MAGNUM Blog

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.

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.