8/6/2019 Fortnightly Report 31-5-2011

1/4

THAKUR INSTITUTE OF MANAGEMENT STUDIES &

RESEARCH

Report on Summer Placement Project

(2010 2012 Batch)

Date:15/05/2011..

Name: Hemal Shah Course: PGDM.

Specialization: Finance Guide: Prof. N.

Krishnamurthy....

Name of the organization: Birla Sunlife Wealth

Management..

Reporting Manager : Mr Nikesh

Project Title: Sector

Analysis..

Status of the Project till 31/05/2011

Banking Sector:

In the current fiscal (FY11), the Indian Banking industry has had to deal with tight monetary policy and low

liquidity. This is despite the economy expected to grow at a healthy pace of 8.6% this fiscal. The central bank raised

interest rates 7 times, cumulatively increasing the repo rate (rate at which banks borrow from the RBI) by 1.75% andthe reverse repo rate (rate at which RBI borrows from banks) by 2.25%. However, with inflation still off RBI's target

7% for the end of FY11, further rate hikes are still expected.

Liquidity still remains a major concern, with the level of tightness currently beyond RBI's comfort level. The

widening gap between credit and deposit growth was one of the major reasons for the same. Credit growth in the

country has been rapid with non-food credit growing at 24.4% as per December 2010 data. This is against a

projection of 20%, showing a huge demand for funds in one the world's fastest growing economies. However,

deposit growth has lagged growing only by 16.5%, against a projection of 17%, leading to an unsustainable liquidity

situation.

Automobile Sector:

De-licensing in 1991 put the Indian automobile industry on a new growth trajectory, which attracted foreign auto

giants to set up their production facilities in the country to take advantage of various benefits it offers. Large middle

class population, growing earning power and strong technological capability have been boosting automobile demandfor past few years. Despite economic slowdown, the Indian automobile sector is expected to see high growth in

coming years, especially in passenger cars segment, said our new research report, "Indian Automobile Sector

Analysis.

The passenger vehicle market, which constitutes around 80% of automobile sales, has immense growth potential as

passenger car stock stood at around 11 per 1,000 people in 2008. Anticipating the future market potential, the

8/6/2019 Fortnightly Report 31-5-2011

2/4

production of passenger vehicle is forecasted to grow at a CAGR of around 11% from 2009-10 to 2012-13.

The recent launch of Tata Nano has brought about a new revolution in the countrys small car segment. Seeing the

good initial response from consumers, many other players in the industry are chalking out their plans to launch cars

in this segment in the next few years. Our research foresees a CAGR growth of around 12% in domestic volume

sales of passenger vehicles during the forecast period. Other segments, such as two-wheelers, multi-purpose vehicleand light commercial vehicle, are also expected to witness fast growth in coming years.

Natural Gas Sector:

Natural gas is fast gaining its appropriate place in Indias huge energy basket that incorporates both renewable and

non-renewable energy sources to meet soaring domestic energy demand. Due to the inherent environment friendly

nature, cost effectiveness, and greater efficiency, natural gas is proving its utility in energy as well as non-energy

sectors.

According to our new research report Indian Natural Gas Sector Analysis, India produced 47.5 Billion Cubic

Meter natural gas in FY 2010, which is still far less from the actual demand in athe country. This shortfall has forced

the government to opt for LNG imports at comparatively higher international prices. The Indian government hasfurther widened demand-supply gap by setting low prices, which exerts immense subsidy pressure on the domestic

oil & marketing companies. It is expected that the shortfall will further widen in FY 2011 with an expected demand

of around 265 MMSCMD and supply of just 197 MMSCMD.

Despite intense pressure on oil and marketing companies, we have found that Liquefied Petroleum Gas (LPG) and

Compressed Natural Gas (CNG) are positioning themselves as a future fuel option for both industrial and non-industrial sectors in the domestic market. The number of LPG customers is expected to grow at a CAGR of around

9% to touch the mark of around 150 Million by FY 2013 end. This will result in a sharp growth of LPG demand,

thus exerting more pressure on its domestic production and imports.

Further, our report reveals that India is witnessing an explosive growth in the usage of natural gas driven vehicles.

The country has the fifth largest fleet of natural gas vehicles (NGV) in the world and holds the highest NGV growth

potential with over 200 cities planned for CNG developments. Usage of CNG in vehicles is rapidly gainingrecognition as it is cost effective and pollution free green fuel. The number of CNG vehicles is expected to grow at a

CAGR of 22.7% during FY 2011FY 2013, on account of favorable government policies.

Besides, the report analyzes current industry developments such as, coal bed methane, city gas distribution,

underground coal gasification, etc. The report also identifies key players in the country and includes their detail

business description, strengths & weaknesses, and their recent activities.

FMCG Sector:

FY11 started off very well for the FMCG sector with companies showing solid growth and firm margins. However,

as the year progressed inflation played spoilsport. As input costs continued to climb, margins of FMCG companies

came under pressure. As a result of strong competition and the fear that high product prices would either triggerdown trading or demand destruction, FMCG companies took judicial price increases. While this resulted in strong

top line growth, margins of companies witnessed downward pressure. Sharp increase in advertisement expenses also

put pressure on margins of these companies.

Telecom Sector:

The Indian telecom industry has continued with its strong subscriber additions during the current year. At the end of

December 2010, the total subscriber base stood at nearly 747 m, of which wireless subscribers contributed to nearly

94%. During March 2010, this figure had stood at about 578 m. The key reason for such a growth in subscriber base

has been the affordability factor. With almost 15 operators competing for subscriber share, tariffs have been

declining. Therefore while companies have added subscribers to their base, the benefits of the same have not really

8/6/2019 Fortnightly Report 31-5-2011

3/4

reflected in their financial performances. Added to this has been the burden of the interest costs related to the huge

amounts of debt that most companies have taken on to fund the 3G spectrum fee. This has led most companies to

operate on very thin margins.

Retail Sector:

The Indian retail market, over the last decade, has shown greater acceptance for organised retailing formats.

Domestic retailing is emerging from a multitude of unorganised family-owned businesses to organised modern

retailing. Rapid urbanisation, changes in shopping pattern, demographic dividend and pro-active measures by the

Government are abetting the growth of the retail sector in India.

Sector Highlights: Indian retail sector accounts for 22% of the country's GDP and contributes to 8% of total

employment Hypermarkets, currently accounting for 14% of mall space are expected to witness high growthDemographic dividend with over 50% of country populace under 25 years of age is a prime driving factor for

modern retail sector The report has been prepared through extensive secondary research supported by detailed

analysis and focuses on market details, growth trends, major players, recent developments and key drivers. The

report also discusses modern retailing formats and mall space distribution.

This report can be used as an Information & Management Tool and is ideal for overseas investors to get the first feel

of the retail sector. Senior managers, apart from gaining insight into the retail sector, can also use this report for

making presentations to internal audiences, customers, collaborators and channel partners.

Steel Sector:

The Indian steel sector has witnessed a roller coaster ride of late wherein it has witnessed a significant spurt indemand due to expanding oil and gas sector, large infrastructure spending coupled with growth in housing,

consumer durables and auto sectors. India became the fourth largest producer of crude steel in the world in 2010 as

against the eighth position in 2003 and is expected to become the second largest producer of crude steel in the world

by 2015. As per World Steel Association (WSA), India was the fourth largest producer of crude steel during

JanuarySeptember 2010 producing produced 50.1 m tonnes (MT) crude steel during the period. Currently, with thegovernments increased emphasis on infrastructure, we believe the sector is poised for significant growth over the

medium to long term. As a matter of fact, Indias per capita steel consumption continues to be low at 46 kg as

against the global average of 198 kg. Thus, this further strengthens our belief that the potential ahead for India toraise its steel consumption is high. The domestic steel industry, which raised prices in wake of some stimulus

measures being withdrawn after the last budget, has warned of another price hike if stimulus is completely

withdrawn in Budget 2011-12.

8/6/2019 Fortnightly Report 31-5-2011

4/4

Signature of TPC:.

Date: 31/05/2011..