FMCG stocks on a roll as household binge during lockdown drives valuations

Source: ETRetail.com, Aug 06, 2020

New Delhi : Stocks of fast-moving consumer goods (FMCG) companies are on a roll since the lockdown in March as increased consumption at home and lesser disruption in demand compared to other sectors have boosted valuations.

The FMCG Index grew 32 per cent from March 23 till now. Among the consumer stocks, several have seen massive rallies during the period with Tata Consumer Products up by 98 per cent, Britannia up by 80 per cent, Godrej Consumer by 56 per cent, Marico by 52 per cent, Colgate by 32 per cent, Dabur by 27 per cent, ITC by 25 per cent and HUL up by 18 per cent, according to Religare Broking.

Ajit Mishra, VP-Research, Religare Broking, said that with the easing of the lockdown measures, resumption of factories and easing of the supply chain of essential products, the companies present in the essential commodity segment as well as in the health and hygiene segment clocked significant revenue as they kept on picking up pace with higher demand.

Products such as biscuits, bread, milk, tea, coffee, food packets, detergents, floor cleaner and hygiene products (sanitisers, hand wash, soaps etc.) were in high demand.

Mishra said that companies such as Britannia, Dabur and Tata Consumers reported strong performance as a large part of their portfolio is present in the essential products segment while that of HUL, Marico, Godrej Consumers, ITC and Colgate reported mixed numbers.

Further, most of these FMCG companies benefitted from benign material prices as well as lower advertisement spends which led to improvement in margins.

The Covid-induced lockdown also impacted FMCG companies’ sales and demand initially as they faced disruption in distribution due to restrictions in the supply chain as well as closure of factories.

Notably, demand for essential commodities started to increase while that of premium products and discretionary items were adversely impacted as strict lockdown was imposed which restricted their movement.

Further, local kirana shops gained more as compared to branded stores as they had varieties of products available and were also able to deliver products on time. Besides, impulsive buying, bulk and economical options and move towards e-commerce and digitalisation was the new trend among the urban consumers during the lockdown period as consumers were afraid of contracting the virus.

As a result, FMCG companies tied up with delivery agents and also launched their own e-commerce apps for reaching out to the customers.

FMCG companies are continuing to focus on their core brands, managing distribution and supply chain and efforts towards growing digitalisation and e-commerce sales. These steps would help them overall the recent challenges and are expected to post decent numbers in the coming quarter.

Foreign trade regulator rejig to cut imports, promote ‘Make in India’ and ‘Ease of Doing Business’

Source: Financial Express, Aug 05, 2020

The Directorate General of Foreign Trade will realign itself along the lines of Prime Minister’s Make in India and will push for production of items domestically to cut down imports. The organisation is “focusing on creating more capacities within the country to produce items that can cut down imports and accelerate exports from the electronics and hardware sector, including ventilators,” Director General Amit Yadav said at an event organized by Electronics and Computer Software Export Promotion Council (ESC) on Wednesday. He also said that the government-run agency is also taking suggestions from the industry and others as to the areas which promise new capacities to reduce import and accelerate exports.

Since the coronavirus pandemic has hit globally, the world as well as India is facing a shortage of ventilators. The agency under the Ministry of Commerce and Industry hence said that its focus will be on ramping up the production of ventilators and exporting them. Other items in electronics and hardware segments in the healthcare and pharmaceutical sectors are also on the government radar.

DGFT overhaul to increase ease of doing business

Stating that DGFT is in an overhaul mode, Amit Yadav said that the agency expects to finish the realigning work by the end of this year. Further, the work undertaken by the agency in the meantime will address changes required to ensure ease of doing business and removing trade barriers. “Our efforts are to promote ease of doing business and give exporters all possible help through application of technology,” Amit Yadav said. The agency has also said that there is a need to build an electronic component sector which will help in developing strong backward and forward linkages.

Meanwhile, the Department for Promotion of Industry and Internal Trade (DPIIT) has said that it will appoint an agency to scrutinise government tenders for compliance with procurement norms as the government pushes for Made in India products. The government had floated a Public Procurement (Preference to Make in India) Order, 2017 on 15 June, 2017, in order to promote the domestic production of goods and services and enhance income and employment in the country.

Domestic pharmaceutical industry to clock 4-6% growth in FY21: Icra

Source: Business Standard, Aug 05, 2020

Mumbai: Indian pharma industry is likely to clock 4-6 per cent growth during the current fiscal, according to credit rating agency Icra.

The domestic pharma industry has been posting slow growth numbers since March after the coronavirus (Covid-19) pandemic hit prescription generation. However, green shoots started becoming visible in June when the sector clocked a 2.4 per cent growth after a near-9 per cent fall in May and an 11 per cent slump in April.

Gaurav Jain, vice president and co-head, Icra, said, “The global demand scenario is largely expected to remain stable for Indian pharmaceutical industry owing to the inelastic nature of prescription drugs, though some impact on volume growth will be felt owing to the lockdown (lesser OPDs/elective surgeries) and lower economic growth.”

He said that the impact of lower demand will be felt more in less developed countries which are additionally impacted owing to low crude oil prices.

Overall, Icra expects the domestic pharma industry to grow at 4-6 per cent in FY21 owing to the coronavirus impact.

Icra, however, estimates that through FY20-FY23, CAGR is expected to be in the range of 8-11 per cent on the back of healthy demand from the domestic market, given the increasing spend on healthcare along with improving access.

The growth in FY21 is expected to be supported by a 1.88 per cent wholesale price index-linked price hike for the domestic price controlled (products that fall under the National List of Essential Medicines) portfolio.

The Indian pharmaceutical industry’s growth remained stable at 8 per cent during FY20. According to Icra research, manufacturing activity has gradually started in China with shipments or air cargo arriving in India for APIs, intermediates and KSMs (Key Starting Materials). This has led to a resumption of production by Indian players though the capacity utilisation across plants is yet to reach pre-Covid-19 levels.

Airtel ties up with Amazon to sell AWS solutions to companies in India

Source: Business Standard, Aug 05, 2020

New Delhi: Telecom service provider Bharti Airtel on Wednesday announced a multi-year, strategic collaboration agreement with Amazon Web Services (AWS) to deliver a “comprehensive set of innovative cloud solutions to large enterprise and small and medium enterprise (SME) customers in India”.

Airtel serves over 2,500 large enterprises and more than a million emerging businesses and companies with an integrated product portfolio, including Airtel Cloud, a multi-cloud product and solutions business.

Airtel Cloud will build an AWS Cloud Practice supported by AWS Professional Services, as well as develop differentiated Airtel Cloud products and capabilities leveraging AWS services, Airtel’s data centre capabilities, and Airtel’s network and telecoms offerings. Airtel customers will benefit from an integrated sales, consulting, and support approach from both companies, and improved security, scalability, and cloud management capabilities.

Additionally, Airtel leverages AWS services for development of its digital applications. Airtel is also a delivery partner for AWS Direct Connect, a cloud service solution that makes it easy to establish a dedicated network connection from a customer’s premises to AWS, providing customers with “increased bandwidth throughput, consistent network performance, and private connectivity”.

“I am delighted with the expansion of our relationship with Airtel. Indian companies are using the cloud to innovate, and in order to operate at an increased scale and speed. Many need partners like Airtel, with deep cloud expertise and an industry-focused approach to support them,” said Puneet Chandok, president, commercial business (India and South Asia), Amazon Internet Services.

Through multiple strategic alliances, Airtel Cloud already provides data centre services, managed services, and cloud services to top Indian and global enterprises, start-ups, SMEs, and governments.

Centre plans on tweaking drug policy that exempts foreign medicines from price control

Source: The Economic Times, Aug 06, 2020

NEW DELHI: The government plans to tweak a provision that allows new medicines developed by foreign companies to be exempt from price control for five years after criticism that it goes against the Make in India policy and discourages local drug manufacturers.

The Department of Pharmaceuticals and the National Pharmaceuticals Pricing Authority are in discussions about revisiting paragraph 32 of the Drugs (Price Control) Order of 2013, which lists out the exemptions, people aware of the matter told ET.

The government broadened the five-year exemption from price control for new foreign drugs patented in India through an amendment in January 2019. The amendment removed a requirement that the drugs should have been developed through indigenous R&D. This included orphan drugs used to treat rare medical conditions.

Senior officials in the Department of Pharmaceuticals said the move was aimed at giving Indian patients access to drugs that are available only abroad.

However, domestic drug makers and civil rights activists criticised the amendment and complained of high prices and unequal treatment. Experts said the move went against the government’s Make in India policy because it discourages Indian companies from developing and producing patented drugs. The government would also be helpless in an emergency, they said.

“The move will restrict the government from putting expensive drugs under price control, regardless of a public health emergency. Most likely, it would encourage foreign pharmaceutical companies to manufacture and commercialise their new patented drugs and medical devices in India,” said a pharma expert.
The National Pharmaceuticals Pricing Authority also faces the problem of companies launching products and excluding them from the price control regime without first applying for exemption.

“The companies have tried to utilise it and the government is fighting cases in the court with these companies. The government should scrap this amendment as it has only helped multinationals to launch their products at exorbitant prices by claiming that they are patented products,” another expert said.

India fourth in terms of start-up unicorn numbers

Source: Financial Express, Aug 05, 2020

When it comes to start-up unicorns, India is the fourth biggest behind the US, China and the UK, housing 21 of the global total of 586 in terms of valuation. The combined valuation of these 21 unicorns stand at $73.2 billion. An additional 40 unicorns have been founded by people of Indian origin which are mostly headquartered in Silicon Valley, US, according to the Hurun Global Unicorn Index, 2020. The value of the 40 which have Indian origin founders, but headquartered outside India, stands at $99.6 billion.

The US has 233 unicorns and is closely followed by China with 227 and both of them together account for 79% of the world’s unicorns. UK is third with 24 unicorns.

“The US and China continue to dominate with 80% of the world’s known unicorns, despite representing only 40% of the world’s GDP and a quarter of the world’s population. The rest of the world needs to wake up to providing an ecosystem that allows unicorns to flourish,” Hurun Report India MD and chief researcher Anas Rahman Junaid said.

Start-ups with over $1-billion valuation are called unicorns.

Interestingly, of the 21 Indian unicorns, Chinese investors like Alibaba, Tencent and DST Global have invested in 11 of them. Japanese investor Softbank has investments in 9 of them, while the USA’s Tiger Global has invested in 5.

The number of Indian unicorns is just a tenth of China’s 227, according to the Hurun list. Further, China has only 16 businesses started outside the country by its diaspora as against India’s 40.

A third of the 21 Indian unicorns, which include Paytm, Oyo Rooms, Byju’s, Ola Cabs, etc, are in the e-commerce sector and Bengaluru is the unicorn Capital of India being home to 8 such enterprises, the report said. The youngest Indian unicorn is the 2017-founded Ola Electric, followed by Udaan and Swiggy, it said, adding on average, it takes 7 years for a start-up to achieve unicorn status in India as against 5.5 years in China and 6.5 years in the US.

Valued at $16-billion, Noida-based Paytm is the highest valued unicorn in India, while Robinhood, co-founded by Baiju Bhatt, is the most valuable unicorn which is based outside India. Hangzhou-based Ant Group, spun out of Alibaba in 2014, is the world’s biggest unicorn with a valuation of $150 billion, on the back of its impending IPO in Shanghai and Hong Kong. At the second place is Beijing-based ByteDance, founded by Zhang Yiming in 2012, best known for its news aggregator platform Toutiao and short video platform TikTok. Taxi-hailing app Didi Chuxing, founded in 2012, is the world’s third largest unicorn with a valuation of $55 billion. Last year Didi started expanding outside of China. The Indian Institutes of Technology (IITs) have emerged as the lead source of unicorn founders, with 36 of the founders being from these institutes and IIT-Delhi being the most preferred one. From a gender perspective, the ratio is not favourable, with 104 Indian unicorn founders being male and only five of them being women, the report said.

July exports at nearly last year’s level; economy on path to revival: Goyal

Source: Business Standard, Aug 05, 2020

Showing signs of significant improvement, the country’s exports in July have reached almost the level of the corresponding month last year, Commerce and Industry Minister Piyush Goyal said on Tuesday.

He said several indicators are reflecting that the economic activities are reviving in the country.

“Our exports have almost reached last year’s July level, with nearly 90 per cent of our export of July 2019 having come back. And, in fact if we were to remove the oil related exports, where we are largely a small value adder… we are 95 per cent plus on the revival of our exports,” he said.

The minister added that the country “today is in a mood” to not only bring back economic activity but also become self-reliant, improve the quality and competitive pricing of products.

Officially the export numbers for the month of July would be released by the commerce ministry during mid-August.

India’s exports fell for the fourth straight month in June as shipments of key segments like petroleum and textiles declined but the country’s trade turned surplus for the first time in 18 years as imports dropped by a steeper 47.59 per cent.

Exports in value terms declined by 12.41 per cent to $21.91 billion in June on weak global demand due to Covid-19. After falling for a record 60.28 per cent in April, the rate of contraction of the country’s total merchandise shipments slowed down to 36.7 per cent in May and 12.441 per cent in June.

UPI transactions hit a new high of 149 crore in July with transaction value reaching Rs 2.91 lakh crore

Source: The Economic Times, Aug 03, 2020

New Delhi: The number of payments transacted on Unified Payments Interface (UPI) hit an all-time high of 149 crore (1.49 billion) in July this year, with the value of transactions reaching Rs 2.91 lakh crore, NPCI data showed.

The previous high was 134 crore (1.34 billion) transactions in the preceding month of June, while the value of transactions was Rs 2.61 lakh crore, as per the data from the National Payments Corporation of India (NPCI).

In July 2019, the number of UPI transactions stood at 82.23 crore, with cumulative value of Rs 1.46 lakh crore.

During the April-July period of 2020-21, the cumulative transactions on UPI reached 631 crore. The value transacted stood at Rs 6.31 lakh crore.

In fiscal year 2019-20, the number of UPI transactions was 1,252 crore (12.52 billion), while the value of payments was Rs 21.32 lakh crore.

NPCI was incorporated in 2008 as an umbrella organisation for operating retail payments and settlement systems in India.
It facilitates payments through a bouquet of retail payment products such as RuPay Card, Immediate Payment Service (IMPS), UPI, Bharat Interface for Money (BHIM), BHIM Aadhaar, National Electronic Toll Collection (NETC Fastag) and Bharat BillPay.

India steps on gas as coal use for power generation slows

Source: LiveMint.com, Aug 03, 2020

Indian power plants used the most gas in at least 3-1/2 years in the June quarter, as operators along the west coast snapped up cheap liquefied natural gas (LNG) imports that have become competitive against coal, government data showed.

Power producers say the trend is likely to continue until at least September, and perhaps beyond, providing a bright spot for LNG sellers as demand elsewhere falls due to a global economic slowdown sparked by the coronavirus pandemic.

Gas consumption by power plants rose 11.7% to 104.83 million standard cubic metres per day (mmscmd) in the three months to end-June from the same period last year, data from the Central Electricity Authority (CEA) showed.

Imports accounted for 37.4% of overall gas consumption by power plants, up from 35% a year ago.

Lower spot prices are making natural gas “lucrative” for power plants, according to India’s largest gas importer Petronet LNG Ltd, which recently cancelled a tender to buy long-term LNG.

“I do believe there is some coal switching taking place and imported coal-based power plants may not be competitive vis a vis spot LNG (consuming power plants),” Vivek Mittal, general manager for marketing at Petronet, said on a recent conference call.

India’s imports of spot gas more than doubled in the June quarter from a year ago to the highest in at least 14 quarters, while purchases under long-term contracts slumped by over a third to the lowest in the same period, a Reuters analysis of the available data showed.

Coal sales plunge

The increased use of gas comes as India’s overall electricity demand is expected to fall this year for the first time in decades, with a likely fall in national coal-fired generation.

Sales at state-run Coal India, which sells most of its output to power companies, fell to the lowest level in nearly four years in the second quarter. Weaker sales could continue through end-September due to the annual monsoon, when coal demand and output typically falls and transportation is difficult.

Imports of coal by power plants also fell to the lowest level during the June quarter in at least seven years.

Still, coal remains India’s dominant fuel for power production. More than half of India’s gas-fired plants are also shut because they are not economically viable, which power producers attribute to high taxes and transportation costs.

Gas consumption increased mainly due to higher consumption by companies on India’s west coast, particularly the state of Gujarat, home to some of the country’s biggest LNG import plants.

The state, which is close to producer countries such as Qatar, also has a better gas transportation network, and is relatively far from coal mines, making gas-fired power production relatively cheaper, power producers say.

Gujarat-based private firms such as Torrent Power and utilities run by the state government accounted for nearly all LNG imports by power companies, according to the CEA.

“We expect global LNG prices to be at current levels for the next two years due to low global demand and gas consumption by power plants in Gujarat to increase,” an executive from a large Indian power producer said. “But only plants on the west coast will be able to make use of the price competitiveness with coal.”

July manufacturing PMI falls to 46; overall activity shrinks for 4th month

Source: Business Standard, Aug 04, 2020

New Delhi: India’s manufacturing activity hit a speed bump in July after being on the slow road to improvement in the previous two months as regional lockdowns severely held back demand, leading to contraction in output.

According to the monthly IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) survey released on Monday, manufacturing PMI stood at 46 in July, down from 47.2 in June.

In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction. PMI had fallen to a historic low of 27.4 in April, but had been steadily climbing since.

“The survey results showed a re-acceleration of declines in the key indices of output and new orders, undermining the trend towards stabilisation seen over the past two months,” said Eliot Kerr, economist at IHS Markit.

“Anecdotal evidence indicated that firms were struggling to obtain work, with some of their clients remaining in lockdown, suggesting that we won’t see a pick-up in activity until infection rates are quelled and restrictions can be further removed.”

Kerr warned that any more spikes in cases may bring further lockdowns which would derail a recovery in the sector.

A nationwide lockdown in April, coupled with a crash in export orders, had led to conditions across sectors falling by the biggest margin ever and new businesses collapsing at a record pace. Since then, jobs have been hit the most and employment numbers saw a further slide in July.

The PMI survey showed manufacturers cut jobs yet again in July, while new orders fell for the fourth straight month. Industry bodies said with a dearth of labour and raw material, supply chains could not be established.

Similar to the trend for output, the pace of decline in new orders accelerated from June, but remained slower than at the height of the current crisis. When explaining falling sales, companies often cited prolonged closures at their clients’ businesses, the survey said.

The situation was made worse by plunging demand from international markets, which further deteriorated sales trends. India’s biggest overseas markets for merchandise shipments such as the US, Gulf nations, and the European Union have been hit hard by the ongoing pandemic.

Survey participants said international clients were hesitant to place orders while the duration of the pandemic remained uncertain. That said, the latest reduction in exports was the softest in four months.

The PMI survey, however, showed that manufacturers remained optimistic towards the one-year business outlook, with sentiment strengthening for the second month to a five-month high. As a result of reduced output, firms continued to cut their purchasing activity, with the result extending the current run of contraction to fifth months. The latest decline in input buying was faster than in June, said IHS Markit.

On the cost front, input prices faced by Indian manufacturers continued to fall. However, the rate of decrease moderated from June, but remained far softer than April’s survey record. Panellists said subdued demand for most goods more than offset the inflationary effects of shortages in some raw materials. Experts say the aftershocks of the lockdown continued to weigh on domestic industry, even as an uneven recovery started taking shape.