IIMB IndustryReport

Summers 2020-21
Industry Reports
Contents
Automobile Sector......................................................................................................3
E-Commerce Sector ................................................................................................. 10
Construction & Infrastructure Sector ...................................................................... 15
FMCG Sector ............................................................................................................ 20
Hospitality & Tourism Sector ................................................................................... 25
Power Sector ........................................................................................................... 28
Oil & Gas Sector ....................................................................................................... 31
Petrochemicals Sector ............................................................................................. 34
Aviation Sector ........................................................................................................ 38
Telecom Sector ........................................................................................................ 42
BFSI Sector ............................................................................................................... 46
IT Sector ................................................................................................................... 50
NBFC Sector ............................................................................................................. 53
Pharma Sector ......................................................................................................... 58
2
Automobile Sector
Overview
India became the fifth largest auto market in 2019 with sales reaching to 3.81 million units. It was
the seventh largest manufacturer of commercial vehicles in 2019. The two wheelers segment
dominate the market in terms of volume owing to a growing middle class and a young population.
Moreover, the growing interest of the companies in exploring the rural markets further aided the
growth of the sector. India is also a prominent auto exporter and has strong export growth
expectations for the near future. In addition, several initiatives by the Government of India and
major automobile players in the Indian market is expected to make India a leader in the two-
wheeler and four-wheeler market in the world by 2020.
Market Size
Domestic automobiles production increased at 2.36 per cent CAGR between FY16-20 with 26.36
million vehicles being manufactured in the country in FY20. Overall, domestic automobiles sales
increased at 1.29 per cent CAGR between FY16-FY20 with 21.55 million vehicles being sold in
FY20. Two wheelers and passenger vehicles dominate the domestic Indian auto market.
Passenger car sales are dominated by small and mid-sized cars. Two wheelers and passenger cars
accounted for 80.8 per cent and 12.9 per cent market share, respectively, accounting for a
combined sale of over 20.1 million vehicles in FY20. Overall, automobile export reached 4.77
million vehicles in FY20, growing at a CAGR of 6.94 per cent during FY16-FY20. Two wheelers
made up 73.9 per cent of the vehicles exported, followed by passenger vehicles at 14.2 per cent,
three wheelers at 10.5 per cent and commercial vehicles at 1.3 per cent. EV sales, excluding E-
rickshaws, in India witnessed a growth of 20 per cent and reached 1.56 lakh units in FY20 driven
by two wheelers. Premium motorbike sales in India recorded seven-fold jump in domestic sales,
reaching 13,982 units during April-September 2019. The sale of luxury cars stood between 15,000
to 17,000 in the first six months of 2019.
Value Chain
3
Following chart explains the factors that will have impact on the entire industry and its value
chain.
Porter’s 5 Force Analysis
SWOT Analysis
Strengths:
1. Large domestic market
2. Increase in the exports level
4
3. Sustainable labor cost
4. Competitive auto component vendor base
5. Government incentives to manufacturing plants
6. Upcoming bases for R&D
7. Growing IT capability in design, development, and simulation.
8. Adoption of high quality and productive initiatives (TQM, TPM, Six sigma etc.)
9. Proximity to market.
Weaknesses:
1. Low labor productivity and
2. High interests and high over heads make the production uncompetitive.
3. Various forms of taxes push up the cost of production and price of produced.
4. Inadequate and low investment in R&D
5. Supply chain infrastructural bottlenecks
6. Multiple tax components in the cost of the vehicle
7. Lack of economies of scale
Opportunities:
1. Commercial vehicle: SC ban on overloading
2. Heavy thrust on mining and construction activity
3. Increase in income level
4. Cut in excise duties
5. Rising demand in rural areas
6. MNC focusing on low cost outsourcing opportunities.
7. Viewed as global hub for manufacturing of small cars
8. Export projected to grow at over 30% p.a.
9. National Automotive Testing and R&D Infrastructure Projects (NATRIP), a US$ 400 million
initiative, aims to create the state-of-art dedicated testing, validation, and R&D infrastructure
across the country.
10. Opportunity to R&D centers in India.
11. High level of sourcing of components from Low Cost Countries (LCC) to act as a growth driver.
Threats
1. Rising input costs of raw materials
2. Rising interest rates
3. Cutthroat competition
4. Increase in fuel prices may lead to slow down in the sales
5. Import of components from ASEAN and China will have adverse effect on GDP.
5
Sector Breakup (Automobiles)
Automobiles
Commercial
Two Wheelers Passenger Vehicles Three Wheelers
Vehicles
Mopeds and Light Commercial

Passenger Cars Passenger Carriers
Electric Scooters Vehicles
Medium and heavy

Scooters Utility Vehicles commercial Goods carriers
vehicels
Multi-purpose
Motorcycles
vehicles
Trends
Current Happenings
Luxury Vehicles
Luxury car market in India is expected to grow at 25 per cent CAGR during 2017-2020.
Premium motorbike sales in India recorded a seven-fold jump with domestic sales reaching
13,982 units during April-September 2019. Sale of luxury cars stood between 15,000 to
17,000 units in H12019.
Volvo plans to assemble hybrid electric cars in India and scale its market share to 10 per cent
by 2020 in the luxury car segment.
As of May 2019, Jaguar Land Rover (JLR) launched its locally assembled Range Rover Velar,
making JLR cars more affordable by quite some margin.
In April 2020, TVS Motor Company bought UK’s iconic sporting motorcycle brand, Norton, for
a sum of about Rs 153 crore (US$ 21.89 million), making its entry into the top end (above
850cc) segment of the superbike market
6
Demand for tax cuts
To revive the sector from the ongoing slump, auto executives plan to demand tax cuts and easier
access to financing for both dealers and consumers with officials from India's finance ministry.
They also asked the government to provide incentives to scrap old vehicles, which they said
would help boost sales, and urged officials to reconsider a proposal to hike registration fees for
automobiles as it would hurt demand. [Reuters]
Toyota-Maruti Joint venture

India’s largest carmaker Maruti Suzuki and the world’s largest carmaker, Toyota Motors, have
joined hands to get a firmer grip on Indian roads. Partnering with Maruti in India would be the
shortest route Toyota can take to get ahead on Indian roads. Maruti’s strengths in cost-efficient
small cars and its dealer-showroom network offer unparalleled advantage. The alliance will also
help the two expand their presence in other emerging markets.
Electric Vehicles
1. Volvo plans to come out with hybrid version of its upcoming S60 sedan in India along with a
PHEV (Plug-in Hybrid Electric Vehicle) version of the S60.
2. A local arm of Finland based energy company Fortum India is planning to install about 720
charging facilities for electric vehicles by 2020 in seven cities in India.
3. EV Motors, in partnership with DLF, ABB India and Delta Electronics, is also planning to invest
US$ 200 million to set up 6,500 electric vehicles (EV) charging stations in the next five years.
4. Electric policy finalized by the Government of Kerala has an aim to get 6,000 electric buses
for the state road transport corporation by 2025.
5. In May 2019, Nissan Motor Company received a patent for wireless charging of electric
vehicles in India.
Other Policies
1. There is an opportunity for government and industry to work together to invest in
manufacturing, R&D and the supply chain.
2. Clear vision of Indian government to make India an auto manufacturing hub.
3. Initiatives like ‘Make in India’, ‘Automotive Mission Plan 2026’, and NEMMP 2020 to give a
huge boost to the sector.
4. Introduction of a new National Auto Policy and Faster Adoption and manufacture of Hybrid
and Electric Vehicles (FAME) II for a clean future in mobility to be launched soon.
5. In February 2019, the Government of India approved the FAME-II scheme with a fund
requirement of Rs 10,000 crore (US$ 1.39 billion) for FY20-22.
6. The Government of India has introduced a policy which allows organizations and researchers
to buy bulk data related to vehicle registrations on an annual basis.
7
Future Trends
Changing Consumer Mobility Habits: Consumer mobility habits are changing every day.
Consumers want vehicles endowed with the latest technologies, especially driver-assist
technologies to enhance their experience. In this era of digitalization, consumers desire
connectivity in cars. They want a vehicle to be a place where life continues, and they have access
to social media, music, Alexa, apps, and their business life. Nowadays, consumers are less
emotionally attached to vehicle ownership. This trend has led to the development of shared cars
and mobility- as-a-service solutions.
Digital Marketing: Advances in technology, changing consumer mobility behavior, and longer car
lifespan have changed the way the automobile industry markets its products and services.
Marketing initiatives in the automobile industry are shifting to online as consumers use digital
and mobile channels for research, shop, and purchase. Dealerships are increasingly relying on
digital marketing to reach customers and prospects. Customers are soliciting for personalized and
excellent experience from dealerships. Therefore, dealerships must up their game and offer
exceptional customer experiences as a marketing strategy.
Car Sharing: In the last couple of years, the way people relate to cars is changing. The notion of
shared cars is gaining prominence, as fuel prices escalate and persons’ awareness of climate
change increase. Also, the availability of low-cost and convenient ride-sharing services such as
Ola and Uber have intensified the trend. Car sharing will continue beyond 2020 and affect the
automobile industry significantly.
Mahindra has entered the ride-sharing business with electric car hailing service Glyd. It has
already invested a significant sum in the self-drive car rental startup Zoomcar that is growing
briskly in India.
Increased Electrification: Electric cars are on the increase since their introduction in the market,
a trend that will continue in 2020. More resources are allocated to the establishment of hybrid
infrastructures and refueling stations. Consumers’ preference for hybrid cars continues to rise
mainly because of increased gas prices and strict environmental regulations. Famous firms like
Dyson have started investing in the manufacture of electric vehicles to meet consumer demands.
Over the past 12 months, Hyundai has invested in Ola, the ridesharing unicorn that has ambitious
electric vehicle run a car hiring and leasing service. Hyundai is developing vehicles and charging
stations specifically for the ride-sharing market. It is piggybacking on two trends here: a shift in
fuel from petrol or diesel to electricity and the fast-growing interest in hailing a cab rather than
owning and driving one’s own car. [Economic Times]
8
Self-Driving Cars: Self-driving cars have won the affection of consumers globally because of their
convenience, reliability, and safety. Tech giants such as Uber, Google are making remarkable
progress in making cars driverless. However, car manufacturers will need to convince consumers
that driverless vehicles are safe amidst various reported cases of collisions. This situation may
seem very farfetched from India’s point of view, but this is surely a part of the future automotive
landscape of India.
Key Performance Indicators
1. Average Production Downtime: It is calculated by taking the hours of downtime at a

production facility within a specified time period and dividing by total time available to
produce vehicles within that same time period.
2. Inventory turn Over: It is calculated by dividing total sales by number of cars in inventory
3. Manufacturing cycle time: It is the time taken by the vehicle to move through the production
line from start to end.
4. Utilization rate: Actual vehicle output/ Potential vehicle output.
9
E-Commerce Sector
Overview
E Commerce stands for electronic commerce and caters to trading in goods and services through
the electronic medium such as internet, mobile or any other computer network. It involves the
use of Information and Communication Technology (ICT) and Electronic Funds Transfer (EFT) in
making commerce between consumers and organizations, organization and organization or
consumer and consumer.
The Indian e-commerce industry has been on an upward growth trajectory and is expected to
reach USD 120 billion in 2020 from US$ 38.5 billion as of 2017. The number of internet users in
India is expected to increase from 687.62 million as of September 2019 to 829 million by 2021.
Rising internet penetration is expected to lead to growth in ecommerce. Government Initiatives
of Digital India make in India, Start-up India, Skill India and Innovation Fund would go a long way
in creating a conducive business environment for the industry players. The government has
extended the FDI limit to 100% in the B2B marketplace model. In addition to this, a Union Budget
of USD 1.24 billion was allocated to BharatNet Project aimed at providing broadband services to
150,000 gram panchayats in 2018-19. With the current pace of digitisation, the industry revenue
is expected to grow at an annual rate of 51%, the highest in the world.
Trends
Impact of Covid-19 – The pandemic has led to increased adoption of E-Commerce and rapid
growth in the sector with a significant number of new users expected to continue using E-
Commerce after mobility restrictions are lifted.
Performance Marketing to Boom – Performance based marketing efforts will likely grow
stronger due to the profitability offered. As brands look for better ROI, marketing that drives
measurable sales is the way forward.
Wallet Usage to Rise – The use of online wallets and payment channels will grow as more
and more Indians adopt digital and cashless payments.
New categories – The growth of companies from niche categories like fashion, food and
groceries has reached an unseen high. It is not difficult to anticipate that new entrepreneurs
will create, capture and dominate a sizeable chunk of one specific market like Nykaa and
BigBasket have done.
Artificial Intelligence – It will play a key role in e-commerce as we rely more and more on our
mobile devices. As technology is being redefined, the trends like suggesting products based
on our purchase history, browsing history, likes etc. would lead the e-commerce industry to
thrive wholeheartedly
Virtual Shopping Experiences – The key purpose of e-commerce sites is to bring the shopping
experience alive for customers. Virtual reality has made its mark strongly in the market and
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this trend will likely grow as it helps users visualize how products will look on them without
physically going to the store.
Key Statistics
The Indian E-commerce industry has been on an upward growth trajectory and is
expected to surpass the US to become the second largest E-commerce market in the
world by 2034. India e-commerce will reach US$ 99 billion by 2024, growing at a 27 per
cent CAGR over 2019-24, with grocery and fashion/apparel likely to be the key drivers of
incremental growth.
Online shoppers in India are expected to reach 120 million in 2018 and eventually 220
million by 2025. Average online retail spending in India was US$ 224 per user as of 2017.
In 2019, it was estimated that one in every three Indian shopped via a smartphone.
The Indian online grocery market is estimated to exceed sales of about Rs 22,500 crore
(US$ 3.19 billion) in 2020, a significant jump of 76 per cent jump over the previous year.
E-commerce and consumer internet companies in India received more than US$ 7 billion
in private equity and venture capital in 2018.
The number of internet users in India is expected to increase from 604.21 million as of
December 2018 to 829 million by 2021.
Latest Developments
In February 2020, Flipkart set up a ‘Furniture Experience Center’ in Kolkata, its first offline
presence in eastern India.
In April 2020, Reliance Industries (RIL) started home delivery of essentials in partnership
with local kirana stores in Navi Mumbai, Thane and Kalyan.
In April 2020, Swiggy received an additional US$ 43 million funding as part of its ongoing
Series I round.
In May 2020, PepsiCo India partnered with Dunzo for its snack food brands that include
Lay’s, Kurkure, Doritos and Quaker.
In May 2020, chocolate maker Hershey India partnered with Swiggy and Dunzo to launch
their flagship online store in order to increase reach.
In Union Budget 2020-21, Government has allocated Rs 8,000 crore (US$ 1.24 billion) to
BharatNet Project to provide broadband services to 150,000-gram panchayats.
In August 2019, Amazon acquired 49 per cent stake in a unit of Future Group.
Reliance will invest Rs 20,0000 crore (US$ 2.86 billion) in its telecom business to expand
its broadband and E-commerce presence and to offer 5G services.
In September 2019, PhonePe launched super-app platform 'Switch’ to provide a one stop
solution for customers integrating several other merchants apps.
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In November 2019, Nykaa opened its 55th offline store marking success in tier II and tier
III cities.
The number of mobile wallet transactions increased 5 per cent month-on-month to
325.28 million in July 2018.
Value Chain
Following is the Porter’s Value Chain analysis for the E-commerce industry:

KPIs generally fall into one of the following four categories:
Sales KPIs
1. Sales: Ecommerce retailers can monitor total sales by the hour, day, week, month, quarter,
or year.
2. Average order size: Average order size tells you how much a customer typically spends on a
single order.
3. Conversion rate: The conversion rate, also a percentage, is the rate at which users on our
ecommerce site are converting (or buying).
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4. Shopping cart abandonment rate: The shopping cart abandonment rate tells you how many
users are adding products to their shopping cart but not checking out. If your cart
abandonment rate is high, there may be too much friction in the checkout process.
5. New customer orders vs. returning customer orders: This metric shows a comparison
between new and repeat customers.
6. Revenue per visitor (RPV): RPV gives you an average of how much a person spends during a
single visit to your site.
7. Churn rate: For an online retailer, the churn rate tells you how quickly customers are leaving
your brand or cancelling/failing to renew a subscription with your brand
Marketing
Time on site: This KPI tells you how much time visitors are spending on your website.
Generally, more time spent means they’ve had deeper engagements with your brand.
Bounce rate: The bounce rate tells you how many users exit your site after viewing only one
page.
Pageviews per visit: Pageviews per visit refers to the average number of pages a user will
view on your site during each visit.
Average session duration: The average amount of time a person spends on your site during
a single visit is called the average session duration.
Traffic source: The traffic source KPI tells you where visitors are coming from or how they
found your site. This will provide information about which channels are driving the most
traffic, such as organic search, paid ads, or social media.
Mobile site traffic: Monitor the total number of users who use mobile devices to access your
store and make sure your site is optimized for mobile.
Day part monitoring: Looking at which part of the day site visitors come, can tell you what
times are peak traffic times.
Average CTR: The average click-through rate tells you the percentage of users on a page (or
asset) who click on a link.
Customer service
Customer satisfaction (CSAT) score: The CSAT KPI is typically measured by customer
responses to a very common survey question: “How satisfied were you with your
experience?” This is usually answered with a numbered scale.
Net promoter score (NPS): NPS provides insight into customer relationships and loyalty by
telling you how likely customers are to recommend your brand to someone in their network.
Hit rate: Calculate your hit rate by taking the total number of sales of a single product and
dividing it by the number of customers who have contacted your customer service team
about said product.
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First response time: First response time is the average amount of time it takes a customer to
receive the first response to their query.
Project management
Budget: The budget indicates how much money you have allocated for the specific project.
Project managers and ecommerce business owners will want to make sure that the budget is
realistic; if you’re repeatedly over budget, some adjustments to your project planning need
to be made.
Return on investment (ROI): The ROI KPI for project management tells you how much your
efforts earned your business. The higher this number, the better. The ROI accounts for all of
your expenses and earnings related to a project.
Cost performance index (CPI): The CPI for project management, like ROI, tells you how much
your resource investment is worth. The CPI is calculated by dividing the earned value by the
actual costs.
Key Success Factors

Wide and diversified product portfolio
Customer Service & Responsiveness
Multi-channel marketing
Conversion Rate
Efficient supply chain management
Acquisition Cost
Cost Structure
Major cost heads for e-commerce firms include:
Technology costs
Software costs
Management costs – Legal, administrative, banking etc.
Marketing costs
Logistics costs
Office Expenses
14
Construction & Infrastructure Sector
Overview
The Construction industry of India is an important indicator of the development as it creates
investment opportunities across various related sectors. Valued at USD 126 billion, it employs
around 44 million people. The Construction industry in value terms is expected to record a CAGR
of 15.7% to reach $ 738.5 bn by 2022. The industry is fragmented, with a handful of major
companies involved in the construction activities across all segments; medium-sized companies
specializing in niche activities; and small and medium contractors who work on the subcontractor
basis and carry out the field work. India was ranked 44 out of 167 countries in World Bank's
Logistics Performance Index (LPI) 2018. India ranked second in the 2019 Agility Emerging Markets
Logistics Index. The infrastructure sector has become the biggest focus area for the Government
of India. India plans to spend US$ 1.4 trillion on infrastructure during 2019-23 to have a
sustainable development of the country. The Government has suggested investment of Rs
5,000,000 crore (US$ 750 billion) for railways infrastructure between 2018-2030.
India and Japan have joined hands for infrastructure development in India's Northeast states and
are also setting up an India-Japan Coordination Forum for Development of Northeast to
undertake strategic infrastructure projects for the region.
The Construction industry in India consists of the Real estate as well as the Urban development
segment. The Real estate segment covers residential, office, retail, hotels and leisure parks,
among others. While Urban development segment broadly consists of sub-segments such as
Water supply, Sanitation, Urban transport, Schools, and Healthcare.
By 2025, Construction market in India is expected to emerge as the third largest globally
By 2025, Construction output is expected to grow on average by 7.1% each year
100% FDI under automatic route is permitted in completed projects for operations and
management of townships, malls/shopping complexes, and business constructions. FDI
inflows in construction development during April 2000 to March 2019: $ 25.05 bn
100% FDI is allowed under the automatic route for urban infrastructures such as urban
transport, water supply and sewerage and sewage treatment. For more information on FDI
policy please refer https://www.investindia.gov.in/foreign-direct-investment
The construction industry also contributes 55% share in the Steel industry, 15% in the Paint
industry and 30% in the Glass industry. Expected cement capacity addition of 80 – 100 MT per
annum will be required over between 2015-2020 to meet the rise in demand in the construction
industry.
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Typical Value Chain of Construction Industry
Key growth drivers

1. Smart cities: 100 smart cities to be developed by 2020
2. Industrial corridors: 5 industrial corridors are currently planned
3. Mega ports: 6 mega port projects are planned by the government
4. Increasing demand for commercial space: Annual absorption of office space in India crossed
42 mn sq ft in 2012
5. Need for logistics, and growth in the sector mandates development of infrastructure. The
logistics sector in India is growing 10.5 per cent annually and is expected to reach US$ 215
billion in 2020
6. International investments
7. Housing development and requirement for affordable housing
8. Public private partnerships to involve private companies in infra development.
Trends
1. In Union Budget 2020-21, the Government has given a massive push to the infrastructure
sector by allocating Rs 1,69,637 crore (US$ 24.27 billion) to enhance the transport
infrastructure.
2. Yearly private equity (PE) and venture capital (VC) investment in India is expected to surpass
US$ 65 billion in 2025.
3. Private sector is emerging as a key player across various infrastructure segments, ranging
from roads and communications to power and airports. Private investment into physical and
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social infrastructure is key to putting India in a high growth trajectory, which will make it a
US$ 5 trillion economy by 2024-25
4. In January 2019, the government outlined the investments under the second phase of
Bharatmala scheme, which will drive the road infrastructure developments in the country.
Accordingly, the government aims to invest INR3.4 trillion (US$50.3 billion) through the
budgetary allocation between FY2019-2020 and FY2022-2023, while INR2.1 trillion (US$30.7
billion) will be made through market borrowings in the Bharatmala scheme by 2023.
5. Accounting for 30.6% of the industry's total value in 2018, residential construction was the
largest market in the Indian construction industry during the review period. The market is
expected to remain the largest market over the forecast period, accounting for 30.1% of the
industry's total value in 2023.
6. Over the forecast period, the market will be supported by the government's vision to provide
houses under the Housing for All by 2022. Under the Pradhan Mantri Awas Yojana (PMAY),
the government has proposed to build 2 crore houses for urban poor.
7. Highway construction in India increased at a CAGR of 21.44 between FY16-FY19. In FY19,
10,855 km of highways were constructed. The Government of India aims to construct 65,000
km of national highways at a cost of Rs 5.35 lakh crore (US$ 741.51 billion) by 2022
17
Porters Five Force Analysis
Force Threat of Bargaining power Rivalry among Bargaining Threat of

substitutes of suppliers existing power of new
competitors buyers entrants’
power
Power Strong Weak Strong Strong Weak
Factors New and Industry Fall in Construction Capital
economical members such as demand for developers requireme
innovative the principal construction have a high nts for
methods & contractors are projects quality of property
processes integrating resulting in information developm
coming up backwards into over capacity for decision ent high
Low the business of Competitive making Few Access to
switching suppliers bidding to developers inputs like
costs once creating win and skilled
a project is concentrated contracts by construction labour
oligopolies construction clients difficult
Readily available companies Developers
construction Overcrowde and clients
materials from d market can postpone
various suppliers dominated projects until
Greater by 5 big a later stage
collaboration construction when they
between companies can secure
contractors, sub- Construction lower costs of
contractors and projects are building
manufacturers highly Decline in
required for standardized client’s
successful demand for
delivery of construction
project projects
Switching costs
of quantity
surveying firms is
low
18
Cost and Time: Project cost and completion time of a project. Estimated cost and time are
different from actual values
Cost predictability: It is associated with design and construction of project
Quality: It is a measure of number of defects associated with project at the end of
rectification period
Safety: It is a measure of lost Time Incidents (LTI) and reportable accidents per 100K
employed
Client Satisfaction: Client perception of product & service vs Contractor perception
Profit margin: It is a measure of profit on turnover (%)
Productivity: It is a measure of percentage of equipment downtime and labor downtime
Typical project cycle and different types of contracts
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FMCG Sector
Overview
The fast moving consumer goods (FMCG) segment is the fourth largest sector in the Indian
economy. The market size of FMCG in India is estimated to grow from US$ 30 billion in 2011 to
US$ 103.7 billion in 2020. Food products is the leading segment, accounting for 43 per cent of
the overall market. Growing awareness, easier access, and changing lifestyles have been the key
growth drivers for the sector. The Retail market in India is estimated to reach US$ 1.1 trillion by
2020 from US$ 840 billion in 2017, with modern trade expected to grow at 20 per cent - 25 per
cent per annum, which is likely to boost revenues of FMCG companies.
Trends
1. India’s household and personal care is the leading segment, accounting for 50 per cent of the
overall market, healthcare (31 per cent) and food and beverages (19 per cent) comes next in
terms of market share.
2. Growing awareness, easier access and changing lifestyles have been the key growth drivers
for the sector.
3. The number of online users in India is likely to cross 850 million by 2025.
4. FMCG market is expected to grow 5-6 per cent in 2020.
5. Indian online grocery market is estimated to exceed sales of about Rs 22,500 crore (US$ 3.19
billion) in 2020, a significant jump of 76 per cent over the previous year.
6. In 2018, e-commerce segment contribution was around 1.3 per cent of the overall branded
packaged FMCG sales.
7. India’s contribution to global consumption is expected to more than double to 5.8 per cent
by 2020.
8. Rural segment is growing at a rapid pace and accounted for a revenue share of 45 per cent in
the overall revenues recorded by FMCG sector in India. FMCG products account for 50 per
cent of total rural spending.
9. E-commerce segment is forecasted to contribute 11 per cent of the overall FMCG sales by
2030.
10. Growing awareness, easier access, and changing lifestyles are the key growth drivers for the
consumer market.
11. The focus on agriculture, MSMEs, education, healthcare, infrastructure and tax rebate under
the Union Budget 2019-20 is expected to directly impact the FMCG sector. This is expected
to increase the disposable income in the hands of the common people, especially in the rural
area, which will be beneficial for the sector.
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Latest Developments
In May 2020, Tata Consumer Products Limited (TCPL) acquired PepsiCo’s stake in NourishCo
Beverages Limited.
In March 2020, Hindustan Unilever Limited (HUL) signed an agreement with Glenmark
Pharmaceuticals Ltd to acquire its intimate hygiene brand VWash.
In November 2019, ITC Ltd acquired 33.42 per cent stake in Delectable Technologies, which
is a vending machine start-up.
Nestle plans to invest Rs 700 crore (US$ 100.16 million) to open a new plant in Sanand for
Maggi.
ITC to invest Rs 700 crore (US$ 100 million) in food park in Madhya Pradesh.
Patanjali will spend US$743.72 million in various food parks in Maharashtra, Madhya Pradesh,
Assam, Andhra Pradesh and Uttar Pradesh.
Value Chain
Inbound Operation Outbound Sales & Marketing Servicing

Logistics Logistics
Includes: Includes: Includes: Includes: Customer Includes:
Inbound raw Finishing goods, Order Management, Order Warranty,
materials, Manufacturing, handling, Management, Maintenance,
Warehousing Packaging, Dispatch, Promotion, Sales Education and
Supply Production Delivery, Analysis, Market training upgrades
Schedules Control, Quality Invoicing Research
Control,
Maintenance
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Issue Areas: Issue Areas: Issue Areas: Issue Areas: Issue Areas:
Processing cost Standardization, Inventory Control, Disruptive Responsiveness,
of raw Demand infrastructural online reliability of
materials, forecast, faulty challenges like road marketplace, after sales
Turnaround packaging, etc. conditions, number Pricing and service,
time at of check posts, promotions, preponderance
warehouse, external need for of defective
infrastructural environment, etc. customization, items, etc.
challenges, fuel etc.
costs, etc.
Porter’s 5 Forces
Force Threat of Bargaining Competitive Bargaining Threat of New
Substitutes Power of Rivalry Power of Entrants
Suppliers Buyers
Power Strong Weak Strong Strong Moderate
Factors Narrow Big FMCG Private label Low Huge
product companies brands by switching investments
differentiation can dictate retailers are cost induces in setting up a
under many the prices priced at a the distribution
brands through discount to customers’ network and
Price war local mainframe product promoting
sourcing brands limits shift brands
from a competition Influence of Spending on
fragmented for the weak marketing advertisement
group of key brands strategies s is aggressive
commodity Highly Availability
suppliers fragmented of same or
industry as similar
more MNCs alternatives
are entering

1. Out of Stock Rate: Measure your ability to meet customer demand
2. Delivered On-Time & In-Full: Monitor the delivery performance
3. Average Time To Sell: Track how long you need to sell your products
4. Sold Products Within Freshness Date: Take care of expiration dates
5. Cash-to-Cash Cycle Time: Analyze your cash cycle time in detail
22
6. Supply Chain Costs: Understand supply chain costs by category
7. Supply Chain Costs vs Sales: Compare your supply chain costs against sales
8. Carrying Cost of Inventory: Assess the costs your inventory holds
9. On-Shelf Availability: Measure the impact on your sales
10. Margin by Product Category: Identify your most profitable products
Key Success Factors

1. Brand Equity
2. Continuous innovation and product differentiation
3. Strong distribution network
4. Efficient supply chain management
Risks for the industry
The millennial effect: Millennials are generally willing to pay for special things, including daily
food. For everything else, they seek value. Millennials in the United States are 9 percent poorer
than Gen Xers were at the same age, so they have much less to spend and choose carefully what
to buy and where to buy it.
Digital intimacy (data, mobile, and the Internet of Things [IoT]): Some FMCG categories,
particularly homecare, will be revolutionized by the IoT. We will see the IoT convert some
product needs, like laundry, into service needs. And in many categories, the IoT will reshape the
consumer decision journey, especially by facilitating more automatic replenishment.
Explosion of Small Brands: Many small consumer-goods companies are capitalizing on millennial
preferences and digital marketing to grow very fast. These brands can be hard to spot because
they are often sold online or in channels not covered by the syndicated data that the industry has
historically relied on heavily.
E-commerce- E-commerce giants Amazon, Alibaba Group, and JD.com grew gross merchandise
value at an amazing rate of 34 percent a year from 2012 to 2017. As their offer attracts consumers
across categories, they are having a profound impact on consumer decision journeys. This change
requires FMCGs to rewrite their channel strategies and their channel-management approaches,
including how they assort, price, promote, and merchandise their products, not just in these
marketplaces but elsewhere.
23
Cost Structure - Major cost heads for FMCG firms include:
1. Research and Development
2. Raw Material Procurement and Processing
3. Manufacturing
4. Logistics
5. Marketing and Servicing
24
Hospitality & Tourism Sector
Overview
The Indian tourism and hospitality industry has emerged as one of the key drivers of growth
among the services sector in India in the past decade but has been severely impacted by Covid-
19 pandemic. Tourism in India has significant potential considering the rich cultural and historical
heritage, variety in ecology, terrains and places of natural beauty spread across the country.
Tourism is also a potentially large employment generator besides being a significant source of
foreign exchange for the country. During 2018, FEEs from tourism increased 4.70 per cent year-
on-year to US$ 28.59 billion. FEEs during January 2019 was US$ 2.55 billion. As of 2019, 4.2 crore
jobs were created in the tourism sector in India, which was 8.1 per cent of the total employment
in the country. The number is expected to rise by two per cent annum to 52.3 million jobs by
2028. According to WTTC, India ranked third among 185 countries in terms of travel and tourism’s
total contribution to GDP in 2018. India ranked 34 in the Travel and Tourism Competitiveness
Report 2019 published by the World Economic Forum.
Market Size
25
India is the most digitally-advanced traveller nation in terms of digital tools being used for
planning, booking and experiencing a journey, India’s rising middle class and increasing
disposable incomes has continued to support the growth of domestic and outbound tourism.
During 2018, foreign tourist arrivals (FTAs) in India stood at 10.56 million, achieving a growth
rate of 5.20 per cent year-on-year. FTAs in January 2019 stood at 1.10 million, up 5.30 per
cent compared to 1.05 million year-on-year. During May 2019, arrivals through e-tourist visa
increased by 21.70 per cent year-on-year to 1.23 million.
International hotel chains are increasing their presence in the country, as it will account for
around 47 per cent share in the Tourism & Hospitality sector of India by 2020 & 50 per cent
by 2022
Key Trends
The sector has received a big boost after 100% FDI has been granted here
Medical tourism, although seasonal, is also on the rise
India has a growing population of English speakers which is beneficial in this sector.
The growth rate in room demand (about 6%) has been consistently outpacing the supply
(about 3%) growth in India for the past few years.
It witnessed the impact of two major government policy decisions - demonetization and GST,
along with the Supreme Court ruling that banned the sale of liquor in all commercial
establishments located on or within 500 meters of any national and state highways, setting
back the hospitality industry’s hopes of improved performance after it garnered some tail
winds in 2016.
The sector’s total contribution to GDP is expected to further grow to US$280.5B by 2026 and
capital investment in tourism is estimated to increase to US$160B which is a 7% YOY growth
26
International hotel chains currently have a market share of 44% which is likely to increase to
50% by 2022.
Porter’s Five Forces

Online ratings (Customer satisfaction): Most visible metric that customers often rely
upon. Considerably influences consumer decision making process.
Occupancy % = rooms occupied / rooms available: Determines how efficiently a hotel is
using the resources at its disposal. Indicates whether promotional activities pursued by
the hotel have attracted the crowd or not.
Revenue per available room = Total room revenue/ Total rooms available: Tells whether
income is equally earned across all rooms. Indirectly indicates occupancy rate.
Market penetration index = Hotel occupancy % / Market occupancy %: Benchmarks hotel
efficiency level with the industry standard
Road Ahead
India’s travel and tourism industry has huge growth potential. The tourism industry is also looking
forward to the expansion of E-visa scheme which is expected to double the tourist inflow to India.
India's travel and tourism industry has the potential to expand by 2.5 per cent on the back of
higher budgetary allocation and low cost healthcare facility, according to a joint study conducted
by Assocham and Yes Bank.
27
Power Sector
Overview
The Indian Power sector is an important contributor for the growth story of Indian Economy.
India is the third largest producer and second largest consumer of electricity in the world and had
an installed power capacity of 371.97 GW as of July 2020. The country also has the fifth largest
installed capacity in the world. India was ranked fourth in wind power, fifth in solar power and
fifth in renewable power installed capacity as of 2018. India has been on a path to achieve 100
per cent household electrification as envisaged under the Saubhagya scheme. As of March 2019,
more than 26.2 million households were electrified under the Saubhagya scheme. Under
Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), 100 per cent villages across the country
stands electrified as of April 2018.
As on July 31, 2020, India had an installed renewable energy capacity of 88.04 GW. Wind energy
is estimated to contribute 60 GW, followed by 100 GW from solar power and 15 GW from
biomass and hydropower by 2022. The target for renewable energy has been increased to 175
GW by 2022. The Government plans to double the share of installed electricity generation
capacity of renewable energy to 40 per cent till 2030. The per capita electricity consumption has
increased from 734 kW to 1075 kWh, an increase of 46% in 8 years. The per capita consumption
has been increasing at an average of 6% every year. This sector is highly dominated by public
sector Companies and is capital extensive. 100 per cent FDI is allowed under the automatic route
in the power segment and renewable energy.
Trends
The industry attracted US$ 12.97 billion in Foreign Direct Investment (FDI), accounting for
3.52 per cent of total FDI inflows in India.
The Govt. of India approved National Policy on Biofuels – 2018, the expected benefits of this
policy are health, cleaner environment, employment generation, reduced import
dependency, boost to infrastructure investment in rural areas & additional income to farmers
The Union and state governments have agreed to implement the Direct Benefit Transfer
(DBT) scheme in the electricity sector for better targeting of subsidies
Initiatives taken by the Energy Efficiency Services (EESL) have resulted in energy savings of 37
billion kWh and reduction in greenhouse gas (GHG) emissions by 30 million tonnes.
The Government of India has released its roadmap to achieve 175 GW capacity in renewable
energy by 2022, which includes 100 GW of solar power and 60 GW of wind power.
28
Value Chain
29
Guaranteed return: A power company is guaranteed a certain return on capital employed on
generation by the government. If input cost increases, a generation company passes on the
cost through increasing the capital employed to maintain margins. Affects profitability of a
power company.
Net Asset Value: NAV is important from a retail investor perspective. Mentioned in Balance
sheet of the company.
Maintenance Cost: Expense incurred in maintenance of plants; an indicator of efficiency
NAV = ((Capacity * rate per MW depending whether it is pure generation company or a
combination of both) - Debt + Cash) / (number of shares outstanding)
Sources of power (Share in installed capacity)
Sources of power
Thermal Renewable Hydro Nuclear

(62.4%) (23.4%) (12.3%) (1.8%)
Cost Structure
Value Chain Major Cost Heads
Power Generation Raw Material Cost (LNG fuel, Coal etc.) and Interest Cost, regulatory
cost
Power Transmission Conductor Cost (ACSR – 38%; HPC: 66%); Tower (18%); Erection and
Foundation (10%), Using HPC increases material cost by 2X but
reduces overall per MW per km cost by 15%
Power Distribution Transmission losses, Infrastructure cost
Growth drivers in Power Sector

Growing demand: Electricity generation witnessed a growth of 0.26% y-o-y in FY20
Policy support from government. Relaxed FDI norms.
Investment in India’s power is to the tune of worth Rs 9-9.5 trillion (US$ 128.24-135.37 billion)
between FY19-FY23. Economic Survey predicts an investment of US$ 330 billion in renewable
sector by 2030
30
Oil & Gas Sector
Overview
The oil and gas sector are among the six core industries in India. The government allows 100 per
cent Foreign Direct Investment (FDI) in upstream and private sector refining projects. According
to the DIPP’s latest FDI Policy, the FDI limit for public sector refining projects has been raised to
49 per cent without any disinvestment/dilution of domestic equity in the existing PSUs. It is sub-
divided into 3 sectors:
Upstream – Includes exploration for crude oil and natural gas reserves, drilling wells and
subsequently operating wells to produce oil and gas.
Midstream – Involves storage, transportation and marketing of oil and gas products. The
operation in midstream include some elements of upstream and downstream sectors.
Downstream – Comprises refining of crude oil and processing of natural gas. It also involves
marketing and final distribution to end consumers.
O&G is a very capital-intensive industry with huge investments in exploration and setting up
processing facilities of crude oil and gas. Oil & gas is a non-fragmented sector with most of the
market being controlled by state owned enterprises – IOCL, BPCL, ONGC, OIL and GAIL. The major
domestic private player is Reliance while international players like Shell, BP and Cairn have a
minor presence. The industry is expected to attract around USD 25 billion in investments by 2022
for the purposes of exploration and production. Government has introduced various policies like
OALP and CBM to attract investment.
Market Size
India is expected to be one of the largest contributors to non-OECD petroleum consumption

growth globally. Crude Oil import rose sharply to US$ 101.4 billion in 2019-20 from US$ 70.72
billion in 2016-17. As of May 01, 2020, India’s oil refining capacity stood at 249.9 million metric
tonnes (MMT), making it the second largest refiner in Asia. Private companies own about 35.36
per cent of the total refining capacity in FY20.
In FY20, crude oil production in India stood at 30.5 MMT. In FY20, crude oil import increased to
4.54 mbpd from 4.53 mbpd in FY19. Natural Gas consumption is forecast to reach 143.08 million
tonnes (MT) by 2040. India’s LNG import stood at 33.68 bcm during FY20. India’s consumption of
petroleum products grew 4.5 per cent to 213.69 MMT during FY20 from 213.22 MMT in FY19.
The total value of petroleum products exported from the country increased to US$ 35.8 billion in
FY20 from US$ 34.9 billion in FY19. Export of petroleum products from India increased from 60.54
31
MMT in FY16 to 65.7 MMT in FY20. Gas pipeline infrastructure in the country stood at 16,981
kms at the beginning of April 2020.
Trends
Global crude oil prices are averaging $67-72 per barrel in 2019, will come down to $55-60 in
2022. This is because higher oil prices in recent years due to various disruptions to supply
(Venezuelan and Iran sanctions, partial shutdown of Saudi Arabia’s largest offshore oil
refinery, crisis in Nigeria) has increased investment in exploration and production which will
lead to increased supply in the future.
As per CRISIL, India's crude oil demand is expected to slow down by calendar 2022, due to
slower capacity additions in refining in the next 5 years.
Despite a slower growth in oil demand, petroleum products demand is expected to grow at a
healthy pace of ~5-6% CAGR in the next 5 years, driven by high-speed diesel (HSD), motor
spirit (MS) and liquefied petroleum gas (LPG).
Growth in the demand will be driven mainly by the transportation, aviation, road construction
industries, as well as government’s push to increase LPG penetration.
While crude oil demand will increase only by 2% CAGR, gas demand will increase by 4% CAGR.
Gas demand will be driven mainly by city gas distribution (CGD) and fertilisers.
Value Chain
32
Force Threat of Bargaining Rivalry among Bargaining Threat of

Substitutes power of existing power of new
suppliers competitors buyers entrants
Power Weak Moderate Weak Weak Weak
Factors Threat is low, as Bargaining Competitive Customers Threat of
renewable power is rivalry is low as have new
energy sources medium as just one-two low/non- entrants
are less despite few players operate existent continues to
developed. players in Upstream, bargaining be low, due
However, the operating, Midstream and power. They to the
pressure may government at Downstream are price capital
become times delays in segments. taker. intensive
significant in subsidy Although a few nature of
the future. payment to oil private operators the industry
There will be a companies have entered the and
shift away from that can lead industry in the economies
crude oil to to big losses. last couple of of scale.
natural gas. years, they do
not pose any
major threat
currently.
33
Petrochemicals Sector
Overview
Petrochemical Industry in India Petrochemicals play a vital role in the functioning of virtually all
key sectors of economy which includes agriculture, infrastructure, healthcare, textiles and
consumer durables. Polymers provide critical inputs which enable other sector to grow.
Petrochemical products cover the entire spectrum of daily use items ranging from clothing,
housing, construction, furniture, automobiles, household items, toys, agriculture, horticulture,
irrigation, and packaging to medical appliances. Basic petrochemicals include olefins (ethylene,
propylene and butadiene) and aromatics (benzene and toluene). They are the building blocks for
a variety of products. Among the various polymers, polyethylene (PE), polypropylene (PP),
poly vinyl chloride (PVC) and poly styrene (PS) are the major ones which are derived from the
various basic petrochemicals. Among basic petrochemicals, ethylene is the most widely used
building block due to its various end uses applications. The size of the petrochemicals industry is
judged by its ethylene cracker capacity.
Sector Overview of Petrochemicals
34
Global Economic Outlook for Petrochemicals
India has the advantage of high population and expected to maintain high economic growth. This
should propel India's polymer consumption to new levels in coming year. Risks to global economy
are rising, at the same time the outlook has become brighter. IHS Markit has revised up 2019
growth rate from 3.3% to 3.4% to reflect stronger growth in the US economy, induced by more
fiscal stimulus. Our view is that rapidly rising US crude oil production will contribute to global
supply exceeding global demand this year.
Crude oil is the key input in petrochemicals production. In recent past, there has been a strong
upswing and downswing in the Crude oil prices, because of Iran-US negotiations and the ongoing
trade war between US and China. The crude oil market would keep a watch on developments in
the Middle East between the UK and Iran, and the US Navy and Iran. However, it seems unlikely
to see an extended rally unless military action leads to a supply disruption. Iran–US tensions
signals that this standoff is going to continue over the summer but the problem for the oil market
is there are still these big concerns about demand.
Geopolitical tensions have been the only pillar supporting crude oil prices and If the WTI prices
breach the $54 level, we can expect prices to touch the lows we saw earlier this year. Most of
the countries have completed their planned renovation, which resulted in the fall of effective
plant utilization this year. In the future we can expect a steady supply and more effective plant
utilization especially in Asia and Middle East. Hurricanes in US and Mexico have not disturbed the
Oil operations much this time and this is also one of the reasons of sluggish Oil prices.
Indian Petrochemical Outlook
In terms of Outlook - Asian PVC market would likely remain firm, mainly due to Indian demand
and tighter supply amid lower operations of Chinese carbide-based PVC plants on stricter
environmental regulations. India's appetite would remain strong next year with PVC deficit
forecast at around 1.5 million mt./year. Globally India is being looked at as the bright spot in the
global economy. Consumer sentiments are high and growth expectations are reasonably well,
which augers well with the petrochemical industry whose growth has a direct relation with the
economic growth. For the Indian petrochemical industry in the key application industries like
packaging, construction, and automobiles helped pull up the demand and declining prices
resulted in higher offtake by downstream converters for virtually all polymers. Government of
India's initiatives like Digital India, Swachh Bharat, Start-up India and Skill development program
etc. have started and will eventually have a widespread multiplier effect. One can expect them
to fuel petrochemical demand in India in the years to come. Success of 'Make in India' program
35
will be a game changer and a big boost to manufacturing in the country. Increased focus on
agriculture and irrigation will boost the demand for plastics.
Major Players in Indian Petrochemicals Market

At present, Reliance Industries dominate the industry. In the early 1990s, Reliance Industries
commissioned three downstream plants in the first phase of its cracker complex. It commissioned
its 750,000 tpa mother cracker and other downstream units in 1997 at Hazira, Gujarat. IPCL
started three cracker complexes - Baroda, Gujarat (set up in 1978, having an ethylene capacity of
130,000 tpa, subsequently increased to 175,000 tpa); Maharashtra Gas Cracker Complex (MGCC)
at Nagothane (set up in 1990, having an ethylene capacity of 300,000 tpa, subsequently increased
to 400,000 tpa); and Gandhar, Gujarat (set up in early 2000, having an ethylene capacity of
300,000 tpa, subsequently increased to 400,000 tpa). Competition has increased with the
commissioning of new capacities by Gas Authority of India Limited (GAIL) and Haldia
Petrochemicals. In April 1999, GAIL set up a 300,000 tpa cracker at Auriya, Uttar Pradesh, as a
part of its forward integration plan. The capacity has been subsequently increased to 440,000
tpa. In April 2000, Haldia Petrochemicals set up its 420,000 tpa cracker at Mednipur, West Bengal
(the capacity was subsequently increased to 520,000 tpa). In May 2010, Indian
Oil Corporation Limited (IOCL) commenced operations of its 800,000 tpa ethylene capacity, thus
further intensifying competition in the domestic market. Moreover, with entry of new players
like Indian Oil Corporation (IOC) (which has already entered in 2010) and Brahmaputra Cracker
and Polymer Limited (BCPL), competition is slated to increase further.
Key growth drivers for chemicals

1. Growth in end-user market such as textiles, automobile, irrigation, construction and
consumer durables to name a few
2. Increasing availability of the raw materials
3. Organic growth and consolidation of the industry
4. Shutdowns of plants globally such as China and EU have shifted the advantage to Indian
manufacturers to invest more heavily in chemicals
Top News in recent time

1. RIL deal to make Saudi Arabia India’s top crude supplier. Saudi Aramco, world’s largest oil
producer, has acquired 20% stake in Reliance Industries Oil to Chemical business. This
acquisition in accompanied with a deal to supply of 5L barrels per day a year of Crude oil from
Aramco. This will result in SA becoming India’s top crude supplier replacing Iraq.
2. British Petroleum has aligned itself with RIL Petro-retail business in Rs.7000 Cr. deal. RIL is
operating with a network of 1400 retail stations in India, BP comes with a license of around
3500 stations.
36
3. Government’s push for Electric Vehicle has oil industry worried. "Huge investments have
already been made by the oil refiners for BS VI stage. The public sector refiners alone are
executing projects worth more than Rs. 30,000 crore to move from BS IV to BS VI fuel quality
level," Direct-General FIPI
4. India is likely to set up gas trading hub by first quarter of 2020-21. The plan is to bifurcate the
GAIL business of gas transmission and marketing first and then to set up gas trading hub.
5. Ambitious Aramco-BPCL-HPCL-IOCL refinery which was supposed to be set up in Ratnagiri can
now be shifted to Raigad on the back of delayed land acquisition and strong resistance from
the localities which has already pushed the project deadlines from 2022 to 2025.
Value Chain for Petrochemicals
37
Aviation Sector
Overview
The civil aviation industry in India has emerged as one of the fastest growing industries in the
country during the last three years. India has become the third largest domestic aviation market
in the world and is expected to overtake UK to become the third largest air passenger* market
by 2024 as per IATA forecasts. Currently, the industry is witnessing massive new developments
in the form of – Low-cost carriers (LCCs), modern airports, Foreign Direct Investment (FDI) in
domestic airlines, advanced information technology (IT) interventions and growing emphasis on
regional connectivity. The Covid-19 pandemic has also changed the industry significantly.
However, what makes the industry unique is the high risk associated with operating in the
industry.
The 6 major stakeholders in the Aviation industry are:
1. Airlines
2. Airports- Infrastructure
3. Aircraft OEMs (Aircraft/Engine/Components manufacturers)
4. Service Providers (Handling, Catering & Cleaning)
5. Customers
6. Government
Trends
India is poised to overtake UK and become the third largest aviation market in the world in
terms of passengers by 2024.
After adjusting for inflation, average domestic fares have fallen by more than 70% since 2005,
expected to fall further till 2024.
India’s passenger traffic stood at 341.05 million in FY20. It grew at a compound annual growth
rate (CAGR) of 11.13% during FY16–FY20. Domestic passenger traffic stood at 274.50 million
in FY20, growing at a CAGR of 12.91% over FY16. International passenger traffic stood at 66.54
million, growing at a CAGR of 5.01% during FY16-FY20.
Freight traffic grew at a CAGR of 5.32% during FY16–FY20 from 2.70 million tonnes (MT) to
3.33 MT. Freight Traffic is expected to grow at a CAGR of 7.27% to reach 4.14 MT in FY23.
The Indian government is planning to invest US$ 1.83 billion for development of airport
infrastructure along with aviation navigation services by 2026.
Low cost carriers to account for about 75% of domestic seats till 2020.
India’s air passenger traffic is expected to grow six-fold to 1.1 billion and the number of
operational airports increase to around 200 in 2040
The number of airplanes is expected to grow to 1,100 planes by 2027.
38
Latest News
In January 2020, IndiGo became first Indian carrier to have an aircraft fleet size of 250 planes
and became the first airline to operate 1,500 flights per day.
In December 2019, AAI announced its plans to set up India's first three water aerodromes in
Andaman & Nicobar.
As of December 2019, France-based Safran Group planned an investment of US$ 150 million
in a new aircraft engine maintenance, repair and overhaul (MRO) unit in India to cater to its
airline customers.
In November 2019, the Competition Commission of India (CCI) approved the acquisition of
shareholdings in Mumbai International Airport Limited (MIAL) by Adani Properties Private
Limited (APPL).
AAI plans to invest Rs 25,000 crore (US$ 3.58 billion) in next the five years to augment facilities
and infrastructure at airports.
UK group to invest Rs 950 crore (US$ 135.9 million) in Turbo Aviation's new airline TruStar.
AAI plans to develop Guwahati as an inter-regional hub and Agartala, Imphal and Dibrugarh
as intra-regional hubs.
Indian aircraft manufacture, repair and overhaul (MRO) service providers are exempted
completely from customs and countervailing duties
National Company Law Tribunal (NCLT) admitted Jet Airways for bankruptcy proceedings
under the Insolvency and Bankruptcy Code (IBC).
The GST Council has lowered the tax rate for economy class flight tickets to 5%. However, the
business class tickets will attract a higher tax at 12%.
Value Chain
39
Forces Threat of Bargaining Bargaining Competitive Threat of Bargaining

Substitutes Power of Power of Rivalry New Power of
Suppliers Buyers Entrants Channels
Power Medium High High High High High
Factors Increasing Powerful Buyers Rapid and Limited High
spending labour unions fragmented volatile growth incumbency concentration
power OEMs, Air travel Limited advantages among
Improved concentrated perceived as Product Low aggregator
technology oligopolies standardized Differentiation switching websites and
Other modes Airports, local product High sunk costs cost agents
of transport monopolies Low per aircraft, Easy access Increased
like Railways Airport switching low MC per to price
is improving Services, cost passenger distribution transparency
Travel can be small number Discretionary High exit channels
delayed or of firms spend, price barriers
limited sensitive Direct &
indirect rivals
Indicators Unit of Measurement Definition

Aircrafts Numbers Total number of planes in operation including
(Fleet) the ones leased out
Employees Numbers Total full-time employees at the carrier
Operating Cost Millions (INR) Total costs of operating all the flights
Available tonnes Million No. of tonnes of capacity available for the
kilometres carriage of revenue load (passenger & cargo)
x distance flown
Available seat Million No. of seats available for sale to passenger x
Kilometres distance flown
Revenue Passenger Million No. of revenue passengers carried x by the
kilometres distance
Total Operating Million Revenues received from total airline
Revenue operations
Total Cargo carried Tons Freight + Mail carried by an aircraft
40
Some more KPIs to consider:
Safety – fatality, reportable dangerous occurrence, reportable occupational illness
Operations – No. of PAX, available flying time, environmental impact,
spills/releases/discharges to land.
Financial – Operating Margin, revenue per available seat
Jet Airways Crisis
As a slew of budget carriers started flooding the market in the mid 2000s, offering no-frills, yet
on-time flights, Jet Airways began dropping fares, some to below cost. On top of that, provincial
taxes of as much as 30 per cent on jet fuel added to its expenses, while price-conscious Indian
travellers refused to pay a premium for on-board meals and entertainment. Unlike budget
operators, full-service airlines such as Jet Airways offered such amenities mostly for free. Jet
Airways lost money in all but two of the past 11 years and had Rs 72.99 billion ($1 billion) of net
debt. While it didn’t separately disclose cash and cash equivalents as of December 31, Bloomberg
calculations show the airline had about Rs 3.55 billion of cash at the end of 2018. It defaulted on
loans that were due by December 31, 2018 and has delayed payments to staff and lessors.
In December 2018, the airline operated 123 aircraft. Not even a year later, the airline departed
for its last flight on April 18th, 2019. Riddled with massive debts and no emergency funds, the
airline is looking for a hero to save them. Question is, is it too late? The Indian government
already allocated the airline’s aircraft and slots to rival airlines, which means that the airline has
virtually no assets and it‘s value crumbles by the day. Claims submitted by creditors against Jet
Airways have shot up from Rs 24,000 crore a month ago to Rs 30,558 crore as of late 2019, making
hopes of any revival of the defunct airline dimmer.
41
Telecom Sector
Overview
India is currently the world’s second-largest telecommunications market with a subscriber base
of 1.20 billion and has registered strong growth in the last decade and half. India has the second
highest number of internet subscribers globally. Total number of internet subscribers stood at
604.21 million, at the end of December 2018. Availability of affordable smartphones and lower
rates of data are expected to drive growth in the Indian telecom industry. National Digital
Communications Policy unveiled by GOI policy in 2018, aims to attract $100bn worth of
investments and 4mn jobs by 2022. The Indian mobile economy is growing rapidly and will
contribute substantially to India’s Gross Domestic Product (GDP) according to a report prepared
by GSM Association (GSMA) in collaboration with Boston Consulting Group (BCG). In 2019, India
surpassed the US to become the second largest market in terms of number of app downloads.
Market Size
India ranks as the world’s second largest market in terms of total internet users. The number of
internet subscribers in the country increased at a CAGR of 45.74 per cent during FY06-FY19 to
reach 636.73 million in FY19. The internet subscribers reached 687.62 million by September 2019.
Total wireless data usage in India grew 10.58 per cent y-o-y to 19,838,886 terabytes between
July-September 2019. India is also the world’s second largest telecommunications market. Its
total telephone subscriber base and tele-density reached 1,177.02 million and 87.45 per cent,
respectively, as of January 2020.
Gross revenue of the telecom sector stood at Rs 121,527 crore (US$ 17.39 billion) in FY20 (April-
September 2019). Over the next five years, rise in mobile-phone penetration and decline in data
costs will add 500 million new internet users in India, creating opportunities for new businesses.
Telecom
Mobile Fixed-Line Internet

(Wireless) (Wireline) Services
42
Value Chain
SWOT Analysis
Strength
Strong demand: World’s second largest in terms of telecom network (a subscriber base of
119.1 crore), internet subscribers (internet users of 51.2 crore) as well as app downloads;
telecom sector likely to have economic value of $217 billion by 2020
Increasing data usage: India is also one of the largest data consumers (an average 1 GB data
per day per user) globally
Good telecom infrastructure: Large telcos have been investing on network infrastructure to
improve customer experience for last few years
Fast-tracked reforms provide room for growth: National digital communications policy, 2018
aims to attract $100 billion worth of investments in the sector by 2022
Weakness
Intense competition: Cut-throat price war among telcos has led to consolidation in the
industry as well as declining overall profits for last couple of years
Debt and finances: Incumbents are currently having unsustainable debt levels owing to
intense competition in the industry.
Late adoption of 4G and advanced wireless technologies: Due to regulatory uncertainties
and delayed spectrum auctions, India were late to the 4G. Though world moves towards the
first commercial deployment of 5G in 2019-mid, India to be a late adopter of 5G services
43
Opportunities
Mobile penetration: unique mobile subscribers to the total population is expected to reach
around 63% in 2025 from 58% in July 2018
Increase in internet users: Rise in mobile-phone penetration along with decline in data costs
is expected to add 500 million new internet users in India
Untapped rural market: Rural tele-density reached 58.8% and 44.6% of the total wireless
subscribers are from rural market
Exploring adjacent businesses in an evolving environment: Moving beyond traditional
telecom business to wider digital consumer space like content and mobile banking solutions
Threats
Interconnection charges: Interconnection charges will be zero effective Jan 1, 2020 from
current rate of 6 paise/min. This would impact the revenues of incumbents
Spectrum auctions: Government of India has kept a high reserve price for spectrum auction.
Given ongoing pressure on ARPU and margins, purchasing the spectrum at a high price (in
circles like Mumbai) put further stress on the balance sheet.
Trends
Over 62,443 uncovered villages in India will be provided with village telephone facility with
subsidy support from the government’s Universal Service Obligation Fund (thereby increasing
rural tele-density).
Broadband service provider, Excitel, plans to raise Rs 200 crore (US$ 28.37 million) in funding
as it plans to expand FTTH (fibre to the home) deployment on its network and establish
presence in 50 cities by December 2021.
BWA technologies, such as WiMAX and LTE, is among the most recent and significant
developments in wireless communication.
Bharti Airtel VoLTE and Reliance Jio 4G services are live across all the 22 telecom circles since
2019. India is expected to be the second largest market in 5G services followed by China in
the next 10 years.
IoT is the concept of electronically interconnected and integrated machines, which can help
in gathering and sharing data. The Indian Government is planning to develop 100 smart city
projects where IoT will play a vital role in development of those cities.
Reliance Jio has partnered with Samsung Electronics to set up a nationwide IoT network. Jio's
IoT platform is ready to be commercially available in 2020.
Between April 23 and July 16, 2020, Jio Platforms Ltd. sold 25.24 per cent stake worth Rs 1.52
trillion (US$ 21.57 billion) to various global investors in separate deals involving Facebook,
Silver Lake, Vista, General Atlantic, Mubadala, Abu Dhabi Investment Authority (ADIA), TPG
44
Capital, L. Catterton, Public Investment Fund (PIF), Intel Capital, Qualcomm Ventures and
Google. This is the largest continuous fundraise by any company in the world.
In April 2020, Vodafone Group Plc infused Rs 1,530 crore (US$ 217.05 million) in Vodafone
Idea as accelerated payment to help it manage its operations.
Reliance Jio Infocomm is going to expand its optical fibre network to over 1,100 cities under
its Jio GigaFiber brand. In August 2019, Reliance commercially launched Jio GigaFiber as a
wired broadband service.
45
BFSI Sector
Overview
Banking, Financial Services and Insurance (BFSI) is an industry term for companies that provide a
range of financial products/services such as universal banks, payments banks and digital banks.
BFSI comprises of commercial banks, insurance companies, non-banking financial companies,
cooperatives, pensions funds, mutual funds, and other smaller financial entities. The Indian banks
industry group had total assets of $2,126.9bn in 2019, representing a compound annual growth
rate (CAGR) of 9.8% between 2015 and 2019. In comparison, the South Korean and Chinese
industry groups grew with CAGRs of 7.2% and 8.4% respectively, over the same period, to reach
respective values of $3,371.2bn and $39,746.8bn in 2019. The bank credit segment was the
industry group's most lucrative in 2019, with total assets of $1,462.8bn, equivalent to 68.8% of
the industry group's overall value. The trading assets segment contributed assets of $619.0bn in
2019, equating to 29.1% of the industry group's aggregate value.
Indian banking industry has recently witnessed the roll out of innovative banking models like
payments and small finance banks.
Types of Banks in India can be divided as follows:

1. Scheduled Banks are accounted for in the second schedule of RBI Act and are governed
by the general rules by RBI like CRR requirements, paid up capital etc
2. Non-Scheduled Banks do not have to comply with any RBI regulations. These are local
area banks usually required to maintain cash reserves with themselves.
The banking regulator has allowed new entities such as payments banks to be created thereby
adding to the types of entities operating in the sector. However, the financial sector in India is
46
predominantly a banking sector with commercial banks accounting for more than 64 per cent of
the total assets held by the financial system.
Recent News and Key Trends

Higher slippages and lower recoveries/resolutions due to pandemic to increase NPA by ~150-
200 bps to 11-11.5% by fiscal 2021
Bank credit growth slow down sharply to 2-3% for fiscal 2021. Agriculture loans to grow at a
steady 6% in fiscal 2021. Working capital loans to increase due to Covid19 pandemic.
PSBs need additional Rs. 400-450 bn of equity capital to comply with Basel 3 for loss
absorption amid challenging times
Merging banks (~23% of banking credit) will focus on integration post consolidation effective
01-04-2020 and thus witness de-growth in their books
Retail to witness increased quality risk as unsecured loans are likely to take a hit in the wake
of economic slowdown
Government Initiatives
In December 2018, Securities and Exchange Board of India (SEBI) proposed direct overseas
listing of Indian companies and other regulatory changes.
In September 2018, SEBI asked for recommendations to strengthen rules which will enhance
the overall governance standards for issuers, intermediaries, or infrastructure providers in
the financial market.
The Government of India launched India Post Payments Bank (IPPB), to provide every district
with one branch which will help increase rural penetration.
Value Chain for Banks
47
Force Threat of Bargaining Rivalry Bargaining Threat of

Substitutes Power of among Power of new entrants
Suppliers competitors buyers
Power Strong Strong Strong Weak Weak
Factors Non-banking Dependence • Intensive • Large • Stringent
financial on customer competition concentratio norms
companies deposits and • Threat of n • RBI
(NBFCs) and loans from mergers & of individual regulations
small other acquisitions customers • High Initial
cooperative financial • High Investments
banks. MFIs institutions switching to comply
also compete for cash costs with banking
for a large generating norms
proportion activities • Entry
of population barriers in
not under terms of
the formal banking
banking net license

As banks have very different operating structures than regular industrial companies, it stands to
reason that investors have a different set of fundamental factors to consider, when evaluating
banks.
Loan Growth: Above-average loan growth can mean that the bank has targeted attractive
new markets or has a low-cost capital base that allows it to charge less for its loans.
Deposit Growth: Deposit growth gives investors a sense of how much lending a bank can
do.
Loan/Deposit Ratio: Loan/deposit ratio helps assess a bank's liquidity, and by extension,
the aggressiveness of the bank's management.
Efficiency Ratio: A bank's efficiency ratio is essentially equivalent to a regular company's
operating margin, in that it measures how much the bank pays on operating expenses,
like marketing and salaries. By and large, lower is better.
CASA Ratio: CASA ratio of a bank is the ratio of deposits in current and saving accounts to
total deposits. A higher CASA ratio indicates a lower cost of funds, because banks do not
48
usually give any interests on current account deposits and the interest on saving accounts
is usually very low 3-4%.
Net interest spread: It refers to the difference in borrowing and lending rates of financial
institutions (such as banks) in nominal terms. It is considered analogous to the gross
margin of non-financial companies. Higher the better, it is for the health of banks.
Capital Ratios: There are a host of ratios that bank regulators and investors use to assess
how risky a bank's balance sheet is, and the degree to which the bank is vulnerable to an
unexpected increase in bad loans, like EPS, Price to Book Value, etc.
Return on Equity Return on Assets: Return on equity is especially useful in the valuation
of banks, as traditional cash flow models can be very difficult to construct for financial
companies and return on-equity models can offer similar information.
Credit Quality: If a bank's credit quality is in decline because of non-performing loans and
assets and/or charge-offs increases, the bank's earnings and capital may be at risk.
49
IT Sector
Overview
IT-BPM industry’s revenue was estimated at around US$ 191 billion in FY20, growing at 7.7% y-
o-y. It is estimated to reach US$ 350 billion by 2025. Moreover, revenue from the digital segment
is expected to form 38% of the total industry revenue by 2025. Digital economy is estimated to
reach Rs 69,89,000 crore (US$ 1 trillion) by 2025. The domestic revenue of the IT industry was
estimated at US$ 44 billion and export revenue was estimated at US$ 147 billion in FY20.
Total number of employees grew to 1.02 million cumulatively for four Indian IT majors (including
TCS, Infosys, Wipro, HCL Tech) as on December 31, 2019. Indian IT industry employed 205,000
new hires and had 884,000 digitally skilled talents in 2019. The IT sector can be divided into six
categories: Software Products, IT services, Engineering and R&D services, ITES/BPO (IT-enabled
services/Business Process Outsourcing), Hardware, and eCommerce. Some of the major
developments in the Indian IT and ITeS sector are as follows:
The government has identified Information Technology as one of 12 champion service sectors
for which an action plan is being developed. Also, the government has set up a Rs 5,000 crore
(US$ 745.82 million) fund for realizing the potential of these champion service sectors.
As a part of Union Budget 2018-19, NITI Aayog is going to set up a national-level program that
will enable efforts in AI and will help in leveraging AI technology for development works in
the country.
Tata Consultancy Services Ltd (TCS), the nation’s largest information technology (IT) services
firm crossed the $100-billion market capitalization milestone.
In July 2020, Infosys won a multiyear deal worth US$ 1.5 billion from investment management
company, Vanguard
In July 2020, HCL Technologies signed a five-year deal worth US$ 600 million with telecom
equipment maker Ericsson
PE (private equity) investment in the sector stood at US$ 11.8 billion across 493 deals in 2019.
As of February 2020, there were 417 approved SEZs across the country with 274 from IT &
ITeS and 143 as exporting SEZs.
In February 2020, Tata Consultancy Services bagged a contract worth Rs 10,650 crore (US$
1.5 billion) from pharma company Walgreens Boots Alliance.
UK-based tech consultancy firm, Contino, was acquired by Cognizant.
In May 2019, Infosys acquired 75% stake in ABN AMRO Bank's subsidiary Stater for US$
143.08 million
In June 2019, Mindtree was acquired by L&T.
Nasscom has launched an online platform which is aimed at up-skilling over 2 million
technology professionals and skilling another 2 million potential employees and students.
50
Trends
Value Chain
51
KPIs for Software Product companies are Average Contract Value, Monthly Run Rate,
Annual Contract Value, Churn Rate, Leads per Month, Orders Booked per Quarter, Days
of Sales Outstanding, etc.
KPIs for Software Services company are Revenue Per Employee, Utilization Rate, Bench
Strength, Leads per Month, Orders Booked per Quarter, Manpower Attrition Rate, Days
of Sales Outstanding, Defects per Thousand Lines of Code.
Force Threat of Bargaining Bargaining Threat of New Competition

Substitutes Power of Power of Buyers Entrants among rivalry
Suppliers
Power Weak Weak Strong Weak Strong
Factors No • Suppliers • For • In the •Intense
Substantial consist of IT conventional IT context of the competition for
substitutes to Infrastructure services, highly conventional IT
IT service providers bargaining commoditized services
apart from (Servers, power of the IT services,
Internal IT Computers buyer is large there is little • Opportunity
departments etc.), and the threat of new for
Recruitment possibility of entrants differentiation
firms, Office pressure on through niche
Space rates exist • Newer specialization
Suppliers technologies occurs in non-
• In the case of allow the conventional
• High nonconventional possibility of services, i.e.
standardizati services i.e. new niche the ones
on exists those that players that focused on
cater to are not emerging
emergent dependent on technologies
technologies, size or and trends such
there is experience as Analytics,
potential for constraints Cloud
differentiation computing,
and higher Social Media,
margins Enterprise
Mobility, IoT
52
NBFC Sector
Overview
Non-banking financial companies (NBFCs) are financial institutions that offer various banking
services but do not have a banking license. NBFCs are also called shadow banks. As per RBI, “A
Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956
engaged in the business of loans and advances, acquisition of shares/ stocks/ bonds/ debentures/
securities issued by Government or local authority or other marketable securities of a like nature,
leasing, hire-purchase, insurance business, chit business but does not include any institution
whose principal business is that of agriculture activity, industrial activity, purchase or sale of any
goods (other than securities) or providing any services and sale/purchase/construction of
immovable property. A non-banking institution which is a company and has the principal business
of receiving deposits under any scheme or arrangement in one lump sum or in installments by
way of contributions or in any other manner is also a non-banking financial company.”
NBFCs lend and make investments, and hence, their activities are akin to that of banks; however,
there are a few differences as given below:
NBFC cannot accept demand deposits.
NBFCs do not form part of the payment and settlement system and cannot issue cheques
drawn on itself.
the deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not
available to depositors of NBFCs, unlike in case of banks.
Indian financial system includes banks and non-financial institutions. Though banking system
dominates financial services, NBFCs have grown in importance by carving a niche for themselves
in under-penetrated regions and unbanked segments. All India financial institutions include
NABARD, SIDBI, NHB, and Exim bank.
The consolidated balance sheet size of the NBFC sector grew by 20.6 percent to ₹ 28.8 trillion
during 2018-19 as against an increase of 17.9 percent to ₹24.5 trillion during 2017-18 as per June
2019 financial stability report of RBI. The NBFC sector has been growing robustly in recent years,
providing an alternative source of funds to the commercial sector in the face of slowing bank
credit.
53
Structure of non-banking financial institutions in India
Non-banking
Financial
Institutions
Non-banking
All-India Financial
Finance
Institutions
Companies
NBFC Deposit- NBFC Non- Housing Finance Insurance

Chit Funds
taking deposit taking Companies companies
Investment Infrastructure Micro-finance

Loan Company
Company Finance Company Company
Asset Finance Core Investmenty

Factors
Company company
Infrastructure
Debt Fund
Classification
By the kind of activity NBFCs conduct, they may be broadly classified into the following
categories:
I. Asset Finance Company (AFC) : An AFC is a company which is a financial institution
carrying on as its principal business the financing of physical assets supporting
productive/economic activity, such as automobiles, tractors, lathe machines, generator
sets, earthmoving and material handling equipment, moving on own power and general
purpose industrial machines. Principal business for this purpose is defined as aggregate
of financing real/physical assets supporting economic activity and income arising
therefrom is not less than 60% of its total assets and total income, respectively.
II. Investment Company (IC): IC means any company which is a financial institution carrying
on as its principal business the acquisition of securities,
III. Loan Company (LC): LC means any company which is a financial institution carrying on as
its principal business the providing of finance whether by making loans or advances or
otherwise for any activity other than its own but does not include an Asset Finance
Company.
IV. Infrastructure Finance Company (IFC): IFC is a non-banking finance company a) which
deploys at least 75 percent of its total assets in infrastructure loans, b) has a minimum
Net Owned Funds of ₹ 300 crores) has a minimum credit rating of ‘A ‘or equivalent d) and
a CRAR of 15%.
54
V. Systemically Important Core Investment Company (CIC-ND-SI): CIC-ND-SI is an NBFC
carrying on the business of acquisition of shares and securities which satisfies the
following conditions:
It holds not less than 90% of its Total Assets in the form of investment in equity shares,
preference shares, debt or loans in group companies
Its investments in the equity shares (including instruments compulsorily convertible
into equity shares within a period not exceeding ten years from the date of issue) in
group companies constitutes not less than 60% of its Total Assets
It does not trade in its investments in shares, debt, or loans in group companies except
through block sale for dilution or disinvestment
It does not carry on any other financial activity referred to in Section 45I(c) and 45I(f)
of the RBI act, 1934 except investment in bank deposits, money market instruments,
government securities, loans to and investments in debt issuances of group companies
or guarantees issued on behalf of group companies.
Its asset size is ₹ 100 crore or above and
It accepts public funds
VI. Infrastructure Debt Fund: Non- Banking Financial Company (IDF-NBFC): IDF-NBFC is a
company registered as NBFC to facilitate the flow of long term debt into infrastructure
projects. IDF-NBFC raise resources through issue of Rupee or Dollar denominated bonds
of minimum five-year maturity. Only Infrastructure Finance Companies (IFC) can sponsor
IDF-NBFCs.
VII. Micro Finance Institution (NBFC-MFI): NBFC-MFI is a non-deposit taking NBFC having not
less than 85% of its assets qualifying assets which satisfy the following criteria:
Loan disbursed by an NBFC-MFI to a borrower with a rural household annual income
not exceeding ₹ 1,00,000 or urban and semi-urban household income not exceeding
₹ 1,60,000.
Loan amount does not exceed ₹ 50,000 in the first cycle and ₹ 1,00,000 in subsequent
cycles.
Total indebtedness of the borrower does not exceed ₹ 1,00,000
Tenure of the loan not to be less than 24 months for loan amount over ₹ 15,000 with
prepayment without penalty
Loan to be extended without collateral
Aggregate amount of loans, given for income generation, is not less than 50 percent
of the total loans given by the MFIs
Loan is repayable on weekly, fortnightly or monthly instalments at the choice of the
borrower
VIII. Factors (NBFC-Factors): NBFC-Factor is a non-deposit taking NBFC engaged in the
principal business of factoring. The financial assets in the factoring business should
55
constitute at least 50 percent of its total assets and its income derived from factoring
business should not be less than 50 percent of its gross income.
IX. Mortgage Guarantee Companies (MGC) - MGC are financial institutions for which at least
90% of the business turnover is mortgage guarantee business or at least 90% of the gross
income is from mortgage guarantee business, and the net owned fund is ₹ 100 crore.
X. NBFC- Non-Operative Financial Holding Company (NOFHC) is financial institution
through which promoter / promoter groups will be permitted to set up a new bank .It’s a
wholly-owned Non-Operative Financial Holding Company (NOFHC) which will hold the
bank as well as all other financial services companies regulated by RBI or other financial
sector regulators, to the extent permissible under the applicable regulatory prescriptions.
Key Events
Even as their importance in credit intermediation is growing, recent developments in the

domestic financial markets have brought the focus on the NBFC sector (including housing finance
companies or HFCs) especially with regard to their exposures, quality of assets and asset-liability
mismatches (ALM). The liquidity stress in NBFCs reflected in the third quarter of the last financial
year (September - December 2018) was due to an increase in funding costs as also difficulties in
market access in some cases. Despite the dip in confidence, better performing NBFCs with strong
fundamentals were able to manage their liquidity even though their funding costs moved with
market sentiments and risk perceptions.
In the CP market, the absolute issuance of CPs by NBFCs have declined sharply relative to its level
pre - IL&FS default. During the stress period, CP spread of all entities had increased, particularly
that of NBFCs, highlighting a reduced risk-appetite for them. Subsequently, the CP spread for
NBFCs has reduced and its gap vis-à-vis other issuers has narrowed. Thus, in a way, the IL&FS
stress episode brought the NBFC sector under greater market discipline as the better-performing
companies continued to raise funds while those with ALM and/or asset quality concerns were
subjected to higher borrowing costs. Post-crisis, while banks’ overall exposure to NBFCs
increased, their subscription to CPs of NBFCs continued to decline.
IL&FS Crisis
IL&FS refers to Infrastructure Leasing and Financial Services, a group of companies. They lend
money to infrastructure projects because the size and duration of those loans make them very
hard for regular lenders to be involved. As IL&FS cannot accept deposits from the public for
lending purposes, it gets its money by issued debt instruments, which are essentially a lending
contract that says that the lender will be repaid according to a contract. These contracts usually
56
specify the duration, interest rates, and when interest and capital are paid. Since 2016, it has
been relying mainly on short-term loans for its funding requirements. But it extended long-term
loans to infrastructure projects. It led to an asset-liability mismatch. Short-term liabilities were
used to finance long-term assets. The company has over Rs.91000 crore in debt. There has also
been a slowdown in the infrastructure sector which has impacted the returns of IL&FS. IL&FS has
not been able to make the interest payments, which is the minimum requirement with most debt
instruments, on one kind of instrument it issues, which indicates that they are out of cash. The
IL&FS defaulted on several of its loans since 27th August 2018. Subsequently, the credit rating
agencies ICRA, CARE, and Brickwork abruptly downgraded IL&FS and its subsidiaries from high
investment grade to junk status. These large-scale defaults and credit downgrade led to a panic
in the Financial Markets.
Given that the loans they call in are longer-term, they are unlikely to get cash from those loans
being repaid, which means that all those investors who bought these debt instruments are
worried that they will not be repaid. The chain effect leads to panic and falling share prices of
companies that hold these instruments, and those to the next and so on. Several of the
companies here are insurance and mutual fund companies, which makes the situation even more
alarming.
57
Pharma Sector
Overview
The pharmaceutical industry in India is the third largest in terms of volume and 13 th largest in
terms of value globally. It is expected to reach INR 3.3tn by 2022. India is the largest provider of
generic drugs globally. Indian exports have a share of 20% in global exports. The exports from
India stood at USD 20 billion in 2020. Pharmaceutical exports include bulk drugs, intermediates,
drug formulations etc. Generic drugs with a market share of 70% forms the largest segment of
Indian pharma space. Over the Counter (OTC) drugs constitute 21% and patented drugs comprise
the remaining 9% of the Indian market share.
The Key Segments in the Indian Pharmaceutical Industry are as follows:

I. API Manufacturers / Traders (Bulk Drugs)
II. Formulation Manufacturers
III. Contract Research and Manufacturing Services Companies
IV. Biotechnology Companies
Market Size of
Indian Pharma in
2020
Formulation exports Formulation exports Domestic

Bulk Drugs exports
(Semi-regulated) (Regulated) Formulations
Rs. 0.28 tn
Rs. 0.49 tn Rs. 0.6 tn Rs. 1.38 tn
The key drivers are majorly knowledge, skills, low production costs, and quality. Due to this there
is demand from both domestic as well as international markets.
Key growth drivers for the demand of pharma products

1. Ageing population
2. Increasing incidence of non-communicable diseases
3. Improved insurance penetration in the country
4. Booming Medical tourism
5. Increasing per capita income
58
India continues to rely on imports of key starting materials, intermediates and API’s from China
with the share of dependence increasing over time. This potentially exposes it to raw material
supply disruptions and pricing volatility.
The following are the factors which make India attractive to global pharma companies:
1. The cost of production (labour and raw material) in India is around one-third of that in the US
and almost half of that in Europe
2. Huge market for life-saving and lifestyle drugs
3. Potential for conducting R&D activities due to a large number of medical institutes and ease
& cost effectiveness of conducting clinical trails
4. Existing manufacturing capability to produce active pharmaceutical ingredients (APIs) as well
as intermediates at lower cost while maintaining quality
5. Product patent regime
6. India has maximum number of USFDA approved plants outside USA which are over 169 in
number
Value Chain
The pharma value chain involves three major components, in general:
I. Manufacturing of the medicine: In order in produce a medicine, several steps are

involved, from the initial research and development phase, to gaining regulatory approval
which allows a medicine to be sold in a market to the final commercialization phase. The
specific steps and requirements will differ between types of medicine, manufacturers,
and countries.
II. Distribution to the dispensing point: This step includes the transportation and handling of
the medicine from the manufacturer to the end user, whether this is a retail pharmacy
(retailer), hospital or dispensing doctor. The complexity of this journey will differ
depending on manufacturer location, the need for importation of the medicine, the
59
nature of special handling requirements, and the geographic location of the end user
which will vary between large urban centres and remote rural villages.
III. Dispensing to the end user: Providing the correct medicine dosage and form, to the right
patient, in a convenient and timely manner is the final step in the value chain. This step
can also involve a number of additional activities, including checking for potential
interactions, providing advice, and processing reimbursement claims, each of which is
intended to ensure the patient receives the full benefit and value from the medicines they
receive.
There are six key components which contribute to the price build-up of medicines:
I. Manufacturer selling price: the net acquisition cost of the medicine from the
manufacturer, reflecting all discounts, rebates or other reductions in price.
II. Cost, insurance, freight charges (CIF), import tariffs and charges: the cost of importing a
finished pharmaceutical product (FPP) or active pharmaceutical ingredient (API) into a
country.
III. Importer margin: applied by the importer who is tasked with procuring and receiving
delivery of imported goods.
IV. Distributor margin: applied by wholesalers and sub-wholesalers to perform the logistical
role of storing and subsequently transporting medicine to point of sale.
V. Retailer margin: applied by retailers in the final step of the distribution chain, the point at
which medicines are dispensed to patients.
VI. Taxes: the final component of the price build-up which can include both national and
regional taxes.
60
Porter’s Five Forces Analysis
Trends & Strategies
Some of the notable trends in the Indian pharma sector are as follows:
1. The percentage of turnover spend on R&D is likely to increase due to the introduction of
product patents and pressure to develop new drugs to boost sales. The Industry is witnessing
a paradigm shift as the focus is shifting from the manufacturing of generic drugs to drug
discovery and development (Sun Pharma, Cadilla Healthcare and Piramal Life Sciences, had
applied for conducting clinical trials on for numerous new drugs)
2. India’s export in the global markets is likely to increase as it will leverage its edge in the
generic space.
3. Indian pharma is witnessing healthy foreign direct investment, amalgamations and
collaborations (such as licensing, co- development, joint distribution and joint ventures) for
R&D, best practices, cost reduction, and to drive up efficiency.
4. Domestic manufacturers are looking to tap into international generic market with high
margins such as in Africa, NA etc.
5. Bulk drug exports in FY20 as India restricted the exports of key modules in wake of supplies
disruption of APIs from China.
6. Covid-19 has exposed India’s dependence on China for API (70% of imports), government has
set aside 6450 cr. for setting up API farms to enhance the ability of country to self-sustain
itself in production of APIs. Procurement for raw material for production of generics will
witness a shift.
7. US President Donald Trump’s ‘buy American’ focus unlikely to impact in near term but needs
to be monitored in medium term if USA came up with restrictive trade practices. This creates
61
new growth opportunities in low generics penetrated nations. Both institutional and branded
generics can be focused in these countries.
8. Current year may witness less US FDA scrutiny likely this year because the inspections are
delayed this year.
The Indian pharma companies would look forward to the following to achieve its full potential:
1. Improve operational inefficiencies to reduce increasing costs and drive bottom-line
2. Strategic M&As to diversify portfolio and support top-line
3. Re-invent operating model to embrace specialty drug business model
4. Apply Advanced Analytics across Value Chain
5. Re-think organizational design for greater value
Thus, cost leadership, differentiation, M&A and focus on new markets are the strategies adopted
by the pharma companies in general.
The following are the forces which could impact the industry:
1. Evolving regulatory landscape
2. Tech-enabled healthcare and engagement with doctors
3. Increased patient involvement in healthcare choices
4. Rise of the role of pharmacy

Return on research capital ratio: Since R&D is one of the major cost for Pharma companies it
is very useful metric to analyse the returns of the company from its research expenses. The
return on Research Capital (RORC) is a basic measure to show gross profit realized by the
company for each dollar of R&D expenditure.
RORC = (Gross Profit of current year) ÷ (R&D expense of previous year)
Profitability ratios: Operating Margin & Net Margin
Liquidity and Debt coverage ratios: Pharma companies do make huge capital expenditures on
R&D which are often debt financed. Hence, they should maintain adequate liquidity and
manage debt well.
62
References
IBEF Industry Reports
ASSOCHAM Reports
NASSCOM Reports
CRISIL Industry Database
Marketline Advantage
Major Newspapers (Indian Express, The Hindu, etc)
IIMB Industry Reports 2019-20
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Summers 2020-21

Porter’s 5 Force Analysis

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Toyota-Maruti Joint venture

Key Performance Indicators

1. Average Production Downtime: It is calculated by taking the hours of downtime at a

Key Performance Indicators

Key Success Factors

Key growth drivers

Force Threat of Bargaining power Rivalry among Bargaining Threat of

Typical project cycle and different types of contracts

Inbound Operation Outbound Sales & Marketing Servicing

Key Performance Indicators

Key Success Factors

Risks for the industry

Porter’s Five Forces

Key Performance Indicators

Porter’s Five Forces

Sources of power (Share in installed capacity)

Thermal Renewable Hydro Nuclear

Growth drivers in Power Sector

India is expected to be one of the largest contributors to non-OECD petroleum consumption

Force Threat of Bargaining Rivalry among Bargaining Threat of

Sector Overview of Petrochemicals

Indian Petrochemical Outlook

Major Players in Indian Petrochemicals Market

Key growth drivers for chemicals

Top News in recent time

Value Chain for Petrochemicals

Forces Threat of Bargaining Bargaining Competitive Threat of Bargaining

Key Performance Indicators

Indicators Unit of Measurement Definition

Jet Airways Crisis

Mobile Fixed-Line Internet

Types of Banks in India can be divided as follows:

Recent News and Key Trends

Value Chain for Banks

Force Threat of Bargaining Rivalry Bargaining Threat of

Key Performance Indicators

Force Threat of Bargaining Bargaining Threat of New Competition

NBFC Deposit- NBFC Non- Housing Finance Insurance

Investment Infrastructure Micro-finance

Asset Finance Core Investmenty

Even as their importance in credit intermediation is growing, recent developments in the

The Key Segments in the Indian Pharmaceutical Industry are as follows:

Formulation exports Formulation exports Domestic

Key growth drivers for the demand of pharma products

The pharma value chain involves three major components, in general:

I. Manufacturing of the medicine: In order in produce a medicine, several steps are

Trends & Strategies

Key Performance Indicators

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