The Dollar Business Magazine April 2017 Issue
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As we stand today, the present government’s ambitious target to touch $900 billion in exports by 2020 has been written off as just that... ambitious! And there are a number of reasons for that; global trade slowdown being the most important. However, these obstacles have not been able to hold back some of India's star exporters, who have gone from strength to strength overcoming multiple challenges that threatened their growth on foreign soil, including policy-related structural flaws. The Dollar Business spoke to a select dozen to understand how their companies have defied the odds to table attractive export numbers in recent years.
![APRIL 2017 II THE DOLLAR BUSINESS 3
LETTER FROM THE EDITOR–IN–CHIEF
S
ometimes, a shocking incomprehension is a better teacher for change than a
whiteboard marker-waving genius. And often, changes come about by question-
ing conventions, even those that have become traditions of thoughts. In an era of
globalisation, one such tradition thrives – the ‘multinational company’ model.
[You don’t need a referendum to conclude on that.] This dogmatism has come to char-
acterise both market economics and society. It is understood to be the governing school
of thought that ensures capitalistic success on both fronts – corporate and individual!
In vogue, this dogmatic certainty has developed traits that makes it irrefutable as say,
religion. How do you prove the existence of God? You don’t. You believe. Similarly, those
who harp about how MNCs are doing justice to Friedman’s flat world, will go far as to
throw Rene Descartes’ process of painstaking reasonings (to achieve absolute certainty)
out of the window if the philosophy of MNCs having become a ‘soggy’ idea is put forth.
But, as I said earlier, sometimes, a shocking incomprehension is a better teacher…
There is obviously little logic or science that can convince a dogma-drunk human,
who spends hours buried up to his neck in sand to cure his rheumatism, that the beach
isn’t really a hospital or the onlookers nurses. That’s not the effort here. My objective is
not to challenge the therapy or slice out the inseparable. The idea is to present a better
alternative – or talking about that man on the beach, suggest a reputed orthopaedic (over
spending days in a process that was proven to be effective by Egyptians some centuries
back). And in this case, not proving a concept of globalisation like MNCs to be flawed,
but to present a better alternative to step onto foreign shores. Exports.
Talk about international trade, and acronyms like FDI and MNC come to mind; what
after years of these concepts being drilled into our heads. But cracks have started appear-
ing on the fortress walls of these popular corporations built on the ideologies of FDIs and
MNCs. These mighty citadels of modern capitalism are now feeling vulnerable, and there
are signs of distrust in the very ‘equity and investment-based’ model they have relied on
for decades. In the past decade, cross-border investments by MNCs have stagnated ($2.1
trillion in CY2006 and CY2015). Actually, in ten years leading to CY2016, their invest-
ments in foreign assets have fallen by 40%.
There is another problem. Over the years, profits of MNCs have been on a downslide.
As per a McKinsey Global Institute report, for the big MNCs, “profits are not only
shrinking but also becoming more uncertain. Since 2000, the return on invested capital
has been about 60% more volatile than it was from 1965 to 1980.” McKinsey has estimat-
ed that corporate profits of the MNCs could shrink from the current 9.8% of global GDP
and 5.6% of revenue to 7.9% and 4.7%, respectively by 2025. [That’s an oops moment for
blind followers of ‘MNC priests’.]
Are we paranoid? Perhaps just practical. A few reasons. Powerful digital platforms
brought alive by the “Internet of things” have been feeding a growing monster (monster
for traditional brick-and-mortar firms, a friendly giant for consumers globally) called
‘e-commerce’. Profits are gradually shifting from heavy industry to idea-intensive sectors
that revolve around R&D, IPR, services, software and algorithms (and which can be
delivered without setting up local facilities). Costs have possibly bottomed out for MNCs
– which makes their accountants pinch themselves at the harsh reality called lowered
ROCE. Availability of low-cost labour is fast becoming a thing of the past (even in China,
Vietnam, Bangladesh and India). Interest rates have fallen to historically low levels across
www.thedollarbusiness/blogs/steven
The disproportionately
high levels of assets in
relation to earnings
(foreign assets,
considered volatile by
shareholders) is the big
problem with MNCs,
much unlike the case with
'only exporting' firms
FEEDING DOGMATISM
TO THE DOGS
Steven Philip Warner
President (VMPL) & Editor-in-Chief,
The Dollar Business
steven@thedollarbusiness.com
@SPWarner www.tumblr.com/blog/steven-p-warner](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
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The Dollar Business Magazine April 2017 Issue
- 1. www.thedollarbusiness.com Vol.4 Issue 04 April 2017 100 $2 EXCLUSIVE INSIDE SURESH PRABHU Minister of Railways, Govt. of India EDGAR VASQUEZ Vice Minister of Foreign Trade, Peru DR. BIBEK DEBROY Member, NITI Aayog Y. K. KOO MD & CEO, Hyundai Motor India Ltd. RAJESH MEHTA Chairman, Rajesh Exports RAKESH SHARMA President − Intl. Business, Bajaj Auto ...AND MANY MORE! IN THE BACKDROP OF INDIA’S FLOUNDERING EXPORTS, THE DOLLAR BUSINESS SPEAKS TO LEADERS ACROSS A DOZEN HANDPICKED INDIAN COMPANIES, THOSE WHOSE SPECTACULAR PERFORMANCES OVER THE YEARS HAVE DEFIED ALL ODDS, MAKING THEM KEY EARNERS OF PRECIOUS FOREX FOR THE NATION. BAJAJ AUTO LTD. I RAJESH EXPORTS LTD. I CYIENT LTD. I DABUR INDIA LTD. I INDO COUNT INDUSTRIES LTD. I INTEX TECHNOLOGIES (INDIA) LTD. I WNS GLOBAL SERVICES KIRAN GEMS PVT. LTD. I SU-KAM POWER SYSTEMS LTD. I SONALIKA INTERNATIONAL TRACTORS LTD. I ASHOK LEYLAND LTD. I HYUNDAI MOTOR INDIA LTD. DGFT’S RESTRUCTURING – IS IT A NECESSITY? AS THE GOVERNMENT REVIEWS A PROPOSAL TO REVAMP DGFT, THE DOLLAR BUSINESS ANALYSES HOW IT CAN BE TRANSFORMED TO TAKE ON THE CHALLENGES OF THE NEW WORLD ORDER IN FOREIGN TRADE.
- 2. APRIL 2017 II THE DOLLAR BUSINESS 3 LETTER FROM THE EDITOR–IN–CHIEF S ometimes, a shocking incomprehension is a better teacher for change than a whiteboard marker-waving genius. And often, changes come about by question- ing conventions, even those that have become traditions of thoughts. In an era of globalisation, one such tradition thrives – the ‘multinational company’ model. [You don’t need a referendum to conclude on that.] This dogmatism has come to char- acterise both market economics and society. It is understood to be the governing school of thought that ensures capitalistic success on both fronts – corporate and individual! In vogue, this dogmatic certainty has developed traits that makes it irrefutable as say, religion. How do you prove the existence of God? You don’t. You believe. Similarly, those who harp about how MNCs are doing justice to Friedman’s flat world, will go far as to throw Rene Descartes’ process of painstaking reasonings (to achieve absolute certainty) out of the window if the philosophy of MNCs having become a ‘soggy’ idea is put forth. But, as I said earlier, sometimes, a shocking incomprehension is a better teacher… There is obviously little logic or science that can convince a dogma-drunk human, who spends hours buried up to his neck in sand to cure his rheumatism, that the beach isn’t really a hospital or the onlookers nurses. That’s not the effort here. My objective is not to challenge the therapy or slice out the inseparable. The idea is to present a better alternative – or talking about that man on the beach, suggest a reputed orthopaedic (over spending days in a process that was proven to be effective by Egyptians some centuries back). And in this case, not proving a concept of globalisation like MNCs to be flawed, but to present a better alternative to step onto foreign shores. Exports. Talk about international trade, and acronyms like FDI and MNC come to mind; what after years of these concepts being drilled into our heads. But cracks have started appear- ing on the fortress walls of these popular corporations built on the ideologies of FDIs and MNCs. These mighty citadels of modern capitalism are now feeling vulnerable, and there are signs of distrust in the very ‘equity and investment-based’ model they have relied on for decades. In the past decade, cross-border investments by MNCs have stagnated ($2.1 trillion in CY2006 and CY2015). Actually, in ten years leading to CY2016, their invest- ments in foreign assets have fallen by 40%. There is another problem. Over the years, profits of MNCs have been on a downslide. As per a McKinsey Global Institute report, for the big MNCs, “profits are not only shrinking but also becoming more uncertain. Since 2000, the return on invested capital has been about 60% more volatile than it was from 1965 to 1980.” McKinsey has estimat- ed that corporate profits of the MNCs could shrink from the current 9.8% of global GDP and 5.6% of revenue to 7.9% and 4.7%, respectively by 2025. [That’s an oops moment for blind followers of ‘MNC priests’.] Are we paranoid? Perhaps just practical. A few reasons. Powerful digital platforms brought alive by the “Internet of things” have been feeding a growing monster (monster for traditional brick-and-mortar firms, a friendly giant for consumers globally) called ‘e-commerce’. Profits are gradually shifting from heavy industry to idea-intensive sectors that revolve around R&D, IPR, services, software and algorithms (and which can be delivered without setting up local facilities). Costs have possibly bottomed out for MNCs – which makes their accountants pinch themselves at the harsh reality called lowered ROCE. Availability of low-cost labour is fast becoming a thing of the past (even in China, Vietnam, Bangladesh and India). Interest rates have fallen to historically low levels across www.thedollarbusiness/blogs/steven The disproportionately high levels of assets in relation to earnings (foreign assets, considered volatile by shareholders) is the big problem with MNCs, much unlike the case with 'only exporting' firms FEEDING DOGMATISM TO THE DOGS Steven Philip Warner President (VMPL) & Editor-in-Chief, The Dollar Business steven@thedollarbusiness.com @SPWarner www.tumblr.com/blog/steven-p-warner
- 3. 4 THE DOLLAR BUSINESS II APRIL 2017 most countries, leaving no further room for hammering borrow- ing costs deeper into the ground. Also, the big tax-rate decline that we’ve since across most nations since the 1990s seems to have bottomed out and most MNCs have already massaged their tax bills to give their profit muscles the maximum relief possible. The return on equity (ROE) of the top 700 multinationals (as per FTSE) has dropped from a peak of 18% to 11% in a matter of a decade. “The returns on the foreign operations of all firms have fallen, too, based on balance-of-payments statistics. For the three countries which have, historically, hosted the most and big- gest MNCs – US, Britain and the Netherlands – ROE on foreign investment has shrunk to 4-8%. The trend is similar across the OECD. Multinationals based in emerging economies, which ac- count for about a seventh of global firms’ overall activity, have fared no better,” states an EIU-OECD research. Allthesemakegroundsforanargumentativebusinessmanthat not too far into the future, ‘non-equity-based globalisation’ (pure exports minus FDI on foreign soil) may remain one of the most efficient ways to creating a global company. For profit-and-pro- ductivity focussed firms, this symbolises the re-emergence of the ‘international company’ at the cost of the MNC format. The superiority of ‘exports-focussed’ firms over MNCs is also proven in academic research. In a extensive research by Harrison and Click (of the US Federal Reserve Board) lasting 14 years and involving over 42,525 firm years, the experts conclude using sig- nificance analysis that capital markets penalise MNCs by “putting a lower value on the equity of multinational corporations than on otherwise similar domestic corporations”. MNCs are valued at a discount of anywhere between 9% to 17%. And in stark contrast is the fact that 'only exporting' firms are valued at a premium of about 4% due to their higher market value and lower asset size! So the disproportionately high levels of assets in relation to the earnings they generate (“foreign assets” that are generally consid- ered volatile by shareholders whose values are subject to vagaries of policy and other macroeconomic changes in both the host and parent nations) is the problem with MNCs, unlike the case with 'only exporting' firms. Exporting firms are therefore far superior to MNCs in terms of efficiency and valuation, and that should serve a clear message to large companies and MSMEs around India. But having made that comparison, is there proof that the ‘ex- ports-focussed’ model is also superior to a company that focusses solely on the domestic market? This piece is not a suggestion to attempt an escape from the ambiguities and anxieties that ac- company investments on foreign shores. It is also not to glori- www.thedollarbusiness/blogs/steven @SPWarner www.tumblr.com/blog/steven-p-warner MNCs are valued at a discount of 9% to 17%. And in stark contrast is the fact that 'only exporting' firms are valued at a premium of about 4% due to their higher market value and lower asset size LETTER FROM THE EDITOR–IN–CHIEF fy everything that’s build around the business model of serving everything “domestically” mainstream. You would have read on Buddha’s realistic middle-path doctrine. Perhaps foreign trade to- day is much like what he preached. There is a downside to adop- tion of the MNC model. [Ever imagine why virtual offices are in fashion these days?] At the same time, keeping your business con- fined within national boundaries isn't wise. There is some sort of reformist, capitalistic animus associated with exports. Does it boost profits? Recent history of domestic firms that have moved to exports confirm the obvious. 82% busi- nesses experienced a positive impact on their bottomline (prof- its) after two years of exporting. Businesses that export, grow by almost 30% in just two years, claims a report titled, ‘Export to Expand’ by Prof. Robert Blackburn of the Kingston University, UK. A study conducted by Barclays puts it straightforwardly that, “Beyond business growth, almost nine in ten (87%) businesses identify other benefits to exporting, including having greater con- fidence in the longevity of the business (44%), increased produc- tivity (37%), stronger innovation (28%) and a longer lifespan for their products and services (27%).” There is enough literary evidence that firms that indulge great- er in exports (or imports) have a higher greater probability of sur- vival. After studying the participation of Indian firms in foreign trade, Prof. T. N. Srinivasan of Yale University, concluded that “ex- porting firms are significantly larger, more productive and more profitable than non-exporting firms.” A study by Megha Mukim of the London School of Economics, titled, ‘Does exporting in- crease productivity? Evidence from India’ that used data for about 20 years and covered over 8,000 manufacturing firms in India concludes that “Exporting is associated with a jump in productiv- ity, both within industries and within firms… Entry into export markets has a positive effect on firm performance…” There are many compelling reports that prove how export en- trants become more productive once they start exporting and that the productivity gap between exporters and their domestic coun- terparts increases further over time. And the observations are not just confined to India. Across the world, economics continues to play a similar game; US, Denmark, UK, Sweden, Kenya, Vietnam, Spain, China, Portugal, Australia, Slovenia, EU…the list is long. It rewards those who avoid the bait of complacency (read: staying domestically-focussed) and overlook the lure of being over-ambi- tious to the extent of being ostentatious (read: jump to become an MNC without testing waters with exports first). And in this lies a lesson for Indian MSMEs – Look before you leap. But do leap! Modern economics is no religion. There is nothing as ‘blind faith’ in capitalism. There is no strategy that’s dogmatic and worth investing in at the same time. Don’t distrust the MNC model or foolhardily undermine domestically focussed businesses. But re- member,thereisalwaysathirdoption–onethat’snosugarrush… try an export-oriented approach to test international waters. That’s what some of India’s exporters have done. It makes them deserving of a place on the cover of this issue. They're the 'Stars of a Globalised India'.
- 4. 6 THE DOLLAR BUSINESS II APRIL 2017 President (VMPL) : Steven Philip Warner & Editor-in-Chief EDITORIAL & RESEARCH Editor : Manish K. Pandey Executive Editor : Indranil Das Associate Editor (Print) : Andres Meren Molier Associate Editor (Online) : Sheela Mamidenna Senior Editor (Print) : Niladri S. Nath Assistant Editors (Print) : Neha Dewan, Ahmad Shariq Khan, Sairaj Iyer, Manishika Miglani, Anishaa Kumar Assistant Editor (Online) : Aamir Hussain Kaki Principal Correspondent : Deepak Kumar Correspondent : Sneha Gilada EDITORIAL CONSULTING BOARD Founder & Editor : Anil Goyal Publisher : Avnish Goyal Chief Consulting Editor : Dr.A. K. Sengupta ADVERTISEMENT SALES & MARKETING Deputy Managers : Aishwarya Singh , Rajesh Basu SeniorExecutives : Ayesha Fatima, Ankit Kharbanda InternationalRepresentatives Seoul(SouthKorea) : Justin Yoon (+82-2-6241-4256) London(UK) : S. Puri (+44 207 376 1996) ART & PHOTOGRAPHY Art Director : Sujesh Kumar G. 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Ltd., 1-1-60/5, RTC Cross Road, Musheerabad, Hyderabad, Telangana 500020, IN PUBLISHED AT 5-2-198/4, Distillery Road, Ranigunj, Secunderabad, Telangana 500003, IN FOR EDITORIAL/CONTENT Email: editorial@thedollarbusiness.com FOR ADVERTISEMENT Email: ads@thedollarbusiness.com FOR SUBSCRIPTION Email: subscription@thedollarbusiness.com . +91-40-67609999 For queries / comments you can send us an SMS at +91-888-633-1947 © Copyright 2017 No part of this magazine may be reproduced in whole or in part without an ex- pressed permission of the publisher. The information on this magazine is for information purpose only. Manish K. Pandey, Editor, The Dollar Business, is re- sponsible for the selection of news and content under PRB Act. Vimbri Media Pvt. Ltd. assumes no liability or responsibility for any inaccurate, delayed or incomplete information, or for any actions taken in reliance thereon. The information contained about each individual, event or organisation has been provided by such individual, event organisers or organisation without verification by us. All disputes are subject to exclusive jurisdiction of competent courts and forums in Hyderabad, Telangana. Printed and published by Avnish Goyal for Vimbri Media Pvt. Ltd. Published at 5-2-198/4, Distillery Road, Ranigunj, Secunderabad - 500 003, Telangana. Printedat:KalaJyothiProcessPvt.Ltd.,1-1-60/5,RTCCrossRoads,Musheerabad, Hyderabad - 500 020, Telangana. Volume: 04 Issue: 04 April 2017 www.thedollarbusiness.com facebook.com/tdbIndia twitter.com/TheDollarBiz linkedin.com/company/thedollarbusiness COVER STORY22 When the going gets tough, the tough get going. In the backdrop of India’s floundering exports, The Dollar Business speaks to a dozen handpicked exporters, across sectors, who have defied all obstacles over the years and emerged victorious when others were falling by the wayside. STAR EXPORTERS APRIL 2017 II THE DOLLAR BUSINESS 7 INBOX LETTERS TO THE EDITOR Readers’ feedback, criticism and appreciation that hit our mailbox in March 2017 MONOLOGUE PEOPLE SPEAK Angela Merkel on the importance of free trade, Justin Trudeau on im- proving the NAFTA & much more GLOBAL TRADE China’s ban on coal imports from North Korea, Donald Trump’s dis- dain for WTO, Russia-Brazil meat trade & more INDIA TRADE The welcome rise in export numbers, Japan-India steel import dispute & much more SPOTLIGHT PERU Rich in minerals, the country is trying to expand its export basket IMPORT’ONOMICS PHOSPHORIC ACID The demand for this acid is peren- nially high. What can importers do to improve margins? SECRET INGREDIENT HERBAL & ORGANIC SOAPS The demand for Indian organic soaps is increasing across the globe. What can India exporters do to retain their foothold? SPECIAL FEATURE DGFT RESTRUCTURING Will a new look DGFT be able to transform India’s foreign trade? CASE STUDY ACME UNIVERSAL SAFEZONE Nitin Tiwari, Managing Director of the company, talks about his inspirations, challenges and plans for his safety footwear business SME CORNER JYOTI APPARELS H. K. L. MAGU talks about his company’s export growth and the challenges faced by the industry TDB FORUM Questions about foreign trade that hit our mail box in March 2017 DATEBOOK Some must-visit trade shows BORDERLINE Editor’s Column EDGAR VASQUEZ VICE MINISTER OF FOREIGN TRADE, REPUBLIC OF PERU On strengthening bilateral trade with India and the challenges that hinder trade and investment. SURESH PRABHAKAR PRABHU UNION MINISTER FOR RAILWAYS, GoI On schemes & targets, challenges & ways to improve logistics and means to remove bottlenecks. 10 12 17 54 14 56 84 60 64 68 80 90 92 94 98 SUJIT S. NAIR CO-FOUNDER,BSICC Speaks about the need for an UK-India FTA, opportunities and chal- lenges in UK post-Brexit era, the contribution of Indian companies to UKs economy, SMEs, and more. SANJIV SAWLA CHAIRMAN, IOPEPC On India’s dependen- cy on imports, global policies effecting India’s exports, poor yield- ing seeds and other challenges that hamper India’s oil seed trade. 8876 86 DR. BIBEK DEBROY MEMBER, NITI AAYOG Talks about the irrelevance of SEZs in the present scenario, pro-trade measures introduced in the Union Budget, GST, demoneti- sation and much more.
- 6. 3rd Edition 17 to 20 April 2017 India Expo Centre & Mart Greater Noida GES 2017 www.gesdelhi.in For registration and more information, please contact: Confederation of Indian Industry Prof. C K Prahalad Centre Velachery Main Road, Guindy, Chennai - 600032 Tel : 044-42444555 Mr Ashutosh Deshpande Director ashutosh.deshpande@cii.in Mr Kazhal Vendhan Executive kazhal.vendhan@cii.in +91 99402 34408 Follow us: Ÿ A global platform for increasing trade in services, enhancing strategic cooperation and strengthening multilateral relationships between all stakeholders. Ÿ Opportunity to understand the potential for services and to increase FDI ow in the sector. Ÿ Platform for service sector industry to interface with world statesmen, business leaders, academia, policy makers and media leaders. Ÿ Platform offering opportunities for networking with business delegations from across the world. LOGISTICS @ GES 2017 Ÿ GES 2017 will be a platform for Global Logistic players. Ÿ India has been experiencing significant growth over the last decade and this is expected to continue, driven by strong domestic and international growth. Ÿ Key policies and infrastructural changes are facilitating tectonic shift in the logistics industry towards improved performance. Ÿ Step into partnership with global players in the dynamic service sector. Tap new business opportunities @ GES 2017 FOCUS SECTORS 3rd Edition 17 to 20 April 2017 India Expo Centre & Mart Greater Noida GES 2017 www.gesdelhi.in For registration and more information, please contact: Confederation of Indian Industry Prof. C K Prahalad Centre Velachery Main Road, Guindy, Chennai - 600032 Tel : 044-42444555 Mr Ashutosh Deshpande Director ashutosh.deshpande@cii.in Mr Kazhal Vendhan Executive kazhal.vendhan@cii.in +91 99402 34408 Follow us: Ÿ A global platform for increasing trade in services, enhancing strategic cooperation and strengthening multilateral relationships between all stakeholders. Ÿ Opportunity to understand the potential for services and to increase FDI ow in the sector. Ÿ Platform for service sector industry to interface with world statesmen, business leaders, academia, policy makers and media leaders. Ÿ Platform offering opportunities for networking with business delegations from across the world. LOGISTICS @ GES 2017 Ÿ GES 2017 will be a platform for Global Logistic players. Ÿ India has been experiencing significant growth over the last decade and this is expected to continue, driven by strong domestic and international growth. Ÿ Key policies and infrastructural changes are facilitating tectonic shift in the logistics industry towards improved performance. Ÿ Step into partnership with global players in the dynamic service sector. Tap new business opportunities @ GES 2017 FOCUS SECTORS 3rd Edition 17 to 20 April 2017 India Expo Centre & Mart Greater Noida GES 2017 www.gesdelhi.in For registration and more information, please contact: Confederation of Indian Industry Prof. C K Prahalad Centre Velachery Main Road, Guindy, Chennai - 600032 Tel : 044-42444555 Mr Ashutosh Deshpande Director ashutosh.deshpande@cii.in Mr Kazhal Vendhan Executive kazhal.vendhan@cii.in +91 99402 34408 Follow us: Ÿ A global platform for increasing trade in services, enhancing strategic cooperation and strengthening multilateral relationships between all stakeholders. Ÿ Opportunity to understand the potential for services and to increase FDI ow in the sector. Ÿ Platform for service sector industry to interface with world statesmen, business leaders, academia, policy makers and media leaders. Ÿ Platform offering opportunities for networking with business delegations from across the world. LOGISTICS @ GES 2017 Ÿ GES 2017 will be a platform for Global Logistic players. Ÿ India has been experiencing significant growth over the last decade and this is expected to continue, driven by strong domestic and international growth. Ÿ Key policies and infrastructural changes are facilitating tectonic shift in the logistics industry towards improved performance. Ÿ Step into partnership with global players in the dynamic service sector. Tap new business opportunities @ GES 2017 FOCUS SECTORS 3rd Edition 17 to 20 April 2017 India Expo Centre & Mart Greater Noida GES 2017 www.gesdelhi.in For registration and more information, please contact: Confederation of Indian Industry Prof. C K Prahalad Centre Velachery Main Road, Guindy, Chennai - 600032 Tel : 044-42444555 Mr Ashutosh Deshpande Director ashutosh.deshpande@cii.in Mr Kazhal Vendhan Executive kazhal.vendhan@cii.in +91 99402 34408 Follow us: Ÿ A global platform for increasing trade in services, enhancing strategic cooperation and strengthening multilateral relationships between all stakeholders. Ÿ Opportunity to understand the potential for services and to increase FDI ow in the sector. Ÿ Platform for service sector industry to interface with world statesmen, business leaders, academia, policy makers and media leaders. Ÿ Platform offering opportunities for networking with business delegations from across the world. LOGISTICS @ GES 2017 Ÿ GES 2017 will be a platform for Global Logistic players. Ÿ India has been experiencing significant growth over the last decade and this is expected to continue, driven by strong domestic and international growth. Ÿ Key policies and infrastructural changes are facilitating tectonic shift in the logistics industry towards improved performance. Ÿ Step into partnership with global players in the dynamic service sector. Tap new business opportunities @ GES 2017 FOCUS SECTORS 10 THE DOLLAR BUSINESS II APRIL 2017 WE VALUE YOUR FEEDBACK, WHETHER CRITICISM OR APPRECIATION. AND HERE ARE A FEW THAT HIT OUR MAILBOXES IN MARCH 2017 While browsing the web, I came across a feature on SEZs on The Dollar Business website. It was very in- formative and highlighted the core issues that are hampering the growth and suc- cess of SEZs in India. Looking forward to more such features. K. V. PRASANNA KUMAR Asst. Commissioner, Visakhapatnam Special Economic Zone (VSEZ), Ministry of Commerce, GoI +91-9866499XXX adcpvsez@gmail.com Your website is content rich and high- ly informative. It’s a great resource and has helped me a lot in my projects. ROJA RAVI National Institute of Fashion Technology +91-7034830XXX rojaravi.apr@nift.ac.in Ifind The Dollar Business highly informative. I must say, it’s a must-read magazine for those involved in international trade. As an avid reader of your magazine, I request you to come up with a special issue that discusses new business opportunities for Indian exporters in emerging markets. CHIRAG SINGHAL Jaipur, Rajasthan +91-9958317XXX chirag.boom@gmail.com Iam a subscriber of The Dollar Business and really en- joy reading the magazine every month. The topics that the magazine covers are relevant for people engaged in exports and imports business. I am an exporter of spices and would appreciate if you can publish more articles re- lated to export of spices, fresh fruits and vegetables. S. SARAVANAN Magee Exports, Dindigul, Tamil Nadu +91-9487178XXX mageeexports.india@gmail.com TALK SWADESHI, TAKE ON THE VIDESHIS... PATANJALI’S MANTRA IS CURRENTLY MUSIC TO THE EARS OF INDIA’S FMCG AUDIENCE. DESPITE THIS EXPERIMENT WITH HEALTH AND CAPITALISM WORKING, ONE WONDERS, WILL THIS YOUNG BUSINESS MODEL EVOLVE INTO A SUSTAINABLE MULTI-NATION CONGLOMERATE? AN UNBEATABLECONCOCTIONOF PATRIOTISMAND BRAND? www.thedollarbusiness.com Vol.4 Issue 03 March 2017 100 $2 www.thedollarbusiness.comVol.4Issue03March2017100$2RNI:APENG/2014/54643 Natural Honey Sweet successWorld consumption is driving exports Embroidery Machines A clear money-spinnerChanging fashion trends a boon for imports Policy Focus Union Budget 2017 Exporters feel ignored ARJUN RAM MEGHWALUnion Minister of State forFinance & Corporate Affairs MANI SHANKAR AIYAR Member of Rajya Sabha SUMIT SAWHNEY Country CEO & MD, Renault India RAHUL GUPTA Chairman, EPCES PUNEET KAURA MD & CEO, Samtel Avionics Ltd. ...AND MANY MORE! EXCLUSIVE INSIDE inbox editorial@thedollarbusiness.com SMS your views to +91-888-633-1947 It’s after a long time that I found a good mag- azine related to international trade. The Dollar Business offers good data and anal- yses and is definitely an excellent resource for importers and exporters. I look forward to reading the magazine with great interest. 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- 7. 12 THE DOLLAR BUSINESS II APRIL 2017 monologue There’s always opportunities to improve trade deals. NAFTA has been improved a dozen times over the past 20 years. JUSTIN TRUDEAU PRIME MINISTER OF CANADA On the future of NAFTA Source: CNBC Those who, in the 21st century, think that we can become great again by rebuilding borders, imposing trade barriers, restricting people’s freedom to move, are doomed to fail. CECILIA MALMSTRÖM UN TRADE COMMISSIONER On trade barriers India is our biggest middle income client. Its economic growth influences global growth. Its achievements in health and education contribute to the world achieving the Sustainable Development Goals. KRISTALINA GEORGIEVA CEO, WORLD BANK On India’s economic growth It is an enormous market, but it is more than just a market. The Commonwealth charter has prosperity at its very centre. GREG HANDS BRITISH MINISTER OF TRADE AND INVESTMENT On trade relations with Commonwealth Nations Source: Bloomberg Source:WorldBank Source:ReutersSource:IANS We do want free, open markets. We certainly don’t want any barriers but at a time of an ‘Internet of things’ we want to link our societies with one another and let them deal fairly with one another. ANGELA MERKEL GERMAN CHANCELLOR On the importance of world trade The figures make it clear that the GDP did not go down as they had predicted. Nothing happened and the country is on a path of fast-paced development. NARENDRA MODI PRIME MINISTER OF INDIA On the impact of demonetisation on GDP Source: PTI COVER FEATURE HOW ARCHAIC ARE INDIA’S ANTI-DUMPING LAWS? FOREIGNTRADE EXPORTS IMPORTS A NEVER BEFORE, NEVER AGAIN SNEAK PEEK... SUBSCRIBE TODAY TO GET INDIA’S MOST CONTEMPORARY BUSINESS MAGAZINE DELIVERED DIRECTLY AT YOUR DOORSTEP. BE UNIQUE. READ DIFFERENT. To subscribe, sms TDB MAG to 56161, write to us on subscription@thedollarbusiness.com, or log on to www.thedollarbusiness.com RENDEZVOUS Mansukh Lal Mandaviya Minister of State for Road Transport, Highways and Shipping, GoI, talks about the Ministry’s challenges and plans. IMPORT’ONOMICS Palm Oil What is fuelling the demand of palm oil in India? Are the margins large enough to lure new importers? UNVEILING THE DOLLAR BUSINESS MAY 2017 ISSUE THE DOLLAR BUSINESS INVESTIGATES THE RELEVANCE OF INDIA’S AGE-OLD ANTI-DUMPING LAWS AT A TIME WHEN THE DOMESTIC INDUSTRY NEEDS TO BE EVER MORE EFFICIENT TO REMAIN COMPETITIVE IN A GLOBALISED ECONOMY.
- 8. 14 THE DOLLAR BUSINESS II APRIL 2017 GLOBAL TRADE LAST MONTH I n a move that is set to deal a major financial blow to North Korea, the Chinese Commerce Ministry has said that it has suspended coal imports from North Korea. The import ban took effect in late February and will last till the end of the year. Beijing’s surprise announcement was part of the efforts to enact United Nations’ sanctions against North Korean regime and send a strong message to deter the country from undertaking further nuclear tests. The ban came six days after North Korea successfully test launched a ballistic missile, which was con- demned by UN Security Council as a violation of its resolutions. In response to North Korea’s earlier powerful nuclear test, the UN Council in November 2016 had adopted a resolution aimed at significantly curtailing country’s coal exports to China to $400 million or 7.5 million metric tonnes, whichever is lower. China’s coal import ban is likely to cut North Korea’s exports by half, depriving the latter of one of its most important sources of foreign currency. Coal has been North Korea’s largest export item to China, accounting for about 40% of country’s total shipments to China (by value). The country has a huge dependency on China for coal trade as China was its biggest consumer of coal. In retaliation to the Chinese ban, North Korea has also stopped shipments of some rare metals to the Dragon. North Korea’s exports to China Coal is North Korea’s largest export item Coal Apparel (not knitted or crocheted) Ores, slag and ash Apparel (knitted or crocheted) Seafood Other Source: TDB Intelligence Unit & UN Comtrade; break-up for CY2015 CHINA-NORTH KOREA COAL IMPORTS Severing the lifeline 42% 14% 4% 25% 8% 7% GLOBAL TRADE LAST MONTH News & Analyses APRIL 2017 II THE DOLLAR BUSINESS 15 GLOBAL ARMS TRADE AT ITS PEAK Return of the cold war? Is the global arms race on, again? Looks like though! As a study by the Stock- holm International Peace Research Institute (SIPRI) suggests that the global exchange of weapons has steadily increased to its highest level since the end of the Cold War. According to the study, the volume of worldwide weapon sales increased by 8.4% between 2012 and 2016 compared with the previous five years and is the highest for any five-year period since the Cold War ended. Interestingly, the spike was fuelled by Middle East (which nearly doubled its imports) and a strong demand from Asia, where India remained the world’s biggest importer of arms accounting for 13% of the global imports. India dwarfed its neighbouring rivals China and Pakistan by increasing its imports by 43% in five years. Meanwhile, United States, Russia, China, France and Germany stood as the five biggest weapons exporter, together accounting for 74% of the world exports. UAE DAMAGED CARS IMPORTS Old is not always gold Come May 2017, and the roads of UAE will be devoid of used and dam- aged cars! Yes, you read it right. In a clampdown on illegal import and resale of cars in UAE, the Emirates Authority for Standardisation and Metrology (ESMA) has reportedly banned the import, insurance and registration of ve- hicles that have been written off in other countries. The directive, which is being seen as a significant step towards making roads safer will come into effect from May 1, 2017 and covers water-damaged, rebuild, burnt out and non-repairable cars besides vehicles with significant manufacturing defects. Going by the official records, UAE every year imports about 3,00,000 used vehicles from United States, Japan and Germany. US-WTO TRADE THREAT A knockout punch The World Trade Organisation (WTO) faced its first attack by US President Donald Trump’s administration after the admisnistration clearly said that it will “not tolerate” unfair trade practic- es that distort markets. Downplaying the role of WTO in settling trade disputes, the United States Trade Representatives’ Office in its annual trade policy agenda re- port (The President’s 2017 Trade Pol- icy Agenda) declared that it was not bound by the WTO’s rulings. The doc- ument signaled that the US adminis- tration “will aggressively defend US sovereignty over matters of trade pol- icy.” The report also touted Section 301 of the US Trade Act, 1974 as a power- ful weapon for trade battles. The document also sent the message that the US administration, in its quest to slash US trade deficits with China and Mexico, might try to push to the limits as to what is acceptable under WTO rules. However, interestingly, China said that it supports the work of the World Trade Organisation. News & Analyses
- 9. 16 THE DOLLAR BUSINESS II APRIL 2017 GLOBAL TRADE LAST MONTH News & Analysis SOUTH AFRICA RHINO HORN EXPORT Proposing trade or poaching? Now this piece of news is likely to alarm wildlife conserva- tionists and bring cheer to poachers! According to media reports, the South African government is planning to go ahead with proposal to legalise and regulate the domestic trade of rhinoceros horn as well as allow some limited ex- ports. The regulations envisage that foreigners visiting South Africa with a permit to export for personal possession will be able to buy two horns. Exports would be allowed only through Tambo International Airport. While the government’s move has found support across exporters’ community, animal rights groups argue that the decision will threaten the rhino population in the country. Interestingly, international trade in rhino horn has been banned since 1977 and South Africa too introduced a mor- atorium on domestic trade of rhino horn in 2009, which has been challenged by rhino breeders several times. IRAN-PAKISTAN KINNOW IMPORT BAN LIFTED A goodwill gesture (with strings attached) Bringing some hope for Pakistani exporters to boost their trade, Iran has temporarily lifted the ban on the imports of kinnow from Pakistan. The move is being seen as a goodwill gesture from Iran. However, the lifting of import ban after six years comes with certain conditions. The restriction has been lifted only for 21 days and the trade will be restricted to just two provinces via land route as imports would not be permitted through air or sea route. These conditions, experts believe, would limit the export volume to 5,000 to 10,000 tonnes of the fruit to Iran. Notwithstanding the con- ditions, Pak exporters are gearing up to take full advantage of the opportunity. BRAZIL-CHINA MEAT IMPORT BAN To ban or not to ban... On March 20, 2017, in what could have been a body blow to Brazil’s meat exports, China placed a temporary ban on Brazilian meat following dramatic media re- ports published across the world suggesting that a ma- jor meat industry scandal was unfolding in Brazil. The ban caused such an upheaval in Brazil’s meat industry that Brazilian government representatives flew to China to resolve the issue with China’s regulatory body. After being assuaged by Brazilian authorities that the scandal had no impact on the quality of meat, China lifted the ban on March 25. The move by China, the big- gest consumer of Brazilian meat, was accompanied on the same day with the lifting of import bans by Egypt and Chile, bringing hope of an end to a crisis that saw one-fifth wiped off the value of Brazilian pork and poul- try exports in the week of the ban. APRIL 2017 II THE DOLLAR BUSINESS 17 INDIA TRADE STORY MERCHANDISE EXPORTS Is the recovery sustainable? I nspiring an ambitious target, India’s merchandise exports exhibited a double-digit growth of 17.48% y-o-y to $24.5 billion in February 2017. A double-digit jump in exports was last recorded in June 2014. Interestingly, exports grew for the sixth straight month marking a heartening recovery from the contraction in shipments last year. It must be recalled that due to weak global demand and slide in oil prices, merchan- dise exports started steadily shrinking from December 2014, raising concerns among the foreign trade community. The re- cent upswing in export shipments also raises hopes of India’s exports closing the fiscal year on a positive note. So, what lifted India’s export numbers? According to Ministry of Commerce, GoI, data, engineer- ing exports helped spike-up the figures as the sector’s exports swelled 47% to $6.6 billion. What’s more? The month wit- nessed 23 of 30 exporting sectors registering a growth. How- ever, a steeper jump in country’s imports of 21.76% y-o-y took the trade deficit to $8.88 billion. A 147% jump in gold imports Mar-16 Apr-16 M ay-16 Jul-16 Aug-16 India’s export growth rate (y-o-y) Exports has been regaining momentum over the last few months Source: TDB Intelligence Unit & Ministry of Commerce, GoI; figures in % 20 15 10 5 0 -5 -10 15 Jan-16 Feb-16 Jun-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 lead to an increase in the overall import bill to $33.38 billion. The solace was that the trade balance in February narrowed down as against January’s $9.84 billion. Now can this recovery be sustained and built upon? We will have to wait and watch. News & Analyses INDIA TRADE LAST MONTH
- 10. 18 THE DOLLAR BUSINESS II APRIL 2017 INDIA TRADE LAST MONTH News & Analyses ARAKU COFFEE RETAIL STORE IN PARIS To Paris with love Joining the hip fashion stores and high-end restaurants in the high streets of Paris, Andhra Pradesh’s Araku coffee made its global debut by opening its flagship retail store in the upscale city. With the backing of top corporate honchos including Mahindra & Mahindra Chairman Anand Mahindra, Infosys Co-founder Kris Gopalkrishnan and Dr. Reddy’s Laboratories Chairman Satish Reddy, the Indian coffee brand will retail its homegrown blend of Arabica coffee under the ‘Araku’ brand at a premium pricing. For Araku, a coffee that is cultivated by the tribals in the picturesque Araku Valley of Vishakhapatnam district, the opening of the flagship store is a big leap. The com- pany has also expanded the brand’s operations in other coun- tries. With a GI tag in its kitty, the coffee brand is also available in Switzerland and is looking to expand operations in Europe. JAPAN-INDIA TRADE DISPUTE At loggerheads WTO has recently accepted Japan’s request and has set up a dispute settlement panel to determine if India indeed broke rules by putting in place safeguard duties on steel imports from Japan. Coming to defence of an industry that sells half of its products overseas, Japan had taken the steel trade dis- pute with India to the World Trade Organisation, calling upon it to set up a dispute settlement panel to examine In- dia’s safeguard duties on steel imports. Alleging that India’s safeguard duties on steel imports from Japan violated glob- al trade rules, world’s second largest steel producer claimed that India’s measures were inconsistent with WTO rules. India, in September 2015, had imposed duties of upto 20% on some hot-rolled flat steel products and set a floor price in February 2016 on some steel products. The move con- tributed to the steep fall in Japan’s hot-rolled coil exports to India that also dropped India to 8th position in 2016 from Japan’s largest buyers list as against its third spot in 2015. Interestingly, Tokyo usually manages to sort trade disputes through bilateral talks. STEEL EXPORTS OVERTAKE IMPORTS Reversing the trend The outlook for the steel sector in the country looks bright and how! While India is on course to becoming the second-largest steel producer, exports of steel for the first time in four years, surpassed imports. Reasons: A re- bound in global product prices, policy and regulatory measures taken by the Indian government and production cuts by China. According to the Steel Ministry data, steel exports surged 77.48% y-o-y to 6.62 million met- ric tonne (MMT) during April-February period of current financial year. Imports, on the other hand, were down 39% y-o-y to 6.59 MMT during the same period, reflecting the path of recovery and growth in the sector. The recovery comes after India steel makers battled a flood of cheap steel exports of China in the domestic as well as global market. To save the domestic steel industry from cheap products dumped by China, the gov- ernment in May 2016 had imposed provisional anti-dumping duties on selected imported steel products. In February 2017, it had extended the duties till 2021 as steel imports surged. However, with exports surpassing steel imports, the prospects of the sector look optimistic. APRIL 2017 II THE DOLLAR BUSINESS 19 USFDA-SUN PHARMA IMPORT BAN A new lease of life India’s largest drug maker Sun Pharma got a breather in March after US Food and Drug Administration (USFDA) lifted an import ban on its Mohali (Punjab) manufacturing facility. The move paves the way for this pharmaceutical giant (whose Ha- lol facility is still under USFDA scanner) to resume exports to the US market. The USFDA not only lifted the import alert imposed on the Mohali plant four years ago, but also removed the facility from the Official Action Initiated (OAI) status. The Mumbai-based drug maker had inherited the Mohali Plant as part of the acquisition of Ranbaxy Laboratories in April 2015. In 2013, USFDA had banned imports of drugs from four of Ranbaxy’s plants including the Mohali plant and ordered the Mohali facility to be fully subject to Ranbaxy’s Consent Decree of Permanent Injunction. With the lifting of the ban after four years, the drug major would be looking at boosting its business in the American market. PATANJALI PRODUCTS OVERSEAS EXPANSION Patanja-Li or Patanja-Lee? This news piece might set alarm bells ringing for Chi- nese manufacturers! Having taken the Indian FMCG market by storm, Yoga guru Baba Ramdev’s Patanja- li Ayurveda is all set to take the fight to overseas mar- ket. According to reports, Patanjali Ayurveda – that sells everything from biscuits to beauty cream – plans to set up a production unit in Jharkhand’s Sahibganj district to export its products to East Asian countries includ- ing China, Myanmar and Bangladesh. It must be re- called that the central government has plans to turn this district of Jharkhand into a multi-modal hub with direct connectivity with neighbouring countries through air, land and water routes. If the reports are any indication, com- pany’s overseas expansion plans are in line with the gov- ernment’s ‘Act East’ policy. Patanjali Ayurveda has already been shipping selected products to United States, Canada, Mauritius and UK. In addition, it has received offers from UAE, Iran and others to retail its products in those markets. INDIA-VIETNAM TRADE BANS Tit for tat Instant coffee making companies in India woke up with a jolt as India temporarily suspended the en- try of six agri-commodities including coffee beans, black pepper and bamboo from Vietnam. The de- cision, that came into effect from March 7 due to “repeated interception of quarantine pests”, also targets cinnamon, cassia and dragon fruit. Vietnam has been requested not to issue phytosanitary cer- tificates for these six commodities for export. The import ban of coffee beans from Vietnam, which is the world’s largest producer of robusta coffee, would in all possibilities hurt the manufacturing and ex- port of value-added instant coffee in India, since the low-priced imported robusta is used in mak- ing soluble coffee and its re-exports. India’s ban on Vietnamese agri products comes close on the heels of Vietnam announcing to suspend import of five agricultural products from India in 60 days starting March 1. Within 60 days, Vietnam will stop the per- mit for peanuts, cocoa beans, tamarind, cassia seeds and haricot beans. It must be recalled that Vietnam had in April 2015 suspended the import of peanuts from India and the ban was lifted in January 2016. It’s worth noting that the bilateral trade between the two countries in FY2016 stood at about $8 billion. News & Analyses FOR ANY REAL ESTATE REQUIREMENT COMMERCIAL AND RESIDENTIAL Contact – Vasant Singh : 9999979355, 9717099195, 011- 40000660/41679355 Email - info@propertygallery.co.in, Web - www.propertygallery.co.in
- 11. 20 THE DOLLAR BUSINESS II APRIL 2017 TDB: Apparel exports looks like an unattractive business because of the severe competition in today’s world. What attracted you to the business? Charan Reddy Arutla (CRA): I have always been passionate about apparel and shopping – usually, I spend a lot of time and money on shopping. Slowly, the idea of starting a manufacturing business and selling apparel struck me. I was then 20 years when I combined all the forces that were willing to back me to take this new step. And with my bachelor degree in business administration in hand, I kick started Roman Island in 2011. TDB: Roman Island has 85 exclusive stores across the country and has re- cently started selling through online platforms. What does your experience say about the market environment? CRA:Yes, we cater to customers through both physical and online retail stores. Well, when we talk about the market size of the apparel industry in India, the behaviour of consumers has drastically changed over the last few years. The consumers’ needs and demands have also grown, and now we are in an era where people like to be up-to-the-date with fashion. We all know that the demand for Roti, Kapda and Makaan (bread, clothes and “IT’S TIME TO EXPLORE UNTAPPED MARKETS” In 2011, an enthusiastic young man combined his passion for fashion with business and started Roman Island. Six years later, this Rs.100 crore company is making its presence felt both in the domestic and international markets. CEO and Chairman Charan Reddy Arutla shares the company’s growth, challenges and plans with The Dollar Business MANAGEMENT INTELLIGENCE FEATURE APRIL 2017 II THE DOLLAR BUSINESS 21 housing) will never cease. The demand has, in fact, been increasing with the change in taste, backed by growing pur- chasing power. Speaking of both physical and online retail stores, they offer different shopping experiences. For instance, a physical store offers prospective customers the opportunity to touch and feel the prod- uct, or even try the fittings of the product immediately. However, in online retailing, it is the photographs of the garments that can ei- ther attract or repel a customer, which is both an advantage and a disadvantage compared to a physical store. And this difference is reflected in the sales num- ber. For us, only about 12-15% of our revenue comes from online sales. TDB: What kind of growth do you ex- pect in the next five years? CRA: We started our business in 2011, with a capital of Rs.50 lakhs. And with- in a short period, the company’s worth has reached nearly Rs.100 crore. Our target for the next five years is am- bitious, as we plan to become a Rs.500 crore company. TDB: Now speaking of markets be- yond the Indian subcontinent, ex- ports contributes around 25% to the company’s revenue. What are your main markets? Do you have plans to strengthen the exports segment? CRA: We have two international offic- es, one in Dubai (UAE) and the other in Zanzibar (Tanzania). At the moment, our focus markets outside of India revolves around East Africa, Middle East and Europe. However, we are working on ways to cater to markets such as Can- ada, Australia, Central and the western Africa. We believe, these are unexplored markets with a lot of potential because demand there is higher than supply. TDB: Also, could share with The Dollar Business your first exports experience? Was it easy to land your first order? CRA: Our first export experience was quite an intriguing one! We were so pas- sionate about exporting our products that we actually shipped a consignment to Dubai even though we did not have any order in hand. We kept the consign- ment at Jebel Ali Port (Dubai) and then started looking for buyers. Fortunately, it did not take us long to find buyers, which boosted my confidence. Well, I was also impressed by the volume game involved in export. And since then, I decided to start concentrating on exports. TDB: As an exporter, what kinds of challenges do you face? Have you been able to find a way to counter them? CRA: When we talk about fashion, every country has its own unique trend – be it styles, preference, measurement re- quirements, etc. These can prove to be a major challenge because we need to cater to each market in its own unique way. Another challenge is the huge com- petition from China and Bangladesh. And sadly, the competition from them is eating into our margins. But we have learnt our lesson! We have found that one way of earning a higher margin is to explore untapped markets – they have proved to be less competitive. And as mentioned earlier, Africa is what we have on our mind – going forward. TDB: Leaving aside competition from countries like China and Bangladesh, this is a very competitive sector even in India. How important is R&D for Ro- man Island? CRA: Well, it is true that this is a very competitive sector not only in India but across the globe. So, when competition plays a significant role in shaping your business and margins, naturally, the role of Research and Development (R&D) in- creases. To survive and to grow in this busi- ness, we need to be innovative, creative and fashionable. Otherwise, if you are slow to react to competition from other brands, your brand will die and you will be out of busines sooner than expected. We have thus created a strong in- house designing team, led by Mr Arvind, who is efficiently supported by our tal- ented and competent sampling team and masters. I also regularly travel to different countries to learn more about their culture and fashion and factors that impact the fashion there. Also, attending trade fairs and fashion shows and collecting samples help us develop new ideas to offer better choices and selections to our customers. TDB: Where do you source your raw material from? Is everything sourced from India or do you also import? CRA: Well, we buy most of our raw ma- terials from well-known mills from across the country. But, yes, there are times we have to import fabrics and accessory trims from China because some of them are either not available in India or their quality isn’t as good as those sourced from China. TDB: Currently, the company focuss- es only on men’s apparel. Do you have plans to venture into women’s apparels going forward? CRA: Our brand, Roman Island, is known for its men’s fashion collection. And even in the future, we would prefer to continue to focus on men’s clothing as we have al- ready developed a niche in this segment. But I must tell you that we have recently purchased a leather factory and have start- ed manufacturing leather products like footwear, belts, wallets and other accesso- ries under the Roman Island label. CHARAN REDDY ARUTLA CEO & CHAIRMAN, KRD EXPORTS PVT. LTD.
- 12. 22 THE DOLLAR BUSINESS II APRIL 2017 COVER STORY STAR EXPORTERS APRIL 2017 II THE DOLLAR BUSINESS 23 As we stand today, the present government’s ambitious target to touch $900 billion in exports by 2020 has been written off as just that... ambitious! And there are a number of reasons for that; global trade slowdown being the most important. However, these obstacles have not been able to hold back some of India's star exporters, who have gone from strength to strength overcoming multiple challenges that threatened their growth on foreign soil, including policy-related structural flaws. The Dollar Business spoke to a select dozen to understand how their companies have defied the odds to table attractive export numbers in recent years.
- 13. 24 THE DOLLAR BUSINESS II APRIL 2017 COVER STORY STAR EXPORTERS T he ball for the cover story started to roll at a time when India’s exports seemed to be just waking up from a slum- ber. And it's now six months on the trot that India's merchandise ex- ports have been on a rise. In February 2017, exports clocked $24.49 billion – a growth of 17.48% over the same month last year. Well, the rise in exports took off after a prolonged lean phase between FY2014 and FY2016 when exports de- clined by 16.60%. And it still is not clear if we will be able to end FY2017 at a high- er export number than that achieved in FY2016. While the giant seems to be waking up from a slumber, the adrena- line sure is yet to start flowing. During all our earlier interactions with the foreign trade community as well as export promotion councils (EPCs), we were made aware of the structur- al and policy flaws as well as the global economic slowdown that inundated our exporters. The growth in the last few months therefore compelled us to ask the question: has the export ecosystem changed or is it that some exporters have been able to find their way around these hurdles? In our quest to find what these exporters were doing that the others were not being able to do, we reached out to the usual suspects, the much vaunted Directorate General of Foreign Trade (DGFT) designated Star Export Houses of India. We scanned across sectors to find companies that have shown spectac- ular growth in exports over the years and have created a niche for themselves in the global marketplace. Hence, this is the story of a select dozen who through their product quality and portfolio, strategic marketing and vision have been able to overcome all odds when it comes to for- eign trade. Though each company has a different story to tell, they are unified in their abilities to inspire our new gener- ation of exporters. These are The Dollar Business Star Exporters. WHAT’S IN A NAME? But before we delve into what makes these exporters so successful, let us look at the definition of successful exporters as per the criterion established by the DGFT and the benefits that they are el- igible for. According to DGFT, a compa- ny engaged in exports can apply for a star export house status if it can be classified as “a merchant or/and manufacturer exporters, service providers, export ori- ented units (EOUs) and units located in special economic zones (SEZs), agri ex- port zones (AEZs), electronic hardware technology parks (EHTPs), software technology parks (STPs) and bio tech- nology parks (BTPs).” Based on their FOB (Freight on Board)/FOR (Freight on Road) numbers for the current year and the last three years, they are further classified into one-star to five-star export houses. This new set of classification was introduced in the Foreign Trade Policy (FTP) 2015-2020. Before formulation of the new FTP, these export houses were categorised as Export House, Star Ex- port House, Trading House, Star Trading House and Premium Trading House. Till 2015, the categorisation was done on the basis of a rupee value of exports which in the new FTP was changed to dollars. Earlier, to be recognised as an export house, a company was required to have an FOB/FOR of at least Rs.20 crore. Now, to be classified as a one star export house, under the FTP 2015-2020, a com- pany needs to have an FOB of at least $3 million. And, to be eligible for two-star, three-star, four-star and five-star export house, a company’s export performance Exporters in the textile sector have been enthused by the government's policy support but rue the lack of speed in disbursal of benefits. APRIL 2017 II THE DOLLAR BUSINESS 25 has to be $25 million, $100 million, $500 million and $2,000 million, respectively. Among the duty-related advantages, under FTP 2015-2020, introduced two years ago, the star export houses are eligi- ble for licences, certificates, permissions and customs clearances on a self decla- ration basis. Three, four and five Star export houses are also eligible to certify their manufactured goods as originated in India for purposes of Certificate of Origin, making it easy for them to get the benefits of preferential treatment that is available under various preferential trad- ing agreements (PTAs), free trade agree- ments (FTAs), comprehensive economic cooperation agreements (CECAs) and comprehensive economic partnerships agreements (CEPAs), etc. With all these advantages and rising revenues, from a far it may seem that these export houses are primed for suc- cess. The truth though is they have to attain this status through hard work and perseverance before they became eligible for the benefits. Yes, you heard it right! BIG HITTERS The contribution of the star catego- ry exporters – both old and new, small and large – is undeniable across indus- tries. Commenting on the contribution of these larger companies, Ajay Sahai, Director General & CEO, Federation of Indian Exports Organisations (FIEO) says, “I am of the view that many of these four and five star export houses have been playing a critical role in our export growth.” These companies, he says, have not only contributed to the foreign ex- change earnings, but have also provided a lot of support to the smaller domestic enterprises and ancillary units by pre- senting their products to a larger global market, thus giving a fillip to the man- ufacturing sector. "The big contributors in these star categories across sectors like textiles, gems & jewellery, etc., account for about 40% to the country’s total ex- ports in value terms," adds Sahai. Ravi Uday Bhaskar, Director Gener- al, Pharmaceuticals Export Promotion Council (PHARMEXCIL) too high- lights that the large export houses in the pharma sector usually contribute 60% of the pharma industry’s entire annual exports revenue. And for the pharma- ceutical exporters in India, US happens to be the biggest market. According to Ranjit Shahani, Vice Chairman & Man- aging Director, Novartis India, “India’s pharmaceutical industry supplies 40% of over-the-counter and generic pre- Innovation and use of technology has helped Star Exporters stay ahead of the crowd. Source: TDB Intelligence Unit & Ministry Of Commerce, GoI; figures in $ billion India’s merchandise exports The country's exports have been experiencing headwinds since FY2014 FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 230 240 250 260 270 280 290 300 310 320
- 14. 26 THE DOLLAR BUSINESS II APRIL 2017 COVER STORY STAR EXPORTERS scription drugs to the United States.” He hopes that the big companies will con- tinue to hold sway in US market despite talks of import barriers on drugs, which are expected to make drugs imported from India expensive in US market. Sa- hani feels that it is the reasonable pricing of the Indian drugs which will make the case stronger for the pharmaceutical ex- porters from India. The textile sector too sees major con- tributions coming in from the larger companies and units. Ashok Rajani, Chairman, Apparel Export Promotion Council (AEPC) says, “Although SMEs comprise over 70% of the apparel export sector in terms of units, the contribution ratio is reverse. The export contribution by large manufacturing units is 76%, whereas the share of SMEs is 24%.” The leather industry, which contrib- utes about $6 billion annually in terms of exports, though is an exception. Unlike other sectors, which see a larger contri- bution coming in from big manufactur- ing units, as per Mukhtarul Amin, Chair- man of Council for Leather Exports, only 20% of exports come from large scale leather companies while SMEs account for the remaining 80% share. Interestingly, Sahai observes that over the years, sectors like engineering goods, textiles and gems & jewellery have wit- nessed significant growth in the num- ber of four and five star exports houses despite not-so-favourable global market scenario. Is it then the case that these companies have discovered the secret recipes to success in export markets? VALUE GAME Some success factors that we came across while interacting with export houses in- cluded the importance of value addition, innovation, and the need to move up the global value chain. The export oppor- tunities when it comes to value-added offerings across sectors is huge, is what many of our star exporters seems to have realised. And this is not limited to just manufacturing sector. For in- stance, Cyient Ltd., a Hyderabad-head- quartered engineering service solutions provider and one of our Star Exporters, is now working towards transforming itself from a mere service provider to a design-build-maintain (DBM) partner for clients with a promise to offer solu- tion-ownership across its customers’ val- ue chain. The company also believes that digital is redefining how products and services are designed, manufactured and operationalised. “Digital is defining new business models like ‘product-as-a-ser- vice’ as well as new commercial models like 'risk-and-reward-sharing' that es- sentially reflect how businesses must re- spond to the changing needs and expec- tations of their customers,” feels Krishna Bodanapu, MD & CEO, Cyient Ltd. The company believes that moving up the value chain, both in terms of products and services, will help drive exports growth. Interestingly, the company earns about 94% of its revenues from exports. Technology and value addition is also a major driver for WNS Group, the busi- ness process management (BPM) giant. As far as the BPM sector is concerned, technology enablement has become a critical component for mature BPM ser- vices over the years. Considering this, WNS has invested in the latest technol- ogies and built tech-enabled proprietary frameworks, platforms and solutions to add more value to its services. “This has also helped us move away from the traditional, input-based model to an outcome-based revenue model. What it means is that we bill our clients not for the number of associates employed in managing a client’s business process but for the outcome we accomplish,” explains Keshav Murugesh, CEO, WNS Group. The success that WNS, once just a cap- tive unit for British Airways, has enjoyed clearly indicates that this new model has found favour with global clients. Today, WNS, headquartered in Mumbai, earns all its revenues from foreign shores. Textile exporter Indo Count Indus- tries Limited, another export-oriented company, also believes that technolo- gy and product innovation is what will keep it ahead of the competition. “In the newer product segments like fashion bedding, utility bedding and institution- al bedding, China is currently the dom- inant player with 85% market share. I think investments in the right technolo- gy, processes, systems, people, R&D and marketing will bring the best out of our efficiency and productivity, thus helping us sustain and enhance our competitive advantage,” says K. K. Lalpuria, Execu- tive Director, Indo Count Industries Ltd. Further, in quest of diversification, both in terms of markets and products, some companies are even resorting to acquisitions. Capacity and product en- hancement, they believe, will be the key to success going forward. Star exporters like Cyient Limited are looking at technology upgradation and acquisitions to add more clients to their kitty as well as diversify their product portfolio. APRIL 2017 II THE DOLLAR BUSINESS 27 ACQUISITION SPREE For many of these companies, acqui- sitions in the international sphere has been the way to go. The results, however, have been varied. For instance, when it comes to Rangsons – Cyient’s acquisi- tion in 2015, Deepak Purswani, Research Analyst, ICICI Direct, believes that the acquisition has still not attained desire scale to be profitable. However, he feels that Rangsons' positioning in defence and aerospace could help Cyient in the long-term to achieve its S3 (services, sys- tems and solutions) strategy by 2020. Similarly, in 2016, in an effort to di- versify its portfolio WNS acquired Value Edge, a provider of commercial research and analytics services to clients in phar- ma and biopharma industry. WNS's ac- quisition of Denali Sourcing Services, a US-based provider of strategic procure- ment BPM solutions, in 2017 is also a significant one as the company specialis- es in high-value, comprehensive source- to-contract procurement solutions. When it comes to Rajesh Exports Limited (REL), its acquisition of the Switzerland-based precious metal re- finery Valcambi in 2015 is expected to help it expand in the Euopean market. The acquisition is expected to improve Rajesh Exports' dominance in the glob- al market with Valcambi giving it direct access to a large European audience. Valcambi, which has the capability to refine approximately 2,000 metric tonne of gold and precious metals per annum, is also expected to increase production at Rajesh Exports’ India plant. Analysts are hopeful that this acquisition will strengthen Rajesh Exports’ position in the international market. And while ac- quisition is one way for capacity expan- sion and increasing market access, set- ting up manufacturing bases in offshore locations has become another way to scale up forex earnings. FINDING HOME ABROAD Our Star Exporters have been aggres- sively looking at setting up bases in for- eign markets for quite some time now. FMCG major Dabur is a prime example of that trend. The company has altered its international market expansion strat- egy by setting up manufacturing bases in various countries through its sub- sidiary Dabur International Ltd. Lalit Malik, Chief Financial Officer, Dabur, explains, “We have established manu- facturing units across the globe to pro- duce products capable of meeting local needs and aspirations. The exports of the company from India are not large, as we have focussed on locally manufacturing products in the destination markets. We have emerged as an Indian-born FMCG transnational through the organic route.” For sectors like commercial vehicles, setting up an assembly line in the des- tination country also makes sense. “The key issue with the commercial vehicle category is that it’s not logistically viable to export these vehicles. People tend to set up assembly lines near the markets. However, of late, we have seen that com- mercial vehicles are being exported from the country,” explains Sugato Sen, Dep- uty Director General, Society for Indian Automobile (SIAM). ThetractormanufacturerSonalika In- ternational Tractors Limited, following a similar strategy has had assembly lines set-up in Algeria, Argentina, Brazil and Cameroon for past many years. In fact, recently, the company has started a small assembly arrangement in Iran too. “We plan to start with 20% localised opera- tion in various markets and then scale it up based on local government policies,” INORGANIC GROWTH THROUGH ACQUISITIONS HAVE HELPED THEM GAIN NEW CLIENTS Commercial vehicle export- ers like Sonalika are setting up manufacturing bases closer to the customer to leverage tax benefits and customise products to country specific needs.
- 15. 28 THE DOLLAR BUSINESS II APRIL 2017 COVER STORY STAR EXPORTERS says Gaurav Saxena, President, Interna- tional Business, Sonalika International Tractors Ltd. The company is also plan- ning to set up local assembly plants to penetrate markets like China, US, Thai- land, Canada, Turkey, Brazil and Russia. However, Bajaj Auto is an exception to this trend and the company believes in exporting from India. “Our domestic and global market presence is quite huge. Internationally, we are present in more than 65 markets. We have been able to create efficiencies in India that we may not be able to achieve elsewhere. If we shift our production outside the coun- try, it will only add to the cost, given the stringent quality parameter we follow. However, we do treat the idea of locali- sation on a case-to-case basis, based on the government policies and duty struc- tures in those respective countries,” says Rakesh Sharma, President – Internation- al Business, Bajaj Auto. It’s evident that there is a one-size-fits- all strategy, but what our Star Exporters have done is that they have explored op- tions and adapted the strategy that has best suited their situation. VOLATILITY VICE This is not to say that our Star Exporters have not faced challenges and hurdles on the way. Among all the factors and challenges, currency volatility is one that has troubled them the most. “There has been a huge amount of volatility in the foreign exchange market because of the weakening of euro and the strengthening of dollar. This has created a huge amount of uncertainty in foreign exchange valua- tions.Inmanyofourexportdestinations, imports have become more expensive as currencies have lost their valuation. Such a scenario has a serious effect on the pur- chasing power, price of the goods and demand,” explains Sharma. According to him, some emerging markets have tak- en a hit due to the tumbling of the com- modities and oil prices since the econo- my of these countries are dependent on the exports of commodities. Arijit Dutta Chowdhury, Business Head – Projects & Defence, Ashok Ley- land, specifically highlights oil crisis as the major challenge to growth in Africa. Africa, in general, is a lucrative market for Indian exporters, particularly from sectors like automobiles, textiles, etc. “Countries like Nigeria and Angola are dependent on oil and therefore are high- ly prone to currency fluctuations when oil prices drop. Hence, at times, it be- comes difficult to sustain operations in those countries. However, the opportu- nities in that region always outweigh the risks and challenges,” feels Chowdhury. POLICY & DUTY PANGS Apart from currency volatility and oil crisis, environmental restrictions and the withdrawal of Generalised Scheme of Preferences (GSP) by EU on organic chemicals posed formidable challenges to the organic chemical sectors. “Besides, the government has signed various FTAs (ASEAN, IKCEPA, etc.) due to which there is a surge in imports and there are also several cases of duty inversion im- pacting the stability of the units manu- facturing those products,” says Satish W. Wagh, Chairman, Chemexcil. K. K. Lalpuria, Executive Director, Indo Count Industries Limited concurs, “In some export markets, India is at a disadvantage compared to its peers due to import duties and certain trade pacts. For instance, Europe offers duty waivers to Bangladesh and Pakistan whereas In- dian players are paying a duty of 9.6%. We face a similar situation in many other markets.” Lalpuria expects the govern- ment to work towards streamlining its FTAs so that India remains competitive. NEED FOR SPEED Our Star Exporters also want the gov- ernment to play a more proactive role to drive exports. Many like Vikas Agarw- al – Head, International Business, Intex Technologies, a leading manufacturer and exporter of mobile phones, feel that there is a need for more clarity and speed when it comes to the advantages extend- ed to these export houses. Agarwal believes that India doesn't do enough for homegrown manufacturers to encourage them to export, and that the ecosystem required to manufacture and export from India, especially in hi- tech manufacturing, is developing at a slow pace. Sahai of FIEO agreeing with Agarwal says, “If we want to garner a greater share, we have to move into those categories where trade volume is high. For example, in high and medium tech- nology sector such as aircraft and elec- tronic equipment manufacturing Chi- na’s exports share is approximately 45%, whereas India is still languishing at 9%. So, the strategy of the country, when it comes to growing our exports, should cover both the traditional sectors and the emerging sectors." The textile sector though, largely be- cause it generates a large numbers of jobs, has been receiving support from the government when it comes to exports. In 2016, the government announced a Rs.6,000 crore package to boost the sector. Ashok Rajani, Chairman, AEPC says, “These incentives have ensured bet- ter reimbursements of taxes and hence improved cost competitiveness. Howev- er, the industry is yet to see the full bene- Continued focus on research and development is a strategy commonly found across our Star Exporters. They realise that innovation is critical to stay ahead of the curve. APRIL 2017 II THE DOLLAR BUSINESS 29 fits of the scheme as the most important incentive, reimbursements of state levies of around 3% are yet to reach the hands of the exporters.” Even in pharmaceuticals sector, gov- ernment has been working towards im- proving the impression of Indian pharma brands abroad. Bhaskar of Pharmexcil says, “The Department of Commerce has launched a unique ‘Knowledge Exchange Programme’ wherein international reg- ulators are invited to understand Indian drug regulatory mechanisms.” Under this programme, Pharmexcil has invited senior officials from Kenya, USFDA, UK and Egypt so far. Quality and regulatory compliance sessions are also conducted by subject matter experts from US and EU in almost all events.” Others feel that more than incentives the government should focus on improv- ing infrastructure. Amin of CLE feels that the certain aspects like logistics and transportation, which add on to the cost of production, as well as guidance regard- ing environment laws (especially in the case of tanneries) should be looked into by the government. He is hopeful that the leather industry will get a boost, with a package similar to one the textile industry has received from government. Major exporters also feel that policies with respect to inputs such as power, wa- ter and labour need to be streamlined as well. “Power costs have been a major hur- dle. We would like to see a specific policy on that front, benefiting the manufactur- ers. Also, adequate steps need to be taken to provide labour reforms to achieve in- creased productivity,” says Lalpuria. Sahai too feels that a little more sup- port is required from the government to help bring Indian export houses at par with their counterparts in competing nations. He accedes that the government provides a lot of non-fiscal support to star export houses. In addition, some of the four and five star export houses are also recognised as the nominated agen- cies for the gems & jewellery sector for the direct import of gold and silver. “But I feel that four and five star export houses should be provided with some upscaling opportunities, similar in line with that provided in the countries like Japan and South Korea. In those countries, these export-oriented companies have con- tributed to the country’s growth at an extremely large scale.” According to him, the double weightage on FOB or NFE on export should also be extended to four and five star export houses. As of now, only one star export houses are allowed to avail the scheme. “If that can be extended or restored back, it will encourage many four and five star export houses to move up the value chain,” he adds. While Mehta of Rajesh Exports feels that the government has been provid- ing support to most of the export busi- nesses, he believes there is still work to be done when it comes to reducing for- malities and time taken for clearance of shipments, etc. The government, howev- er, has been working to overcome these challenges with the recently announced Trade Infrastructure for Export Scheme (TIES) that replaces predecessor ASIDE. KEEP ON GLOWING Despite these challenges, our Star Ex- porters have set themselves ambitious export targets. Cyient aims to touch the $1-billion revenue mark by 2020, most of it from exports. Indo Count believes that it will soon be able to challenge China's supremacy in fashion and institutional bedding. Su-Kam plans to change the way appliances are run today by con- necting their solar panels to power grids. Ashok Leyland wants to be counted among the top ten truck makers in the world within the next five years. Hyun- dai plans to start exporting to developed markets like Australia from India and Kiran Gems wants to be known as the largest diamond manufacturing estab- lishment in the world. In the face of global economy that refuses to budge, uncertainties in the commodities market, a rising tide of iso- lationism across the globe and the possi- bility of policy jolts from the predictably unpredictable Donald Trump adminis- tration, these goals may not be easy to achieve. But then these are our Star Ex- porters! At a time when others have rued the lack of government support, they have gone out on a limb to capture new markets and introduce new products and services. They are stars with or with- out recognition and they will continue to shine bright come what may! A LITTLE MORE SUPPORT FOR STAR EXPORTERS WILL FUEL THEIR REVENUES Services exporters are changing their business model to win more clients.
- 16. 30 THE DOLLAR BUSINESS II APRIL 2017 COVER STORY STAR EXPORTERS Hyundai Motor India Limited (HMIL), the second largest car manufacturer in India, has been surprising the industry with its spectacular performance year after year. What's more? HMIL has been India’s biggest car exporter for the last 10 years consecutively. In an exclusive interaction with The Dollar Business, Y. K. Koo, Managing Director & CEO, HMIL, reveals the road ahead for this exporting giant. INTERVIEW BY ANISHAA KUMAR TDB: In February 2017, Hyundai Motor India Limited reg- istered a sales growth of 4% year-on-year in the domestic market. You also managed to pull off record sales in Novem- ber last year despite demonetisation and other policy chal- lenges. Did you take any specific measure to boost sales? Y. K. Koo (YKK): In February 2017, Hyundai India reported domestic sales of 42,327 units and in November 2016 it record- ed highest-ever monthly domestic volume of 50,016 units. De- spite low customer sentiments due to demonetisation, Hyund- ai India posted a steady growth and good customer response. Unique and innovative customer benefit schemes were offered across India to excite customers and boost sales. TDB: In FY2016, Hyundai India sold 6,43,269 cars, of which 1,67,268 cars were exported. How is FY2017 shaping up? YKK: FY2016 was a year of excellence for Hyundai India. We continued to build upon our strength of innovation through customer centricity and strengthened our product portfolio with models such as Elantra and Tucson. This year looks prom- ising with the entire industry optimistically looking forward to a good growth. Realising that, Hyundai recently launched the 2017 Grand i10 through an innovative digital launch. The dig- ital launch received an overwhelming response of more than three million views across all Hyundai’s social networking sites. We have seen growth across all models, especially Grand i10, Elite i20 and Creta. TDB: What are your major markets when it comes to ex- ports? Which range of products do you export more? YKK: Hyundai Motor India is currently exporting to 87 coun- tries across the globe. The models that are being exported are Eon, Grand i10, i20 and Creta. The major markets for us are Latin America, Mexico, Chile, Peru, Panama, Africa and the Middle East, South Africa, Algeria, Tunisia, the Asia Pacific, Philippines and Nepal. All the cars that are exported from our plant are customised as per market requirements of the desti- nation country with respect to safety features, design, govern- ment regulations and customer demand. Going ahead, we are exploring the opportunities to export to Australia as well. TDB: In terms of exports, what challenges does Hyundai Motor India face? YKK: Exports are dependent on several unforeseeable factors including the political and economic conditions in the destina- tion countries. Also, changes in government regulations related to banking, financing, imports taxes, etc., have an impact on exports. However, despite these challenges, our exports have been growing continuously because of the quality and design of our cars. TDB: Hyundai has been very successful in India over the last two decades. What are your plans for the future? YKK: Two qualities have defined Hyundai’s last two decades in India – learning and innovation. Utilising these qualities in the next four years, we plan to expand and strengthen our product lineup with eight new launches that will be equipped with new technologies. Out of these eight models, three will be new segment products and five will be full-model change products, apart from the regular product enhancements with facelifts and special editions. We are also refreshing the price value equation of our existing products to enhance the reach of our modern premium portfolio. We also expect exports to go up as exports from India play an integral role in the overall global operations of Hyundai Motor Company. TDB: How has the Union Budget 2017 been for the sector? YKK: We had a great start in 2017. Hyundai has recorded a growth of 7% in the domestic passenger vehicle segment for the month of January and February, over the respective months last year. Such pragmatic results are due to an increase in cus- “EXPORTS DEPEND ON UNFORESEEABLE FACTORS” Hyundai Motor India Limited APRIL 2017 II THE DOLLAR BUSINESS 31 INTERVIEW BY ANISHAA KUMAR tomer visits and conversions at the dealership on the strength of improved customer confidence generated by the Union Budget, which has further positively impacted the customer disposable income and overall sentiments across the industry. TDB: How has the 'Make in India' initiative impacted Indian automobile sector in general and Hyundai Motor India in particular? Will the initiative be able to establish India made cars in developed markets? YKK: Hyundai India has always believed in the “Make in In- dia-Made for the World” philosophy since its inception and we have retained our export lead for the last 12 years. We have made our brand synonymous with global customers’ aspira- tions and offered products that are made in India and conform to the global benchmarks of quality. The initiative has resulted in customers around the world being able to access the best global technology and quality at an affordable price. TDB: Premium hatchbacks, mid-size cars and SUVs seem to be the flavour of the season. What is your strategy for these segments in the year ahead? YKK: All Hyundai products are either trendsetters or bench- mark creators. Three of our products – the Grand i10, Elite i20 and Creta – offer unmatched value to the customers, backed by performance and Hyundai’s assurance of global quality. Be- ing the winner of Indian Car of The Year (ICOTY) for three consecutive years, the Grand i10, Elite i20 and Creta have re- defined their respective categories. While the new 2017 Grand i10 rewrote the rules in the hatchback segment, the Elite i20 has captured 44% market share in the premium compact cate- gory. Creta, on the other hand, has raced to over 100,000 book- ings within eight months of its launch. To further strengthen the brand image of Hyundai as an innovative and progressive brand, in Auto Expo 2018, we will showcase our strong hybrid IONIQ. In the second half of 2018, of the three new segment products, we will be introducing a new family-oriented con- cept and design-led product, followed by a sub 4-meter SUV in the first half of 2019. TDB: Besides manufacturing good cars, Hyundai is also known for its CSR activities such as the Chakka Chakka Playground, children safety quiz, children safety fairs, etc. Are there any new initiatives on the anvil? YKK: As a caring and responsible manufacturer, it’s our duty and responsibility to apprise the masses about the importance of road safety. In November 2015, in association with the Ministry of Road Transport and Highways, we had launched the Safe Move campaign. Safe Move campaign is a mega ini- tiative and we aim to spread the awareness through different platforms to make it a mass movement. This traffic safety cam- paign reached out to over 90,000 students across 142 schools and 100,000 residents across 146 RWAs in 11 cities. We also released #BeTheBetterGuy, innovative safety awareness videos on various digital platforms, featuring Hyundai's corporate brand ambassador Shah Rukh Khan. In 2017, Hyundai will work aggressively towards developing an ecosystem of safer roads through our road safety programmes and we will also look forward to spreading the message of heritage conserva- tion through our Happy Move 2017 initiative. TDB: The company is also contributing towards 'Skill India'. Could you elaborate a bit more on this? YKK: When it comes to ‘Skill India’, we have adopted 33 gov- ernment ITIs and 5 polytechnics – with at least one institute in each state and in each zone. Students from the ITIs would have an opportunity to be absorbed as technicians in our compa- ny. Near our factory, we have completed three 'Dream Village' projects, with the last one being inaugurated on February 3, 2017. This year, we have ambitious plans to adopt 60 villages in Sriperumbudur taluk in Tamil Nadu. Y. K. Koo MD & CEO, Hyundai Motor India Ltd. YEAR OF ESTABLISHMENT 1996 STAR STATUS Five Star PRODUCT TYPES Automobiles EXPORT MARKETS Europe, Middle East, Latin America and Asia TOTAL SALES IN CY2016 6,62,056 Units TOTAL EXPORTS IN CY2016 161,517 Units SHARE OF EXPORTS IN SALES 24.39% HEADQUARTERS New Delhi
- 17. 32 THE DOLLAR BUSINESS II APRIL 2017 COVER STORY STAR EXPORTERS INTERVIEW BY ANISHAA KUMAR TDB: What inspired you to foray into the business of gold jewellery exports? Rajesh Mehta (RM): My father used to supply stones (di- amonds and other gems) to jewellers while my brother (Prashant Mehta) and I used to accompany him. At that time (1985-1988), manufacturing was not happening in the country. Because of the Gold Control Act, gold was not freely available. It was controlled and sold by the Reserve Bank of India. Un- der this Act, manufacturing of gold was practically banned. We thought that if we needed to manufacture, first we needed to understand the business basics. Manufacturing was allowed only if you were an exporter. And that was the reason we got into exports. TDB: In recent years, Rajesh Exports has shown an impres- sive growth. In four years leading to FY2016, revenues leapt more than six times to Rs.1,65,220 crore. What has the suc- cess mantra been? And how about some of the biggest chal- lenges that you would've faced over the years? RM: I would like to attribute the company’s success to our “will” to grow and the dedication, focus and hard work that our team put in to ensure that this “will” succeeds. Additional- ly, doing things with the right spirit and honesty complements the main goal. I think that is the primary reason for the growth that we have achieved. In terms of challenges, there were many in the past and they keep popping up even now. However, the biggest challenge we faced was to rise from scratch to a level where you get counted. It’s true that in business, there is always a set of challenges as you scale up and progress from one stage to another. I think we successfully negotiated those challeng- es while taking off from zero and even at later stages. It’s like when you are playing a sport, you move from the local to state to national and then finally to representing your nation at the international level. At every level, you face the challenge of sur- passing the previous level. TDB: In your opinion, what gives Rajesh Exports – the larg- est exporter of gold in India – an edge over its competitors? RM: We are the largest exporter of gold in the country and we have been so, I think, for around two decades now. Our ex- pertise, volumes in the business and the infrastructure that we have built over the years give us that edge. Simultaneously, we have been able to utilise that edge to grow and fine-tune our business. We bring that edge to practice as much as possible. TDB: Could you take us through your export markets? Is there any new market you are looking to expand to? RM: We are exporting to most of the countries around the world. We consistently look at finding new markets. I think, we currently have about 35-40% share in the Indian exports (of gold jewellery and other allied products) and we hope to increase our exports by adding newer products to our portfolio and expanding to newer geographies. TDB: Dubai is one of Rajesh Exports’ main markets. The re- cently announced import duty hike by the Dubai customs to 5% – how do you see its impact in the long run? RM: We use Dubai as a base for redistribution to other major markets across the world. That’s why in terms of numbers, we export a substantial amount of gold to Dubai as it forms a hub from where we redistribute it. The recent hike in gold import duty has not had much of an impact on our exports to Dubai as our products are primarily re-exported from there. TDB: How has the industry changed over the years? Has it become easier to export gems and jewellery from India? RM: Previously, Indian products were not considered consis- tent. So, wherever we went for export orders, we practically faced the same challenge. People used to say “Indian exporters come and take the order for one thing but they supply some- thing completely different.” We had to convince the customer “WE BEGAN EXPORTS BY GENERATING TRUST...” Rajesh Exports If each institution in India was as 'efficient' (manpower-wise) as Rajesh Mehta-led Rajesh Exports is, India's GDP in FY2016 would have been about $98,692 trillion – about 6,000 times bigger than USA's! An 'exponential growth focus' has enabled Mehta to create a behemoth with an overwhelming presence on domestic and foreign soils. The pride in being tagged 'India’s No.1 gold exporter' is a luxurious one, one that Mehta can afford. APRIL 2017 II THE DOLLAR BUSINESS 33 by first supplying samples and then generating trust. That was one of the major challenges for us as exporters − to represent 'Brand India'. Today, ground reality has changed. India has cre- ated its own brand and our exporters are taken more seriously. So, now it’s relatively easier to export gold jewellery. TDB: Are you concerned about the impact of demonetisa- tion and the volatility in international gold market? RM: I have not seen any major impact on our business from demonetisation. Of course, demonetisation has had an impact on several other businesses. But I believe because of demoneti- sation, people’s trust in gold has increased even more and that may eventually prove to be a boon for the jewellery business as it may lead to people investing more in gold. I really don’t see any negative impact of it in the long run. TDB: In 2015, Rajesh Exports debuted on the Global For- tune 500 list, replacing ONGC. Are you proud of the feat? RM: We were pleased. We could see our efforts of building a world class company bearing fruit. It was a newer sense of sat- isfaction for us but at the same time, it brought an added sense of responsibility. Though Rajesh Exports has been responsible in what it has done till date, we realised that being recognised at this scale meant that we needed to be more responsible in future. TDB: In India, your Shubh Jewellers retail brand is most present in Karnataka. How to you plan to expand your retail footprint in India? RM: Shubh Jewellers is our primary retail brand. We are plan- ning to open more showrooms across India and then globally. Currently, we have 81 showrooms in Karnataka and going for- ward, we will be expanding a little more in Karnataka and then in other parts of South India. After that, we will open stores across India, and from there, we plan to go global. So, Shubh Jewellers continues to be a focus area for our business. TDB: The buyout of Valcambi helped Rajesh Exports grow in all verticals of the gold supply chain. What next? RM: We will improve our retail presence with more brick and mortar stores in India and abroad. We are also looking at establishing an e-commerce platform so that we can mar- ket bars of gold from Valcambi around the world, directly to customers. Apart from e-retailing, we will also be get- ting into duty-free shops at airports to sell Valcambi brand gold bars. TDB: What is the difference between marketing for the domestic market and for the international market? RM: Overseas, as we cater to large wholesalers only, the mar- keting strategy is different. In the home market, we supply to showrooms and now operate in retail as well. In the interna- tional market, marketing is primarily about relationship build- ing, more about a product and a price point. In India, market- ing is more of a retail kind, like B2C. TDB: In a traditional business like gold, what role do inno- vation and R&D play? RM: Innovation plays a very important role in any industry and that is required in gold trading also. Products have evolved substantially over time. So, what we had earlier is completely different from the product we have now. The focus is now on the design, look and weight of the jewellery (because prices are very high). As customers’ preferences have changed, now you see lighter (weight) jewellery in the market. TDB: As an exporter, do you think the government’s assis- tance to the gems and jewellery sector has been enough? RM: The government has been giving a reasonable amount of support to most export businesses. However, the support can be greater. It can do more in terms of reducing formalities, reducing times taken for shipment clearances, etc. Rajesh Mehta Chairman, Rajesh Exports YEAR OF ESTABLISHMENT 1989 STAR STATUS Five Star PRODUCT TYPES Gold and Gold Products EXPORT MARKETS Europe, Middle East, North America, Europe, Asia TOTAL REVENUE IN FY2016 Rs.1,65,220 crore REVENUE FROM EXPORTS IN FY2016 Rs.33,044 crore (Excludes sales of Bullion) SHARE OF EXPORT IN REVENUE 20% for exports HEADQUARTERS Bangalore