Success in my Habit
Monday, May 8, 2017
More smartphone components to be included under Make in India to boost manufacturing
Economic recovery to gather pace from Q1: Morgan Stanley report
Start-up policy to get makeover
The government is likely to tweak the Start Up India policy within a fortnight to accommodate more innovations, an official aware of the developments told Business Standard. The definition of the policy would be changed as well, making it more liberal for the biotechnology sector in particular, he said. Also, the tweaked policy would mean a second chance for any entity that has faced rejection in the past.
In the biotechnology sector, a start-up could benefit from the policy up to eight years of incorporation, up from the five-year criterion currently. This is because of the relatively long gestation period of the biotech sector, compared to information technology and manufacturing, it is believed.
The move by the Department of Industrial Policy and Promotion (DIPP), the nodal agency for the policy, is expected to create space for more budding entrepreneurs in the country to be eligible for self-certification, relaxed public procurement norms, rebate in patent filing, start-up funding, investment and easier closure compliance. Besides the definition change, the DIPP is likely to allow rejected entities to apply again for tax-exemption benefits. Softening the earlier stance of not considering once-rejected applications again for tax breaks, the DIPP has said such proposals would be reviewed. “The only mandate for acceptance or rejection of proposals is that the idea has to be innovative. The entity may have applied at a premature stage. It may have grown and advanced over time. It cannot be a yardstick for a particular company for all times. They will be allowed to apply again,” said the official. Recent reports suggested that only ~5.66 crore funding has been infused into start-ups under the scheme so far, while the government had planned to set up a ~10,000crore fund of funds for the purpose. Fund manager Small Industrial Development Bank of India, or Sidbi, has to create the full corpus of ~10,000 crore by 2025, of which a ~1,315crore fund has been created so far.
But government officials indicated that the pace of approval had picked up. The inter-ministerial board (IMB) approved about 12 start-ups for tax exemption benefits from the 62 considered in the latest meeting on May 1. In all of 2016-17, only 10 start-ups got approval for a tax break from the 142 applications considered. The IMB includes officials from the DIPP, Department of Science and Technology, and Department of Biotechnology. Now, the Ministry of Electronics and Information Technology has also been included in the IMB.
Only those start-ups incorporated since April 1, 2016, are eligible to be considered for tax breaks from income-tax on profits and capital gains tax. The eligible start-ups can avail a three-year tax holiday in a block of seven years now, against five years announced last year. The condition was relaxed in this year’s Budget announced on February 1 to ease financial burden on startups and their founders.
A start-up is an entity, incorporated or registered in India not prior to five years, with an annual turnover not exceeding ~25 crore in any preceding fiscal year and working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property.
Commerce and Industry Minister Smt. Nirmala Sitharaman has said that mid-term review of Foreign Trade Policy would be completed early to synchronise its roll out with GST
Commerce Secretary Ms Rita Teaotia, Chairman RIS Shri Hardeep Singh Puri and DGFT Shri Ajay Bhalla also participated in discussions. The event was attended by the trade policy experts from the industry, academia, Research and Government .
Major suggestions discussed during the deliberations related to promoting Rupee Trade, facilitating not only exports but also imports and reducing cost of credit. Participant recommended harnessing the high foreign exchange earnings and large employment generation potential of services related to the Tourism, Education and Health sector. Such services fall under the WTO category of the Mode 2 Services, also called the ‘Consumption Abroad’ category. It was emphasised that promotion of mode2 in services sector shall contribute in domestic economic development and job creation.
Concerns were also raised on issues relating to GST and its impact on export. Minister said that Department of Commerce has already taken up these issues with Department of Revenue, and assured that it will again take up theses issues With DoR for placing it before GST council to find a solution.
Critical role of Logistics sector for export competitiveness was also discussed;, reducing the cost of credit in promoting exports, export basket diversification, strategy for promoting value added exports, agriculture exports and services exports were also deliberated.
It may be noted that while announcing the five year FTP, 2015-2020 on 01.04.2015, Hon’ble Commerce & Industry Minister had announced that the policy would be reviewed on mid-term basis. The exercise has been initiated by Department of commerce in January 2017. DGFT has held consultation with a cross section of stakeholders.- Exporters, Traders, Export promotion Councils, Commodity Boards, Various Ministries of the Central Govt., State Governments, foreign missions of India and Industry Bodies- in this regard.
Thursday, May 4, 2017
MakeMyTrip raises US$ 330 million from Ctrip.com, Naspers, others
MakeMyTrip said in a statement on Wednesday that it had entered into a definitive share purchase agreement with unnamed investors for ordinary shares worth $165 million (it plans to issue 4.58 million shares at $36 apiece).
The company added that it plans to issue 916,000 ordinary shares to Ctrip at $36 per share, and 3.66 million Class B convertible ordinary shares at the same price to MIH Internet SEA Pte, a subsidiary of Naspers.
The shares issued to Naspers will be convertible into ordinary shares of the company on a one-to-one basis, MakeMyTrip said.
The fresh capital infusion comes after MakeMyTrip, one of India’s first consumer Internet companies, which is also listed on NASDAQ, bought rival Ibibo Group’s travel business in India in an all-stock deal in October 2016 for about $720 million.
The move created the country’s largest online travel firm which, according to a note by Morgan Stanley, is worth $1.8 billion.
The money will come in handy for MakeMyTrip which is seeing increasing competition in its ticketing business from rivals including Yatra and Cleartrip, as well hospitality start-ups including the SoftBank-backed OYO Rooms (Oravel Stays Pvt. Ltd).
Over the years, MakeMyTrip has also started focusing on tours and hotel bookings that have higher profit margins than ticketing.
According to industry executives and experts, air ticket bookings offer a gross margin of 5-7% as against 10-20% hotel bookings offer.
According to an investor presentation by MakeMyTrip in April, the firm’s air ticketing transactions grew 28% in 2015-16 and tours and hotel bookings by 126% the same year. Net revenue in the air ticketing business grew 14% year-on-year; that in the tours and hotels business rose 45%.
A senior executive at MakeMyTrip said the company would invest in its hotels business and in redBus, the bus ticketing platform it acquired from Ibibo.
“As we penetrate deeper into tier II/III cities, budget hotels and homestays will be important,” said Rajesh Magow, co-founder and chief executive officer, India, at MakeMytrip, adding that this segment would drive growth. For MakeMyTrip, the premium hotel segment “is also important” because it helps the cause of consumer loyalty, Magow added.
MakeMyTrip’s revenues are currently split almost equally between ticketing and tours and hotel bookings, he said.
MakeMyTrip also plans to use the funds to expand overseas, especially in South-East and West Asia, and strengthen its business-to-business vertical to cater to small and medium enterprises, before rolling out the product for larger corporate entities.
“We are building a product which is a user-friendly tool to enable travel booking. This will be ready in 3-4 weeks. We will begin with SMEs as there are no massive structures and procurement processes (in them),” said Magow.
According to industry experts, the fresh capital will give the company ammunition to expand its lead over competitors.
“This capital is meant to grow the combined entity in an accelerated pace. The focus on hotels is understandable as this is an unsolved problem,” said Rutvik Doshi, director at Inventus (India) Advisors. “A large number of hotels do not have proper administrative or accounting processes and not even marketing capabilities. Getting the long tail of hotels online, especially the ones in smaller cities and towns, will require immense capital and effort.”
A ton of energy going into India: Tim Cook
At the analyst call after the second quarter earnings early Wednesday (India time), Chief Executive Tim Cook said, “We’re very optimistic about our future in this remarkable country with its very large, young, and tech-savvy population, fast-growing economy, and improving 4G network infrastructure.” Cook said in his opening address that revenue in India grew by strong double digits during the quarter ended April 1, setting a record.
Chief Financial Officer Luca Maestri quantified the “strong double-digit” growth for India — over 20 per cent. The company achieved double-digit growth in the US, Canada, Australia, Germany, the Netherlands, Turkey, Russia and Mexico, Maestri said. “Our growth rates were even higher, over 20 per cent in many other markets, including Brazil, Scandinavia, the Middle East, Central and Eastern Europe, India, Korea and Thailand.”
Globally, Apple sold 50.76 million iPhones in its second quarter financial year, down from 51.19 million a year earlier during the corresponding period. In India, around 2.5 million iPhones are estimated to have been sold between October 2015 and September 2016.
While the talk on India revolved around high growth (mainly of iPhones) and 4G network access, top executives remained tight-lipped on the regulatory hurdles Apple faces in the country as well as on the company plans in this geography.
For instance, when Simona K Jankowski of Goldman Sachs asked Cook if it was reasonable to assume that Apple would sell 10 million to 20 million iPhones in India next year, keeping in mind the growth and 4G roll-out, the chief executive officer spoke of having “a ton of energy going into the country on a number of fronts”. According to the transcript of the analyst call available at Seeking Alpha website, Cook said, “We’ve been investing quite a bit… it is the third-largest smartphone market in the world today behind China and the US… So, we believe, particularly now that the 4G infrastructure is going in the country and is continuing to be expanded, there’s a huge opportunity for Apple there. So that and the demographics of the country is why we’re putting so much energy there.”
To another question from Jim Suva of Citigroup Global Markets on Apple’s road map for India and whether it needed to work more with the government to set up stores and production units as well as to improve sales further, Cook agreed that the company was “underpenetrated there”. The company is “bringing all the things that we brought to bear in other markets that we’ve eventually done well in, and that’s from channel to stores to our ecosystem and so forth,” Cook added. He referred to India’s growth rates in relation to iPhone sales as “really good by most people’s expectations”, but said, “maybe not mine as much”. Cook’s meeting with Prime Minister Narendra Modi last year in New Delhi had centred on the promise that India market held, and the country has delivered in terms of consumer response.
The company is bringing all the things to the India market, Cook said. But when and how are among the questions that have kept industry watchers glued to the scene. Business Standard spoke to people close to the company and analysts to piece things together on Apple’s likely India road map for setting up fully-owned stores, starting manufacturing in the country, stepping up assembly lines, selling Apple-certified pre-owned phones and opting for the e-commerce route.
Store plan can wait
Even as Apple had proposed early in 2016 to set up fully-owned stores in India, 30 per cent local sourcing norm as part of the single brand retail foreign direct investment policy (FDI) policy has kept the plan on hold. A senior official at the Department of Industrial Policy and Promotion (DIPP) told this newspaper recently, “There’s been no retail proposal from Apple for a long time.”
Sources in the know said that the company was clear that compliance with the sourcing clause was not feasible. Case-to-case approval for niche cutting-edge companies was among the solutions devised by bureaucrats so that a company such as Apple could be spared from mandatory local sourcing. But definition of cutting-edge has been in the making for at least a year. Even as the government subsequently decided that a company manufacturing substantially in India would not have to comply with sourcing norms for owning retail outlets, the mathematics is still not working out for Apple, a source said.
There’s no show-stopper time frame for opening stores in India, a person familiar with the workings of the tech major said. Currently, there are franchisee stores in the country. “Apple could wait for long, till it has the right environment to set up stores as these are iconic destinations the world over. Typically, the company would not look at more than two to three stores in five to 10 years.” He cited global numbers to explain that Apple has no flagship store in many countries, including in Singapore. Dubai recently opened one. There are 495 stores in 18 countries, with maximum in the US, followed by Canada. China is high in the pecking order, too, with 40 stores, but Belgium, Mexico, Macau have only one each; the UAE, Netherlands and Sweden have three each; Turkey and Brazil have two each.
Make in India
However, the narrative has shifted to manufacturing in India now, at least from the government side. But for Apple, manufacturing will not take off till it makes business sense for the company’s component suppliers and the vendor universe, another source associated with production pointed out. Apple had asked for 15 years of Customs duty waiver, to be able to import components such as iPhone kits and other equipment needed for smartphone manufacturing, without incurring a high cost.
Anyway, now the GST (goods and services tax) regime will subsume those duties, a senior official in the finance ministry said, adding, “Nobody can do anything about tax concessions now.” He was replying to a query on the government rejecting Apple’s duty-waiver proposal. It would mean the company would continue to wait for the right time to start manufacturing in India, quite like having its stores.
Assembly line
Assembling in India is one route that is on. In fact, Wistron Corp - No. 92 & 93 Industrial Suburb II Stage, Yeshwanthpur, Bengaluru, India — stands out in the list of top 200 suppliers of Apple on the official website. It is the only one name associated with India to begin assembling of iPhones. To begin with, Taiwanese original design manufacturer Wistron will assemble iPhoneSE in the Karnataka plant. Last-mile work is in progress and things should start in about two months, a source at Wistron indicated.
However, it is the other Taiwanese firm - electronics contract manufacturer Foxconn - that caught public attention with its mega $5-billion now-on now-off investment proposal for Maharashtra. Sources close to the development said even as Foxconn is a big supplier for Apple worldwide, there’s nothing in India yet to connect the two. But, in the coming months or years, things could change and Foxconn could possibly start manufacturing for Apple even in India, they pointed out.
Other plans
Starting online stores is among its plans, and buying iPhones online could be a possibility in the future for Indian shoppers, one of the sources quoted above said. Then there are two more pieces in the Apple jigsaw — sale of Apple-certified pre-owned phones in India and the concept of phased manufacturing that the Ministry of Electronics and Information Technology recently floated. The proposal to bring pre-owned phones into India was rejected by the government and the company has not returned with any revised plan on that. Phased manufacturing is something that Apple top bosses may be discussing already with the government, at least to figure out what it exactly means.
ADB sees India growing 7.4% in 2017-18, says GST, bankruptcy law big positives
World's highest railway bridge is coming up over the Chenab in J&K
Cabinet approves National Steel Policy 2017
The new Steel Policy enshrines the long term vision of the Government to give impetus to the steel sector. It seeks to enhance domestic steel consumption and ensure high quality steel production and create a technologically advanced and globally competitive steel industry.
Key features of the NSP 2017:
1. Create self-sufficiency in steel production by providing policy support & guidance to private manufacturers, MSME steel producers, CPSEs
2. Encourage adequate capacity additions,
3. Development of globally competitive steel manufacturing capabilities,
4. Cost-efficient production
5. Domestic availability of iron ore, coking coal & natural gas,
6. Facilitating foreign investment
7. Asset acquisitions of raw materials &
8. Enhancing the domestic steel demand.
The policy projects crude steel capacity of 300 million tonnes (MT), production of 255 MT and a robust finished steel per capita consumption of 158 Kgs by 2030 - 31, as against the current consumption of 61 Kgs. The policy also envisages to domestically meet the entire demand of high grade automotive steel, electrical steel, special steels and alloys for strategic applications and increase domestic availability of washed coking coal so as to reduce import dependence on coking coal from about 85% to around 65% by 2030-31.
Some highlights of New Steel Policy
The Indian steel sector has grown rapidly over the past few years and presently it is the third largest steel producer globally, contributing to about 2% of the country's GDP. India has also crossed 100 MT mark for production for sale in 2016-17.
The New Steel Policy, 2017 aspires to achieve 300MT of steel-making capacity by 2030. This would translate into additional investment of Rs. 10 lakh Crore by 2030-31.
The Policy seeks to increase consumption of steel and major segments are infrastructure, automobiles and housing. New Steel Policy seeks to increase per capita steel consumption to the level of 160 Kgs by 2030 from existing level of around 60 Kg.
Potential of MSME steel sector has been recognised. Policy stipulates that adoption of energy efficient technologies in the MSME steel sector will be encouraged to improve the overall productivity & reduce energy intensity.
Steel Ministry will facilitate R&D in the sector through the establishment of Steel Research and Technology Mission of India (SRTMI). The initiative is aimed to spearhead R&D of national importance in iron & steel sector utilizing tripartite synergy amongst industry, national R&D laboratories and academic institutes.
Ministry through policy measures will ensure availability of raw materials like Iron ore, Coking coal and non-coking coal, Natural gas etc. at competitive rates.
With the roll out of the National Steel Policy-2017, it is envisaged that the industry will be steered in creating an environment for promoting domestic steel and thereby ensuring a scenario where production meets the anticipated pace of growth in consumption, through a technologically advanced and globally competitive steel industry. This will be facilitated by Ministry of Steel, in coordination with relevant Ministries, as may be required.
Background:
Steel is one of the most important products in the modern world and forms the backbone to any industrial economy. India being one of the fastest growing economies in the world, and steel finding its extensive application right from construction, infrastructure, power, aerospace and industrial machinery to consumer products, the sector is of strategic importance to the country. The Indian steel sector has grown exponentially over the past few years to be the third largest producer of steel globally, contributing to about 2% of the country's GDP and employing about 5 lakh people directly and about 20 lakh people indirectly.
Untapped potential with a strong policy support becomes the ideal platform for growth. Owing to the strategic importance of the sector along with the need to have a robust and restructured policy in present scenario, the new NSP, 2017 became imminent. Though, National Steel Policy 2005 (NSP 2005) sought to indicate ways and means of consolidating the gains flowing out of the then economic order and charted out a road map for sustained and efficient growth of the Indian steel industry, it required adaptation in view of the recent developments unfolding in India and also worldwide, both on the demand and supply sides of the steel market.
Wednesday, May 3, 2017
Actis to invest US$ 500 million in green energy platform Solenergi
Solenergi is among the successful bidders for the Rewa solar power project in Madhya Pradesh.
“Actis recently completed the fund round for its fourth fund. Of this, it plans to deploy around $500 million for Solenergi Power,” said one of the two people cited above, requesting anonymity. A second person who also asked not to be identified confirmed this.
A spokesperson for Actis declined to comment.
Actis aims to take advantage of the country’s growing green economy which, in turn, is fuelled by the government’s ambitious clean energy goals. India plans to generate 175 giga watts (GW) of renewable energy by 2022. Of this, 100GW is to come from solar power projects.
Actis invests exclusively in emerging markets with a focus on investments in energy and real estate. Its fourth energy fund, Actis Energy 4 (AE4), raised $2.75 billion in commitments and will invest the funds in Latin America, Africa and Asia. Its earlier energy fund, Actis Energy 3, raised $1.15 billion in 2013. Of the $7.8 billion deployed by Actis, 26% is in the energy sector.
Solenergi Power had placed a aggressive bid of Rs3.30 per kilo-watt hour to win a contract to build 250MW capacity at Rewa. The other successful bidders are Mahindra Renewables Pvt. Ltd and Acme Solar Holdings Pvt. Ltd.
Experts say financial heft helps in placing competitive bids. “The cost of capital is the principal differentiator in determining the viability of solar project bids. Then comes the question about how patient is the capital for returns? Also, the structuring of a project will make a big difference in terms of effective cost of capital. And then is the issue of the type of business model a developer or asset owner has,” said Anish De, partner at the infrastructure and government practice at consulting firm KPMG in India.
Actis was encouraged by the success of its existing Indian renewable energy platform, Ostro Energy, and looking to launch another, Mint reported in January.
“AE4 already has an extremely strong pipeline with $2 billion of deal equity either completed or in late stage including four large scale regional platforms,” Actis said in a 6 March statement.
Ostro Energy and Solenergi are among the energy platforms that Actis has created globally, following Globeleq Meso America in Central America, Zuma Energia in Mexico, Aela Energia in Chile and Atlantic Renovaveis in Brazil.
“Demand for electricity and quality infrastructure in growth markets is high and rising. Energy services are crucial to a country’s economic development. An estimated $10 trillion of investment is required by 2035 across non-OECD (Organisation for Economic Co-operation and Development) countries to meet future demand,” the Actis statement added.
India’s demand for green energy is expected to grow sevenfold in 2035, according to the latest BP Energy Outlook released in January.
Subscribe to:
Posts (Atom)