivity Scheme, Udan (Ude Desh Ka Aam Nagrik). The scheme reached its fourth stage as the aviation ministry gave nod to 78 fresh routes under UDAN 4.0 to enhance connectivity to remote and regional areas of the country. In this stage, north east states, hilly areas and islands of India have been given priority. The fresh routes will encourage tourism & local travel in these areas and help strengthen their economies.

Freight is one more vertical of this industry, the freight traffic seems to be slow but gathering pace. The government has allowed 100% FDI under the automatic route in scheduled air transport service, regional air transport service and domestic scheduled passenger airline. However, FDI over 49% would require government approval. Government introduced Krishi Udan scheme on both domestic and international routes to help farmers in transporting agricultural products and improve the product value.

Road Ahead

Lot of Scope available in this sector as huge opportunity untapped, considering that air transport is still expensive for majority of the country’s population.

India would be well placed to achieve its vision of becoming the third-largest aviation market, would push growth automatically. The growth rate of more than 10% could be seen over next 2-3 years.

BENEFICIARIES : INDIGO, SPICEJET.