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Investeurs chronicles  9
 

Investeurs chronicles 9

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May be after few generations, happenings of this decade will pale out, but for now, a host of momentous occurrences of last ten years make it one of the more consequential passages of time. Momentous, ...

May be after few generations, happenings of this decade will pale out, but for now, a host of momentous occurrences of last ten years make it one of the more consequential passages of time. Momentous, it is, for the world, but for our country, India, it is perhaps more than that. A transformational decade for India & the Indians! In our present volume of Investeurs Chronicles we take you through how India has emerged in the decade gone by.

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    Investeurs chronicles  9 Investeurs chronicles 9 Presentation Transcript

    • December 2010, Volume: 9 Sensex 20389.07 Nifty 6101.85 Dollar 44.95 Gold 20660 Silver 45900 Crude Oil $) 93.38 Investeurs Chronicles INSIDE • The Game Changer decade 2001-2010 Investeurs Consulting P. Limited S-16, U.G.F, Green Park Ext. New Delhi-110016, www.investeurs.com
    • Time flies, but in human quest of capturing the impossible, we pursue capturing and bracketing this time. One such bracket is decade. It is a commonpractice to get into a retrospective mode at end of such signposts to assess whether what has gone by was significant, & contributing to the arc ofhistory. By that measure the passing decade appears to be in possession of some of the defining and path breaking events of our times. Starting of thedecade had a different terrain: biggest concern was Y2K, America was still the undisputable super power, Euro zone was unheard of, the World TradeCentre stood tall, & social networking didn’t figure in anyone’s mind. About 3650 days hence, look around, and you will feel as if living in a differentworld!Millennium bug or Y2K problem threatened to put world in to turmoil at start of the decade, but, financial markets turned out to be the bigger threat!Having survived different crisis in 90’s & 9/11 shock, global markets were high at confidence. Common notion was that developed nations will go onbeing richer, & developing ones would continue developing. But in this merry making, an important issue of worldwide low interest rates wasoverlooked, which created bubbles in housing markets. As a result associated financial assets also expanded unsustainably. This coupled with Centralbank’s inflation only targeted approach, resulted in a credit crunch in 2007 and evolving in to a full-blown financial crisis in 2008. What followed werefall of financial giants, & a hurricane of quantitative easing to arrest that fall.World was recovering from aftermath of this crisis, when, Euro zone countries, member of world’s largest trade block, ran into a fresh crisis ofpotentially disruptive sovereign debt levels. Some of the most affluent of the European Countries, PIGS, Portugal, Ireland, Greece & Spain have eitheravailed bailout packages or are trying hard to avert that. Nevertheless, the entire region, apart from Germany, still seems to be on a financialpacemaker.
    • All in all, a high magnitude disaster has been averted, to a good extent, but countries who managed to survive financial turmoil of 2008 without muchalmost all major economies are on crutches, limping back to widening fiscal impact. While most of the rich nations are still fighting with the stubborndeficits, ageing population, & trade imbalances. recession, India has got its momentum back, clocking GDP growth of around 8%.May be after few generations, happenings of this decade will pale out, butfor now, a host of momentous occurrences of last ten years make it one of Living standards of Indians has improved in last decadethe more consequential passages of time. Momentous, it is, for the world, • Over 70m households (34% of total) earn Rs. 80,000 to Rs.but for our country, India, it is perhaps more than that. A transformational 18,00,000 per annumdecade for India & the Indians! • Six hundred thousand households earn more than Rs. 18, 00,000 per annum.On the surface our economy has stepped on gas, markets are booming, our • Market researchers believe that household income is massivelystature as a race & as a country has risen, but, scratch this surface a little, understated – baggage of the era of controls and usurious taxesand you may end up discovering that these economic, political & • Independent studies suggest 1.6 million households earn over RsInternational milestones are merely manifestations of the transformation in 40 lakh per annum and about 100,000 people have more than Rs. 4the psyche of Indians. Now, we are a nation of higher optimism, higher crore in assets.confidence, & greater enterprise! • Real Incomes increased by 12%; However, real GDP per capita hasThe Galloping Elephant grown at 10% over FY02-07.So much so about yesteryears economy horses. But this decade, if it • 50% of the people have seen incomes rise in the past 12 months; 9%belongs to any one, goes to the dragon & the elephant. Much has been have seen their Incomes decline.written about dragon powerhouse (China).So; let’s concentrate on ourindigenous elephant economy, India.For long, India has been considered as a sluggish economy weighed down No doubt that Indian outsourcing to big global corporations enabled theby its own components, leave alone the global ones. This decade has broken country to leap to 9% growth from decades of growing at 4%. It put Indianthat jinx, & shown that elephants can gallop! India became a part of the executives & professionals at par with their global counterparts. But,elite 12 countries trillion dollar economy club in 2007. Its economy stands Outsourcing to India, now, is no longer only a cost cutting measure. Inat 1.367trillion US$ in 2009. Indian economy is the twelfth largest in the fact, it is a quality conscious, value addition system to the parentworld, & in terms of purchasing power parity (PPP), India stands at number company. Moreover, India’s abundant No doubt that Indian outsourcing tofour. big global corporations enabled the country to leap to 9% growth from decades of growing at 4%. It put Indian executives & professionals at parWhile rich nations were growing at an average of 5% in initial three quarter with their global counterparts. But, Outsourcing to India, now, is no longerof the decade, India pitched a dazzling growth performance in the same only a cost cutting measure. In fact, it is a quality conscious, valuetime period. Highpoint of the growth story came in 2005-06 when GDP addition system to the parent company. Moreover, India’s abundantgrowth for the country stood at 9.5%. India is also one of those few time
    • Human capital is moving up the value chain in promising new areas of biotech Decade of dazzling deals:and pharmaceuticals, computer software and electronics, and the auto and  Tata Steel acquired 100% stake in Corus Group on January 30, 2007 inaerospace industries. an all cash deal of $12.2 billion.  India Aluminum and copper giant Hindalco Industries purchasedForeign exchange reserves, which forced India to open up in 1990, have been Canada-based firm Novelis Inc in February 2007. The total worth ofincreasing to unprecedented levels. They were equivalent to a meager three week the deal was $6-billion.import cover in 1990, but in this decade they had touched a peak of 16.9 months  Vodafone purchased administering interest of 67% owned by Hutch-in 2004, & currently are at about 12 months. In value terms, forex reserves are at Essar for a total worth of $11.1 billion on February 11, 2007.284.18bn US$ currently, & India has the sixth largest forex reserves in its kitty.  The acquisition of Japanese pharmaceutical company Daiichi Sankyo by Indian major Ranbaxy for $4.5 billion in 2008.Growth Curve  Tata Motors acquired Jaguar and Land Rover brands from Ford Motor in March 2008. The deal amounted to $2.3 billion. 1990-91 2005-06 2008-09 2009-10  In November 2008 NTT DoCoMo, the Japan based telecom firmGDP Growth (%) 5.0 9.5 6.7 7.4 acquired 26% stake in Tata Teleservices for USD 2.7 billion.Exports (US$ bn) 18.1 103.1 185.3 176.5  The Oil and Natural Gas Corp purchased Imperial Energy Plc in January 2009. The deal amounted to $2.8 billion.Imports (US$ bn) 24.1 149.2 303.7 78.7  Bharti Airtel bought operations in 15 countries from Kuwaits ZainForex (US$ bn) 2.2 145.1 241.4 279.10 telecom in a 10.7 billion dollar deal.Output of Food grains ( mn tones) 176.4 217.3 233.9 216.85  The Piramal Healthcare sells its domestic formulations business to USCrude Oil (mn tones) 33.0 32.2 33.5 36.71 drug maker Abbott for a whopping Rs 17,000 crore in May 2010.  Sun Pharmaceutical Industries (Sun) completed the acquisition of aFinished Steel (mn tones) 13.5 46.5 57.2 65.46 controlling stake in Israel based, Taro Pharmaceutical Industries (Taro) in September 2010.With such shine & sound in the economy, confidence in the Indian market is  Reckitt Benckiser to buy Paras Pharmaceuticals for Rs 3,260 crore. (December 2010)unmatched. Sensex attained its highest intraday level at 21,078 on 8.01.2008.It is  Tata Chemicals to buy British Salt for 93 mn pounds. (December 2010)still hovering around level of 20,000, at times breaching it in last few weeks.  Welspun Corp bought 35 per cent of Australian Leighton Holdings forThe last year of the decade, 2010 has another feather to its cap. It has witnessed around USD 104 million (December 2010)maximum IPOs for the Indian stock market, 70 public issues, which comprises of  iGate Corporation to buy 60% stake in Patni Computer Systems (December 2010)62 IPOs and 8 FPOs. They resulted in companies raising a record Rs 71,100crore. Indian companies raised more money in share sales in the domestic marketin 2010 than they had ever done in the past. This reflects the confidence of global& domestic investors in India when uncertainty in rest of the world is at historichigh.
    • The decade has been phenomenal for Indian Corporate in particular. No say, Japan, China, South Korea, Taiwan, Singapore, and that of India islonger are they a faint & distant image of their rich, foreign counterparts. democracy. It has been a custom around the world for freedom to followInstead, they have transformed into a lot of soaring confidence, & towering growth. But, in India, it is different. We started growing after having laborvision companies. Nothing better than a string of merger & acquisitions, of rights, free trade unions, free press, & universal adult franchise, all fruits ofwhich Indian companies have been recently a part of, highlights change of democracy, in place.sentiment. Our political system has functioned as a mechanism for redistribution,Be it 12 billion US$ Tata Corus deal which made it fifth largest deal in the giving various groups a piece of the pie and even allowing intermediatesteel industry globally, & spear headed Tata in to second most castes to come to power. Many say that fast GDP growth has benefited onlygeographically diversified steel producer in the world, or, Hindalco buying a few rich businessmen. However, the latest data and research show thatNovelis in 6 billion US$ deal, Indian Corporate have made their global record GDP growth has benefited the masses and the poorest states. Povertyambitions clear. This trend is not merely restricted to the metal sector. In has fallen sharply and the poorest states have increased growth amazingly.automobile space, there were deals like Tata Motors clinching Jaguar Land That’s one reason so many incumbent governments in poor states haveRover and Mahindra and Mahindra’s purchase of Ssangyong. been re-elected.Indian pharma industry has been another dazzling sector of Indian For decades, anti-incumbency dominated elections, and three-quarters ofindustries of late. Whether it was Ranbaxys sale to Daiichii, Ajay Piramals incumbent governments lost. But the trend has reversed in the last fewdomestic formulations business to Abbott or Paras Pharmas sale to Reckitt years: suddenly three-quarters of incumbents are winning. So will it beBenckiser, deals have been a plenty, & each one of them outstanding in its wrong to say that in the decade gone by Economic and Social empowermentmagnitude and efficacy. has taken over Caste and Religion-based identity politics? Today, after a period of rapid growth, politics is set to enter another phase, which is likelyEach one of them louder & more emphatic in announcing the arrival of to be defined by battles for a more equitable distribution of wealth andIndian business to the global arena. resources.Mergers & Acquisitions create a whole new world order, and it is projected The clearest evidence that the political paradigm is changing can beto gain momentum in the coming years as well. At the same time, Indian observed by looking at the economic growth which skyrocketed betweencorporate with their new found exuberance seem to be all set for creating a 2000-04 and 2004-09:niche for themselves in this new world order.Changing face of Indian PoliticsWhen we talk of India’s growth story, it seems imperative to compare it withother high performing Asian economies of the past & the present. Apartfrom the explicit differences between economies of other Asian economies,
    • Avg. % GSDP growth A decade which started with technological concerns, ended on financial, &State 2000-2004 2004-2009 spent intermittent period, partly in political misendeavors, & partly inBihar 4.5 12.4 financial. One third of the world is on booster dose of quantitative easing,Chhatisgarh 6.1 9.7 or if simply put, printing money, another one third is on massive fiscalJharkhand 1.9 8.5 cuts, & remaining one third is busy combating effects of combined action of the two third of the world. However, there is an unwavering optimismMadhya Pradesh 1.9 6.6 of getting back to normal, albeit a new normal (another contribution ofOrissa 4.8 19.2 this decade.Uttar Pradesh 3.3 6.7 What & how this new normal turns out to be in the coming decade isGujarat 12.0% 15.9 anybody’s guess! Technology’s tectonic shiftThough many other factors (alliances, caste, regional pride, inflation) The industry which spearheaded India’s growth story is IT-ITES. And itremain highly relevant but fast growth matters as never before. When slow is still going strong as obvious by the way in which IT-ITeS exportsgrowing states accelerate to 6% or more, incumbents start winning. Why have been able to pick up even though recovery in the developed worldhave fast growth and mass improvement gone together? Not because remains weak. It vindicates the fact that India is no longer America’ssome crumbs from fast growth were thrown to the poor. Rather, only back office. In fact, there is a competitive edge which Indian ITwhen the vast majority of people improved their income did this add up companies provide to the businesses along with moving up in theto record growth and poverty reduction. value chain.With the economy projected to continue growing at between 7-9% annually Confidence in the domestic companies to be self sufficient inover the next decade, there is every reason to believe that development technology is another highlight. Bajaj ventured out on its own, as alsoand governance issues will increasingly dominate public discourse with Hero recently. Tata acquired Land rover-Jaguar to provide fillip to itsdifferent social groups demanding their share of the GDP pie. technology. All these instances show that India is now focusing on itsOde to the past, & prose for the new own technology development rather than relying on others.With unique growth model & new found trends, Indian Elephant is surely The other domestic technology revolution albeit with a hint of socialup, & dashing. What it now needs to overcome are road blocks inherent in welfare is the UID scheme. If successful, it would be a pioneer in lowthe system; some & not all because some of the apparent road blocks are cost , technology oriented solution to inclusive growth in country.in fact speed checks to ensure safety, and quality of the journey.