ISSUE 7

INSIDE THIS ISSUE • Moody’s estimates of GDP growth rate • Industrial Growth rate figures • Bhusan Steel lands up in trouble • IFCI to raise Rs.2000 Cr via bonds • India Post set to hit ground running when it gets banking license

TAPMI Newsletter Manufacturing Hub “We want a to give a

collective opportunity

to the world….

Come make in

India….I invite you”

People expected that it will be Narendra Modi's big-bang block buster speech that will lay out the roadmap, but this has not happened. Would you agree with me that the concrete roadmap is still missing? This speech is directed at all of India. The purport of speech is to instill a sense of pride in the future of the country. There are five or six elements in the speech that obviously reflect a sense of priority, whether it is women, government servants or sanitation, whether it is skills, manufacturing, safety or security. The Key takeaways from the speech are: Promote Made in India: Giving an open invitation to the world to make India a manufacturing hub, Modi said, "Come make in India. Be it plastics or cars or satellites or agricultural products, come make in India."

Pradhan Mantri Jan-Dhan Yojana: Modi launched the 'Pradhan Mantri Jan Dhan Yojana' to help poor open bank accounts that will come with the facility of a debit card and an insurance cover of Rs 1 lakh. Digital India: Digital India is a dream for the poor, with broadband connectivity, we can ensure long-distance education," Sansad Adarsh Gram Yojana: Modi asked all MPs to developed a model village in their constituencies by 2016. Moratorium on violence: Called for a 10-year moratorium on caste and communal violence.

Planning Commission to be replaced: Modi said that he would replace the Planning Commission that for decades guided the country's economy with a more modern institution.

Clean India: The government plans to launch the Swacch Bharat plan in October.

After this speech, critics continue to ask “Acche din kab aayenge”. He has not laid down the plan of Action for his independence speech.

WAS IT A BLOCK BLUSTER SPEECH AT RED FORT?

TAPMI NEWSLETTER

COKE Buys 16.7% Stake in Monster for $2.15 Billion: On Thursday, it announced that it had acquired a 16.7% stake in Monster for $2.15 Billion. The deal unites the biggest soda maker in the world with the largest energy drink brand in the United States. GE in talks Again to Sell Appliances Business: General Electric is again in discussions over a potential sale of its appliances business, the century old division gave birth to the wash dryer and the toaster oven. Electrolux is in talks with them for this acquisition. JSW to buy Welspun Maxsteel for 1K Crore: JSW Steel will acquire smaller rival Welspun Maxsteel for about Rs.1,000 Cr as India’s third largest steel maker seeks to source cheaper raw material, cut production costs and strengthen its presence in the northern and western markets. BSE likely to Cut Equity Transaction Fee by 15%:BSE currently charges 3.25 for every 1 lakh worth of trades in cash segment. The transaction fee is likely to be cut to 2.75. FIIs outpace Domestic Investors in BSE200: The ratio of investment by foreign institutional investors compared with domestic institutional investors in BSE 200 Companies has gone up 2:1 in June this year from 1:4 five years ago. As per some market strategist FIIs flows may surpass 2012 record of $24 Billion.

1

Samsung loses its top position in India but its India head says the contrary: Samsung's India head has come down hard on research agencies claiming that the Korean major has lost its No 1 position in the handset market, saying the reports were driven by 'business motive', although he conceded the pace of growth for the electronics company had slowed. BD Park, president & chief executive for south-west Asia, told in one of the interviews that Samsung still holds the lead in India with a share of almost half the market. Earlier one of the market research firm stated that Samsung, the global leader in smartphones, has lost its top position in the Indian handset market to the homebred Micromax Informatics. According to the agency, Micromax leads the overall handset market with a 16.6% market share as compared to 14.4% market share occupied by Samsung India.

2

Jet Plans to Cut Costs via Joint Sourcing with Etihad: Jet Airways aims to save $100 million by renegotiating contracts with its vendors and suppliers with help from its strategic partner Etihad Airways, India’s second-biggest airline by market share said in its latest annual report. Saving costs and active collaboration with its financially muscled partner is critical for Jet to fly out of its quagmire of losses. Etihad owns 24% stake in Jet. Jet’s latest reported financial figures showed a record quarterly loss of 2,153.6 crore in January-March, up more than four times on year. Annual loss surged more than five-fold to 4,129.8 crore, the equivalent of the combined yearly losses of the previous six years. Consolidated net worth fell to a negative. The airline has about 5,000 staff at the top-ten airports and some airports would need a reduction of up to 40%. Jet should reconfigure 21 Boeing 737 planes to an economy class configuration, which will lead to a net additional revenue of $40 million.

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3

India Post set to hit the ground running when it gets bank license: By seeking to engage a service provider who can supply up to 1.5 crore ATM/ debit cards in three years, the Department of Posts (DOP) is truly gearing up for its foray into banking. RBI, on its guidelines for licensing of payment and small banks (July 2014) state that the objective of these banks is to further financial inclusion by providing small savings accounts and payments/ remittance services to the migrant labour workforce, low-income households, small businesses,

Sector entities and other users. We think: RBI is using the Indian Post network of low income group to penetrate the banking system further into the rural areas. After DOP becomes a payment bank what happens to its core services of mail and other retail services? Will the private courier service providers benefit from this move?

Sun Plans to Rise in Japan's Pharma Mkt Sun Pharmaceutical Industries, which is in the process of acquiring control of Ranbaxy Laboratories from Daiichi Sankyo, will soon put its purchase to work through the exclusive marketing opportunity offered by two drugs in the US, rationalising research and other costs and eventually using its association with the seller to crack the Japanese market. Japan, the world's largest drug market after the US and Europe, has proved tough for Indian players to succeed.The penetration of generic drugs is less than 25% compared with more 80% in the US drug market. But the Japanese government's intent to raise this share to 60% by 2017 has prompted analysts to dub it as the next big frontier for Indian drug makers. Petroleum ministry clears 5% ONGC divestment: It may fetch the government about Rs. 18,000 crore to meet disinvestment target for the current fiscal. As per the Budget 2014-15, the disinvestment target is Rs. 58,425 crore including receipts from disinvestment of government stake in the non-government companies.RBI says FII investment limit in Bank of Baroda has reached the trigger limit. Further FII investment will need RBI approval.

HUL to Split Home and Personal Care Biz

Hindustan Unilever is splitting its home and personal care (HPC) business into two separate divisions for a sharper marketing focus, translating into a shake-up of its top management that also sees India’s biggest consumer goods maker appointing a woman as head of a business division. Priya Nair, 42, now vice-president, laundry, will manage home care at Unilever’s India unit. Samir Singh, 41, in charge of Lifebuoy globally and personal care lead for the South Asia cluster, will head personal care. A decade ago, the company replicated the organisational structure of its Anglo-Dutch parent by consolidating its consumer goods businesses from five segments into two — home and personal care being one and foods the other. HUL now gets nearly 75% of its revenue from its HPC portfolio while the foods business contributes around 16%.

TAPMI NEWSLETTER ISSUE 7

JLR Drives up Tata Motors Net 212% to Rs. 5,400 Cr India’s biggest automaker Tata Motors has posted 212% increase in its consolidated net profit for the quarter ended June compared with the year ago period, helped by robust sales volume growth of Jaguar Land Rover. Tata Motors on Monday reported consolidated net profit of 5,398 crore in the first quarter, up from 1,726 crore in the same quarter last year and way higher than any street estimate. Its revenue on a consolidated basis grew 38% to 64,683 crore, up from 46,796 crore a year ago. Domestic revenues for the June quarter dropped 15.4% year-on-year to 7,705 crore, down from 9,105 crore a year ago while profit declined 44% to 393 crore from 703 crore. In China, JLR’s sales volume grew 61% year-on-year in the June quarter. JLR now derives nearly 29% of its total sales from the Chinese market, up from 21% a year back. Except for the Japanese and Brazilian markets, JLR has outperformed industry growth in the luxury car segment every other region. After sprinting for a decade, are the good times over for Cognizant? Ever since Francisco D'Souza took over as CEO of Cognizant in 2007, it looked as if the company could do no wrong — the US-based software provider outgrew the industry even when rivals floundered during the global financial crisis. But over the past year or so, it has been looking ragged and beginning to resemble rivals it vanquished not so long ago. The spoilers were: Europe, where revenue fell 1 per cent sequentially, longer sales cycles and continued weakness in its best-performing sectors, including manufacturing, retail and healthcare. Not surprisingly, both JPMorgan and Susquehanna International Group downgraded Cognizant. Over the past few years, and especially since the Lehman crisis of 2008 that saw Infosys and Wipro slip from the glory days, Cognizant has grown its annual revenues at double the industry growth rates. It has even outpaced TCS, India's largest software services company, consistently since then in terms of revenue growth. For its part, Cognizant still enjoys top management stability and continues to win big deals — the $2.7-billion contract signed with Health Net during the June quarter was its biggest win. The challenge for Cognizant will be to make up for the lost momentum over the next six months.

Moody’s pegs GDP growth at 5% this year: Indian economy is likely to expand in the range of 5.4 to 5.9 per cent this fiscal, as per Government estimates. The new Government, which took charge in May, has initiated various measures to attract more investments and remove bottlenecks in the infrastructure, among others, to boost growth. Industrial growth slows to 3.4% in June: IIP for June month has come at 3.4% against exp of 5.8%. As it is for June month and most of the companies result for Jun qtr is also out as such should not have any impact on market. Whereas CPI came at 7.96% vs exp of 7.4% and MOM 7.31% this may restrict RBI in taking any decision on rate cut.

Bhusan steel landed in a debt mess (Current D/E: 3.5 times): In the past, debt repayments did not matter as much for Bhushan Steel because its operations generated cash well in excess of what it had to pay by way of interest and loan repayments. The company’s problems began in 2010-11, when its debt repayment obligation more than trebled to ₹1,118 crore. This was probably because a part of the loans taken for capacity expansion, including for phases I and II of the Odisha plant, became due. Bhushan Steel’s operating cash flows of ₹994 crore, fell short of its debt-repayment obligations.