Aventus Partners Business and Human Capital Outlook 2011- 12


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Aventus Partners Business and Human Capital Outlook 2011- 12

  1. 1. Aventus Partners Business, Financial & Human Capital Outlook for 2011-2012Aventus Partners
  2. 2. The Economy - OverviewWe have been chugging along at a robust c. Some rub off effect at the ruralgrowth rate for the last 1 year of close to level on account of the farm loan8%. The bad news hit the stands on the waiver schemeIIP Numbers for November, whichshowed that the growth engine had more d. Trickledown effect of the NREGAor less stalled.Inflation has been a runaway monster this e. Low interest costs on loans foryear. The government and the RBI have automobiles, coupled with easyboth been at their wits end trying to disbursal of loans by banks andcontain the situation. However, you NBFCs.cannot have your cake and eat it too. Ithas come to the point where the RBI and However, the inflation monster will soonthe government both need to take sides. be catching up with the last of the above.Do you or do you not let a hyper inflated Increased interest rates will be the firstreal estate market deflate? spoilers and will affect two wheeler loans first. If the increasing interest rates areWe at Aventus Partners believe the any indication, the rates will be headedwriting is already on the wall. The stance further upwards for low end four wheelers,of the banks and the RBI is clear - the real and these will be into the next leg of theestate business will need to fend for itself slowdown that one may expect to see inin the short to medium term. Reform the the sector.way you do business, or else.......It is astrong and clear message and shows that The slowdown will have the least effect onthe regulators and the policy makers the high end of the automobile sector,mean business this time around. where the price elasticity is the least. These automobiles will continue to growAutomotive sector has shown strong at a steady clip.growth figures, but in the coming monthsin the light of the increase in interest Banking as a sector had a good run forrates, it would be interesting to see how most of last year. They also accounted forthe market heads out from here. The about some of the problems, with their laxgrowth has been robust on many counts, lending processes and the inability toprincipally: grow their disbursal markets for credit. th There is pressing need for banks to find a. The award of the 6 pay creative ways to branch out to new commission( by the Centre, sectors for lending; (especially in the light states the PSUs and the armed of the current stance of RBI in forces) microfinance sector and the situation in b. Decent corporate sector salary the real estate market).The effective rate increases of inflation for a large part of the last year has been close to 10%. This does notAventus Partners Page | 1
  3. 3. portend well for the economy, especiallygiven that we are also suffering frommajor imbalances in the trade account. So what is the situation going to be like inWe have a deficit of nearly 8.5% with the the next financial year?bias on the import side. The government’s It is going to be all gloom?complete lack of clarity on the crude oilpricing and taxation will have a long term The slowdown has already commenced,detrimental effect on the fiscal. We need and the government, though it may beto get the actual budget deficit (including able to manage an 8.5% number for thisthe hole in the oil pool account) under year’s GDP growth is going to have acontrol. Sweeping it off the books is not difficult time forecasting the numbers forgoing to be a long term viable solution. the next year.Aventus Partners Page | 2
  4. 4. Expectations from the Budget, 2011-12This year, we can expect the following: markets; it will be back centre stage. 1. A roll out of the Direct Tax Code. While the code was formed with a 5. Expect social sector spending to strong element of honesty in go up, keeping in view state mind, do not expect the elections in West Bengal and government to adhere to the Tamil Nadu, there will be a slew philosophy of the DTC. They will of schemes announced in these 2 stick to it for a year or two, before states, along with additional they start tweaking it again, allocations to NREGA and the incrementally. It is far too JNNURM schemes. tempting to not let revenue seepage occur. 6. Wealth Tax: expect a surprise on this front to spring up. 2. Some kind of road map on the long pending GST rollout. With Things you can expect the Budget to the central government tweak: monkeying around with the o Reduction on duties on components of the bill and trying agricultural imports to give the finance minister surreptitious control of the o The list of items to make it to the process, we believe that finally GST list will be further pruned, the ability of the central policy makers to work around state o FDI In retail governments has been exhausted. We should expect a o Increase in FDI in Insurance roll out of the GST this year. o Consolidation on Central Sales 3. A partial to complete roll back of Taxes subsidies. If the finance ministry o Call for withdrawal of Octroi is feeling greedy enough, expect a claw back even. The auto industry guys are the ones who will be expecting the subsidies The important thing to remember is that provided to continue, one should this will not be a big bang budget where be surprised if they did. It is time one should expect much on the reform for the government to have its front on capital account convertibility. pound of flesh back. There may also be a change in the STT. 4. A return to the FRBM Act, this Also there may be changes with regard to was put on the back burner, after the collapse of the global financialAventus Partners Page | 3
  5. 5. the tax norms and some clarity emerging speaking on this, the government may goon tax treatment of LLPs. Broadly in for tweaking the holding structure advantage that the LLPs have to make it more tax efficient from the government’s perspective. Sectoral Influences and Outcomes The following sectors will be at an 6. Retail players advantage post budget: 7. Insurance Players 1. Textiles, Garments, textile accessories, textile yarn, fabric, VSF 8. Fertilizers & Pesticides and processing intermediataries. Sectors that will struggle: 2. Automobile manufacturers and 1. Oil & Gas, till such time as there auto ancillaries with an exports is clarity on the oil pool account focus. 2. Banks and Financial Services 3. Capital Equipment export firms; 3. Real Estate Companies 4. Infrastructure financing firms. 4. Consumer Products companies 5. IT/ITES companies Overall Human Capital Outlook for 2011-12 1. We expect the outlook to improve Retail space, especially at the for top talent acquisition in many farm to fork supply chain sectors. With the coming boom in management side, with the the infrastructure space, there will upcoming reforms in the retail be a demand for leadership talent side. There is a distinct talent in the domain of Energy shortage in this arena, and we (Supercritical Thermal Power, expect a lot of talent coming in, Hydel Power, Wind and Solar initially from overseas to Energy). We expect demand in overcome the shortages here. nd these sectors to pick up in the 2 half of the year. 2. We expect an immediate upshot on the hiring numbers for theAventus Partners Page | 4
  6. 6. 3. There will be a continued focus latest IRDA guidelines and on the IT/ITES sector, given its consolidation of products, we foreign exchange potential and believe that the sector will come we expect to see strong numbers in for consolidation in this year. coming in at the leadership levels, The focus for the larger, more which can only be hampered by established players will be on the speed of the US recovery. going public. For the smaller and newer players the focus will be on 4. We expect steel and resources to making operations further cost be muted, though the commodity effective. Therefore, we see market is overheated, on account demand being created in of China’s slow down and the insurance majors for Chief poor recovery of the real estate Financial Officers’ with IPO sector in the USA. There will be experience. For people at replacement hiring in the Steel & General Managerial levels and Resources sectors, but the large above, handling the regulatory numbers will still have to wait to aspects of IPOs along with come in. investment banking opportunities will also grow. There will be a 5. The real estate business will see need for professionals with strong a squeeze on profitability and process knowledge in the cost management and we will see younger insurance companies. a pruning of high cost talent in this arena. 8. Banks and financial services companies will face a tough run 6. We predict a level of strong this year. They will be struggling consolidation in the telecom to get credit moving as there is space. We believe that the sector still a fair amount of uncertainty in is overheated, and there will be the market. Expect talent to be in the fall out of the 2G scandal in demand in corporate banking the telecom domain. So while focussed on the export sectors. growth numbers will continue to Also expect to see a fair amount be robust for the larger players, of executive poaching here. the newer entrants will have to play the game more cost 9. Automobile companies have had effectively, that means sharing a dream run for the past 2 years. infrastructure and services. This We do see an increased interest will give rise to stronger in companies on getting in fresh outsourcing opportunities for talent at the top levels, IT/ITES players to get a specifically for new variants and stronghold in the domestic brands .We believe there will be market. We see a movement of robust growth here and there is people from the telecom potential for a lot of hiring in this companies to the IT/ITES sector. companies servicing the telecom space . Organizations that have stronger processes and systems to manage 7. Insurance as a sector has had human capital will be in a position to robust growth; however, given theAventus Partners Page |5
  7. 7. retain talent more effectively. Performance management is going to beCompensation increases this year are crucial in the coming year, as we see aseen to be moving in at 15% on an great deal of uncertainty in the marketaverage. However, top talent continues to environment going forward. Organizationsbe a scarce commodity, and we expect that are not able to time the momentum ofcompensation increases to be in the the uptick are going to suffer in the shortrange of 20-25% for leadership talent with to medium term. It is therefore crucial forexisting employers and 33% and upwards companies to keep their ear to the groundfor moving from one company to another. and to be able to effectively manage their people’s aspirations and expectations."The shell must break before the bird can fly." -- TennysonAventus Partners Page | 6
  8. 8. Aventus Partners is an HR solutions firm that enables clients Acquire, Develop and Manage talent. Reach us at: sriram@aventus.in tania.gooptu@aventus.in venkat.iyer@aventus.in +919895345133 +919810215872 +919810608607 Offices:Aventus Human Capital Aventus Human Capital Aventus Human CapitalLLP LLP LLP40/48, Ground Floor, Pocket 919, 2nd Stage, Personal Chamber,40 Varthur Main Road, Natham’s House,EPDP Road, CR Park, New Tubrahalli, Chittoor Road, Cochin-Delhi-110019 Bangalore- 560 066 682035Phone +91 11 40561242-45 Phone +91 80 3253 7215, Phone: +91 484 3248780Fax +91 11 40561241 +91 80 2854 3089 www.aventus.in New Delhi | Kochi | Bangalore