indian economy – opportunities unlimited. fastest growing free market democracy
TRANSCRIPT
Indian Economy – Opportunities Unlimited
Fastest Growing Free Market Democracy
India: Ranks Among the Top-15 Countries in terms of GDP at constant prices
204.90 223.40
319.30
103.1 90.9
116.05104.4 109.4
154.7
0
100
200
300
400
500
600
700
1999-00 2002-03 2005-06
US
D B
illio
n
Services Agriculture Manufacturing
Indian economy has witnessed an unprecedented growth….
Contribution
of Services -
increased
from 49 to 54
percent
Sound performance of each industry segment is leading to the overall robust performance of Indian economy
Indian economy is the 4th largest in terms of PPP – USD 3.9 trillion in 2006
Registered highest second quarter growth since 2001-02 i.e. 9.2 percent
Booming Indian markets providing impetus to the economic growth
India's GDP: 2002-06 (Till Q2)
423.73484.4
534590
286
0
100
200
300
400
500
600
700
2002-03 2003-04 2004-05 2005-06 2006-07 (TillQ2)
US
D B
illi
on
GDP at Constant Prices
4%
8.50%7.50%
8.40%9.05%
Indian GDP has registered one of the fastest growth rates across the globe
India: Robust Economic Platform
India's Forex Reserves: 2001-07 (Till February 2007)
55.5
74.8
106.8
138.2
153.3
182.8
0
20
40
60
80
100
120
140
160
180
200
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 (Till 16Feb 07)
US
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n
External Debt-to-GDP Ratio
21.120.4
17.8 17.3
15.8
10
13
16
19
22
2001-02 2002-03 2003-04 2004-05 2005-06
Rat
ioIndia’s enhanced economic performance has been major contributor towards increased Forex reserves
Ever rising Forex reserves providing adequate cushion against any possibility of currency crisis or monetary instability
External debt-to-GDP ratio has shown remarkable improvement…..
India’s Forex reserves are in excess of external debt……
…..at present level of Forex reserves, the country has adequate cover for 12 months of imports
The decreasing external debt to GDP ratio indicates that India has a sound economic platform
India: Attractive Investment Destination
Net FII into India: 2001-07 (Till February 2007)
1.80
0.60
10.00 10.209.40
6.80
0
2
4
6
8
10
12
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 (Till 16Feb 07)
US
D B
illio
n
FDI Inflow - India: 2001-07
4,2223,134 2,634
3,755
5,546
16,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
US
D M
illio
n
India is ranked second in AT Kearney FDI confidence index
Telecom and Electronics topped the list of inward FDI
FDI inflow for the period April – December 2006 witnessed a growth of 151 percent over the same last year
Mauritius has been the largest contributor towards FDI into India…..
Return on the Investments in India (2006 Q1)
MARKET PE Ratio
P/B Ratio RoE (%)
India 16.1 4.53 22
China 10.62 2.06 17
Indonesia 10.26 3.09 NA
Korea 9.85 1.84 16
Malaysia 13.21 1.82 16
Taiwan 12.17 2 11
Thailand 9.84 2.32 23
EM Asia 11.19 2.12 15
Latin America 9.35 2.46 18
EM Europe 10.9 2.39 15
With the better performance on PE ratio and ROE, Indian markets have attracted large investments
200 percent Increase
India: Surging Exports
I n d i a ' s I m p o r t : 2 0 0 1 - 0 6
6 1 . 5 2
7 8 . 2 8
1 1 1 . 8 9
1 4 9 . 6 5
1 8 1 . 3 7
0
2 0
4 0
6 0
8 0
1 0 0
1 2 0
1 4 0
1 6 0
1 8 0
2 0 0
2 0 0 2 - 0 3 2 0 0 3 - 0 4 2 0 0 4 - 0 5 2 0 0 5 - 0 6 2 0 0 6 - 0 7
US
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n
Im p o r ts
I n d i a ' s E x p o r t s : 2 0 0 1 - 0 6
5 2 . 8 1
6 3 . 9 5
8 3 . 8 1
1 0 3 . 4 2
1 2 4 . 6 5
0
2 0
4 0
6 0
8 0
1 0 0
1 2 0
1 4 0
2 0 0 2 - 0 3 2 0 0 3 - 0 4 2 0 0 4 - 0 5 2 0 0 5 - 0 6 2 0 0 6 - 0 7
US
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E x p o r ts
Petroleum products are the contributor towards the growing imports by India
The quality and cost advantage are the two important parameters leveraged by the Indian producers to increasingly market their products and services
Services sector has been a major contributor to increased exports from India.
Imports of products by India mainly includes petroleum products and minerals
The Indian companies have chalked out extensive plans to increase their presence abroad
The acceptance of Indian products along with the cost advantage has provided an edge to Indian companies.
India: Pacing Ahead to Emerge as the Major Economy in the Globe
Projected GDP Growth Rates for Select Upcoming Economies
0
2
4
6
8
GD
P G
row
th R
ate
(%)
Brazil
China
India
Russia
0
20
40
60
80
100
India Russia Vietnam Ukraine China Chile Latvia
GR
DI
Sco
re
2006 Global Retail Development Index (GRDI)
2005 Global Services Location Index
3.27
1.62
3.56
2.95
3.21
3.47
1.51
2.67
1.06
2
1.17
1.26
0.94
1.44
1.16
1.12
1.76
2.14
Thailand
Singapore
Philippines
Malaysia
China
India
Financial structure Business environment People and skill availablity
India has been ranked superior to other major countries by many prominent surveys…
AT Kearney placed India among the top three in its FDI confidence index…
… retail market along with services sector has been attracting lot of interest from the major players
India is expected to outperform its rivals in the BRIC, in terms of GDP growth rates from 2015 onwards…
India: Vibrant Economy Driving M&A Activities
SECTOR USD (Mn)
SECTOR USD (Mn)
Automotive 518 Manufacturing 933
Banking and Financial
1375 Media 630
Chemicals & Plastics
1133 Oil & Gas 384
Electrical & Electronics
896 Pharma & biotech
2520
Energy 1484 Telecom 2198
FMCG, Food and Beverages
1327 Others 4006
IT & ITES 2903 Total 20305
Growth Drivers: Globalization of
competition Concentration of
companies to achieve economies of scale
Lower interest rates and vibrant global markets
Cash Reserves with Corporate
Trends: Ratio of Size of
acquisition to the size of acquirer has grown from 10 percent in 2004 to 25 percent in 2006.
Cross-border deals are growing faster than domestic
Private Equity houses have funded projects as well as done some acquisitions in India.
Number of deals and values
12.3
18.3
28.2
306
467
782
0
5
10
15
20
25
30
2004 2005 2006
US
D B
illio
n
0
100
200
300
400
500
600
700
800
900
Nu
mb
er
of
de
als
Deal Values No. of Deals
…Contribution of private equity deals to total number of deals have increased from nearly 9 percent in 2004 to 28 percent in 2006
In 2006, there were a total of 480 M&A deals and 302 private equity ones…
… Average deal size close to USD 36 million…
USD 12.1 billion Tata Steel buys Corus Plc.
Major M&A Deals Undertaken Abroad by India Inc.
Essar Steel acquired Algoma Steel
USD 1.58 billion
Tata Tea has acquired 30-percent stake in the US based Energy Brands Inc. USD 677 million
Videocon Industries acquired Daewoo Electronics Corporation Limited USD 730 million
Hindalco acquired Novelis Inc.USD 6 billion
USD 11 billion Vodafone buys Hutch
Major M&A and Investments Announcements in India
Mylan Laboratories acquired a majority stake in Matrix Laboratories USD 0.74 billion
Aditya Birla Group increased its stake in Idea Cellular by buying 48.14-percent stake USD 0.98 billion
USD 1.7 billion
USD 0.905 billion
USD 1 billionPlans investment in private equity, real estate, and private wealth management
Plans to spend on its development operations in India over the next four years
Renault, Nissan and Mahindra & Mahindra to set up Greenfield automobile plant in Chennai.
India: Astounding Demographics
Growth in the
higher income
categories of
India’s
population, has
lead to a
burgeoning
affluent section
of society, which
has significant
level of
purchasing
power
By 2009, India will
have 1.1 million
individuals with a
wealth of USD
100,000
Per Capita Income
393461
519583
638
0
100
200
300
400
500
600
700
2002-03 2003-04 2004-05 2005-06 2006-07 E
2
9
48
221
726
9
17
74
285
710
20
33
120
404
613
2001-02 2005-06 2009-10(E)
Rich (Above 115000)
High Income (57000 - 115000)
Consuming class (23000 - 57000)
Working class (10200 - 23000)
Needy (Below 10200)
Annual Household Income
(in USD)
DEMOGRAPHIC TRANSFORMATION OF INDIA
* In PPP terms
(Mill
ion
Po
pu
lati
on
)
Increasing per-capita income coupled with emerging middle class has provided necessary impetus to the consumerism in India
India: Increasing Working Population
-3
0
10
17
31
33
44
64
71
314
-5 45 95 145 195 245 295 345
Stock Position 2005
South East Asia 362
Southern Asia 132
India 691
Africa 500
China 934
Latin America 359
USA 200
Europe 497
Japan 85
World 4,168
Growth in Global Working Age Population (15-64)
In Million
Countries worldwide are anticipating a shortage of working population
in the future. India is expected to emerge as a clear winner and by 2050
it will have the largest working age population.
Addition to working age population by 2010
2006
2008
2010
• GDP – USD 590 billion
• GDP growth rate – 9 %
• Services Contribution – 54 %
• FDI limit not 100 percent in major industry sectors such as Telecom, Semiconductors, Automobiles, etc.
• Balance of Trade – USD (46.2) billion
• Investment goal – USD 250 billion
• GDP – USD 750 billion
• GDP growth rate – 9.5%
• Services Contribution – 60 %
• FDI limit is expected to be close to 100 percent in major industry sectors such as Telecom, Semiconductors, Automobiles, etc.
• Balance of Trade – Should increase with surging exports as compared with imports
• Investment goal – USD 305 billion
• GDP – USD 900 billion
• GDP growth rate – 9%
• Services Contribution – 60-65 %
• FDI limit is expected to be 100 percent in major industry sectors such as Telecom, Semiconductors, Automobiles, etc.
• Balance of Trade – Should be positive with increased level of exports as compared with imports
• Investment goal – USD 370 billion
Growth Expected in India
To sustain the GDP growth of more than 8 percent India requires an investments of USD 1.5 trillion in the next five years
India’s Sunrise Sectors
Infrastructure1
Automobile2
Telecom3
Semiconductor4
Aviation5
Defense6
Government has identified infrastructure as a priority sector to sustain the momentum of the GDP growth rate. The investment goal for infrastructure sector are:
• Power – USD 140 billion by 2010
• Roads – USD 25 to 30 billion by 2010
• Ports – USD 8 to 10 billion by 2010
• Civil Aviation – USD 15 to 17 billion by 2010
• Telecom – USD 22 billion by 2010
India to Gain in terms of Economic Prosperity due to Continued Government Initiatives in Infrastructure Sector
Railways has initiated process to develop dedicated freight corridor…
Increase in traffic is expected to amount to 12-15 percent for passenger traffic and 15-18 percent for cargo traffic…
… Government of India spends approximately USD 4 billion annually on road development
There is increasing competition between full services carriers and low cost carriers…..
•The government has initiated the process of up-gradation and modernisation of national airports worth USD 9 billion by 2010.
•It has also initiated process of modernisation of other non-metro airports (more than 40 cities)
‘Golden Quadrilateral’, ‘North-South’ and ‘East-West’ corridors are the major road infrastructure being undertaken by the government. 96 percent work of Golden Quadrilateral has been completed
• Project ‘Sethusamundram’, which involves dredging of the Palk Strait to facilitate maritime trade through it
• Project ‘Sagarmala’ – a USD 22 billion project for the modernisation of major and minor ports
• Private sector can set up coal, gas or liquid based thermal projects, hydel projects and wind or solar projects of any size. Mega power projects permitted in India.
• Foreign equity participation upto 100 percent is allowed in the power sector through automatic route.
Largest two wheeler manufacturer….
……Fifth largest CV manufacturer in the world
Domestic production of auto components has increased to USD 10 billion in 2005-06, a jump of 17 percent…
Exports have grown by 30 percent to USD 1.8 billion
India’s Sunrise Sector: Automobile
Total Commercial VehiclesCAGR for production : 24.5%
CAGR for sales : 24.3%
50
150
250
350
450
2001-02 2002-03 2003-04 2004-05 2005-06
Uni
ts (
thou
sand
s)
Domestic SalesProduction
Total Two WheelersCAGR for production : 15.1%
CAGR for sales : 13.8%
500
2,500
4,500
6,500
8,500
2001-02 2002-03 2003-04 2004-05 2005-06
Uni
ts (
thou
sand
s)
The Indian automobile sector generates a revenue of USD 34 billion per year. Its contribution to GDP is around 3-4 percent.
Production and domestic sales figures for commercial vehicles are growing at a rate of approximately 24 percent.
Production and domestic sales of two wheelers are growing at a rate of approximately 15 and 14 percent respectively.
Tele-Density
45
7
9
13
17
0
4
8
12
16
20
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07(Q3)
Tele
-Den
sity
(%
)
Internet Subscribers
3 4
5
6
7
9
0
2
4
6
8
10
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07(Q3)
Su
bsc
rib
ers
(in
Mn
)Telecom Subscribers (Wireline & Wireless)
4453
76
98
140
190
0
40
80
120
160
200
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07(Q3)
Su
bscri
be
rs (
in M
n)
The Indian mobile market is witnessing strong growth and is slated to become the third largest in the world behind US and China in the next two to three years
India’s Sunrise Sector: Telecom
India ranks among the top 10 countries of the world with regards to its telecom network.
India has 40.3 million wireline subscribers and 149.6 million wireless (mobile and WLL-F) subscribers.
Tele-density has more than doubled in the last 3 years.
Mobile communication and internet penetration are adding to the momentum of telecommunication sector
Semiconductor Design Market and its Components: 2005
78%18%
4%
VLSI Design Hardware Design Embedded Software
Semiconductor Design Market: 2004-06
2.43.2
4.6
0
2
4
6
8
10
2004 2005 2006
US
D B
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n
India’s Sunrise Sector: Semiconductor
Indian companies have chalked out plans to establish fabrication units thus catering to the overall demand from designing to manufacturing phase
India has developed strong competence in design side of semiconductor industry….
India has approximately 125 companies operating in the semiconductor domain
Captive semiconductor units in India contribute 62 percent to the total revenues being generated by the industry….
Many international players such as Intel, AMD, etc have established their R&D centres in India, which assists them to develop novel products at fast pace
Investment Opportunities in Indian Aviation Industry
Activities in the Indian Aviation Industry
Carrier Proposed Requirement
Air India 50 Aircrafts
Indian Airlines 43 Aircrafts
Jet Airways 30 Aircrafts
Air Deccan 60 Aircrafts
Kingfisher 48 Aircrafts
Spicejet 20 Aircrafts
Indigo 100 Aircrafts
GoAir 15 Aircrafts
Paramount 5 Aircrafts
Magic Air 10 Aircrafts
Global aviation major Boeing plans to invest approximately USD 280 million to establish airplane maintenance facility and a pilot training centre. The company estimates that Indian market will require 470 airplanes worth USD 35 billion by 2025.
GMR has undertaken project for modernisation of Delhi airport. The project worth is USD 1.94 billion.
Airbus plans to invest USD 1 billion over a period of 10 years to establish training centres, maintenance, repair and overhauling (MRO) centre, and engineering and design centre in India.
EADS plans to invest USD 2.57 billion over a period of next 15 years to establish technology centre in India.
Indian carriers have placed orders for approximately 480 aircrafts to be delivered by 2012. State operated carriers – Indian airlines and Air India have placed orders worth USD 8 billion for approximately 100 aircrafts to modernise its fleet.
The demand for corporate jets has increased and it is estimated that
number of corporate jets in India will be 300 in next 18 months.
Canadian avionic firm – CAE plans to expand its operations in India. It plans to aggressively market its simulation and modelling technologies to civil and military aviation customers.
India has among the highest returns on foreign investment
- Dan Scheinman, Cisco System Inc. as told to Business Week, August 2005
“We came to India for the costs, stayed for the quality and are now
investing for innovation.”
A T KearneyFDI Confidence Index 2005
India is among the three most attractive FDI destinations in
the world
Jack WelchGeneral Electric
“India is a developed country as far as
intellectual capital is concerned.”
US Department of Commerce
By 2032, India will be among the three largest economies in the world
BRIC ReportGoldman Sachs, October 2003
Why India? – Quote Unquote
For detailed information on India, visit the IBEF website: www.ibef.orgContact IBEF at [email protected]
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