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List of Top Conglomerates in India | Tata, Birla & More!

Top Conglomerates in India: It has been almost three decades since the Indian economy underwent liberalization and privatization and opened up to the world. Since then we have evolved into a $3 trillion economy in 2019 and have set sights on becoming a $5 trillion economy by 2025.

A portion of the achievements can be attributed to private players that have established themselves in multiple industries to form conglomerates. Today, we take a look at the top conglomerates in India.

What is a Conglomerate?

A conglomerate in simple words is a multi-industry company. A conglomerate includes one group that overlooks multiple business entities in entirely different industries.

One may wonder why companies would even want to grow into multi industries instead of maintaining a profitable lead by focussing on one industry. It is because such companies put greater emphasis on growth and they realize the impacts they can have due to their capital potentials.

It is interesting to note that Amazon one of the top global conglomerates has never been profitable because the company makes long-term growth a priority over profits. This is also because of other means of financing have enabled firms to remain afloat and grow into multiple industries.

The success of conglomerates can also be attributed to brand recognition among consumers. The success of a company in one industry makes consumers more willing to experiment with their products in other industries. Another factor that plays the most important role in the success of these conglomerates is the men leading them. These are those that even we look up to.

List of 7 Top Conglomerates in India

1. Reliance Industries Ltd.

This Indian conglomerate company was founded as Reliance commercial corp. 60 years ago by Dhirubhai Ambani. The company was partitioned after Dhirubhai Ambani’s death between his two sons. Hence came Reliance Industries headed by Mukesh Ambani. The company owns oil, petrochemical, textile, natural resource, banking, and telecommunication enterprises throughout India.

RIL is currently one of the most profitable and largest publicly-traded companies in India. The company has an MCAP of over Rs. 15 lac crore. RIL is currently the only Indian company ranking in the top 100 in the Forbes 2000 [2020] list. The company is ranked 71st in the world according to the list.

2. Tata Group

Tata Group is an Indian conglomerate giant founded in 1868 by Jamsetji Tata. The conglomerate is owned by Tata and Sons and is currently run by Natarajan Chandrasekaran.

However, it is Ratan Tata’s legacy of 21-years tenure that is admired by many. During his tenure revenues grew over 40 times and profit over 50 times. Under him Tata acquired Tetley and Tata Motors acquired Jaguar Land Rover. Tata group has companies present in automobile, airline, chemical, defense, FMCG, electric utility, Finance, home appliance, hospitals, IT, retail, eCommerce, steel, industries, etc.

Its biggest companies include TCS [over 9 lac crore] and ITC [over 2 lac crore]. Both the companies made it to the Forbes 2000 list ranked 374 and 806 respectively. ITC is currently India’s largest employer with over 4.4 lakh employees.

3. Aditya Birla Group

Birlas are one of the most popular names in the business world in India and Aditya Birla Group is one of the biggest Conglomerates in India. The group was founded by Seth Shiv Narayan Birla in 1857 and currently headed by Kumar Mangalam Birla as its chairman. The group operates in Branded Apparels, Fashion, Textiles, Cement, Carbon Black, Metals, Chemicals, Telecom, Financial Services, and more.

4. Mahindra Group

Mahindra was founded in 1945 as a steel trading company and is currently one of the largest Indian conglomerates. Its companies are present in aerospace, agribusiness, automobile, construction equipment, defense, energy, finance, insurance, industrial equipment, IT leisure and hospitality, logistics, real estate, retail, and two-wheelers.

One of the most notable chairpersons from Mahindra is Anand Mahindra. One of its most successful investments includes Kotak Mahindra Bank Ltd.

5. Bajaj Group

The Bajaj Group conglomerate company was founded in 1926. The company is currently headed by Rahul Bajaj. Bajaj initially expanded into the scooter and three-wheeler manufacturing.

Today the company has its presence in the finance, electrical, iron, steel, home appliance sector, etc. Its most notable company is Bajaj Automobile which is ranked as the world’s fourth-largest 2&3 wheeler manufacturer.

6. Adani Group

Adani was founded in 1988 as a commodity trading firm by its current chairman Gautam Adani. The company began trading coal in 1999 and began coal trading in 1999 and ventured into the market for edible oil under the Fortune brand.

The group currently holds a portfolio of companies which include the energy, resources, logistics, agribusiness, real estate, financial services, defense, and aerospace sectors. Today the group holds one of the largest electric companies in India i.e. Adani Green and is India’s largest port developer and operator.

7. L & T Group

Larsen & Toubro Limited was founded in 1938 by two Danish engineers taking refuge in India. The two engineers, Henning Holck-Larsen and Søren Kristian Toubro escaped Germany’s invasion of Denmark during WW2.

The company has business interests in basic and heavy engineering, construction, realty, manufacturing of capital goods, information technology, and financial services.

Also read:

Closing Thoughts

Today, in this article, we covered seven of the top conglomerates in India.

Although there are multiple advantages that the company enjoys by extending into other industries, not all companies opt for it. Take Unilever for eg. The company in its pursuit to gain a larger margin branched itself into every activity that might be necessary for its business. Unilever in its pursuit to gain a larger margin branched itself into other activities that might be necessary for doing its business. The company owned plantations, oil mills, their own shipping line, logistics business, and even ran the stores themselves.

They, however, realized that they were better off only focussing on their core business i.e. creating FMCG products. This led to them selling off their supermarkets, chemical business, and cosmetics and investing in building their brands. Some other noteworthy Indian conglomerates are the Bharti Group, Godrej Group, and Wipro.

October 12, 2020 Aron Almeida Market, Stocks No comments yet

Top Companies in Indian Airline Industry 2020!

List of Top Companies in Indian Airline Industry: The aviation industry in India is one of the fastest-growing industries and has claimed the third spot among the largest domestic markets in the world. Although the industry is struggling during COVID19, however, no depression lasts forever.

Today, we take a look at the future prospects of the Indian airline industry and the top companies in Indian Airline Industry in 2020.

Prospects of the Indian Aviation industry

This sector contributed close to $72 billion to Indian GDP and is en-route to also become the 3rd largest air passenger market by 2024. These bright prospects are mainly due to the untapped potential considering that air transport is still considered expensive for the majority of the country’s population which will change with the country’s economic growth. Today we

The Indian government realizing this potential has allowed 100% FDI in these sectors. Investments over 49% will, however, require government approval. The Indian government has also planned to invest up to $1.82 billion for the development of airport infrastructure and aviation navigation services by 2026.

As of March 2019, India had 103 operational airports, this number is expected to increase to 190-200 by FY40. The rising demand expects the number of airplanes to reach 1,100 by 2027 and by 2038 will require 2,380 new commercial airplanes.

Indian Aviation Industry during COVID-19

The aviation industry played a very important role in assisting the government in midst of COVID-19. Under the ‘Lifeline Udan’ scheme operators like Air India, Alliance Air, IAF transported essential medical cargo throughout the country in order to combat COVID-19. 588 flights were operated as of June 20, 2020, under the scheme carrying 940 tonnes of cargo.

The civil aviation industry, unfortunately, was one of the worst-hit in the midst of the crisis. According to the Centre for Asia Pacific Aviation(CAPA) the sector is at a breaking point with domestic traffic declining by over 60% international traffic by 70-80% in FY21.

CAPA also states that 30% of the workforce is estimated to be impacted in the sector. Post the complete lockdown that took place earlier this year air travel was initially subject to only 45% capacity utilization and international flights were suspended till August 31st. Travel that does take place is currently only for essential purposes.

Top Companies in Indian Airline Industry — 2020!

1. Interglobe Aviation (Indigo)

Indigo is the leader in the Indian aviation industry with the current market cap of Rs 49,923.47 Cr. This company trades on Indian stock exchanges with the latest share price of Rs 1,364.95 per share.

Indigo is India’s largest airline by passengers carried and fleet size and boasts a 60.4% domestic market share as of July 2020. The airline was founded by Rahul Bhatia of Interglobe Enterprises and Rakesh Gangwal in 2006 after it took delivery of its first aircraft in July 2006.

The company operates in Indian domestic markets as a low-cost carrier. The company has grown its fleet to 276 aircrafts today and has been one of the few airlines that have been profitable for 10 years.

2. SpiceJet

Spice Jet is India’s 2nd largest airline in terms of domestic passengers carried and has a market share of 13.6% as of July 2020. It has the current market cap of Rs 3,085.41 Cr.

The airline was established as ModiLuft in 1994 with backing from Lufthansa but ceased operations in 1996. In 2004 Indian entrepreneur Ajay Singh acquired the company and renamed it as SpiceJet. SpiceJet started its operations with 2 aircraft on lease and currently has a fleet of over 90 aircraft.

3. Jet Airways

Jet Airways Ltd is an Indian international airline. In March 2019 it was reported that nearly a fourth of Jet Airways’ aircraft was grounded from operations due to unpaid lease rates. It is a smallcap company trading in the Indian stock market with a market cap of Rs 311.82 Cr. The stocks of Jet Airways used to trade at a share price above Rs 1,300 per share in 2005. However, as of Oct 2020, this stock is hovering at a share price of Rs 31.

4. Air India

Air India is India’s flag carrier owned by the Indian government. The airline is India’s largest international carrier with a market share of 18.6%. Domestically the airline falls behind market leaders Indigo and SpiceJet with a market share of 9.1% as of July 2020. The airline was founded in 1932 by JRD Tata and made a profit of Rs 60,000 in its first year carrying weekly mail and 155 passengers.

After WW2 Tata airlines became a public ltd company under the name Air India. Unfortunately, years of loss-making operations have turned the airline into a debt-stricken entity. The government has time and again tried to sell the airline but unsuccessfully. The new owner would have to take on a debt of US$4.7 billion.

The airline operates flights domestically and to its Asian destinations through its subsidiaries Alliance Air and Air India Express. The airline currently has a fleet of 173 aircraft.

5. Air Asia India

Air Asia India was established in 2013 as an Indian airline trough a joint venture between Tata Sons and Air Asia Investment Ltd. ( Malaysia).

The airline also marked the return of the Tata Group into the aviation industry after 60 years. Air Asia holds a 6.2% market share as of July 2020. The airline has a fleet of over 30 aircraft.

6. Vistara

Vistara is another airline that includes a Joint Venture between Tata and a global airline. The airline was founded in 2013 as a joint venture with Singapore airlines. Vistara is a name taken from the Sanskrit word meaning “ Limitless expanse”.

Vistara had a market share of 4.2% as of July 2020. The airline has a fleet of 42 aircraft.

7. GoAir

GoAir, part of the Wadia Grp. is a lowcost airline. It launched its operations in 2005 and as of July 2005 holds a market share of 3.8%. The airline has a fleet size of 55 aircraft.

The airline had earlier looked for a merger with Spicejet and later appointed JPMorgan to scout for potential investors. In its attempt to raise capital the airline had planned to go for an IPO this year but these plans been delayed.

Also read:

Closing Thoughts

The takeoff of the Indian Airline industry has been delayed unfortunately due to COVID-19. Industry experts CAPA expects the Indian aviation industry to shrink to 2-3 players if they do not receive additional funding. This according to them would result in sustainable damage in connectivity throughout India.

Ajay Awtaney, Founder, LiveFromALounge.com said that he expects only IndiGo, Vistara, and Air India will be able to survive post-COVID-19. “IndiGo is cash-rich. They are doing the right thing by raising liquidity and have also taken cost-cutting measures. Vistara too is in a good position right now. They are bleeding financially but have the support of two strong backers. Air India, on the other hand, has the backing of the government”. This calls for added government focus on the industry in order to ensure that the industry does not suffer irreparable damage.

October 11, 2020 Aron Almeida Market, News No comments yet

5 Biggest Merger and Acquisitions in India cover

5 Biggest Mergers and Acquisitions in India!

List of the Biggest Mergers and Acquisitions in India: Mergers and Acquisitions (M&A) have increased in the Indian subcontinent over the years. These deals play a very important role in the growth of any company in the long term and also the economy. Today, we are going to cover the biggest Mergers and Acquisitions in India.

Here, we’ll take a look at the ever-evolving M&A environment and rank the biggest deals that included Indian companies. Let’s get started.

Mergers and Acquisitions in India

A business taking over another business occurs more frequently than you think. These takeovers are known as acquisitions. Situations, where two or more companies come together to form a single company, are known as mergers. The Indian law recognizes these mergers as ‘Amalgamation’.

The purpose of such M&A revolves around a company’s growth strategy. The M&A may take place in the company’s efforts to increase market share, geographical outreach, to reduce competition, profit from patents, or even enter new sectors or product lines. Companies often take advantage of other underperforming companies or governments looking to disinvest.

According to a report from Bain, the 3600 M&A deals that took place between 2015 and 2019 amounted to more than $310 Billion. According to the report over 60% of the deals by volume and trade were attributed to industrial goods, energy, telecom, and the media sector. One of the major reasons for the increasing competition is owed to the changing landscape after the increasing availability and use of the internet. The effects of increased competition are more evident in companies from the eCommerce industry. This industry has paved way for some of the most aggressive M&A in the recent past.

Another aspect that significantly affects the M&A environment is the political scenario of the country. This is because unfortunately for India the capital requirements do not meet the unexploited potential of the Indian markets. Foreign companies bridge this gap. Unfavorable laws present and those created against a foreign country severely impact their investment prospects in India. Initiatives by the government to quicken the M&A are examples of support given by the government. Such initiatives have assisted India to achieve the 63rd rank in Ease of doing business ranking by the World Bank.

5 Biggest Mergers and Acquisitions in India

1. Arcelor Mittal

The biggest merger valued at $38.3 billion was also one that was the most hostile. In 2006, Mittal Steel announced its initial bid of $23 billion for Arcelor which was later increased to $38.3 billion. This deal was frowned upon by the executives because they were influenced by the patriotic economics of several governments. These governments included the French, Spanish, and that of Luxembourg. The very fierce French opposition was criticized by the French, American, and British Media.

Then Indian commerce minister Kamal Nath even warned that any attempt by France to block the deal would lead to a trade war between India and France. The Arcelor board finally gave in to the deal in June for the improved Mittal offer. This resulted in the new company Arcelor-Mittal controlling 10% of global steel production.

2. Vodafone Idea Merger

Reuters reported the Vodafone Idea merger to be valued at $23 billion. Although the deal resulted in a telecom giant it is safe to say that the 2 companies were pushed to do so due to the entry of Reliance Jio and the price war that followed. Both companies struggled amidst the growing competition in the telecom industry. The deal worked both for Idea and Vodafone as Vodaphone went on to hold a 45.1% stake in the combined entity with the Aditya Birla group holding a 26% stake and the remaining by Idea.

On the 7th of September, Vodafone Idea unveiled its brand new identity ‘Vi’ which marked the completion of the integration of the 2 companies.

3. Walmart Acquisition of Flipkart

Walmarts acquisition of Flipkart marked its entry into the Indian Markets. Walmart won the bidding war against Amazon and went onto acquire a 77% stake in Flipkart for $16 billion. Following the deal, eBay and Softbank sold their stake in Flipkart. The deal resulted in the expansion of Flipkart’s logistics and supply chain network.

Flipkart itself had earlier acquired several companies in the eCommerce space like Myntra, Jabong, PhonePe, and eBay.

4. Tata and Corus Steel

Tata’s takeover of Corus Steel in 2006 was valued at over $10 billion. The initial offers from Tata were at £4.55 per share but following a bidding war with CSN, Tata raised its bid to £6.08 per share. Following the Corus Steel had its name changed to Corus Steel and the combination resulted in the fifth-largest steel making company.

The following years were unfortunately harsh on Tata’s European operations due to the recession in 2008 followed by reduced demand for steel. This eventually resulted in a number of lay-offs and sales of some of its operations.

5. Vodafone Hutch-Essar

The world’s largest mobile operator by revenue – Vodafone acquired a 67% stake in Hutch Essar for $11.1 billion. Later in 2011 Vodafone paid $5.46 billion to buy out Essar’s remaining stake in the company. Vodafone’s purchase of Essar marked its entry into India and eventually the creation of Vi. Unfortunately, the Vodafone group was soon embroiled in a tax controversy over the purchase with the Indian Income Tax department.

Closing Thoughts

In this article, we discussed the biggest Mergers and Acquisitions in India. While acquisitions are prevalent in almost every industry only a few of them turn out to be successful. We’ve already seen above that the reasons for M&A may be extremely varied. Most of these M&A are predatory and take place when the acquirer is doing well but unfortunately, there may be multiple reasons that may turn the M&A into a disaster.

That is why companies take extra precautions before entering into M&A and ensuring they are taking on an asset and not just a liability.

October 10, 2020 Aron Almeida Market, News No comments yet

Top 10 Companies in India by Market Capitalization

List of the Top 10 Companies in India by Market Capitalization (Updated Oct’20): As per the International Monetary Fund (IMF), India is the seventh-largest economy in the world in terms of nominal Gross Domestic Product (GDP), which is valued to be worth US$ 2.308 trillion. This is mainly due to business various Indian companies have been doing in India and overseas.

Every company operating in India works extremely hard to get better in terms of the quality and customer satisfaction that they provide through its products or services. An organization is generally evaluated on different parameters such as assets, profits, sales, market value, share price, etc. and is ranked accordingly. However, when we talk about the size of a company, one of the biggest factors to look at is its market capitalization.

In this post, we are going to discuss the ten biggest public companies in India based on their latest market capitalization.

What is market capitalization?

Market capitalization is the aggregate valuation of the company based on its current share price and the total number of outstanding stocks. It is calculated by

Market capitalization = (Current market price of 1 share)*(total number of outstanding shares)

It helps to classify the companies in different types like large cap, mid cap, and small cap companies. The companies with a market cap of Rs 29,000 crore or more are large-cap stocks. Company stocks with a market cap between Rs 8,500 crore and 29,000 crores are mid-cap stocks and those less than Rs 8,500 crore market cap are small-cap stocks. (Related post: Basics of Market Capitalization in Indian Stock Market.)

Let’s understand with an example

Just by looking at the share price, you cannot judge the size of a company. For example, here are the share price of two companies from the automobile sector.

Maruti Suzuki – Rs 7,059
MRF – Rs 59,798

Which company is bigger?

If you just look at the share prices, you might think that MRF’s share price is quite large compared to Maruti Suzuki, and hence, it may be bigger.

However, the total number of outstanding shares of Maruti Suzuki is much large compared to MRF. Maruti Suzuki has around 30.2 Crore shares while MRF has 0.42 crores shares. Therefore, the market capitalization of Maruti Suzuki is Rs 213,785 Crores while the market capitalization of MRF is Rs 25,115 Crores. Therefore, Maruti Suzuki is a bigger company compared to MRF.

Top 10 Companies in India by Market Capitalization

Here is the list of the top 10 companies in India by market capitalization:

1. Reliance Industries

Reliance Industries Limited (RIL) is an Indian multinational company headquartered in Mumbai, currently headed by Mukesh Ambani. The company was co-founded by Dhirubhai Ambani and Champaklal Damani in the 1960s as Reliance Commercial Corporation.

Reliance owns businesses across India engaged in energy, petrochemicals, textiles, natural resources, retail, and telecommunications. Reliance is one of the most profitable companies in India. The market capitalization value of RIL is Rs.14,72,850 Crores with a current price of Rs.2,233.

2. Tata Consultancy Services (TCS)

Tata Consultancy Services Limited (TCS) is an Indian multinational information technology (IT) service and consulting company headquartered in Mumbai, Maharashtra, India. It is a subsidiary of Tata Group and operates in 149 locations across 46 countries.

TCS is the second-largest Indian company by market capitalization. TCS is now placed among the most valuable IT services brands worldwide. The market capitalization value of TCS is Rs. 10,55,527 Crores with a current price of Rs. 2,812.

3. HDFC Bank

HDFC Bank is an Indian banking and financial services company that was incorporated in 1994, with its registered office in Mumbai, India. Its first corporate office at Sandoz House, Worli was inaugurated by the then Union Finance Minister, Manmohan Singh.

As of June 2019, it had a base of 1,04,154 permanent employees with 5,130 branches across 2,764 cities. It is India’s largest private sector lender by assets and market capitalization. It has a market capitalization value of Rs. 6,78,909 Crores with a current price of Rs. 1,233.

4. Hindustan Unilever (HUL)

Hindustan Unilever Limited (HUL) was established in 1933. It is a British-Dutch manufacturing company headquartered in Mumbai, India. Its products include foods, beverages, cleaning agents, personal care products, water purifiers, and consumer goods.

As of 2020 Hindustan Unilever portfolio had 35 product brands in 20 categories with 18,000 employees and sales of Rs. 39,783 crores in 2019-20. The market capitalization value of Hindustan Unilever is Rs 5,02,722 Crores with a current price of Rs 2,139.65.

5. Infosys

Infosys Limited is an Indian multinational corporation that provides business consulting, information technology and outsourcing services.

It is the second-largest Indian IT company after Tata Consultancy Services with its headquarters in Bangalore, Karnataka, India. The market capitalization value of Infosys is Rs. 47,1431.68 Crores with a current price of Rs. 1,106.8.

6. H D F C

Housing Development Finance Corporation Limited (HDFC) is an Indian financial services company founded in 1977 as the first specialized mortgage company in India based in Mumbai. It is a major provider of finance for housing in India.

HDFC also has a presence in banking, life and general insurance, asset management, venture capital, realty, education, deposits, and education loans. The market capitalization value of HDFC is Rs. 3,51,555.95 Crores with a current price of Rs. 1,957.65.

7. ICICI Bank

It is an Indian multinational banking and financial services company headquartered in Mumbai and its registered office in Vadodara, Gujarat. It offers a wide range of banking products and financial services in the areas of investment banking, life, non-life insurance, venture capital, and asset management.

ICICI Bank has 4867 branches and 14367 ATMs across India and has a presence in 17 countries including India as of March 31, 2018. The market capitalization value of ICICI bank is Rs. 2,76,902.79 crores with a current price of Rs. 401.5.

8. Kotak Mahindra Bank

Kotak Mahindra Bank is an Indian private sector bank headquartered in Mumbai, India. Established in 1985 by Uday Kotak.

In February 2003, Kotak Mahindra Finance Ltd. (KMFL), the group’s flagship company, received a banking license from the RBI. It offers banking products and financial services in the areas of personal finance, investment banking, general insurance, life insurance, and wealth management. It is the thrid largest Indian private sector bank by market capitalization value of Rs. 2,61,250.38 crores with a current price of Rs. 1,319.85.

9. HCL Technologies

HCL Technologies Limited is an Indian information technology (IT) services and consulting company. This firm is primarily engaged in providing a range of software services business process outsourcing and infrastructure services. It is a subsidiary of HCL Enterprise. The company has offices in 44 countries and 147,123 employees.

The current market capitalization value of HCL Technologies is Rs. 2,32,221.89 crores with the latest share price of Rs. 855.75.

10. Bharti Airtel

Bharti Airtel Limited (AKA Airtel) is an Indian global telecommunications services company. It offers an integrated suite of telecom solutions to its enterprise customers in addition to providing long-distance connectivity both nationally and internationally. The company generated a net sales of Rs 87,539 Cr in the financial year 2019-20.

Market capitalization value of Bharti Airtel is Rs. 2,31,970.3 crores with a current price of Rs. 425.2.

Summary: Top 10 Companies in India by Market-cap

S.No.	Company Name	Current Price	MarketCap (Rs.Cr)
1	Reliance Industries	2233.45	1472850.02
2	TCS	2812.95	1055527.06
3	HDFC Bank	1233.55	678909.43
4	Hind. Unilever	2139.65	502722.8
5	Infosys	1106.8	471431.68
6	H D F C	1957.65	351555.95
7	ICICI Bank	401.5	276902.79
8	Kotak Mah. Bank	1319.85	261250.38
9	HCL Technologies	855.75	232221.89
10	Bharti Airtel	425.2	231970.3
11	Wipro	374	213739.74
12	Maruti Suzuki	7062.4	213340.98
13	ITC	167.85	206540.04
14	Bajaj Finance	3317.9	199932.45
15	Asian Paints	2050.6	196693.1

Disclaimer: This data is updated in October 2020, 2019. As the stock price changes in the future, market capitalization will also change. Hence, the list of top 10 companies in India by market capitalization can also change in the future.

Also read: How to Invest in Share Market? A Beginner’s guide!

That’s all for this post on the top 10 companies in India by Market Capitalization. I hope it was useful for you. Take care and Happy Investing.

October 9, 2020 Dharmendra Singh Market, Stocks 10 comments

#12 Companies with Highest Share Price in India (Updated)

List of Companies with highest share price in India (Updated- October 2020): The majority of shares in India trade at the share price below Rs 1,000 per share on Indian stock exchanges. Howere, there are a few stocks that trade at a price in the mutiples of thousands of rupees. Although, share price of a company has nothing to do with the companies valuation and even a company with a share price of Rs 2,000 can be undervalued compared to it’s peers. Anyways, for the small retail investors, it might be a little difficult to enter those stocks which trade at a very high share prices.

In this article, we are going to discuss the most expensive shares in India i.e. the companies with the highest share price in India. Here, we’ll look at 12 of the costliest shares in India based on the current share price at which they are trading in the market.

Note: Please study the companies carefully if you want to invest in any of the stocks mentioned in the list here. A high stock price doesn’t guarantee a fundamentally strong company or a good investment. And vice versa. Let’s get started.

#12 Companies with Highest Share Price in India

1. MRF (Rs 60,269)

Market Capitalisation = Rs 25,554 Cr

Madras Rubber Factory (MRF) is a Tyre manufacturer that produces a wide range of tyres. It specializes in Car & bike tyres, trucks/buses tires etc.   Currently, MRF has the highest share price in India among all the listed companies on BSE/NSE. The all-time high share price of MRF is Rs 81,426. The stock is currently trading at a standalone PE of 70.

MRF has never split its share and has a face value of Rs 1o. Noticeably, this company was trading at a price of Rs 10,000, in November 2012.

Also read: Why Do Companies Like MRF Don’t Split the Stock?

2. Honeywell Automation (Rs 32,198)

Market Capitalisation = Rs 28,463 Cr

Honeywell Automation India Ltd, a part of Honeywell group, USA and is a leader in providing integrated automation and software solutions. It has a wide product portfolio in environmental and combustion controls, and sensing and control, etc. This stock has given a return of over +235% in the last 5 years. It is currently trading at a PE of 60.03.

3. Page Industries (Rs 20,627)

Market Capitalisation = Rs 23,001 Cr

Page Industries is an Indian manufacturer and retailer of innerwear, loungewear and socks. One of the fpopular brand under Page Industries is Jockey (Underwear and inner wears company). .This stock has turned out to be a multi-bagger stock in the last couple of years and has given a return of over +2,000% in the last ten years.

Page industries is currently trading at a PE of 119.05.

4. Shree Cements (Rs 20,296)

Market Capitalisation = Rs 73,272 Cr

Shree Cement is an Indian cement manufacturer headquartered in Kolkata. This Indian cement manufacturer company was founded in Beawar, Ajmer district, Rajasthan, in 1979. Shree cement is the biggest cement maker in northern India and also produces and sells power under the name Shree Power and Shree Mega Power.  Shree cements is currently trading at a PE of 49.08.

5. 3M India (Rs 18,795)

Market Capitalisation = Rs 21,182 Cr

3M India Ltd is the subsidiary listed company of 3M Company USA in India. 3M Company USA holds 75% equity stake in the company. It has a diversified portfolio of products in dental cement, health care, cleaning, etc. This stock is currently trading at a PE of 117.77.

Also read: How to Invest in Share Market? A Beginner’s guide!

6. Abbott India (Rs 15,975)

Market Capitalisation = Rs 33,947 Cr

Headquartered in Mumbai, Abbott India Limited, a publicly listed company and a subsidiary of Abbott Laboratories, takes pride in offering high-quality trusted medicines in multiple therapeutic categories such as women’s health, gastroenterology, cardiology, metabolic disorders, and primary care. It is currently trading at a PE of 51.72. This stock has given a return of over 179% in the last 5 years.

7. Nestle India (Rs 15,851)

Market Capitalisation = Rs 153,377 Cr

Nestle India is in the food processing industry with a wide variety of products like Maggi, Kit-Kat, Nescafe, Every day, etc.   It is the Indian subsidiary of Nestlé which is a Swiss multinational company.This stock is currently trading at a PE of 73.59.

8. Bosch (Rs 13,291)

Market Capitalisation = Rs 39,202 Cr

Bosch ranks eighth in the list of companies with highest share price in India. It is a part of the German multinational company Robert Bosch (or just Bosch), headquartered in Germany. Bosch belongs to the automobile ancillaries industry and currently trading at a PE of 78.23 (52-week high- Rs 17,273).

9. Tasty Bite Eatables (Rs 10,598)

Market Capitalisation = Rs 2,592 Cr

This company operates in the food processing industry with products like tasty bite rice, noodles, entrees, etc. The Company offers a range of ready-to-serve (RTS) ethnic food products under the brand name Tasty Bite and Frozen Formed Products (FFP). This stock is currently trading at a PE of 78.62.

10. Bombay Oxygen (Rs 10,350)

Market Capitalisation = Rs 155 Cr

This is one of the lesser-known companies on the list of companies with highest share price in India and a smallcap company by marketcap. Incorporated in 1960, Bombay Oxygen is an Industrial gases company. The Company’s name has been changed to BOMBAY OXYGEN INVESTMENTS LIMITED w.e.f 03 October, 2018.

Also read: How To Invest Rs 10,000 In India for High Returns?

11. Procter & Gamble (Rs 9,872)

Market Capitalisation = Rs 32,598 Cr

P & G is in the personal care industry with products in hygiene and health care. The Company is involved in manufacturing, trading and marketing of health and hygiene products. The Company’s brands include Ambi Pur, Ariel, Duracell, Gillette, Head & Shoulders, Olay, Oral-B, Pampers, Pantene, Tide, Vicks, Wella and Whisper. This stock is currently trading at a PE of 74.

12. Bharat Rasayan (Rs 9,176)

Market Capitalisation = Rs 3,900 Cr

Bharat Rasayan Limited is a smallcap company based in India and engaged in manufacturing of pesticides-technical, formulations and its intermediates. The Company primarily offers Metaphenoxy Benzaldehyde. The Company’s products are Insecticides, which include Acetamiprid, Bifenthrin, Chlorpyrifos, Cypermethrin etc.

This stock is currently trading at a share price of PE of 24.

Also read: 8 Best Discount Brokers in India – Stockbrokers List 2019

Summary

Here is the list of Companies with Highest Share Price in India along with a few other popular stocks added:

S.No.	Company Name	Share Price (Rs)	MarketCap (Rs Cr)	Current PE
1	MRF	60269.95	25554.46	21.98
2	Honeywell Auto	32198.45	28463.43	60.03
3	Page Industries	20627.25	22999.38	119.17
4	Shree Cement	20296.95	73232.91	49.08
5	3M India	18795.8	21182.87	111.77
6	Abbott India	15975.35	33947.62	51.72
7	Nestle India	15876.85	153077.79	73.59
8	Bosch	13291.75	39202.21	78.23
9	Tasty Bite Eat.	10598.15	2719.49	78.62
10	Bombay Oxygen	10350.05	155.25	---
11	P & G Hygiene	9872.25	32046.05	74
12	Bharat Rasayan	9176.8	3900.14	24.07
13	Sanofi India	8748.4	20147.57	39.07
14	Dixon Technolog.	8719.7	10088.82	102.4
15	Yamuna Syndicate	8644	265.69	3.5
16	Polson	8028.8	96.35	19.39
17	Maruti Suzuki	6892.4	208205.62	51.63

Disclaimer: The list of 12 Companies with Highest Share Price in India is till date October 2020. The stock market is dynamic and the stock prices will change in the future, which may change the list or the order of the companies listed here.

That’s all for this post on ‘#12 companies with the highest share price in India’. Most of the companies on this list are trading at a high PE. If you want to buy any one of them, then please study the company carefully. Just being the costliest shares in India doesn’t make them a good pick for investment. Moreover, past performance does not guarantee future returns.

Further, do comment below which other stocks can find a place in this list of companies with highest share price in India by next year (October 2021)? And which ones will be thrown out of the list, according to you? Happy Investing!

Kritesh Abhishek

Hi, I am Kritesh (Tweet me here), an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting

www.linkedin.com/in/kriteshrules/

October 7, 2020 Kritesh Abhishek Market, Stocks 19 comments

LIC IPO 2020 – Are You Ready? | Expected IPO Dates & Details

LIC IPO 2020 Details: Earlier this year Finance Minister Nirmala Sitharam announced during the 2020-21 budget that the government would sell a part of its holdings in LIC through means of a public listing. Judging by the size of the company it could be the largest IPO the country has seen. The IPO of LIC may even be bigger than this expectation as the government also plans to incentivize the participation of retail investors by offering discounts on IPO price and issuing bonus shares.

Today we take a look at where the IPO stands as we almost near the end of 2020. In this LIC IPO article, we’ll discuss a brief history of IPO, why the government is going for LIC IPO, the Expected dates of LIC IPO, and much more. Let’s get started.

LIC India – Brief History

LIC was founded in the year 1956 and is wholly owned by the government. The state-owned life insurance and investor is the oldest and the largest in the country. The company is headquartered in Mumbai. There are currently 24 insurance companies operating in the country but none of them come close to LIC which holds a 69% market share.

Moreover, As of 2019, Life Insurance Corporation of India is the biggest insurance company in India and had a total life fund of ₹28.3 trillion. The total value of sold policies in the year 2018-19 is ₹21.4 million. LIC settled 26 million claims in 2018–19. It has 290 million policyholders. The company is estimated to have assets worth Rs. 34 trillion.

The government had initially expected to offload a 10% stake. But later revised it to 25% as SEBI guidelines state that within 3 years of listing the minimum public shareholding should be at least 25%. The government is expected to incentivize retail investors with a 10% discount followed by a bonus issue. Of the shares offered 5% of the shares are expected to be reserved for retail investors and employees of LIC.

This IPO is expected to increase transparency in the affairs of the company as all financials will be required to be released to the shareholders. The company’s investments in bonds and equity are expected to come under greater scrutiny post the listing.

(Source: LIC Annual Report 2019-20)

When will the LIC IPO be held?

Currently, the LIC IPO stands delayed due to the COVID-19 pandemic and its occurrence depends on future market conditions. The pandemic has delayed a lot of the pre IPO work.

IPO Date: Yet to be Announced (Expected Q4 2020/21)
Price Band: —
Minimum Lot Size: —
Issue Size: —

The government still has to value its business and value its physical assets. Valuations of the company are expected to be completed in a short period of time but valuations of its physical assets which is the most crucial part of the pre IPO process may take from 6-8 months. This means that the IPO will not hit the markets this year. The earliest estimates state that the IPO may occur in the 4th quarter of 2020-21.

The LIC IPO 2020 will offer a good opportunity to retail investors and the company’s employees to become investors in one of the most reputed companies in India. Moreover, the IPO may also offer listing day gains to the shareholders. Further, whether LIC Policyholders will get any reserved quota in this IPO is yet to be decided.

Why has the government chosen to disinvest LIC?

The government plan to sell LIC is part of its Rs. 2.1 trillion disinvestment plan which was announced in the budget. The government expects to raise up to Rs. 90,000 crore from LIC and IDBI bank stake sales. Out of this, the government aims to raise Rs.20,000 cr. from sales of IDBI. As of September, the government has raised Rs 4.99 trillion through its disinvestment process. There is very little to rejoice about as the Narendra Modi government will have to use this to try and bridge the budget gap that has now been widened due to the coronavirus lockdown.

The LIC IPO will contribute significantly to the governments’ aims to meet its funding requirements Unfortunately the governments plan to disinvest its stake in LIC and other companies like Air India, BPCL, Concor have been delayed due to the pandemic.

As the government is required to give up 25% of its stake in the company, the proposed IPO is estimated to be worth Rs.3 lac cr. This raises the problem as the market may not find sufficient buyers in India. In order to combat this, the government has decided to disinvest in tranches starting with 10% but this too may not be absorbed by the domestic markets. Hence, the government has looked into listing the company in overseas bourses in order to attract large investors. With the decision still in progress, the government has already received pitches from global stock exchanges.

Also read: ‘Vi’ – Vodafone-Idea Rebranding’s Reasons and Benefits!!

Closing Thoughts

The Price of the IPO is not known as the price is generally announced a week before the shares are opened up for the subscription. There is a good probability for oversubscription especially after considering that investors around the world and retail investors domestically have been left dry especially if they are IPO hungry as many IPO’s have been derailed.

The LIC listing could turn out to be bigger than expected and could turn LIC into India’s biggest companies in MCAP that can compete with the likes of Reliance and TCS.

October 5, 2020 Aron Almeida Market, Stocks 1 comment

Why Do Companies Like MRF Don’t Split the Stock?

Ever wondered why do companies like MRF don’t split the stock? If you check the current market price of MRF Share, it’s hovering at a whopping price of Rs 60,499 per share. It’s all time high for the last 52 weeks is 73,565.70. Even though the price of one share is too high for this company, the interesting question here is why the MRF’s management/promoters are not splitting its shares? After all, buying a stock at Rs 60,499 per share is not financially viable for most of the retail investors.

In this article, we are going to answer the same. Here, we are going to discuss why companies like MRF don’t split the stock. However, before we discuss these expensive stocks, let’s first study why companies split their stocks?

Quick Note: If you are do not know what is stock split and bonus shares, then check out this post first- Stock split vs bonus share – Basics of stock market

An Interesting study on companies that Rapidly Split Stocks in Past

You might have heard about the wealth creation story of Infosys. A small investment in the 100 shares of Infosys in 1993 would be worth over Rs 6.04 crores by now. (Also read: How to Earn Rs 13,08,672 From Just One Stock?)

In the last 25 years, Infosys has given multiple bonuses and stock splits to its shareholders. And, that’s why the share price of Infosys is still in the affordable purchase rate for the average investors. In fact, if Infosys has not given so many bonuses and splits, the price of one share of Infosys might have been over multiple lacks by now. Here is the bonus and split history of Infosys since 1993 till 2018:

(Source: Moneycontrol)

Besides, Wipro is another common stock with a similar story. Because of its consistent bonuses and splits, the Wipro share is still in the purchase range for the retail investors. Else, if the management had decided not to give any split or bonus, then the share of Wipro might also have been over multiple lakhs and maybe over crores by now. (Also read: Case Study: How 100 shares of WIPRO grew to be over Rs 3.28 crores in 27 years?)

The big question – Why do companies split a share?

Here are four common reasons why companies split their shares-

Stock splits help to make the share price affordable for retail investors. For example, if a company is trading at a share price of Rs 3000 and it offers a stock split of 10:1, then it means that its price will drop to Rs 300 per share after the split. Now, which price is more affordable to the public- Rs 3,000 or Rs 300? Obviously, Rs 300.
The stock split makes the stock more liquid and hence increases its trading volume. This is because the total number of outstanding shares increases after the stock split.
Splitting a stock does not affect the financials of a company. Although the outstanding shares of the company will increase after the split, however, the face value will decrease in the same proportion. Overall, stock splits don’t affect the financials and hence the companies are willing to go for it.
As small and retail investors are more interested in affordable shares, stock splits help in increasing their participation and overall helps the companies to build a broadly diversified investor base for their stock.

Overall, in terms of value, the stock split doesn’t matters much as the financials of the company remains the same. However, by splitting the shares- the company is able to keep the shares affordable to the public and hence maintains a wide ownership base.

Companies that do not split their shares – List of few Costliest Shares!

The reasons to split shares might be clear by reading the above paragraph. However, the next big question is why few companies do not split their shares? Why the share price of many stocks in the share market is still in the 5 figures if they have an option to split their stocks.

If you check the current market price of the companies listed on the Indian stock exchange, you can find out that there are many companies whose share price is above Rs 10,000. Here are a few of the top ones:

S.No.	Company Name	Share Price (Rs)	MarketCap (Rs Cr)	Current PE
1	MRF	60269.95	25554.46	21.98
2	Honeywell Auto	32198.45	28463.43	60.03
3	Page Industries	20627.25	22999.38	119.17
4	Shree Cement	20296.95	73232.91	49.08
5	3M India	18795.8	21182.87	111.77
6	Abbott India	15975.35	33947.62	51.72
7	Nestle India	15876.85	153077.79	73.59
8	Bosch	13291.75	39202.21	78.23
9	Tasty Bite Eat.	10598.15	2719.49	78.62
10	Bombay Oxygen	10350.05	155.25	---
11	P & G Hygiene	9872.25	32046.05	74
12	Bharat Rasayan	9176.8	3900.14	24.07
13	Sanofi India	8748.4	20147.57	39.07
14	Dixon Technolog.	8719.7	10088.82	102.4
15	Yamuna Syndicate	8644	265.69	3.5
16	Polson	8028.8	96.35	19.39
17	Maruti Suzuki	6892.4	208205.62	51.63

Quick Note: The above prices and values are updated till Oct 2020!

All these shares are not easily affordable for the average retail investor. Even the shares of Maruti is trading at a current price of above Rs 6,800.

Why Do Companies Like MRF Don’t Split the Stock?

Here are a few common reasons why few companies do not split their shares:

1. They are already doing good. Why bother to split?

Many of these companies are already good. Then, why should they bother to split the share and make it cheap?

For example- MRF was trading at a share price of Rs 8,786 in October 2010. Currently, as of October 2020, it is trading at Rs 60,499. The people might have argued that the stock was expensive and not affordable even in 2010. However, it has done pretty well in the last 10 years and given a return of over 588% to its shareholders.

In short, if a company is doing good, they why it should bother to go through the splitting process. It’s already making money for itself and its investor, even when the share price is expensive.

2. Fewer public shareholding

The high share price of a company results in low public shareholding. Retail investors and traders can’t easily enter such stocks. Sometimes, this also helps in decreasing the volatility in the share price. Moreover, by allowing the high share price, the promoters tend to keep the voting right in their hands. This helps in maintaining a static voting right which allows the owners to make key decisions without much interference.

Besides, fewer public shareholding also helps in avoiding scenarios like creeping acquisition or in worst case hostile takeovers. Expensive stocks discourage acquisition.

3. No financial benefits

There are no financial benefits while splitting the shares. The value of the stock remains the same after stock splitting (the financial statements and ratios don’t change). That’s why until and unless the promoters have any good enough reason, the share splitting does not appeal much to the management and promoters.

4. Keeps traders and speculators away:

The stock split increases liquidity and makes the stock affordable. This results in an increase in the participation of retail investors and traders. And with an increase in participation, speculation also increases. On the other hand, a high share price helps to keep the traders and speculators away from the stock. Only serious investors are the ones who can find these companies appealing and might want to enter these stocks.

Another benefit of the high share price is that it keeps the newbie investors away from them. As the new investors are mostly attracted to the affordable companies and are not willing to invest a high amount, therefore their participation in quite low in these companies.

5. Symbol of Status and Uniqueness

Do you know that one share of Warren Buffett’s company- Berkshire Hathaway costs around Rs 2.3 crores? Yes, that’s true. The current share price of Berkshire Hathaway Inc. Class A is $3,15,350.00

A high share price can be sometimes regarded as a symbol of status. Splitting that share means losing this exclusiveness.

Closing Thoughts

There are no specific guidelines or rules from SEBI or any stock exchange about a stock split. Therefore, the prices of the shares can go as high as it can and the company is not obliged to offer any split.

As we discussed in this article, there are both pros and cons of a high share price. The biggest advantage of a high share price is that it helps to keep the traders and speculators away from that share. Anyways, a company might choose whether it wants to split a share or not- depending on what suits them best for their interests.

That’s all for this post on Why Do Companies Like MRF Don’t Split the Stock.. I hope it was helpful to you. If you still have any doubts/queries on this topic, feel free to comment below. I’ll be happy to help. Take care and Happy Investing!

Kritesh Abhishek

www.linkedin.com/in/kriteshrules/

October 4, 2020 Kritesh Abhishek Market, Stocks 2 comments

Why Adani Green Shares are Rallying?

Stock analysis on why Adani Green shares are Rallying: Over the last year, the shares of Adani Green Ltd. have multiplied investor fortunes by over 12 times. This is the first company in the Adani Group led by Gautam Adani to cross the Rs. 1 trillion market capitalization.

This also made Adani Green the top solar generator globally. Today we take a look at the reasons for this increase.

Adani Green Energy Ltd. is currently the largest solar power producer in the world. AGEL is part of the diversified Adani Group. AGEL established its first solar project in 2015 and had completed just two solar projects by 2017. The Company went public in 2018 in plans to accelerate its growth to meet its targets. The company develops, owns, operates, and maintains utility, scale, grid-connected solar, and wind farms.

What was the cause of the Adani Green share rally?

Here are a few of the potential reasons why Adani Green shares are rallying:

1. Infrastructure Potential

Adani group tops among global solar developers because of its 2.3 GW operational projects, 2GW under construction. In addition to these, earlier this year in May AGEL won the world’s largest solar bid of 8GW worth $6 billion ( 45,000 crores) by the Solar Energy Corporation of India (SECI). This puts AGEL’s total capacity at 12.3GW. According to Mercom Capital, this puts AGEL at the no. 1 spot in the latest ranking of global solar companies by Mercom Capital.

In the last 3 years, AGEL’s capacity base grew 3.4 times, and the 8GW project awarded by SECI will ensure that this is carried forward. This also AGEL on track to achieve its target of reaching 25GW of renewable energy capacity by 2025.

AGEL is currently in the final stages of its talks regarding the takeover of 205 MW solar power plant owned by Essel Group. In order to meet the construction needs of 4 upcoming projects, AGEL has begun discussion with lenders like Standard Chartered Bank, JPMorgan, MUFG, Barclays, DBS Bank, and Qatar National Bank, among others.

2. Net Profit

Another reason that added to the rally was the net profit of Rs 55.64 crore from Q4 of the last fiscal announced in May this year. In the year before AGEL had reported a net loss of Rs. 94.08 crore in the corresponding quarter. The total income of the company during Q1FY21 rose to Rs 878.14 from Rs 675.23 crore in the same period last year.

Lower expenses were one of the factors responsible for profits this year. The company mentioned a change in the depreciation method. This led to a reduction in depreciation and amortization.

3. Global Interests

AGEL growth had sparked global interests in the firm. Earlier this year in April Total invested Rs. 3707 crore for a 50% partnership with Asian Green. Total is a global energy giant that produces market fuels, natural gas, and low carbon electricity. Total did this through its subsidiary Total SA which will enter into a 50:50 joint venture with AGEL.

Last week Vanguard Group too acquired 1,30,84,019 equity shares in AGEL leading to 3% gains on the stock price.

Closing Thoughts

Adani Green can produce over 12 GW and targets 25 GW by 2025. But does this warrant its Mcap exceeding Rs.1 Lac crore? Its production estimates peg the total cost at Rs. 30,000 crore. This is after considering Rs. 5 crores spent for each MW making the 1 lac crore value exceeding. NTPC a conventional energy producer has 19 times the operating asset base and much higher revenue but still is valued less than Rs.90,000 crores.

A good portion of the price increase is the future anticipation that the company will perform due to its infrastructural potential, increasing profitability, and global interest is shown above.

Apart from this, it is impossible to address that AGEL is present in multiple hurdles present like the huge cost of capital from secured rights for large-scale land requirements and transmission connectivity which is available to establish large players. AGEL also benefits from the high growth potential of the renewable industry which is also pushed for by the Indian government.

September 29, 2020 Aron Almeida Market, Stocks No comments yet

‘Vi’ – Vodafone-Idea Rebranding’s Reasons and Benefits!!

Understanding Vodafone-Idea Rebranding as Vi: Earlier this month ‘Vodafone Idea Ltd’, the resultant of a merger between Vodafone India Ltd and Idea Cellular Ltd. in 2018 rebranded itself as ‘Vi’ (read as ‘we’). With so much competition going on in the Indian telecom market, analysts were expecting Vodafone-Idea’s management to take some drastic steps. Vodafone-Idea needed some steps to fight back Reliance Jio and Bharti Airtel to grow its customers and margin.

Today, we take a look at the reasons behind the Vodafone-Idea rebranding as Vi, and the possible future of Vi.

‘Vi’ – Vodafone-Idea Rebranding: Why it was done? & Reactions?

Rebranding is a market strategy where a new name, symbol, or change in design is done for an already-established brand in order to create a new corporate image for the organization.

In the case of Vi, such reactive rebranding was done to mark the final step towards the integration of the two brands, three years after the news of the merger was first announced. Vodafone India Ltd and Idea Cellular Ltd were two brands that came together to survive the disruptions in the telecom industry post the introduction of Jio.

The rebranding luckily created a lot of social media buzz. But, not all were in favor of Vi with even Jio entering the fun.

It is clear that Vi now wants to be seen as a competitor and not just a survivor like its parent companies. But rebranding is an expensive affair and comes with added risks. When Snapdeal had created a new identity in 2016, the company spent close to 200 crores. When BP changed its logo to a Helios flower it cost the company $211 million.

In 2010 Zain, a telecom company was acquired by Airtel and renamed to Airtel Kenya. But unfortunately, the brand has undergone multiple rebrandings in the past. Starting from Kencel to Celtel in 2004, then to Zain in 2008 and finally Airtel Kenya. This brand change resulted in confused customers.

Although this cost seems excessive for a simple name change it is necessary as building awareness for a new brand in consumer minds is not easy. This includes multiple costs apart from market research. An actual implementation includes changing the signage on buildings, company letterheads, websites, and name tags. And also putting up advertisements to let the consumers know about the rebranding.

Also read: The Telecom War in India – Jio, Airtel, Vodafone?

Plans post ‘Vi’ Vodafone-Idea Rebranding

Things finally started going their way when the company finally received the much-needed relief where the nation’s apex court granted 10 years to pay the billions it owes to the government. The first step that the company is likely to take will be raising funds in order to meet its immediate operating expenses, government dues, interest payments, etc. The company plans to do this by issuing convertible bonds. The hybrid bonds will have tenures of around 10 years.

Once this is done the immediate focus of the company will be on improving its ARPU’s (Average Revenue Per User). Unfortunately for Vi, they currently have one of the lowest ARPU in the industry in comparison to Airtel and Jio. This is important because in order for the firm to achieve a cash flow breakeven it will need to generate double the ARPU’s it currently has.

In addition to this, the company will have to focus on retaining its falling active subscriber base. Vodafone Idea in the last few years has lost close to 100 million subscribers to new entrant Jio. One of the major reasons for this fall is the lack of exposure to the 4G network.

This is bound to affect retention as its competitors are currently preparing themselves for 5G networks. Once its operational efficiencies are improved the next round of financing is expected to come from equities which can be utilized to further strengthen its position in the industry.

Closing Thoughts

After Vodafone-Idea rebranding as Vi, they have also started offering many attractive deals and plans, which are somewhat similar or better than their competitors.

Although Vodafone Idea has rebranded itself to Vi in search of a fresh start, however, only time will tell about the effectiveness of the new brand. Luckily for Vi, if everything goes in its favor, it will be viewed as the underdog that rose to compete, instead of being viewed as two loss-making entities that came together for survival.

September 24, 2020 Aron Almeida Market, News No comments yet

Can Reliance Retail Replicate the Success of Jio in the Retail Sector?

After severely disrupting the telecom sector, Mukesh Ambani led Reliance has set its eyes on the Indian retail sector. Today, we are going to discuss one of the most popular questions these days i.e. can Reliance Retail replicate the success of Jio in the retail sector similar to what they did in telecom? Here, we assess the acquisition spree undertaken by reliance and the possibility of a disruption in the retail segment. Let’s get started.

Reliance and Future group acquisition

On August 29th, Reliance Retail reached an agreement with Future Group. According to the deal, Reliance would buy Future retail, wholesale, logistics, and warehousing business for $3.4 billion (Rs. 24713 cr.)

The Future Group was founded by Indian businessman Kishore Biyani as a stonewashed fabric seller in the 1980s. Today it is known for its retail segment which includes the BigBazaar hypermarket chain, Pantaloons clothing shop, FBB, Foodhall, Easyday, Nilgiris, Central, and Brand Factory.

But unfortunately for the Future group, its success came with huge amounts of debt and the COVID-19 pandemic finally broke the last straw. The deal gives Reliance access to 1500 stores in more than 400 cities with millions of customers.

Why did Reliance Choose Future?

Future despite being a brand that used to be successful is loaded with debt and doesn’t come close to compete with Reliance retail which as of September 2019 had over 10900 stores in 6700+ cities. The answer to this could lie in Futures’ presence on a scale in the brick and mortar retailing established brands, work systems, and human resources built over the years. The sale comes with established label brands that have a vendor ecosystem that has been developed.

The deal also includes Futures supply chain solutions which offer warehousing and logistics services. Its customers include the likes of Tata which uses this company as a service provider for dealers across the country and such a deal would help Mukesh Ambani in expanding his reach.

The deal, however, fell through with restrictions placed on the man who led the organized retail revolution in India. Kishore Biyani and his family members are not allowed to re-enter the retail segment for the coming 15 years. This is part of the non-compete agreements that are valid generally for 3-5 years.

The possible reasons for the long period maybe the financials of Future. Biyani is still allowed to operate in the home retailing sector through hometown stores. He owns Praxis Retail which has around 48 stores and has a generated revenue of Rs.702 crore in the last fiscal year.

Investing and Acquisition Spree of Reliance in Retail

After disrupting the telecom spree, Reliance recognized the potential of the Indian retail sector. This began in 2018 with Reliance announcing its entry into the e-commerce space with an online and offline hybrid system. This was followed by a series of acquisitions and finally the founding of Jiomart late in 2019.

Acquisitions and Investments

One of Reliance retails biggest acquisitions includes that of Hamleys for Rs. 620 crores. The acquisition of the 259-year-old toy store chain will give reliance added foothold in global markets to compete with the likes of Wallmart and Amazon. Reliances other investments include Genesis Luxury Fashion, apparel firm Future 101 Design, GLF Lifestyle brands, GIB body care, etc. and Zivame. Reliance also acquired Rhea Retail. In the pharma, segment Reliance acquired an online pharma company Netmeds for 420 crores.

Reliance has not limited itself to only expanding into the organized retail segment. It has also taken steps to ensure that the retail segment can be easily integrated into the online market place by making some significant acquisitions in the following startups

Other Acquisitions

Company Acquired	Function
Grab	Logistics startup
C-Square	software firm
Reverie Language Technologies	A vernacular language-as-a-service platform that enables real-time delivery of online content in many vernacular languages.
EasyGov	Indian government schemes/services aggregator enables people to apply for various government schemes
SankhyaSutra Labs	A multi-physics simulation service helps to find solutions to industrial problems.

Strategy for the Retail Sector

Reliance first entered into the retail segment in 2006. At this point, Reliance has not even been partitioned between Mukesh and Anil Ambani. By 2014 Reliance already had surpassed market leaders like Future in terms of revenue. It was in 2018 that Reliance tested the eCommerce space through reliancefreshdirect.com and ajio.com. In November 2018 reliance began testing JioMart “Desh ki Nayi Dukan”. It was tested in Mumbai, Thane, and Kalyan. Here orders could be placed through the instant messaging app Whatsapp. This gives Reliance access to the massive 400 million user base through Jio and Whatsapp. In the eCommerce, space Reliance is still behind market leaders like Amazon and Walmart.

So what plans does Mukesh Ambani have in store for the retail sector?

After having fair amounts of success in the organized retail sector Reliance has turned its focus towards the unorganized sector which includes local Kiranas. Mukesh Ambani has made it clear that Reliance’s future includes prospects where 50% of the groups’ revenue would be made through consumer-facing business in a decades time. Retail currently accounts for 21% of Reliances revenue.

In order to achieve this goal through the unorganized sector Reliance place to get local merchants on its eCommerce platform. Here the digital infrastructure built by Reliance Jio will be combined with its physical retail business. This is also known as O2O (Online to Offline marketplace) a business model used by Chinese eCommerce giant Alibaba. Here the consumer searches and orders the product through an online platform but buys it through offline channels. In the midst of all this will be the Point of Sale (PoS) terminal which is still being tested.

This PoS terminal will not only help merchants carry out common debit and credit card transactions but also enable them to keep a product inventory and also order through the wholesale store network. The apps and systems that will enable this are still being tested.

After understanding the design set in place the acquisition mentioned earlier(particularly support services) look more like strategic acquisitions. Examples include the purchase of ‘Grab a Grub’ a Mumbai based hyperlocal delivery company, Csquare info solutions – a company that provides software solutions for distributors and retailers, Haptik Infotech will provide conversation AI-enabled devices to users. These strategic acquisitions will not only boost Reliance’s mission but also help the startups extend their reach and funding under Reliance.

Challenges in the Unorganized Sector

One of the challenges that Reliance would face is getting local traders to tag along. Praveen Khandelwal, Secretary-General of the Confederation of All India Traders has lobbied in the past against eCommerce MNC’s players. He also states that the same rules would apply to domestic entrants as well.

This is mainly due to the predatory pricing followed by eCommerce players. This is mainly due to the predatory pricing followed by eCommerce players. If we look at how Reliance had gained significant market share in the telecom sector it becomes clear that there is a good possibility that the same predatory pricing measures may be used in the initial stages of the retail venture.

The Big Question: Can Reliance Retail Disrupt the Retail segment?

The Indian retail market was valued at 700 billion in 2019 and is expected to grow to $1.3trillion by 2025. Out of this the organized retail sector forms only a 10% share. The online retail segment is much smaller than this and it is worth only 3% of the total retail market in India. This shows why Mukesh Ambani was towards the retail segment.

Infiltrating the unorganized sector through the means of retail offers unlimited scope for growth. This also shows how only a small portion of the market has been tapped offering room for multiple players. Reliance may be able to grow within the sector but a disruption like the one seen in telecom is far fetched.

Bloomberg reported that a 40% stake has been offered to Amazon in Reliance retail in exchange for a $20 billion investment in the company. What’s interesting is that the near future will bring the possibility that two of the wealthiest men teaming up or otherwise competing to exploit the vast Indian retail opportunity.

September 22, 2020 Aron Almeida Market, News No comments yet

Indian Electricity & Power Sector – Key Companies in 2020!

An analysis of a list of companies in Indian Electricity & Power Sector: The first electric street light in Asia was lit in Bangalore on 5th August 1905. Despite what seems like a headstart the electrification of India seemed like an uphill battle in the last for almost a century. However, in the last decade, India has begun to make strides not only in extending electrification throughout the country but also introducing greener alternatives.

Today, we take a look at the possible future prospect on the Indian electricity & power sector and top players that are present in the current environment.

Indian Electricity & Power Sector

India is the third-largest producer and second-largest consumer of electricity in the world. India had an installed power capacity of 371.97 gigawatts (GW) as of July 2020. When we take a look at the growth opportunities in this sector their prospects can be viewed in the two plans already put forward by the government. The first being the governments’ vision of ensuring 24×7 affordable and quality power for all.

According to the Ministry of Power, the Saubhagya mission which had begun in 2017 where 100% of households in 25 states would be electrified has already been achieved. The only states left out were Assam, Rajasthan, Meghalaya, and Chhattisgarh.

100% electrification, however, does not mean that going forward there will be limited opportunities isolated only to the remaining four states. India’s energy demand is expected to double by 2040 and also has the potential to triple. This is mainly because of the rising Indian temperatures and increased appliance ownership among consumers. This would require India to add massive amounts of power generation capacity in order to meet the demand from the 1 billion airconditioning units the country is expected to have by 2050.

Another government initiative that offers growth potential in the sector is its plan to double the electricity generation capacity of renewable energy. As of 2018, India ranked fourth in wind power, fifth in solar power, and fifth in renewable power installed capacity. If government plans are successful the shared electricity generated through renewable would increase to 40% by 2030. Currently, the electricity sector is dominated by fossil fuels like coal. In the 2018-19 fiscal these fossil fuels produced about three-quarters of the country’s electricity.

Quick Fact: Did you know that Bhadla Solar Park is located in Bhadla village, in Rajasthan’s Jodhpur district is claimed to be the largest solar power plant in the world. Spanning 14,000 acres, the fully operational power plant has been installed with a capacity of nearly 2,250 megawatts (MW).

Top companies in Indian Electricity & Power Sector

1. Power Grid Corporation Of India Ltd.

Power Grid Corporation of India Limited (POWERGRID) was incorporated on 23 October 1989 as a public limited company, wholly owned by the Government of India. The company is engaged in the power transmission business with responsibility for planning, implementation, operation, and maintenance of inter-state transmission system and operation of national and regional load dispatch centers.

Its transmission network consists of roughly 164,511 ckm Transmission Lines and 243 EHVAC and HVDC substations, which provides a total transformation capacity of 3,67,097 MVA. POWERGRID transmits about 50% of the total power generated in India on its transmission network. The government of India currently holds a 51.34% stake in the company and the balance 48.66% is held by the public.

2. NTPC Ltd.

NTPC Limited is an Indian Public Sector Undertaking company, which is engaged in the generation and sale of electricity. The company generates electric power using coal-based thermal power plants and is headquartered in New Delhi. The company has also ventured into oil and gas exploration and coal mining activities. It is the largest power company in India with an electric power generating capacity of 62,086 MW. It contributes over 25% of the total power generation of the country.

The company has approximately nine joint venture stations, which are coal-based. It also holds approximately nine renewable energy projects. The company’s subsidiaries include NTPC Electric Supply Company Limited, NTPC Vidyut Vyapar Nigam Limited, Kanti Bijlee Utpadan Nigam Limited, Bhartiya Rail Bijlee Company Limited, and Patratu Vidyut Utpadan Nigam Limited.

3. Adani Transmission Ltd.

Adani Transmission Limited is a holding company. The Company operates as a power transmission company. It is engaged in the transmission of electric energy. Despite only being incorporated in just 2013 it is already one of the top companies in the sector. The company owns, operates, and maintains approximately 5,050 ckm of transmission lines.

4. NHPC Ltd.

NHPC Limited ( National Hydroelectric Power Corporation) is a Public Limited Company and was incorporated in the year 1975. It was created with the objective to generate hydroelectric power. The government of India and State Governments holds a 74.51% stake within the Company while the remaining 25.49% is public.

Over the years the company has diversified into other sources of energy like Solar, Geothermal, Tidal, Wind, etc.

5. Tata Power Company Ltd.

Tata Power Company Ltd is India`s largest private sector power utility with an installed generation capacity of over 10,577 MW. The core business of the company is to generate, transmit, and distribute electricity. Tata is one of the few companies that are present in all segments of the power sector viz Generation (thermal, hydro, solar, wind, and liquid fuel), transmission, and distribution.

6. Adani Green Energy Ltd.

Adani Green Energy Limited (AGEL) is one of the largest renewable companies in India. The company was incorporated in 2015 and is part of the Adani Group. In 2017, the company took complete control of the overall solar energy portfolio of Adani Enterprises.

The Company operates and maintains utility-scale grid-connected solar and wind farm projects. AGEL broke into the news in September 2020 when the stock price of the company grew 1300% in one year and they posted a profit in the year 2019-20.

Also read:

Closing Thoughts

The power sector has immense opportunities in a country like India. But before investing it is also important that the investors inspect other aspects of the industry. For a long, time the power sector has found itself debt-ridden. This was primarily because of the lack of trickle-down of payments from the DISCOMS( Power Distribution companies) to the GENCOMS( Power Generation Companies). Another aspect that the investors must take caution is the viability of renewable energy companies.

Although they are marketed as a safer future, it is important to note that they too come at environmental costs and significantly higher economic costs all the while producing only a fraction of the energy in comparison to other fossils fuels. This affects both the motive i.e greener earth and the profitability prospect of the company.

September 21, 2020 Aron Almeida Market, Stocks No comments yet

Indian Auto Ancillary Industry – Top Companies in 2020!

A Study on top companies in Indian Auto Ancillary Industry: The Auto Ancilliary Industry includes companies that provide supporting equipment to the primary products of a vehicle company. This support may be in the form of Tyres, Battery, Brakes, Suspension, etc.

Such industries enable vehicle companies to focus on their core competencies while they are able to produce quality parts they specialize in. The high growth prospects of the Auto Ancillary Industry makes it one of the sunrise industries in the Indian markets. Today, we take a look at the Auto Ancillary Industry in India and its top players. Let’s get started.

The Auto Ancilliary Industry in India

The Auto Ancilliary sector from India is mainly focussed domestically and does not play a large role globally. But this tips the scale in its favor when we look at the strides it can make in terms of growth. An Auto Ancilliary Industry is heavily dependent on the Automobile Industry. Luckily enough the Indian Automobile industry is the world’s fourth-largest, with the country currently being the world’s fifth-largest manufacturer of cars and seventh-largest manufacturer of commercial vehicles in 2019.

The Auto Component Manufacturers account for 2.3% of India’s Gross Domestic Product (GDP) and employs as many as 1.5 million people directly and indirectly each. Currently, the turnover of the industry stood at Rs 1.79 lakh crore (US$ 25.61 billion) in FY20 (till September 2019) and the export of auto components grew 2.7 percent to reach Rs 51,397 crore (US$ 7.35 billion) during the same time.

As per Automobile Component Manufacturers Association (ACMA), automobile components export from India is expected to reach US$ 80 billion by 2026. The Indian auto components industry aims to achieve US$ 200 billion in revenue by 2026.

Top Auto Ancilliary Companies in India

A. Tyre Segment

1. MRF Limited

MRF Limited is India’s Largest Tyre Company in terms of total sales and MCAP. The company initially started off in Madras as a balloon factory. It was in 1952 that the company decided to enter rubber manufacturing.

MRF today has come a long way to not only have a quarter of the market share but also has extended its presence to 65 countries. MRF makes and sells tyres not just for passenger cars and motorcycles, but also for trucks and buses, farm machinery, Pickup, 3-Wheeler, etc. The company also manufactures other rubber products such as conveyor belts and toys.

2. Balkrishna Industries Limited (BKT)

Balkrishna Industries Limited (BKT) is a leading manufacturer that specializes in the Off-Highway tire market. This includes specialist segments like mining, earthmoving, agriculture, construction, and other industrial tyre segments.

The company was founded in 1987 and since then has achieved the status of one of the best quality tyre brands in India. BKT has developed into a global player in the Off-Highway tire industry with a 6% global market share. Balkrishna Industries predominantly caters to the replacement market in North America and Europe. The Italian football second division, Serie B is known as Serie BKT after Balkrishna Industries purchased naming rights.

3. Apollo Tyres

Apollo Tyres was founded in 1972 and is headquartered in Gurgaon, India. Since then it has become one of the leading global suppliers of tyres and boasts a presence in over 100 countries. The company markets its products under two brands Apollo and Vredestein.

If tyres that come as original fitment with new vehicles are considered then Apollo Tyres takes the top spot. The company currently makes radials for cars, bikes, and a host of other commercial vehicles.

4. CEAT Ltd

CEAT is one of India’s leading tyre manufacturers today and has a strong global dominance. It was founded in 1958 and is now headquartered in Mumbai. CEAT, however, was not originally an Indian company. It was originally founded in Italy(1924) and the name CEAT was an abbreviation for ‘Cavi Elettrici e Affini Torino’. It was in 1982 that the RPG Group acquired the company.

Today, it makes tyres for cars, bikes, trucks, SUVs, Auto-rickshaws, buses, tractors, and various other vehicles. CEAT produces over 165 million tyres every year and offers the widest range of tyres to all segments and manufacturers.

5. Goodyear India

Goodyear is one of the world’s oldest and largest tyre companies. It was established in the year 1898 and is one of the most recognizable brands in today’s age. Goodyear has been in the Indian markets since 1960 and since then has developed a good understanding of what the Indian consumer wants and delivers accordingly.

Its products in the Indian markets include value offerings, high-performance radials, and rugged, off-road-ready tyres. Apart from this, Goodyear is known for supplying radials to Formula One cars and also serves airplanes.

B. Battery Segment

1. Exide Industries

Indian company Exide is one of the biggest manufacturers of batteries in the whole world. The company as old as independent India itself was incorporated as Associated Battery Makers (Eastern) Ltd. The company was renamed Chloride Electric Storage Co (India) Ltd and then again in 1995 the name was changed to Exide Industries.

Exide today forms a large portion of India’s battery exports. The company supplies automotive and industrial lead-acid batteries ranging from 2.5Ah to as high as 20,500Ah.

2. Amara Raja Batteries

Amara Raja Batteries is one of the largest manufacturers of lead acid batteries for both industrial and automotive applications. It sells its products under the brand Amaron and Powerzone. Amaron is the second-largest selling automotive battery brand in India. Powerzone on the offers a wide range of inverters, home UPS and inverter batteries.

The company not only makes batteries for distribution in India, but exports its products Africa, Asia Pacific, and the Middle East.

3. HBL Power Systems LTD

HBL Power Systems LTD offers specialized batteries and finds its biggest buyers in the aviation industry. The company was founded in 1997 and successfully developed its first product i.e an aircraft battery. Over the years the company also began manufacturing custom-designed, high-quality, cost-effective batteries to meet the needs of various core industries.

Apart from airways, the firm distributes its batteries to other sectors like railways, defense, and other heavy industries.

C. Other Auto Ancillary Industry Companies

1. Bosch Ltd

Bosch is originally a German engineering and technology MNC founded in 1886. The company entered India in 1922 but ventured into the auto ancillary only in 1951 after purchasing a 49% stake in Motor Industries Company Ltd (MICO). In 2008 MICO was renamed to Bosch Ltd.

Although the company functions in areas like Mobility Solutions, Industrial Technology, Consumer Goods, and Energy and Building Technology 84% of its revenues from India come from its automotive business. Bosch currently has a turnover of over $3 billion and 18 manufacturing sites, and seven development and application centers.

2. Motherson Sumi Systems Limited (MSSL)

Motherson Sumi Systems Limited (MSSL) was established in 1986 through a joint partnership between Samvardhana Motherson Group and Sumitomo Wiring Systems of Japan. MSSL is one of the leading auto component manufacturers. They specialize in automotive wiring harnesses, dashboards, door trims, bumpers, mirrors for passenger cars, and is also a leading supplier of plastic components and modules to the automotive industry.

The company recently acquired 80% of the stock of a German-based company called Peguform Group.

3. Endurance Technologies

Endurance Technologies Limited was incorporated on December 27, 1999. The company is one of India’s leading automotive component manufacturing companies. The company manufactures and supplies a diverse range of components.

Its products include aluminum Die–Casting Products, two-wheeler aluminum alloy wheels, shock absorbers, front forks for motorcycles and hydraulic and gas-charged dampers, struts, gas springs clutches, friction plates, hydraulic disc brakes, rotary brake discs, hydraulic drum brakes, and tandem master cylinders. The company has 16 manufacturing plants within India 2 in Germany.

4. WABCO India Limited

WABCO India Limited is a leading supplier engaged in manufacturing automotive components and related services. The Company provides safety and vehicle control solutions to the commercial vehicle segment of the automotive industry.

WABCO is also engaged in the manufacture of air brake actuation systems for commercial vehicles. The Company is also involved in various other segments, such as off-highway, defense, luxury bus, car, and trailers.

5. Sundram Fasteners

Sundaram Fasteners established in 1966 is a part of the TVS Group. Over the years they have grown into global leaders, manufacturing critical, high precision components for the automotive, infrastructure, windmill, and aviation sectors.

In Auto Ancillaries the company produces iron powder, tappets, shafts and hubs, couplings and gears, gear shifters, automotive pumps, radiator caps, hot forged components, cold extruded parts, powder metal components, and high-tensile fasteners.

Also read:

Closing Thoughts

The auto ancillary industry is in the growth phase and is expected to grow at a double-digit CAGR between the period 2019-2026. Although investing in the Auto ancillary industry seems to be attractive it is important to note that all rumors to the automobile sector are also felt in the auto ancillary industry. These include impacts from festival seasons, credit crunch, bank interest rates, fuel costs, etc.

Another important factor that is expected to have a significant impact on the industry in the coming years is the push for Electric vehicles. Hence for inventors looking for long term investments selecting a company that is in tune with the changing needs into the electric segment would be optimal.

September 17, 2020 Aron Almeida Market, Stocks No comments yet

Indian Pharmaceutical Industry - Major Pharma Shares in India cover

Indian Pharmaceutical Industry – Best Pharma Shares in India!

Quick analysis of major shares in the Indian Pharmaceutical Industry: There is no other industry in the country that has achieved a global stature as that of the Indian Pharmaceutical Industry. The fact that the Indian Pharmaceutical industry has the possibility of soon being called the ‘Pharmacy to the World’, speaks volumes.

Today, we are going to discuss Indian Pharmaceutical Industry along with the major pharma shares in India. Here, we will give you an insight into the current state of the Indian Pharmaceutical Industry and the top-performing Indian companies.

Role Played by the Indian Pharmaceutical Industry

The Indian Pharmaceutical Industry plays a very important role in the global pharma markets. The industry supplies over 50 percent of global demand for various vaccines, 40 percent of generic demand in the US, and 25 percent of all medicine in the UK. Presently, over 80 percent of drugs used globally to combat AIDS are sourced from India.

India also constitutes 40 to 70 percent of supply to the World Health Organization’s demand for DPT and BCG vaccines and 90 percent of the global demand for the measles vaccine. Indian drugs are exported to more than 200 countries in the world making it the largest provider of generic drugs globally.

The Indian Pharma industry has been able to achieve this because of its unique characteristics. The drugs produced by Indian companies are low priced but still maintain the high regulatory standards of markets like the US and Europe. The reason for the drugs being of low price is mainly due to the large labor pool available. This also includes scientists and engineers with potential in comparison to their counterparts abroad.

The industry also reveals a highly competitive domestic environment which keeps the prices low. The low prices are one of the reasons why although India ranks tenth globally in terms of value but third in volume. The low prices coupled with the high quality offered which fall in line with the USFDA standards make the drugs not only accepted but also demanded everywhere in the world.

Growth prospects of the Indian Pharma Industry

Data from 1969 would help us better understand the growth prospects and the potential of the Indian Pharma industry. As of 1969, the Indian domestic market was dominated by foreign players holding a 95% market share. As of 2020 Indian pharma has an 85% domestic share and alone accounted for 15% of the global market. Pessimistic estimates have shown that the Indian Pharmaceutical market is expected to reach a value of between US$50 billion and US$74 billion by 2020.

This growth is mainly driven by the growth in medical infrastructure within the country. This would extend the accessibility to sections that lacked such healthcare before. The rising awareness and the ability to afford medicines will also account for a significant portion of domestic growth. India is projected to become one of the top 10 countries in terms of medical spending.

By 2040, India is also predicted to be the most populated country on earth, overtaking China. Other reasons for a boost in the global growth of Indian pharma would be the increase in branded drugs becoming off-patent over time. All these reasons coupled up would account for domestic growth making India attractive to international investors.

As global developed markets slow down, emerging markets like India, Russia, China, Brazil will account for greater roles in the pharma industry both as producers and consumers.

Pharmaceutical Industry – Best Pharma Shares in India

1. Sun Pharma

Sun Pharmaceuticals is Indias largest pharmaceutical company and the fifth largest specialty generic company in the world. The MNC was established by Mr. Dilip Shanghvi in 1983 offering products to treat psychiatry ailments.

Today the company offers its capabilities by producing branded generics, specialty, OTC products, antiretrovirals (ARVs), active pharmaceutical ingredients (APIs), etc. Its formulations treat various areas like cardiology, psychiatry, neurology, gastroenterology, and diabetology.

2. Aurobindo

Aurobindo Pharma was established in 1986 by Mr. P. V. Ramprasad Reddy, Mr. K. Nityananda Reddy, and other committed professionals. The company first began operations in a single manufacturing unit of Semi-Synthetic penicillin in Pondicherry. Today Aurobindo Pharma sells over 300 products in over 125 countries.

About 35% of sales are generated through APIs, 65% from the formulations business, of which 63% of formulation sales are from the United States. It is noteworthy that Aurobindo Pharma has one of the highest exposure to imports of APIs from China, mainly for antiretroviral and antibiotic drugs.

3. Lupin

Lupin Ltd. was established in 1968 and is currently amongst the top 10 generic companies in the world. Its businesses include formulations, Active Pharmaceutical Ingredients (API), drug delivery systems, and biotechnology. It is also known for growth therapies like Cardiology, Central Nervous System, Diabetology, Respiratory, Gynecology, Anti-Infective, Gastro-Intestinal, and Oncology.

4. Dr. Reddys Labratory

Dr. Reddy’s Laboratories was founded by Anji Reddy in 1984. The MNC manufactures and markets a wide range of pharmaceuticals in India and oversea,s and has over 190 medications, 60 active pharmaceutical ingredients (APIs) for drug manufacture, diagnostic kits, critical care, and biotechnology products.

5. Cipla

Cipla formerly known as Chemical, Industrial & Pharmaceutical Laboratories was founded by Dr. K.A. Hamied in 1935. The company has its presence around the world and is a therapy leader in India for anti-malarial with a market share of over 34%. The company also has a vast portfolio with more than 1,500 products in the market.

Cipla is known for its key role in selling HIV medicines in sub-Saharan Africa at one–twenty-fifth of the cost of medicines sold by other manufacturers.

Pharma Industry amidst COVID-19

The Covid-19 pandemic has exposed the reliance of the Indian pharma on China for the procurement of API (Active Pharmaceutical Ingredient). China was one of the leading countries to produce and sell APIs to the rest of the world until recently. The early effects of the coronavirus on China impacted the supply of such API throughout the world.

Pharma’s use Chinese ingredients to produce one-fifth of the world’s supply of medicines. For the number of medicines manufactured the reliance on Chinese APIs is as high as 70%. The figures in the manufacturing of antibiotics are much worse as they rely as high as 90% on Chinese imports.

Despite this Indian pharma’s have still strived to meet up to the added expectation during COVID-19. The industry has been able to also view the pandemic as an opportunity by providing drugs to many friendly countries. This was seen in situations when countries like the United States requested India to export the anti-malarial medicine — Hydroxychloroquine — in order to combat COVID-19. The industry rising up to the occasions have made global powers realize the potential of Indian pharma’s in becoming the Pharmacy to the world.

Despite the COVID-19 impact, the domestic pharma industry will grow between 4-6 percent in FY21. Following this it is also expected to have an 8-11% compounded annual growth rate (CAGR) in the FY 2020-2023 period.

Also read:

Closing Thoughts

As seen above, the Indian pharma industry has unlimited potential especially in the post corona environment as global powers become skeptical towards China. In order for the industry to take advantage of the global scenario, the government’s role is of paramount importance.

It is important that the government raises its healthcare spending to 3% of GDP YoY. The lack of focus on directing adequate spending towards healthcare was seen in the shortages of healthcare personnel, equipment, and infrastructure. It is also necessary that both the increase and reduction in prices are regulated.

Extremely low prices have the possibility of making Indian pharma’s an unattractive investment opportunity. This may wipe out up to a $20 billion market opportunity. Another aspect that requires attention is the increased focus required in the AatmaNirbhartha of API. COVID-19 has shown both the cracks and the possibilities that the Indian pharma industry possesses.

With the right policies ensuring growth and guiding the industry it is entirely possible that India becomes the “Pharmacy to the World” in the future.

September 15, 2020 Aron Almeida Market, Stocks No comments yet

Investing in Incredible India thematic investments trade brains

Investing in Incredible India – Companies to Look Out!

An analysis of Investing in Incredible India thematic stocks: India is one of the known tourist destinations in the world, thanks to the magnificent monuments, rich cultural heritage, and history. An added advantage has been the diversity offered in every aspect by different states that leaves tourists wondering if they even are visiting the same country.

This tourism is not only limited to options of sightseeing but also includes religious attractions and other medical/wellness tourism that involve Ayurvedic and spa therapy. Today, we have a look at the tourism industry from the perspective of an investor in order to provide insights into what picture it has to offer.

An Overview of the Tourism Sector in India

The tourism sector in India attracts close to 11 million foreign tourists every year. The Taj Mahal alone attracts nearly 6 million people. The domestic tourism industry brings in a huge contribution to the industry The Kumbh Mela saw a whopping 150 million visitors in 2019.

This has resulted in the Indian tourism industry growing at a fast pace (nearly 10% YoY). As of 2018 Tourism industry was one of the major growth drivers of India’s economy contributing close to $250 billion or 10% of the country’s gross GDP.

— What forms part of the tourism sector?

The sectors that form part of tourism include the following

1) Tours and Travel Agencies

These include tour operators, travel agents, online travel agencies, etc. They offer tours and travel services packages in a single product. These packages include travel, accommodation, and guides These services and packages are also provided online. For eg. Thomas Cook, Cox and Kings, Goibibo, Makemytrip.

2) Transportation

The transport sector connects tourists and destinations around the world. This sector is comprised of the Airline Industry, Car Rentals, Water Transport, Railways, etc. If we look into the aviation industry in India, a few of the leading companies are Indigo, Spice jet & Jet Airways. Further, in the railway, the only publically listed company in India is IRCTC.

3) Accommodation and catering

The Accommodation sector forms one of the most integral parts of the tourism industry. This is because tourists need a place to stay and rest. These may range from top-class hotels, camping, or rented accommodations. Taj Vivanta, Club Mahindra, Airbnb, etc. If we look into affordable housings, OYO has made a remarkable presence in this sector.

4) Food and Beverages

Apart from being one of the basic needs, it is also safe to say that this sector alone attracts a portion of tourists both domestic and foreign. This includes restaurants, bars, cafes, nightclubs, etc.

5) Other Connected Sectors

These include attractions, financial services (currency exchange), the entertainment sector( casino, shopping malls, theme parks), etc. For Example Goan Beaches, Imagica waterpark, UB city.

Why should you invest in the Indian tourism sector?

— General Scenario while Investing in Incredible India

Apart from the potential already mentioned above, there are multiple reasons why one should invest in the tourism sector. The most important being the government support. The government has brought forward many schemes like Incredible India in order to market and boost tourism. The government has also allocated funds and introduced policies that are aimed at preserving tourist sites.

In 2014, the government introduced the e-tourist visa which enabled tourists to get an Indian visa quickly online. The government in order to gain tourist confidence also introduced a Tourist police task force specifically established to ensure the safety and security of tourists.

In order to boost the domestic acceptance of tourists, the government also officially introduced slogans like ‘ Athithi Devo Bhava’. It is rare to find another industry where the government has taken the initiative of marketing and maintaining the assets and resources.

— Investing in Incredible India during COVID-19

It may come as a surprise if you were told that there may be a ray of opportunity in investing in the tourism-related sectors during the pandemic we are in. This is because of all the sectors it is tourism that is the worst hit. This has sent the stocks of most tourism dependant companies tumbling.

But it is also important to foresee that the pandemic will end one day with the introduction of a vaccine. This, in turn, has the possibility of leading to an explosion of tourism after people have spent months cooped up in their homes due to fear of traveling.

If not the normalization will also lead to the tourism sector reaching pre-COVID levels. This provides investors the opportunity to buy stocks in a distressed sector that have the ability to weather the storm at cheaper rates increasing the probability of booking returns in the short-term.

Below are some of the companies associated with the tourism industry along. The table includes companies along with the MCAP, Debt to Equity ratio along with their respective promoters pledge.

Name of the Company	MCAP (In cr.)	DEBT/EQUITY	Pledged Shares
India Tourism Development Corporation Ltd	1909.23	0	0
Mahindra Holidays & Resorts India Ltd.	2317.83	0	0
EIH Ltd	3826.66	0.09	0
Thomas Cook	1,182.11	0.25	0
BLS Internation	957.91	0	0
Chalet Hotels Ltd	3,239.38	1.03	32.12
Westlife Devolopment	5,565.15	0.32	0
VRL Logistics	1346.12	0.31	0
The Indian Hotels Company Ltd.	9329.73	0.42	0
Spicejet Ltd.	2793.49	(-0.55)	44.01
Interglobe Aviation	46,544.96	0.06	0
Lemon Tree Hotels Ltd	1893.47	0.31	34.14

Closing Thoughts

While Investing in Incredible India theme, one should remember that the tourism industry although distressed currently will not always remain so. The major assets i.e. monuments, cultures, traditions remain despite the pandemic. Selecting stocks that have the ability to weather the storm provides investors with the opportunity to ride the profits in the short term.

September 8, 2020 Aron Almeida Market, Stocks No comments yet

Nifty 50 Companies – List of Nifty50 Stocks by Weight [2020]

An analysis of Nifty 50 Companies to learn Nifty Constituent Stocks by Weightage: Nifty 50 is the benchmark index of the National stock exchange (NSE) in India. Basically, an index is the stock exchange creating a portfolio of the top securities held by it based on market capitalization in the respective category (entire market or sector-wise).

These indexes are useful because they provide investors and companies with a reliable benchmark. They have also been used as an investment strategy. In these cases, Investment Managers just set up their fund portfolios to simply track the index. They use the same portfolio as the index in an attempt to gain similar market returns.

Indexes play an important role as they also stand in representation of a country’s market and economy. Today, we observe NSE’s benchmark index namely Nifty 50. We take a look at the companies they have included along with the weights assigned to each.

Nifty 50 – NSE Benchmark Index

The Nifty 50 index tracks the behavior of the top 50 blue-chip companies as per market capitalization that are traded on the National Stock Exchange. Although the index includes only 50 of the 1600 companies that trade on the NSE it captures 66% of its float-adjusted market capitalization. Therefore, it is considered a true reflection of the Indian stock market.

Here are a few top features of the Nifty 50 Index:

The base year is taken as 1995 and the base value is set to 1000.
Nifty is calculated using 50 large stocks that are actively traded on the NSE.
The 50 companies are selected on the basis of the free-float market capitalization.
Here, the 50 top stocks are selected from different sectors.
Nifty is owned and managed by India Index Services and Products (IISL)

Nifty 50 Companies – Constituents of Nifty 50 by Weights – 2020

	Name	Industry	Weight
1.	Reliance Industries Ltd.	Energy - Oil & Gas	14.00%
2.	HDFC Bank Ltd.	Banking	9.56%
3.	Infosys Ltd.	Information Technology	7.56%
4.	Housing Development Finance Corporation Ltd.	Financial Services	6.59%
5.	Tata Consultancy Services Ltd.	Information Technology	5.12%
6.	ICICI Bank Ltd.	Banking	4.80%
7.	Kotak Mahindra Bank Ltd.	Banking	4.27%
8.	Hindustan Unilever Ltd.	Consumer Goods	4.22%
9.	ITC Ltd.	Consumer Goods	3.62%
10.	Bharti Airtel Ltd.	Telecommunication	2.85%
11.	Larsen & Toubro Ltd.	Construction	2.38%
12.	AXIS Bank Ltd.	Banking	2.08%
13.	Bajaj Finance Ltd.	Financial Services	1.84%
14.	Maruti Suzuki India Ltd.	Automobile	1.78%
15.	Asian Paints Ltd.	Consumer Goods	1.65%
16.	HCL Technologies Ltd.	Information Technology	1.64%
17.	State Bank of India	Banking	1.57%
18.	Nestle India Ltd.	Consumer Goods	1.26%
19.	Mahindra & Mahindra Ltd.	Automobile	1.24%
20.	Sun Pharmaceutical Industries Ltd.	Pharmaceuticals	1.23%
21.	Dr. Reddy’s Laboratories Ltd.	Pharmaceuticals	1.17%
22.	UltraTech Cement Ltd.	Cement	1.02%
23.	Power Grid Corporation of India Ltd.	Energy - Power	0.98%
24.	HDFC Life	Insurance	0.97%
25.	Britannia Industries Ltd.	Consumer Goods	0.96%
26.	Titan Company Ltd.	Consumer Goods	0.93%
27.	Tech Mahindra Ltd.	Information Technology	0.90%
28.	NTPC Ltd.	Energy - Power	0.90%
29.	Wipro Ltd.	Information Technology	0.89%
30.	Bajaj Auto Ltd.	Automobile	0.84%
31.	Bajaj Finserv Ltd.	Financial Services	0.80%
32.	Cipla Ltd.	Pharmaceuticals	0.78%
33.	Hero MotoCorp Ltd.	Automobile	0.74%
34.	Bharat Petroleum Corp. Ltd.	Energy - Oil & Gas	0.71%
35.	IndusInd Bank Ltd.	Banking	0.68%
36.	Shree Cement Ltd.	Cement	0.62%
37.	Eicher Motors Ltd.	Automobile	0.61%
38.	Oil & Natural Gas Corporation Ltd.	Energy - Oil & Gas	0.61%
39.	Coal India Ltd.	Energy & Mining	0.58%
40.	Tata Steel Ltd.	Metals	0.58%
41.	UPL Ltd.	Chemicals	0.56%
42.	Grasim Industries Ltd.	Cement	0.53%
43.	Hindalco Industries Ltd.	Metals	0.51%
44.	Adani Port and Special Economic Zone	Infrastructure	0.51%
45.	JSW Steel Ltd.	Metals	0.48%
46.	Indian Oil Corporation Ltd.	Energy - Oil & Gas	0.48%
47.	Tata Motors Ltd.	Automobile	0.40%
48.	GAIL (India) Ltd.	Energy - Oil & Gas	0.38%
49.	Bharti Infratel Ltd.	Telecommunication	0.35%
50	Zee Entertainment Enterprises Ltd.	Media & Entertainment	0.27%

Quick Note: If you want to research more about the fundamentals of these companies, you can go our Stock research and analysis PORTAL here.

Bonus: BSE Sensex Constituent Stocks

The BSE Sensex or the Sensex 30 tracks the behavior of the top 30 companies as per market-cap registered on the Bombay Stock Exchange. BSE Sensex stands for S&P Bombay Stock Exchange Sensitive Index. Here are a few top facts about Sensex 30:

The 30 companies are selected on the basis of the free-float market capitalization.
These are different companies from different sectors representing a sample of large, liquid, and representative companies.
The base year of Sensex is 1978-79 and the base value is 100.
Sensex is an indicator of market movement. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE has gone down. If Sensex goes up, it means that most of the major stocks in BSE went up during the given period.

Sensex 30 Companies- Constituents of Sensex 30 by Weights – 2020

	Name	Industry	Weight
1.	Reliance Industries Ltd.	Integrated Oil & Gas	17.20%
2.	HDFC Bank Ltd.	Banks	10.41%
3.	Infosys Ltd.	IT Consulting & Software	8.87%
4.	Housing Development Finance Corporation Ltd.	Housing Finance	7.66%
5.	ICICI Bank Ltd.	Banks	5.57%
6.	Tata Consultancy Services Ltd.	IT Consulting & Software	5.52%
7.	Hindustan Unilever Ltd.	Personal Products	4.89%
8.	Kotak Mahindra Bank Ltd.	Banks	4.69%
9.	ITC Ltd.	Cigarettes,Tobacco Products	4.14%
10.	Bharti Airtel Ltd.	Telecom Services	2.77%
11.	Larsen & Toubro Ltd.	Construction & Engineering	2.76%
12.	AXIS Bank Ltd.	Banks	2.35%
13.	Maruti Suzuki India Ltd.	Cars & Utility Vehicles	2.06%
14.	Bajaj Finance Ltd.	Finance (including NBFCs)	1.99%
15.	Asian Paints Ltd.	Furniture,Furnishing,Paints	1.92%
16.	HCL Technologies Ltd.	IT Consulting & Software	1.90%
17.	State Bank of India	Banks	1.82%
18.	Nestle India Ltd.	Packaged Foods	1.46%
19.	Mahindra & Mahindra Ltd.	Cars & Utility Vehicles	1.46%
20.	Sun Pharmaceutical Industries Ltd.	Pharmaceuticals	1.45%
21.	UltraTech Cement Ltd.	Cement & Cement Products	1.12%
22.	Titan Company Ltd.	Other Apparels & Accessories	1.08%
23.	Tech Mahindra Ltd.	IT Consulting & Software	1.04%
24.	Bajaj Auto Ltd.	2/3 Wheelers	1.01%
25.	POWERGRID	Electric Utilities	1.00%
26.	Hero MotoCorp Ltd.	2/3 Wheelers	0.86%
27.	NTPC Ltd.	Electric Utilities	0.81%
28.	IndusInd Bank Ltd.	Banks	0.75%
29.	Tata Steel Ltd.	Iron & Steel/Interm.Products	0.72%
30.	Oil & Natural Gas Corporation Ltd.	Exploration & Production	0.71%

Also read: What is Nifty and Sensex? Stock Market Basics (For Beginners)

That’s all for this post. I hope it was useful for you. In case, if you have any queries related to Sense and Nifty 50 Companies or constituent stocks, let me know by commenting below. I’ll be happy to help. Happy Investing.

September 7, 2020 Aron Almeida Market, News 2 comments

Why are Gold prices skyrocketing? Is it a good time to buy?

Why were Gold Prices Sky-Rocketing? And Is it a Good time to Enter?

After the gold prices crossed Rs. 50,000 for 10g after 9 years period since 2011 in India, there seems to be no stop to how high the prices can go. The gold prices touched Rs.58,100 for 10g in Bangalore as of 7th August. This shouldn’t have come as a surprise because commodities like gold have always had exceeding demand in India. Especially after considering that India is one of the world’s largest consumer second only to China.

However, the increase seems unrealistic in times of pandemic where every investment seems to have suffered, only gold seems to have found its biggest boom. In the three year period from September 2016 to October 2019, gold saw an increase of 25% in its value. But along with the increasing troubles of 2020 in the midst of a pandemic the value of gold has already shot up 37.8% or by Rs. 15,240 with 5 more months to go.

Today, we take a look at the scenario finding possible reasons for the boom and also discuss if investing now is a good idea.

The Indian Gold Market

It would be rare to find a market in India that has consistently been in demand such as that of Indian Gold. There have been many jokes that have passed on claiming that the gold available in households is more than sufficient to cover all the deficits and debt that our country faces. But when we look at the following figures these statements may not be exaggerated. Indian households have piled up as much as 25000 tonnes of gold. To put things in perspective that alone would amount to Rs. 145.25 lakh crores in today’s rates. India’s central bank the RBI, on the other hand, has a total holding of 653.01 tonnes of gold. That too after buying additional 40.45 tonnes of gold in the current year.

The figures in the households are the ones that have been accounted for. It does not include gold smuggled into the country which stands approximately at around 120-200 tonnes every year. After observing these figures it may not come as a surprise that India accounts for 25% of the world’s total physical gold demand worldwide.

Why is there an increase in Gold Price?

For many Indians, gold has always been the favorite investment instrument traditionally apart from the land. Despite this, a significant portion is still placed in liquid assets like cash, stocks, etc. In the times of a pandemic, individuals are seeking shelter for their savings in an investment that doesn’t necessarily provide great returns but at least maintains its value and provides liquidity. This has led to the demand for gold skyrocketing to new heights.

Now we take a look at some other factors that have lead to this increase in demand.

1. Scarcity

As you may already know that gold is scarce because all gold is mined. Over time however mining for more gold has become difficult and due to its characteristics, it is safe to say most of the gold is recycled and put back into circulation. But luckily enough this gold cannot be consumed like other commodities. Enabling it to keep its value since time immemorial keeping up with the rising population. Another factor that adds to its scarcity due to its lack of consumption is what happens after the commodity is bought.

Gold, after it is bought, is taken out of the market for long periods of time only to be kept in a drawer or bank locker taking it out of the market for years. But these factors like scarcity, inability to consume, etc, have always existed. Then why have the prices increased now?

These factors have always existed at lower prices only because the increasing demand has always been checked with adequate supply. In order to limit the spread of the virus most countries had to resort to a lockdown. This has had adverse effects on not only mining but also a lack of shipments. As per some estimates, the global demand for gold is 1000 tonnes more than the supply. This rise in demand as mentioned earlier has been due to people’s search for a secure asset.

2. Culture

The demand for gold also has its roots in humans’ desire for beauty. Demand for gold in India is interwoven with culture, tradition. This is primarily because of the dependence of marriages and other functions on gold. According to a study by the World Gold Council, Indian consumers view gold as both an investment and an adornment. When asked why they bought gold, almost 77 percent of respondents cited the safety of investment as a factor, while just over half cited adornment as a rationale behind their purchase of gold.

3. Geopolitical Factors.

People search for a safe haven like gold extends to periods of geopolitical tension like war. This is the reason why crisis situations like wars have a negative impact on almost all asset classes. But when it comes to gold it has a positive impact. This increase in the price of gold was earlier also noticed during the Korean nuclear crisis. Similar trends are noticed due to tensions between India-China and US-China.

4. Exchange Rates

It has been observed that a weakened US Dollar also leads to a rise in gold rates. The same is noticed in the current situation.

5. Limited Influence by Big Market Movers.

In stock markets, it is the FII and DII’s that are termed as market movers. This is because of their ability to influence market trends due to top huge capital in possession. In the Gold market, it is the central banks that have a significant influence. This is because almost every central bank keeps reserves in the form of investment in gold. When an economy is performing well and the RBI has sufficient foreign reserves it will want to get rid of gold.

Because gold does not generate any return and a booming market will provide a better return if the money is invested elsewhere. But in this scenario, the other investors as well will not want to invest in gold as they too would prefer to earn returns. Hence central banks are caught on the wrong side of the trade leading to a fall in the value of gold.

But however, the influence the central banks like RBI have is limited. This is because of the Washington Agreement. This agreement, however, is not binding and is more like a gentleman’s agreement. According to it, central banks will not sell more than 400 metric tons a year. Limiting the influence of central banks even if they want to benefit from high prices.

In Closing: Should you Invest in Gold now?

Predicting Investments is always tricky due to the uncertainties present. Most of us may have already noted the effects of economic turmoil on gold and decided to invest in the future if we are faced with a similar scenario. But that doesn’t help today, does it? In order to help you take better decisions, let us take a look at previous gold rate highs.

If you notice in the above chart you’ll be able to see that the Gold rates boomed in the 1980s as well. But a person investing in such a high would only reap the benefits almost 3 decades later post 2008. Similarly, a person who invested in 2011 is reaping some minimal positive benefits in 2020. Hence considering this if investments were made in gold say in early 2020 is a completely different story than investing now.

However, it is also best to take a look at the forecasts predicted by analysts. Analysts, however, have been bullish and have predicted that gold prices could go up to Rs. 65,000 for 10g in the next 18-24 months. But it is necessary to note that these estimates depend on a period that COVID-19 will take a while more to be controlled. Also, public vaccine availability is not anticipated for at least months to come.

From the above arguments, it shows that when the investment is made on a long term perspective there may be other alternatives that provide better results in the same time frame. However, investing for short periods completely depends on one’s estimates for COVID control or vaccine availability oy unavailability.

Also read: [Update] COVID-19 Vaccine: When can we expect it to be ready?

August 13, 2020 Aron Almeida Invest Intelligently, Investing Psychology, Market, News No comments yet

Oil and Petroleum Industry in India cover

Oil and Petroleum Industry in India: Where to invest?

Understand the Oil and Petroleum Industry in India and its major players: The Oil and Petroleum Industry in India has been among the eight core industries that contribute largely to the GDP of India. India is the 3rd largest Oil Consumer in the world after USA and China. It already attained 63% of the energy self-sufficiency by 2017 due to its increased attention to the promotion of alternative sources of energy namely, wind, solar and nuclear energy.

The stock market for Oil and Petroleum products also has started showing surge due to the announcement of the Government’s privatization program resulting in more global energy players showing interest in buying a majority stake in the Bharat Petroleum Corporation.

This article aims to provide the latest trends in the Oil and Petroleum Industry in India including its market size. Later, we will talk about the big players in this industry in India. Let’s get started.

India’s Economic Growth via Oil and Petroleum Industry

It is important to note that India’s economic growth is largely related to its demand for energy. The projections reveal that the need for the energy sector in oil and gas is expected to grow and therefore, investors consider investment opportunities in this sector in India.

Additionally, the Government of India has also adopted certain policies to cater to the industry with maximum investments. Hence, it has allowed 100% Foreign Direct Investment (FDI) in this sector including petroleum, natural gas, and refineries. This is evidential from the latest developments in Reliance Industries Limited, Cairn India, and Bharat Petroleum Corporation. As the fastest-growing sector, investors see promising returns in this sector.

Market Size of Oil and Petroleum Industry in India

Now, let us talk about the numbers to understand the market size of the oil and petroleum industry in India better:

India gained the position of the second highest refiner in Asia as its Oil Refining Capacity was calculated to be 249.9 million metric tons (MMT) in May 2020 of which the private companies contribute about 35.36% for the year 2020.
India is expected to be one of the major contributors world-wide to non-OECD petroleum consumption.
In the year 2020, crude oil production is recorded at 30.5 MMT and natural gas consumption is expected to reach to 143.08 million MMT by 2040.
Similarly, in 2020, the import of crude oil increased to 4.54 million barrels per day (mbpd) as compared to the last year and LNG import is 33.68 billion cubic meters (bcm).
The consumption of petroleum products has also seen a spurt of 4.5% at 213.69 MMT.
The export of petroleum products from the country also has risen to USD 35.8 billion as compared to USD 34.9 billion in 2019 and the quantity-wise rise is at 65.7 MMT in 2020 as compared to 60.54 MMT in 2019.
Currently, India as one the largest emitter of greenhouse gases has the share of natural gas in the energy sector of 6.2% which is expected to rise to 15% by 2030.
As the second-largest consumer of Biogas India is planning to open 5000 CBG plants by 2023 under the SATAT scheme.
Minister of Petroleum and Natural Gas, Government of India sets the target to reduce oil and gas import dependency by 10% by 2022 thereby giving a wide range of opportunities to foreign investors to invest in projects worth US$ 300 billion.
Gas Authority of India Limited (GAIL) as of March 2020 had the biggest share of 71.61% of the country’s natural gas pipeline network.
Indian Oil Corporation Limited in March 2020 was leading the segment of the product pipeline network with 51.25%.
The energy trade between India and the USA is going to cross US$ 10 billion by the end of the year 2020.

Investment and Government Initiatives

According to the senior-most market technical expert, CK Narayan, the crude oil prices will continue to grow as he analyzed after the biggest downfall during the recent pandemic, it has risen to $44 and will continue to rally further. Mr. MK Surana, the CMD of Hindustan Petroleum also predicts the surge in the price of crude oil in the last quarter of the year 2020 over $45. He also finds the Indian refinery sector as promising due to their ability to get established at the world-class level.

It is indeed worth to mention here that the petroleum and natural gas sectors were able to grab US$ 7.82 billion during the 10 years April 2000 to March 2020, according to the Department for Promotion of Industry and Internal Trade Policy (DPIIT). The initiative from the Government to set up bio-CNG plants has allowed them to spare US$ 1.1 billion to promote clean fuel.

Natural Gas production also is going to be increased to 15% by 2030 and the top players of the Liquified Natural Gas producers aim to have 1,000 LNG stations across the country which is something that will attract more investors. According to Rajeev Mathur, an executive director of GAIL (India) Ltd, the natural gas demand will be increased by 3-4% by end of March 2021. ONGC has raised US$ 300 billion through the External Commercial Borrowing.

The government is planning to invest US$ 9.97 billion to expand the gas pipeline network. The Government also approved fiscal incentives to improve recovery from oil fields with an intention to lead the hydrocarbon production to Rs. 50 lakh crores in the next 20 years.

Top Players in Oil and Petroleum Industry in India

— 1) Reliance Industries Limited

As the world’s largest refining hub, RIL’s Jamnagar, Gujarat’s plant has a refining capacity of 1.24 mbpd. Until June 2020, its segment revenue from oil and gas was US$ 455.53 million.

Its Petroleum segment has a vast network of over 1300 fuel retail outlets across the country. It becomes the first company to have the market capitalization of over Rs. 13.75 lakh crores in India.

— 2) Oil and Natural Gas Corporation (ONGC)

ONGC, as the largest crude oil and natural gas company of the country, signed a Memorandum of Understanding (MoU) with NTPC to set up a Joint Venture for the renewable energy business in India. Its market cap is more than Rs. 1.04 lakh crore.

ONGC Videsh – subsidiary of ONGC, which is India’s biggest International Oil and Gas Company, has made new oil discoveries in Colombia and Brazil as part of its Energy strategy 2040. The company also signed an MoU with ExxonMobil for offshore blocks.

— 3) Petronet LNG Limited

This company has set up the country’s first LNG receiving and regasification terminals and has a market cap of Rs. 38,227.5 crore. The company is expecting partnerships with fuel and gas retailers on LNG stations for long haul trucks and buses. With the aim to set up 300 LNG stations by 2023, it is planning to set up 1,000 LNG stations over a period of time across the country.

— 4) Indian Oil Corporation Limited (IOCL)

IOCL focuses on the safety of India’s energy sector and self-sufficiency in refining & marketing of petroleum products with over 47,800 customer touchpoints. It has a market capitalization of Rs. 1.71 crore and contributes the highest to the national exchequer by way of duties and taxes.

In March 2020, it started supply of the world’s cleanest petrol and diesel across the country and it is also planning to invest Rs. 500 crores in Karnataka.

— 5) Oil India Limited

A public sector company and the second-largest in hydrocarbon exploration and production, Oil India Limited shares are showing increasing trends. Despite blowouts at one of its sites, there are predictions from the market experts that they will be able to recover and prices will be better gradually. It has a market cap of Rs. 10,291.01 crore.

Also read: Passenger Vehicles Industry in India: How much competitive is it?

Bottom line

Succinctly, the energy sector in an Indian economy is growing faster than any other major economies. The industry experts also predict the energy demand to double by 2035. Moreover, the country’s contribution to the global primary energy consumption is also estimated by the analysts to double by 2035.

The growth in the consumption of crude oil is projected to grow at 3.6% Compound Annual Growth Rate – CAGR and the natural gas to grow at 4.31% CAGR by 2040. The Diesel demand too will be twice by 2029-30.

Therefore, the oil and petroleum sector look promising for the country and the coming years are going to be remarkable in terms of demand, consumption as well as the growth point of view.

August 3, 2020 Team Trade Brains Market, News No comments yet

Passenger Vehicles Industry in India- How much competitive it is?

Passenger Vehicles Industry in India: How much competitive is it?

An Analysis of Passenger Vehicles Industry in India to understand the latest trends and the key players: Indian economy holds the fifth-largest position in the auto market in 2019 and was expected to cross Germany by 2020 in terms of a number of sales. However, the recent pandemic has flipped the side to a completely opposite direction thereby causing a drop of over 17% in the industry.

Several Government initiatives and promising actions by the major automobile players of India was helping this industry to outperform at the world-class level by making the country a leader in this industry. The domestic Indian market is predominantly ruled by two-wheelers and passenger vehicles. The growing middle-class and young population has made the two-wheelers market the dominant one in terms of volume.

This article aims to study the Passenger Vehicles Industry in India including its current trends, biggest players, recent developments, and Government initiatives.

The Passenger Vehicles Industry in India

Passenger Vehicle (PV) is a motor vehicle which has at least four wheels where no more than eight seats are allowed in addition to the driver’s seat for transporting the passengers. Generally, cars are considered as passenger vehicles.

In India, the small and mid-sized cars selling is holding the highest position in terms of sales of the passenger vehicles (PV) industry. The PV industry recorded a market share of 12.9% in India until June 2020. Out of the total automobile exports of 4.77 million, PV accounted for 677,340 exports until June 2020. In 2019, over 3 million PVs were produced and sold domestically.

Currently, Maruti Suzuki and Hyundai are the top players in this industry. Maruti Suzuki with sales of over 208,000 Alto cars, 200,000 Dzire, and 192,000 swift cars reported in 2019 domestic sales of 1.75 million.

However, domestic sales in the PV industry recorded a decline of 9.1% until March 2020. Maruti Suzuki has already started selling BS-VI compliant vehicles that include Alto, Eeco, S-Presso, Celerio, WagonR, Swift, Baleno, Dzire, Ertiga, and XL6.

Latest Trends in the PV Industry in India

The entire automobile industry attracted Foreign Direct Investment of US$ 24.21 billion in the 10 years from April 2000 to March 2020. The growing demand has made the way for the industrialists to invest more in India’s ever-growing industry.

The announcement by Jaguar Land Rover in May 2019 of the launch of its locally assembled Range Rover Velar has made JLR cars quite affordable. The deal between the Tata AutoComp Systems (Tata Group’s Auto-component segment) and Prestolite Electric (based in Beijing) happened in January 2020 aims to enter the Electric Vehicles market by starting a joint venture of their own.

Force Motors’ investment of US$ 85.85 million focuses on the development of the two new models in the coming two years. MG Motor India is also planning to launch affordable Electric Vehicles in the next 3-4 years.

The Indian Government announced in the Budget of 2019-20 to provide tax deduction of Rs. 1.5 lakh for the interest paid on the loan taken to buy Electric Vehicles thereby promoting sales of such EVs. It is also planning to facilitate the start-ups involved in the EV space by setting up the incubation centers.

(FIG: PV Market Share Manufacture wise – FY19)

— FAME II (Faster Adoption & Manufacturing of Electric Vehicles Phase II)

It is also notable to mention here about the Government’s initiative that approved the FAME II scheme (Faster Adoption and Manufacturing of Electric Vehicles Phase II) w.e.f. April 2019 under which allocation of Rs. 10,000 crores were made to promote electric mobility in the country over the three years 2019-20 to 2021-2022.

The scheme aims to provide incentives on the purchase of such vehicles to promote electric and hybrid vehicles. They primarily aim to electrify the public transportation and shared transportation.

— Bharat Stage VI Norms

Introduced in 2000, these norms are the standards implemented by the Government to control air pollution by vehicles. The norms are based on various stages and as the stage goes up the rules become stricter.

Thus, BS-VI stage compliance would require more robust technologies and investment into such technologies to upgrade the vehicles. Consequently, the buyers will also need to pay more to buy the vehicles as the making cost goes up.

Market Leaders in the Indian PV Industry

As mentioned earlier, the PV market is predominantly led by Maruti Suzuki with more than 50% market share. The industry analysts believe this is due to their planning to empty the BS-IV inventories and keeping the BS-VI compliant vehicles available ahead of the time.

No matter what there are other players too who are contributing not as much as Maruti Suzuki, but their little contribution makes the Indian Automobile Market the fastest-growing market to be ready to compete at the global level. Let us see who these big players are, how are they contributing and what do they have in their baskets.

Here are the top seven passenger vehicle Makers in India:

Rank	Original Equipment Manufacturers (OEMs)	PV Sales FY20	PV Sales FY19
1	Maruti Suzuki	14,36,124	17,29,826
2	Hyundai Motor India	4,85,309	5,45,243
3	Mahindra & Mahindra	1,86,978	2,54,351
4	Tata Motors	1,31,197	2,31,512
5	Honda Cars India	1,26,899	1,83,787
6	Toyota	1,14,081	1,50,525
7	Ford India	66,415	92,937

— 1) Maruti Suzuki India Limited

The largest car maker of India, Maruti Suzuki is a subsidiary of Japan-based Suzuki Motor Corporation. They have already launched BS-VI compliant Tour S CNG & Tour S in this year. It has already crossed the 20 million sale milestone in the year 2019. It is leading the market by reaching the target of cumulative sales of one million utility vehicles. Until June 2020 it has recorded sales of more than 1.5 million units.

— 2) Hyundai Motor India Limited (HMIL)

The subsidiary of a South Korean parent company Hyundai Motor Corporation, HMIL is the second-largest carmaker in India. Its Santro car had been recorded as a runaway success. It was the first automotive company in India to achieve the export target of 1 million cars in just 10 years. This year, its Hyundai Venue car has been awarded as the Indian car of the year. It sold in 2019 545,243 cars however its market share declined in that year.

— 3) Mahindra & Mahindra Limited

The decades-old Indian multinational vehicle manufacturing company, Mahindra & Mahindra Limited. The largest tractors manufacturer in the world records the highest production in India of cars. With the introduction of SUVs in 2019, they reported a 2.21% growth in PV sales. In a challenging time, XUV300, Alturas G4 and Marazzo have helped M&M to add sales of about 27,000 units additionally.

— 4) Tata Motors Limited

The world’s leading automobiles manufacturer and an automobile arm of the Tata Group, Tata Motors has extended its presence globally by setting up Joint Ventures with Fiat and Marcopolo. It holds a 45.1% market share in the commercial vehicle segment in the year 2019. To improve electric mobility infrastructure in the country it has created a separate vertical by joining hands with Tata Power.

— 5) Honda Cars India Limited

As the leading premium car manufacturer of India, Honda Cars was established with the specific purpose to cater PV industry with the latest technology-based vehicles. It is a subsidiary company of Japan-based Honda Motor Co. Limited. It recently launched WR-V compact SUV with robust features in two different trim options and in both petrol and diesel fuel choices.

— 6) Toyota Kirloskar Motor Private Limited

It is a subsidiary of the Japanese parent company Toyota Motor Corporation. Among the carmakers, it holds the fourth largest position in India. In 2012, it started One Make Racing Series with the Etios car and witnessed an overwhelming response from the youngsters.

— 7) Ford India Private Limited (FIPL)

It is a subsidiary of Ford Motor Company and since 2019 Mahindra and FIPL joined hands to set up a Joint Venture. It is the number 1 Passenger Vehicle Exporter in India competing with Hyundai. It exports in 35 countries almost 40% of its engine production and 25% of its car production.

Also read:

Impact of COVID-19 on the Indian PV Industry

With the current situation of the global pandemic, the biggest challenge these car makers will face is the changing customer preferences. Due to the Work from Home concept, the demand of the Passenger Vehicles has seen a sharp fall in the six months so far as compared to the last year.

The industry experts estimate that the customers’ preference during this time has gone back to the original small and compact cars for which Maruti Suzuki is leading the market as always. However, for SUVs and MPVs the market may not be as good as for the small and affordable cars.

The luxury cars will too see a downfall. The predictions are also against the promotion of EV sales as they need advanced technology and are quite costly. Many startups are under a red zone meaning they are already falling short of cash and liquidity making it difficult for them to survive. Interestingly, the used car business will gain as the customers may face liquidity crunch to some extent.

August 3, 2020 Team Trade Brains Market, News No comments yet

Public vs Private Banks in India: Which is performing better?

A Brief Study on Public vs Private Banks in India: Regardless of which sector one works in, it relies on the banking sector. This is the very reason why the banking sector is known as the backbone of the economy. A country with a poor banking sector is not only destructive to the banking industry but also to economic growth overall.

Due to its importance today we try and understand the banking sector through its division of public and private banks and analyze their contributions to helping the economy grow or not in the recent past

What do you mean by Public and Private banks?

Banks are classified as Public or Private depending on their ownership. First, let us understand the basic difference between Public vs Private Banks in India:

— Public Sector Banks

A Public sector bank is one where the government owns a majority stake (i.e. more than 50%). In common parlance, they are also known as government banks. Due to its ownership, the aims set for these banks revolve around social welfare and fulfillment of the country’s economic needs. These banks are formed by passing Acts in the parliament. Eg. Bank of India, Canara Bank, Punjab National Bank, Bank Of Baroda, State Bank of India.

(Source: Wikipedia)

— Private Sector Banks

A Private sector bank is one where the majority stake is held by private organizations and individuals. Private banks have profit maximization set as their main goals. These banks are registered under the Companies Act.
Eg. HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, Yes Bank.

Differences in the working of Public vs Private Banks in India

Although the banks being public or private perform the same functions, due to their aims and period of existence customers notice significant differences depending on the banks they choose.

Private banks arrived relatively late in the Indian banking sector thanks to the reforms introduced in 1991. This is one of the reasons why people find public banks secure as they already have been around longer enabling them the gain their trust. Also, the confidence that the government will not let a public bank fail adds to this security. Private banks make up for these security concerns through their technological advancements and superior customer service.

What is it like to work for these two bank types?

In the year 2013 80,000 government bank jobs received close to 40 lakh applications making it one of the most sought after careers. The reason for this has been the job security and reduced work pressure present in these banks. This, unfortunately, has reflected on the banking sector as public banks have been known to take too long to perform duties.

This can be attributed mainly to the fact that the employees do not have any incentives to work better. The competitiveness faced here is prior to the job in the examination set during the selection process.

Working for private banks, on the other hand, increases the rewards available to an individual but with additional risk. Employees receive higher remunerations but are required to work in highly competitive environments. This too has rubbed off on how the functioning of private banks is viewed i.e. fast-paced, efficient, and easier to deal with.

Which one is performing better?

— Customer Base

( ATM with the highest altitude in India, present in Sikkim)

Longer periods of existence in the Indian markets have allowed public banks to develop a larger customer base in comparison to the private banks. The goals set have also played a major role in achieving this. Public banks function with the aims of ensuring banking accessibility throughout the country.

This has motivated the public banks to penetrate deeper into rural areas gaining a greater customer base. Private banks, on the other hand, enter only areas where they see a potential to earn a profit. This is the reason private banks mainly function in urban areas and not rural.

— Market Share

As of 2018 public sector banks account for 62% of the total banking assets and 58% of the total income, the rest occupied by private banks. Although public banks have a greater market share, their hold has been continuously slipping. As of 2016 public sector banks accounted for 75% of the total banking assets and 71% of the total income.

Public banks are steadily losing out even when it comes to loans. Figures from 2018-19 show that private banks gave a total of ₹7.3 trillion in loans, while public sector banks gave ₹2.3 trillion in loans. In comparison the total amount of loans in 2011 which stood at ₹40.8 trillion, public sector banks had a share of 74.9% and private sector banks around 17.8%.

The one segment that we would expect public sector banks to not loose out one is deposits. Especially after considering the security of deposits it to be one of their USP’s. But unfortunately over the last few years, public sector banks have lost market share here too. As of 2011 the total amount of deposits in the Indian banking system stood at ₹53.9 trillion, public sector banks had a share of 74.6% in it. The share of private sector banks was a little over 18%. By 2019 the total amount of deposits in the Indian banking system stood at ₹125.6 trillion. Of these Public sector banks had 63.1% of these deposits and private sector banks 28.7%.

— Non-Performing Assets (NPA)

One would expect private banks to have a high number of NPA’s considering that in order to gain an edge over public banks the private banks may be more approachable when it comes to loans, leading to higher NPA’s. But this has not been the case as the NPA’s of private sector banks have been lower in comparison to private banks.

In the 5 years leading up to 2018, the NPA’s of private sector banks increased from 0.7% in 2014 to 2.4% in 2018. Figures that seems reasonable in comparison to that of the private sector where the NPA’s rose from 2.6% in 2014 to 8.00% in 2018 and have been increasing since then.

Also read: What are NPA’s? And How do they affect Banks?

Closing Thoughts

It is evident that although the public sector still holds a greater market share they have not been able to compete with the growth rate of private banks. In order to achieve this, Private banks have capitalized on the weaknesses of Public Banks. Coupling superior customer service with the inclusion of technological changes has worked out in favor of the private banks. It is good to see that these measures adopted by private banks are forcing the public banks to implement them too.

But if the public banks keep playing catch up with the private banks they will soon be seen falling behind even in terms of market share. This has called for multiple structural reforms to ensure that does not happen because at the end of the day it is the public banks that look after and perform in the interest of the economy.

August 2, 2020 Aron Almeida Market, News No comments yet

Chinese investments in Indian Unicorn Startups cover

[Snapshot] Chinese investments in Indian Unicorn Startups

A Brief Analysis on Chinese investments in Indian Unicorn Startups: The Galwan clash that arose due to China claiming Indian territory had left 20 Indian army soldiers martyred. The clash triggered public outrage where boycott of all Chinese companies and their products was demanded. In some cases, politicians even spilled their outrage by calling for a boycott of Chinese cuisines.

After increased escalations, 49 Chinese apps were banned by the government. This, however, has left many unclear when it comes to Indian firms that have received funding from Chinese investors. “Should these companies and their products be boycotted as well?”, was the question in the minds of many. Many such companies were left in a critical state hoping that no such backlash is directed towards them.

Today, we have a look at the chinese investments in Indian Unicorn Startups. Here, we are going to analyze the scale of Chinese investments in Indian companies and the added agony they face trying to survive the COVID-19 environment.

How much China holds on the Indian Economy?

Investments from China have totaled up to $8.7 billion ever since 2015. Of these $2 billion were made in 2018 which went on to increase in 2019 to $ 3.9 billion. 18 out of the 30 unicorns i.e. companies that have a valuation of $1 billion and above have received funding from Chinese investors.

However, it is not only the Chinese investments that had significant Indian market reach. Chinese companies too have enjoyed a significant grasp on the Indian Market. Chinese smartphones like Oppo and Xiaomi led the Indian market with an estimated 72% market share in 2019.

Government concerns over Chinese Investments

When it came to investments, Indian relations with China were not any better prior to the clashes either. The only difference is that the restrictions placed on the Chinese investments have gained significant public support post the clashes. As on April 18th, the government issued an update on the FDI policy.

This prevented direct investments into Indian companies from countries that share their borders with India. This was done in order to ensure that any investment directed into Indian firms are done so with a purely financial interest instead of those with strategic economic interests.

China has been particularly blamed for following this approach as they try to further their domestic economic interest. Unfortunately, for us, they also have played an active role in the Indian startup ecosystem. Under the updated FDI policy billions of dollars from Chinese investments will be subject to government scrutiny. The FDI policy was updated also to address Data security and Chinese propaganda concerns. Any Chinese investor investing in Indian firms will have to get the Indian government’s approval first.

When this rule was first passed it drew considerable criticism from Indian unicorns and startups. This criticism was not in defense of the Chinese but instead simply because the Indian investor simply does not prefer to make risky investments or simply does not have that amount of domestic capital. This would not only hurt the Indian startups severely but the effects would also be seen on the Indian economy. This would be because of the shortage of investments Indian companies would face which would be required to spur their growth.

Loopholes and Legal Consequences

Legal experts also said that enforcing the notification would be “close to impossible“. It is also unclear how effective the law is going to be. In the case of Paytm, Alibaba simply rerouted its investments from China to its subsidiary present in Japan and then invested in Paytm.

It is also unclear up to what extent of investment by Chinese investors in a foreign firm will make the firm an entity that furthers Chinese interests under Indian laws.

The FDI laws in China, however, have already been geared up to retaliate. These work against companies that operate in China but originate from countries that have discriminated against Chinese investors.

Chinese investments in Indian Unicorn Startups

The table below shows some of the major Unicorns that have received funding from Chinese investors:

Indian Unicorn	Chinese Investments Received	Major Chinese Investors
Paytm	900 million	Ant Financials (AliBaba Group) and SoftBank Vision Fund
Ola	1.225 billion	Softbank , Tencent, Sailing Capital, China Eurasian Co-op Fund, Eternal Yield International, Steadview Capital
Udaan	585 million	Hillhouse Capital, Tencent
Swiggy	500 million	Meituan-Dianping, Tencent Holdings and Hillhouse Capital Group
Zomato	750 million	Ant Financial
BigBasket	300 million	Alibaba Group
Dream11	100 million	Steadview Capital and Tencent
Byju	40 million	Tencent
Flipkart	300 million	Tencent Holdings and Steadview Capital
Oyo	100 million	Didi Chuxing

Why Indian companies go for Chinese investments?

Over the years India has acquired the third spot in terms of startup ecosystems but unfortunately, more than 80 percent of the money invested in these startups comes from outside of India. One of the major reasons for startups accepting Chinese investment has been due to the lack of capital present in India or lack of capital directed towards innovation-driven startups. Domestic investors have taken very little interest in the startup environment.

We also lack companies like Google and Facebook that take particular interest in such startups that are innovation-driven and with internet dependant products. Unfortunately, the country’s highest-valued firm, Reliance Ltd. in recent times also has to lookup to Facebook for investments. When it takes companies of that scale to grab the attention of global investment giants it is difficult for startups to do the same. Chinese investment firms recognized the gap and have succeeded in replacing American giants in this space.

Another reason is the patient capital provided by Chinese investors. The companies targeted by Chinese investors are mainly startups in their initial stages. The aim of a startup at this stage is to ensure growth and increase market reach. But these goals demand huge capital expenditure.

At the initial stages, these startups are evidently not profitable for a couple of years. This is where the patient capital provided by the Chinese steps in. Unlike domestic investors looking for profitable companies or secure investment, the Chinese investment firms recognize viable startups and provide them with the capital that helps them grow.

(India taking on dragon – An Image featured in Taiwan Times)

The Galwan clash post the updated FDI policy has put further restraint towards accepting Chinese investment. Indian startups that were particularly looking to raise funds in order to survive the COVID-19 environment will now have to look elsewhere.

Companies that already have settled agreements with Chinese investors will also be affected. This is because they may already be in the midst of investments that take place over multiple rounds. They will be forced to restrategize in the times of COVID-19 where they are desperate for investments at lower valuations.

Closing Thoughts

In the midst of the deteriorating India-China relations, demands for an alternative to the capital that were earlier provided by Chinese investors. But if we shed some light on PM’s call for an ‘Aatmanirbhar Bharat’ it also provides solutions if Aatmanirbharta in investments is followed.

Startups in 2019 raised Rs.40,000 crore. For Aatmanirbharta to be achieved in investments at least 50% i.e Rs. 20,000 crore will have to be sourced from within India. But in order to spur this growth, the root causes due to which domestic investors steer clear of startups must be addressed.

One of the reasons is that navigating through thousands of startups before investing. Weeding out those that may lack the commercial potential takes substantial skill and effort that all may not be ready to devote. The answer to this may be provided by Alternate Investment Funds(AIF) or Venture Capital Funds. These specifically focus on investing in startups and at the same time employ necessary skill in order to differentiate between startups.

But, at the moment only investors with a minimum annual income of Rs. 50 lakh and minimum net worth of Rs. 5 crores are allowed to invest in AIF’s. Government support and new regulations that focus on making the environment more inclusive will go a long way in providing the necessary support to startups in India.

July 20, 2020 Aron Almeida Market, News No comments yet