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The Narendra Modi-led National Democratic Alliance (NDA) government's impatience with the Reserve Bank of India (RBI) over its failure to effect quicker and deeper lending rate cuts is understandable. At present, the bulk of the global economy is passing through turbulent times, and China, which has served as the world's growth engine, is slowing down, India's performance offers a welcome contrast. With oil prices once again plunging, the NDA government is of the view that the fiscal headroom provided by lower energy import costs and falling inflation offers a window of opportunity to further stimulate growth. Pitching for an interest rate cut to boost growth, Union Finance Minister Arun Jaitley has asserted that common sense says the interest rates should come down. RBI Governor Raghuram Rajan, who has so far resisted pressure from the government as well as the industry on easing monetary policy, is due to announce the next bi-monthly policy on September 29. Experts are of the view that the possibility of achieving a gross domestic product (GDP) growth of 8 per cent this fiscal, a rate cut could just be the icing on the cake for investors, both domestic and foreign. "If oil is selling at half the normal price, commodity prices are low, and we have stocks and stocks of food grain, then inflation is the least of our worries," Jaitley told Britain's The Financial Times. Growth, he said, was running at 7-7.5 per cent, a strong performance given adverse international conditions in which investors have scampered from emerging markets. Still, he said, if India's interest rates were lowered, the economy could grow still faster. With uncertainty getting over with regard to the US Fed rate, the central bank may yield to the pressure of easing rates. Quite a few columnists and media commentators read the Fed's decision to hold rates as clearing the ground for RBI to announce a rate cut. Given the current economic scenario, analysts are not ruling out the possibility of a 25 basis point repo rate cut by the central bank, particularly after a disappointing first quarter GDP data. Rajan has been under pressure to cut the rates further, with the government and industry leaders repeatedly stressing on the need to lower the cost of capital to give a boost to the economy, especially in the wake of retail inflation hitting record low levels and wholesale inflation actually being in the negative zone for 10 months in a row. Earlier this month at a meeting with Prime Minister Narendra Modi, industry captains renewed their call for another rate cut in the backdrop of a slowing economy and falling inflation. Industry association Assocham has said there was room for monetary easing to the tune of 75-125 basis points over the next seven months. The association pointed out that between January and July this year, the Wholesale Price Index (WPI) and Consumer Price Index (CPI) inflation fell 793 and 298 basis points, respectively, over the same period in 2014. Rajan's cautionary admonition, that achieving sustainable and inclusive growth is not possible merely through quick fixes like rate cuts and giveaways, takes a longer and more holistic view of the reforms debate. During the course of the CK Prahlad memorial lecture last week, the RBI boss counselled patience while cautioning policymakers against overemphasising the importance of rate cuts and other forms of stimuli. Citing Brazil's experience, Rajan said, "Brazil tried to grow too fast. The 7.6 per cent growth came on the back of substantial stimulus after the global financial crisis. In an attempt to keep growth high, the central bank was pressed to reduce interest rates, fuelling a credit spree that overburdened customers are now struggling to repay." Brazil, which was hailed as one of the most promising emerging markets not too long ago, has been downgraded to junk rating by international credit assessor Standard and Poor's. Rajan also cited India's own example. "Growth has to be obtained in the right way. It is possible to grow too fast with substantial stimulus, as we did in 2010 and 2011, only to pay the price in higher inflation, higher deficits and lower growth in 2013 and 2014," the governor said.Rajan also advocated the necessity of strong institutional structures, to support high growth. He also put the ball in the government's court, saying reforms (not rates) held the key to India's sustainable growth. Rajan said monetary policy can help strengthen the current economic recovery, but he added India will ultimately "expand sustainable growth potential only by continuing to implement reforms the government and regulators have announced. In a nutshell, the focus should be on improving the business environment as a way to drive growth rather than extending stimulus and rate cuts.
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By Haider Ali KhanMicromax has announced its newest affordable 3G smartphone, the Canvas Spark 2, priced at just Rs. 3,999. The smartphone is yet another attempt to break price barriers for driving smartphone adoption in India especially the tier-2 and tier markets and to empower the average Indian consumer with smartphone and mobile internet access, said the company.Commenting on the launch, Vineet Taneja, CEO, Micromax said, “With the Canvas Spark 2, we are yet again reaffirming our commitment to massify the smartphone and Internet usage in the country.Our association with Snapdeal has been long standing, and we expect sales of Canvas Spark 2 to touch newer heights in the coming weeks, which will further strengthen our leadership position in India” The Canvas Spark 2 is Google certified, runs on Android Lollipop that allows the users to access full suite of Google apps. The 3G powered, dual SIM, Canvas Spark 2 comes with a 1.3 GHz quad core processor with a 4GB of internal storage (expandable up to 32GB) and the latest Android Lollipop 5.1. Spark 2 has 1800 mAh battery which gives you up to 324 hours of backup on standby mode. The smartphone has a 5-inch FWVGA 854x480 IPS display with a 5MP rear camera and a 2MP front camera. It will also feature Firstouch language solution which will basically help users to click pictures, search their contacts and access their music playlist directly from the home screen in the language of their choice from 10 supporting languages. The Canvas Spark 2 will be available in black colour option at Rs 3,999, exclusively on Snapdeal. Buyers have to register on Snapdeal, starting 10am on 23rd September 2015 to get a chance to buy the smartphone from its first flash sale on the 30th of September at 12 noon.
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Online fashion retailer Jabong.com is looking for a buyout. The parent company — Global Fashion Group (GFG) — is in talks with Paytm to sell the online fashion retailer. AB Kinnevik, the largest shareholder of GFG, is spearheading the sale process and is reaching out to other potential suitors for selling Jabong, according to a report in Mint. Kinnevik is also negotiating on behalf of Rocket Internet, which owns more than 21 per cent of GFG. It wants to sell its stake in the money-losing Indian fashion store ahead of GFG's proposed stock market listing, they added. Kinnevik owns more than 25 per cent of GFG. The talks are at a very early stage and the valuation of Jabong is being pegged at anywhere between $500 million and $800 million, the newspaper reported. The company was launched in 2012, and is headquartered in Gurgaon. The report states that Jabong had sales of Rs 811.4 crore and a loss of Rs 454 crore for the 2014 year ended December 31. The company even shut its offices in London and moved to India to cut losses even further. If the stake sale by GFG goes through, this could be one of the largest deals in the Indian online fashion industry after Flipkart's purchase of Myntra in May 2014. According to media reports, Amazon India held talks with Jabong for a potential buyout in November last year. However, the deal fell through at the beginning of 2015 after Jabong asked for a $1.2 billion valuation. Jabong was founded in 2010 by Mohan, Sinha and two other promoters who have since left the company. Its owners German e-commerce group Rocket Internet in September last year merged Jabong with four other online fashion retailers in Latin America, Russia, Middle East, Southeast Asia and Australia to create Global Fashion Group (GFG), an entity that was valued at 3.1 billion in July.
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Calling for measures to make it easier to do business in India, Chairman & CEO of US-based diversified conglomerate GE, Jeff Immelt, on Monday (21 September) said Prime Minister Narendra Modi's reform programmes need to be executed better and faster to attract overseas investors to India. He also said that GE will not invest in atomic energy in India until accident liability laws are brought in line with global rules. "It is never easy but it is always fun (in India). As time goes on, we see great opportunities for a market of this size. We want it to be easier to do business with," Immelt said during an interaction with journalists here. While giving a thumbs up to Modi, whom he met earlier in the day, Immelt said: "We believe that Prime Minister Modi's vision is the right vision and what we expect is just execution -- better execution, more execution, faster execution." Stating that Modi's vision for the country makes it much 'more investible', he said: "I think it allows us to think of the country (for the) long term." Reiterating that overseas investors are observing 'symbols' of real changes happening in India, Immelt said in his 33 years of association with GEand frequent trips to India this was the first time he actually felt things were really happening on the ground. "This is, kind of, may be the fifth time, I personally have been on Indian real modernisation programme. I am an old hand on bidding for projects, this is the first time I actually think it is going to take place. "So I view that is a giant symbol to the outside world to say there is real progress...There are big symbols outside investors are looking for where progress is made," he said. Giving an example of the power sector where he would like to see reforms happening, Immelt said at some point of time there has to be "less subsidisation of local electricity prices" in India. "... Have to go to more market pricing. That's going to allow reinvestment, that's going to allow more production," he said. While acknowledging that it is an 'easy thing for a CEO to say but very hard thing to do politically', he said "those are the kind of things we would like to see." He also pointed out the need to reduce bureaucracy and put aside the practice of "17 stamps on government document" in this digital age. Immelt said "there are only a few things that is keeping the country (India) from being truly great. We are that are that close!" He pointed out "few reforms, ability to get more into the villages; more healthcare, more electricity and more water to the people in the country" that would transform India.GE Not To Invest In N-power In IndiaGeneral Electric Co will not invest in atomic energy in India until accident liability laws are brought in line with global rules, Chairman Jeff Immelt said on Monday, in a setback for top-level efforts to get U.S. firms to build power stations. Speaking shortly after a meeting with Prime Minister Narendra Modi, Immelt said India needed to "homogenize" its liability law with the rest of the world. With the 1984 Bhopal gas tragedy still fresh in India's mind, parliament five years ago passed a law that makes equipment suppliers responsible for an accident, a deviation from international norms that companies found hard to swallow. In January, Modi and U.S. President Barack Obama unveiled a plan centered on insurance aimed at breaking the stalemate, but India stopped short of softening the liability law. At the time, GE-Hitachi Nuclear Energy said it would review the governmental agreement in due course. It appears to have fallen short of the company's requirements. "I am not going to put my company at risk for anything -- there is no project that is worth it. We have to get common language on this," Immelt told reporters. "There is an extremely standard liability regime that the rest of the world has adopted and as we go forward and think about investing, whatever happens has to homogenized between India and the rest of the world," he said.
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Narendra Modi has faced criticism rare for an Indian Prime Minister from the Congress-led Opposition for his frequent foreign trips. If critics of Modi are to be believed, the Indian economy is in a bad shape and Modi's much-vaunted efforts to increase investment and create jobs are not working. His frequent foreign journeys are more in the style of paid, luxurious junkets that only generates media publicity and online hype without any concrete progress on the ground. The reality, however, is far different and the numbers tell a different story. Ever since Modi started his foreign trips, India has become a hot destination for Foreign Direct Investments (FDI). India has received $19.78 billion FDI from 12 countries visited by Modi in financial year 2014-15. During the period, Indian companies invested $3.42 billion in these countries which include Bhutan, Brazil, Nepal, Japan, the US, Myanmar, Australia, Fiji, Seychelles, Mauritius, Sri Lanka and Singapore. In 2014-15, FDI in India increased by 27 per cent to $30.93 billion. After the Make in India programme was launched in September last year, it's raining FDI. Data from Department of Industrial Policy and Planning shows the inflows have jumped 48 per cent between October 2014 and April 2015 over the year-earlier period. Modi's visits have managed to attract FDI at a time when domestic investment and demand remains weak and quotes foreign diplomats and officials as saying that there are no problems about Modi government's efforts at attracting foreign investment, according to an article in The Economic Times. He coined the phrase "start-up India" in a pitch for more people to get entrepreneurial opportunities and called for states to provide electricity for all within 1,000 days. In the last three months alone, global manufacturing giants such as Siemens, Foxconn, Softbank have announced large multi-billion dollar investments in the country. Other global giants are waiting in the wings. In the next one year, major infrastructure projects like highways, metro rail networks, roads, railways and massive investment parks are likely to see large investment from Chinese and Japanese companies and banks. According to media reports, Japan, China and South Korea have together pledged investments worth $50 billion while United Arab Emirates (UAE) has promised to partner India in putting together a $75 billion infrastructure investment fund. “Modi's visits were necessitated by the economic and strategic agenda he set out for India to press its suit as a major player, to impress the economic factor into diplomacy, and to connect strongly with the Indian diaspora,” writes Krishnan Srinivasan in The Telegraph. Modi’s reform agenda suffered major setback when lawmakers ended the monsoon session of Parliament acrimoniously and without approving the Goods and Services Tax (GST) bill aimed at faster economic growth. Political opposition had already forced Modi to backtrack on a pro-business land bill. However, a latest survey conducted by American think-tank Pew Research Center has shown rise in Modi's favourability rating in India from 78 per cent in 2013 to 87 per cent in 2015. Over half of the respondents — 56 per cent — said they were satisfied with the direction in which the country was going, and 74 per cent said the economy was currently in good shape, it said.
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Sun Pharmaceutical Industries Ltd, India's top drugmaker by sales, said on Saturday (19 September) it had agreed to sell two divisions marketing central nervous system drugs to Strides Arcolab Ltd for Rs 165 crore ($25 million). Sun Pharma, which last year bought domestic peer Ranbaxy Laboratories Ltd, in July said it may sell low-margin businesses it deemed do not hold long-term value. Under the latest deal, Strides Arcolab will take over Ranbaxy's Solus and Solus Care divisions, Sun Pharma said in a statement. As per IMS July 2015 MAT report, all the products of these two divisions together accounted for approximately Rs 92 crore in sales. “The agreement with Strides is part of our strategy to firmly consolidate our CNS business in India. We firmly believe that the potential of Solus and Solus Care divisions can be greatly enhanced with the focus that Strides will put in growing them. The divestment will help these divisions, its customers and the team,” said Abhay Gandhi, chief executive officer — India Business, Sun Pharma. “The acquisition of Solus and Solus Care divisions is of strategic significance to the growth of our branded business in India. The rich product portfolio and capable teams of these two divisions will help us establish a strong footing in the fast growing CNS market of India,” said Subroto Banerjee, president – Brands, India of Strides Arcolab. In May, Strides Arcolab had acquired Australian generics business of Aspen Pharmacare Holdings Ltd for Australian $380 million. Strides Arcolab had also acquired 74% stake in the domestic business of Bafna Pharmaceuticals Ltd for Rs48 crore in July last year. The deal includes Bafna’s flagship haemoglobin tablet Raricap, which fetched Rs20 crore sales in fiscal year 2014. Bafna’s domestic business was valued at Rs65 crore for the deal. In September 2014, Strides had agreed to buy rival Shasun Pharmaceuticals Ltd in an all-stock transaction valued at about Rs 1,200 crore. Sun Pharma had completed the $3.2 billion acquisition of Ranbaxy Laboratories in March to create the world’s fifth-biggest generic pharmaceutical company by revenue. The closure of the deal, announced on 6 April last year, created an entity with almost Rs30,000 crore in combined annual revenue and Rs2.5 trillion in market value.
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Sapphire Foods India Private Limited has acquired Dodsal Hospitality Private Limited from the Dubai-based Dodsal Group. Dodsal Hospitality has the exclusive rights to operate Pizza Hut in South and West India, and it operates 81 Pizza Hut outlets across 8 states. This transaction has resulted in Sapphire Foods India Private Limited becoming one of the largest owners of the Pizza Hut franchise in India. The deal was closed on September 15, 2015. The transaction involved the acquisition of Dodsal Hospitality Private Limited by Sapphire Foods India Private Limited from Dodsal Lifestyle Mauritius Limited, Dodsal Lifestyle Limited, BVI, Dodsal NKI Mauritius Limited, Rajen Kilachand, Samir Rajen Kilachand, Nikhil Rajen Kilachand, Nayantara Rajen Kilachand and Nina Rajen Kilachand. Shardul Amarchand Mangaldas & Co (SAM & Co) advised the Dodsal Group in the sale of its property. SAM & Co team was led by Managing Partner Pallavi Shroff. The Sapphire group was represented by the law firm Luthra & Luthra.
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Weak economic revival and global trade continue to impact the traffic at 12 major ports in the country, according to a study by BofA Merrill Lynch Global Research. The weaker-than-expected domestic revival has impacted non-oil-non-gold imports while weak global growth continues to hit exports growth, says the study. The port sector witnessed a tepid 3.9 per cent year-on-year (y-o-y) growth in the first half of the calendar year 2015. After registering a robust 11 per cent y-o-y growth during 9MFY15, container traffic has slowed down to just 3 per cent y-o-y in in the first half of the calendar year 2015 due to weak EXIM trade. The BofA Merrill Lynch Global Research has recently cut its growth estimates for non-oil-non-gold imports as well as for exports. Despite India's muted power demand growth at 0.5 per cent in in the first half of the calendar year 2015 against robust 8.5 per cent domestic coal production growth, the study says that the growth in coal traffic has remained strong at 20 per cent mainly driven by a robust 24 per cent y-o-y growth in thermal coal. Coal imports growth would turn flat in FY17 before starting to decline from FY18 as Coal India to ramp-up its production at 11 per cent CAGR in FY15-19 (versus just 4 per cent in the last decade). Port traffic growth has a strong correlation with GDP. However, despite an improving economy, based on bottom-up cargo-wise analysis, the study says port traffic to register a CAGR of only 4.5 per cent in FY15-19 against 4.7 per cent recorded during FY10-15. Weak port traffic growth for the sector would also impact private sector operators. The study has cut port traffic growth estimate for Adani Ports to 14 per cent Compound Annual Growth Rate (CAGR) in FY15-19 (against 18 per cent earlier) and for Gujarat Pipavav to 9 per cent CAGR in FY15-19. However, these ports would continue to gain market share from the inefficient and congested major ports operated by the government and given their strategic location on India's west coast.
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India can be far more successful and far more influential than it is today, according to Raghuram Rajan, Governor, Reserve Bank of India (RBI). Rajan said this while delivering his key note address at the fourth C K Prahalad Memorial Lecture organised by Ananta Aspen Centre and the Confederation of Indian Industry (CII) in Mumbai. Rajan further mentioned that in the difficult times, environment for growth has to be achieved in the right way by working hard towards recovery and aiming at sustainable growth. While the monetary policy will be accommodative there is room to expand sustainable growth potential. By continuing with reforms that the government and regulators have announced a sustainable growth potential can be achieved. Speaking about RBI’s key task to support growth he mentioned that it would focus on keeping the interest rates low in the near term as well as future to have a moderate interest rate regime to help borrowers as well as the savers. It will also focus on cleaning up the banking sector of the distressed assets, so that it can fund the growth agenda. He also suggested that India must resist special interest rates for targeted stimulus, long tax breaks, subventions, subsidies, directed credit, all of which historically rendered industry un-competitiveness with government over extended and country incapable of gaining its rightful position among nations. Pressure on the RBI increased this week, after inflation dived to a new low in August, thanks to falling commodity prices. Adding to that, the United States kept rates steady on Thursday. RBI governor Raghuram Rajan, however, said any move in India would have to consider long-term inflation implications. He said limping global growth coupled with uncertainty about the US economic growth probably compelled Federal Reserve to stay on hold. Rajan welcomed a government move to bring in a bankruptcy code to tackle rising bad loans, saying banks have to clean their books. Rajan said it is not clear India needs a so-called "bad bank" to deal with non-performing loans, adding it would be preferrable to push banks to clean up balance sheets themselves. Mentioning about what RBI is trying to do and what more it needs to do in improving the environment of the financial sector Dr Rajan, elaborated on four aspects like, need to foster competition and innovation; creating hospitable environment to those who don’t belong to the club; dealing with distress for improving structures and strengthening human capital in the financial sector. Rahul Bajaj, Chairman, Bajaj Auto Ltd, while delivering his welcome remarks mentioned that financial sector reforms should be a continuous process so that they are aligned and are future ready. He further elaborated that the role of reforms pertaining to financial sector should be to align rules and requirements among the multiple regulators so as to simplify; enable innovation and productivity in business for the benefit of customers and shareholders; stabilize the regulatory environment, create consistent and visible guidelines, and reduce risk amongst market participants and in the overall system in general and upgrade skills within the regulators through a healthy interaction and cross-pollination with private sector.
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Just at a time when exits were beginning to pick up in the country, paving the way for private equity investors to cash out profitably from their portfolio companies, there comes a dampener - depreciating rupee against the dollar. Private equity investors are increasingly finding it difficult to get an exit route for the investments made due to the depreciating rupee against the dollar and therefore opting for initial public offerings rather than strategic sale. “There is some stress for private equity in generating returns due to rapidly depreciating rupee along with competition leading to higher valuations,” said Bijou Kurien, Member, Strategic Advisory Board and Mentor, L Capital Asia (LVMH Group) in India Retail Forum 2015. Returns for private equity has dropped from 40-50 per cent in 2005-08 to 10 per cent in the last two years and holding period has rose to 6 years from 3 years earlier, Kurien added. So far, 2015 proved to be a bumper year for private equity and venture capital exits. This is even as the overall exit scenario all these years have remained grim. As per research firm Venture Intelligence, private equity and venture capital firms in the country realised over $6 billion (Rs 38,000 crore) via share sales in the January – July period this year. This seven month figure is 33% higher than the $4.5 billion realized by investors in the previous best full calendar year of 2010. A single PE investment cycle usually lasts 5-7 years after which PE firms normally exit by way of trade sale, public listing, recapitalisation and secondary sale. Trade sale is the most common exit for private equity investments as trade buyers in the same industry are often more likely to realise synergies with the business and are therefore, the most natural buyers of the business. Typically, public listing takes place during positive market conditions as prevailing at present. Commenting on the valuation matrix, industry experts at the panel discussion said digitisation of retail business has helped in bringing the price sensitive middle class Indians closer to consumption and in turn aided the entrepreneur scale up his business much faster than the brick and mortar economy that has helped the valuations soar. “Without compromising on the quality, the e-commerce evolution has helped in sustaining a scalable business not necessarily on financial matrix of being profitable, but in terms of creating value,” said Bharat Banka, Founder and Ex-CEO, Aditya Birla Private Equity. However, experts also said that for any business to sustain, it is absolutely imperative to create value and profit. In today’s day and age, fund managers are increasingly investing in changing consumer behaviour and attitude. Hence, the normal valuation matrix is not being applied by fund managers while valuing the digital business rather than the brick and mortar conventional business, referring to the current valuation attracted by startups like Snapdeal and Flipkarts.
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