India to be a $3.5 trillion economy by 2020: Sonal Varma, Nomura

A gradual economic recovery
is under way in India, and the economy
can easily hit the $3.5 trillion mark in
next five years, provided the government
keeps the reform momentum going,
Nomura India Executive Director and India
Economist Sonal Varma said in a webinar
organised by ETMarkets.com on
Thursday.
For India to become a $3.5 trillion
economy, GDP has to grow at 7.5-8 per
cent on a sustainable basis, which is not
that tough, given the reforms roadmap
that the government has. Lower crude oil
prices will help contain inflationary
pressures and fiscal deficit, which will in
turn draw higher foreign direct investment,
she said.
FDI or foreign direct investment is a more
stable form of capital flow, which can
strengthen the fundamentals of any
economy. Data suggests the current
account deficit was financed by FDI flows
this time around, which has put lesser
weight on the government’s balance
sheet, which is a big positive.
“We are already a $2 trillion economy,
growing at a nominal rate of around 11.5
per cent (7.5 per cent real + 4 per cent
inflation ),” Varma said. “It is not a tough
ask. What we need to do is ensure that
policies are enacted that can sustain our
growth at 7.5-8 per cent without
generating inflationary pressures,” she
added.
The green shoots visible right now are FDI
flows and private capex, which are
showing a pickup. Varma said various
stalled projects have been revived, which
is a positive trigger for both the economy
and the markets.
There were less number of stalled
projects in June 2015 compared with the
year ago period. Private capital
expenditure this year is much better than
past two years. Apart from that, the
government has been on a reform
overdrive and has announced various new
projects in chemical products, metals,
electricals, transport services,
construction and real estate segments.
However, business confidence is still
mixed. Although it had improved post
elections in mid-2014, but that tempo
seems to have been lost, the Nomura
economist said.
According to Varma, weak global demand,
especially the slowdown in China, is also
weighing on the market sentiment. A good
budget, clearer signs of domestic growth
recovery and faster reforms can be
positive triggers for the market.
The forthcoming budget will be important
for markets and economy. However,
Varma does not see any populist measure
from the government even though the
outcome of the Bihar elections were not
in line with what most market participants
were hoping for.
What can strain on India’s balance sheet
is impact of the Seventh Pay Commission,
which could be as high as 0.7 per cent of
GDP. The government has to figure out
ways to finance this expenditure. Even
most global credit rating agencies have
voiced their concerns over the same.
The total impact of the pay commission
award is estimated to be Rs 1,02,000
crore, which would be 0.7 per cent of
GDP. Of this, the central government will
have to budget for around 0.5 per cent of
GDP and the rest has to be paid by
railways, Varma said.
Asked about various avenues from which
the government can raise money, she said
it may have to hike the service tax rate
(14.5 to 16 per cent) or/and excise/
custom duties or go for higher asset sales
(not only disinvestment, but also telecom
spectrum).
She said government’s capital expenditure
(as a percentage of GDP) may take a hit
as a result of the pay panel award.
Global rating firm S&P has already
expressed concerns over the slowdown in
the pace of reforms. India’s rating can
come under stress if the government fails
to pursue its reforms agenda and
overshoots the fiscal deficit target, it said.
“We are not expecting any populist
measure in the budget. But credit rating
agencies would want to see the impact of
the Seventh Pay Commission on fiscal
prudent (both centre and states), reforms
outlook (especially GST ) and growth
outlook,” Varma added.
“We are not expecting a downgrade, but
no upgrade either. The outlook is stable
for now,” she said.
US Federal Reserve rate hike:
Commenting on concerns over the
impending rate hike by the US Federal
Reserve, Varma said there might be some
nervousness ahead of the hike, but it
would also clear the uncertainty.
Nomura’s view is that the Fed will hike
rate in December, but the future pace
would be gradual: only two 25bp hikes
throughout 2016. So, the hikes should not
be too disruptive, she said.

India has the potential to become a multi-trillion dollar economy with a per capita income of about $ 40,000 by 2050

India has the potential to
become a multi-trillion dollar economy
with a per capita income of about $
40,000 by 2050 if it manages to grow at
seven per cent annually for the next
30-35 years, a top World Bank official has
said.
“If we can manage to grow at seven per
cent for next 35 years, we will not only be
the second largest economy in the world
at that time but we will be prosperous and
people will be rich enough,” World Bank
Executive Director for Bangladesh, Bhutan,
India and Sri Lanka Subhash Chandra
Garg said.
Addressing the Indian-American
community at the Indian Consulate, Garg
said India has the potential to become a
multi-trillion dollar economy with a per
capita income of about $40,000 by 2050
as against the current $2,000 but to
achieve that it will have to grow at seven
per cent annually for the next 30-35
years.
However, he said that achieving and
sustaining a seven per cent growth rate
for 35 years is “very difficult” and “would
require a lot of transformation in the way
we manage our economy”.
He underlined that India will have to
transform its agriculture completely, grow
its services and manufacturing sectors
and give a boost to healthcare and
tourism.
Garg noted that a “big challenge” will be
to get people out of agriculture and use
them in the manufacturing and services
sectors, while also ensuring that
agricultural production in the country
increases.
He acknowledged that the Indian
government’s push on manufacturing
through its ‘Make in India’ initiative is
required to boost the sector in the country
and contribute to economic growth.
“We will need to produce for us and
manufacturing will be a story which
requires another transformation,” he said
adding that a much bigger concentration
and necessity will be to boost the
services sector.
About 55 per cent of India’s population is
already working in the services sector but
the country has to aim to bring this to
80-85 per cent of the population.
Noting the advantage of demographic
dividend which India has, Garg said there
is need to transform this young population
into extremely productive.
“We should plan to export one-two million
people every year with new skills all over
the world,” he said, adding that the
government should pursue a policy to
equip its young people with training and
skills and send them abroad to provide
services in various fields.
He noted that the World Bank is working
very closely with the Indian government
and contributing to making its vision of a
strong and prosperous nation a reality.
Garg said from the smart cities initiative
to the Swachh Bharat campaign, the Bank
is partnering with the government in
projects that are aligned with its policies.

Top 5 battery companies in India in terms of revenue.

               Battery companies have bright future due to increase sales of electric vehicle and the uses of robots in future

1. Exide Industries Ltd
Company Established & Founder:
Founded in 1947 by TV Ramanathan who
is also MD and CEO of the company
Manufactures: They manufacture
batteries from 2.5Ah to 20, 400Ah. Some
of the types are VRLA, Lead Acid and
tubular batteries, UPS, inverters etc. Some
of their most famous brands are Exide, SF,
Sonic and Standard Furukawa .
Revenue: Annual Revenue is around Rs
55,000 Million to Rs 60,000 Million
Manufacturing Facility: 3 in
Maharashtra, 2 in West Bengal, 1 in Tamil
Nadu and 1 in Haryana
Website: http://www.exideindustries.com
2. Amara Raja Batteries Ltd
Company Established & Founder:
Company was established in 1985.
Currently Jayadev Galla is the MD of the
company.
Manufactures: Amara Raja is one of the
largest manufacturers of lead acid
batteries for industrial and automotive
applications. They manufacture VRLA and
lead acid batteries. Their powerful brand
names are Amaron and Powerzone .
Revenue: Annual Revenue of the
company has risen from Rs 20, 000
Million to Rs25,000 Million
Manufacturing Facility: One in Andhra
Pradesh, Renigunta, the company also
exports its products to Asia Pacific, Africa
and the Middle East.
Website: http://www.amararaja.co.in
3. Luminous Power Technologies Pvt Ltd
Company Established & Founder:
Luminous Power Technologies Pvt Ltd was
founded in 1988 and Manish Pant is the
managing director of the company.
Manufactures: They manufacture
batteries in 12V to 1200Ah to 1.75vpc.
They manufacture VRLA/SMF, flat plate,
solar tubular monobloc and automotive
batteries. Popular brand names are
Electra and Racer brand .
Revenue: The revenue has increased
from Rs 10,300 Million to Rs 10,800
Million
Manufacturing Facility: Total eight
manufacturing units based in Himachal
Pradesh and Maharashtra and there is one
based in China also
Website: http://www.luminousindia.com
4. HBL Power Systems Ltd
Company Established & Founder:
Company was founded in 1977 and
Avinash Arora is the vice president sales
of the company.
manufacturerss: HBL manufactures
custom designed, high-quality, cost
effective DC power systems. HBL caters to
Aviation, telecom, railways and many other
sectors. HBL manufactures Nickel
Cadmium pocket plate, fibre plate and lead
acid batteries. Popular Brand names are
Ignite and Ride-on
Revenue: Rs 11,000 Million to Rs 11,200
Million
Manufacturing Facility: Seven units
located in all over the country.
Website: http://www.hbl.in
5. Su-Kam Power Systems Ltd
Company Established & Founder: Su-
Kam power systems was founded in the
year 1998 and Kunwer Sachdev is the
founder and Managing Director.
Manufactures: Su-Kam manufactures
over 70,000+ batteries per month. It is
present in 70 different countries. They
develop mainly back up systems like SMF,
lead acid, automotive and tubular
batteries. Su-Kam itself is a brand name
which is very popular.
Revenue: Total annual revenue is Rs
7000 million to Rs 7200 million
Manufacturing Facility: Total Seven
facilities in Baddi, HP and Nepal
Website: http://www.su-kam.com

2025 see a doubling of the total revenues earned out of tourism in India.

Tours and travel firm Cox & Kings
reported a consolidated net profit of Rs
64.56 crore for the fourth quarter ended
March 31, 2015. However, company’s
consolidated net sales declined marginally
by 0.83 percent to Rs 484.12 crore
during January- March quarter as against
Rs 488.21 crore for the same period a
year ago.
Peter Kerkar, director, Cox & Kings says
the loss in net sales was because in
fourth quarter because of subdued
outbound tourism and slack education
travel sector. According to him the outlook
for FY16 is very robust on back of
expectation of a double digit growth in
education travel sector in the next quarter,
which is their biggest segment and on
robust predictions by WTCC on India
travel growth. Plus relaxations of visa
rules into India will also help, says
Kerkar.
The current net debt for the company is
around Rs 2300 crore and Kerkar expects
it come down by another Rs 250-300 in
FY16 crore.
He is also confident of steady EBITDA
margins for the current fiscal too.
Below is the transcript of Peter Kerkar’s
interview with Sonia Shenoy & Reema
Tendular on CNBC-TV18.
Reema: Your net sales have come down
by nearly a percent in this quarter? Is it
only to do with the slack season which
impacted your revenues or was there any
other factor? What is the outlook on your
growth in FY16?
A: This quarter is our most subdued
quarter particularly in terms of outbound
which starts from the first quarter of this
year. Our prediction for the next year
going forward is quite robust because our
biggest segment today in terms of
earnings is our education division which
is primarily based in Europe and Australia.
We have got some very good news that
the estimated growth of primary school
kids is 12 percent up in the UK, which
means that we can look forward to some
double-digit growth in this education
travelsector which for us is our strongest
single product.
As far as India goes, again we are
incredibly bullish because World Travel &
Tourism Council (WTTC) has come out
with a very good prediction for Indian
travel growth. They are saying that by
2025 we will see a doubling of the total
revenues earned out of tourism in India.
So given these two trends and the
relaxation of visa rules into India, we
should see a fairly robust year for this
coming financial year.
Sonia: So double digit growth is what you
are expecting in your education business
and India looks bullish as well what will
all this do to the margins? Your margins
are still not yet at the double digit mark.
For this quarter the adjusted margins are
at 9.5 percent. For FY16 what could the
margin trajectory look like?
A: If you look at our EBITDA margins for
the last 3 years they have been incredibly
robust and very steady. In fact they have
been at 40 percent plus margin for the
last three years and we don’t see us
changing that margin base. Because it is
a very steady income growth and this
quarter as we said is anomaly because it
is the slack season for our education. Our
education centers has shut down over the
winter period so you do see a slight
decline in that area. However, if you see
the whole year year-on-year (YoY) our
margins are relatively very steady on the
EBITDA level.
Reema: Post your previous interaction you
had indicated that you are guiding a 15 –
20 percent EBITDA growth for the
consolidated entity in FY16 and a free
cash flow guidance Rs 400-500 crore.
Would there be any change to this
guidance on margins as well as cash
flow?
A: We came out with that guidance and
we will stand by that guidance so what is
significant for this year is that if you see
our balance sheet last year, our gross
debt was almost Rs 5,590 crore and we
have managed to reduce that gross debt
by Rs 1,800 crore. So it is a significant
reductionin our debt.
We feel that the whole company outlook
has completely transformed after this
balance sheet item and we believe that it
should affect our future very significantly
going forward.
Sonia: There has been a substantial
reduction this quarter so where does your
debt stand at currently and how much can
you reduce it further by the end of FY16?
A: Currently, our net debt stands at Rs
2,300 crore odd and if you see our last
quarter we did around Rs 57 crore of
interest payout as opposed to Rs 84-85
crore in previous quarter, so there was a
saving of nearly Rs 20-22 crore quarter-
on-quarter (QoQ). Therefore, the impact
on us just in terms of interest reduction
should be close to a Rs 100 crore a year
which should go straight to our bottom
line.
In terms of free cash as we gave the
guidance, we will standby which means
that we should see our debt coming down
in the range of Rs 250-300 crore
comfortably YoY.
Reema: The company has a massive
thrust on growing Meininger. In fact you
said that you would like to add Rs 12,000
beds over there in the next 3 years. Any
change to that assessment? How much of
those total numbers of beds would be add
in FY16?
A: What we did was because this is a
capex model we tied up with the largest
European Hotel and Real Estate which is
called Foncière des Murs. They have
dedicated 400 million euro to assist in the
buying of our properties which we then
lease from them. This is why we are so
confident of delivering a total of 12,000
beds in a period of four years.
Obviously, we expect that these beds will
come through from year 2017-2019 rather
than 2015 because a lot of these are new
bills. It takes us between 18-24 months to
deliver on these properties. So you will
see the real uplift in terms of beds only
after 2017. So, 2016 is a muted year we
have just done the agreement with them
and we are looking at the properties to
invest as we speak.

LED lights to help India save $2 billion in four years: Piyush Goyal

“I hope to utilise these savings to power
the homes of 280 million Indians deprived
of energy access, sadly, 67 years after
independence,” Goyal said.
NEW DELHI: The government is planning
to save $2 billion in four years by cutting
down on energy usage by 10,000 MW
during peak hours by promoting LED
lights, Power, Coal and Renewable Energy
Minister Piyush Goyal said today.
“The plan is to cut down energy demand
by nearly 10,000 MW in peak hours by
changing to LED lights in street and
homes by 2019. This itself will save
power to the tune of $2 billion,” Goyal
said in a question and answer session
with Facebook users.
Apart from this, the government is
focusing on star rated appliances and
improving industrial energy efficiency for
an overall saving of about 100 billion
units a year, that is 10 per cent of
country’s current consumption, he said.
“I hope to utilise these savings to power
the homes of 280 million Indians deprived
of energy access, sadly, 67 years after
independence,” Goyal said.
Apart from lowering LED lights prices,
Goyal said the government is taking steps
to boost rooftop solar power production.
“We are hoping to scale the demand for
rooftop solar and in the next seven years –
we have plans to roll out 40,000 MW for
rooftop solar, which is massive.
Concurrently, we will start procurement
through reverse bidding which should
help bring down the prices. To what
extent the prices will come down, I cannot
say at this point,” he said.
On forecast of a deficient monsoon, the
Minister said, “Obviously a deficient
monsoon is a matter of concern to all
policymakers. We are preparing ourselves
to increase coal-based power generation
significantly, just like we did last year due
to delayed monsoon, so that it can
compensate for the lower hydel power
and meet the increased demand of a
agrarian pumps to provide water.”
Further, based on the need assessment in
different areas, supplementary public
works will be initiated to provide alternate
employment, he said adding fortunately,
the food stocks are at comfortable levels.
On huge transmission loss, Goyal said the
problem was more sever in eastern and
northern parts.
“In states like Bihar, it’s upwards of 40
per cent. We have started two new
schemes for rural and urban areas
focused on upgrading the T&D
infrastructure by feeder segregation of
powerlines to farms, extensive metering
along transmission corridors, smart
meters, and advanced communication
systems to integrate consumption data
with billing so that we can address this
problem of power theft and distribution
losses,” he said.
Goyal also said government is taking
comprehensive steps to check coal mafia
operating in mines including installation
of CCTVs to boost output especially in
eastern region mines

Govt proposes to get 7M electric vehicles on road by 2020

Union Minister of Heavy Industries and Public Enterprises, Anant Geete, launched Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) with an aim to promote and encourage sale of electric and hybrid vehicles. Its implementation could mean benefits and subsidies of up to 1.38 lakh per smart car.

The Government aims to bring 6-7 million (60-70 lakh) electric and hybrid vehicles on road by 2020. For which, an estimate of 14,000 crore will be required over a period of 5 years to successfully implement the scheme.

As of now, Rs 795 crore has been allocated which will be utilized under Phase 1, which has been again broken down into two 1-year period: 2015-16 and 2016-17. Out of Rs 795 crore budget, Rs 500 crore would be utilized for giving incentives alone.

The incentives and budget allocations are as follows

Vehicle Segment	Minimum incentive `	Maximum incentive `
2  wheeler scooter	1800	22,000
Motorcycle	3500	29,000
3  wheeler Auto rikshaw	3300	61,000
4 wheeler cars	11,000	1,38,000
LCVs	17,000	1,87,000
Bus	30,00,000	66,00,000
Retro Fitment Category	15 % or ` 30,000 if reduction in fuel consumption is 10-30%	30 % of Kit price` or ` 90,000 if reduction in fuel consumption is more than 30 %

 

To implement the Scheme to its optimum, the ministry has divided it in 4 sections

1. Smart cities (All cities which are being currently converted into smart cities)
2. 6 major metropolitan cities: Delhi-NCR, Greater Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Ahmedabad.
3. Cities where more than 1 million citizens reside
4. All cities of North East

The reimbursement will be directly provided to the end customer by the manufacturer, who himself will receive it from DHI (Department of Heavy Industry). However, the scheme is limited to vehicles made or assembled in India, imported electric or hybrid vehicles won’t be accounted for under this scheme.

As per rough estimates, if 6-7 million electric vehicles are able to run on Indian roads by 2020 then 9500 million litres of fuel would be saved, the value of which is Rs 62,000 crore (at the rate of Rs 64.95 / litre) according to Track.in.

The official press release talks about the scheme and pilot plans to encourage the initiative by the government.