German Government to sponsor training program for Indian SMEs

The German ministry of Economic Cooperation will sponsor training program to five MSME associations in the country to help them improve efficiency and their business expertise.

The German ministry has chosen five different associations from different states for this program. The associations from Madhya Pradesh, Punjab, Haryana, Gujarat and Indian Industries Association. The German government through two of organizations- the German Confederation of Skilled Crafts (ZDH), the apex body of the German Skilled Crafts-SEQUA will impart training to the Indian associations. The program is design to improve management expertise, to bring in more professionalism and help companies in improving their access to finance and other services.

The Indian association which are going to part of this program are Federation of Madhya Pradesh chamber of commerce and industry, Indian Industries Association IIA, Mohali Industries Association in Punjab, Gujarat chamber of Commerce and Industry and Faridabad Small Industries Association in Haryana.

MSMEs Big Potential of Pushing IT Spending: NASSCOM Study

Nasscom has come out wiht a study pointing towards huge gap in IT adoption Micro, Small and Medium Enterpises (MSMEs). It has has also pointed the huge untapped potential. According to Nasscom the IT penetration in manufacturing sector is abysmal and SME companies hardly make any major investment in IT.

The IT adoption amongst SME & MSMEs is very high in financial and accounting domain but lag behind in areas of CRM, procurement, production planning and supply chain management. SME companies hardly invest in automation and IT solution for enhancing production efficiency. The study found that though rate of IT adoption was at 75% in finance & accounting amongst companies but it just 18% in manufacturing process and even lower rate of 16% in ERP solutions.

Such low adoption of new technology imperil the chances of gaining competitiveness not just domestically but also in global markets as a lot of these SMEs compete in export markets. According to the study Indian SMEs & MSMEs spent meagre 1% of their total revenue on IT adoption, which was way below the global average of 4.5%. Lack of IT spending is crucial challenge for government which wants to improve both efficiency and competitiveness of Indian manufacturing and make India leader.

The Nasscom study also highlighted both demand side and supply side issues resulting in poor IT adoption amongst SMEs. While lack of internal IT expertise, affordable solutions, complexity of adoption, and lack of service providers was the issue with demand side, the supply side constrains were lack of last mile connectivity, support costs & qualified systems integrators.

India’s Growth Fails to Enthuse Deal Activity

M&A activity has failed to ignite this year in India and has performed miserably compared to last year. Despite all the hoopla about India being second fasted growing economy in the world, the M&A activity this year hasn’t even been 50% compared to last year. Considering the fact that 2008 was written off financially, performance should have been better this year, a decline is certainly surprising. Last year, for first three quarters $30bn was spend on M&A activity in India and in comparison this year during first three quarters the figures were meager $13bn. The average deal value also fell by half to $33mn from $67mn last year.

Foreign acquires only accounted for just $3.9bn of all such deals this year, which is only 30% of the total deal value. Again this is lower than last year’s share of foreign acquirers in total deal value, which stood at $15.7bn, five times the present value. Last year, Asian countries had dominated the list of biggest acquirers, four out of ten. This year the figure fell to three out of ten.

Mauritius did the biggest turnaround from being at bottom of top ten foreign acquirers to number one this year with $1.2bn acquisition followed by France, which accounted for a quarter of all outside deals. The United States came third with $379mn worth of acquisitions of Indian companies. Japan which was the biggest foreign acquirer last year slid five places to sixth position this year.

This year, Infrastructure sector was the common target sector for both Indian and foreign acquirers, telecommunication and Electric, Gas & Water sector were in top five target sector for both domestic and foreign acquirers. Pharma sector, which was the biggest target sector for both foreign and domestic acquirers, retained its position but only for foreign acquirers, who invested $1bn this year. Indian acquirers made most of the acquisitions in Oil & Gas sector.

Retail food chain was the pick of foreign acquirers it hardly featured on the acquisition radar of domestic acquirers, but foreign acquirers made investment of $100mn. Similarly, domestic acquirers made acquisition worth $677mn in Business Services sector which was almost disregarded by foreign acquirers.

Awaiting the Great Nano Flood of 2010

Potential consumer segments and its conversion to Nano market

Last year Bihar faced flood that it hadn’t seen for fifty years and no one had any clue as what measure would be required to curtail it. yesterday Tata motors launched it people car- nano, which will be available to public by mid this year. Government, public & private institutions seem to be unaware and under-prepared for the NANO flood, which will grip the nation 2010 onwards.

Though nano potential market in India has been sized by many investment firms, but as the product itself is evolutionary, so will evolve its customers. In a country where public transportation has been never been emphasized on the potential is enormous. India young population is filled with such potential, we at the potential buyers which will come into being once Nano hits the market.

Nano is most likely to emerge as second car of choice for the family, where even housewives would demand, from grocery shopping to mall shopping, Nano is going to emerge as the transporting alternative for shopping escapades of upper-class Indian housewives and middle-class families which have long been waiting for second cheap alternative.
A large number of collage going crowd which till now ply on two-wheeler ranging from Rs 50,000 to 1Lac. Soon, a large number of them would be turning towards Nano, this conversion would further flood not only the road but already cramped educational institutions, which may have to invest in parking lots than on labs.

Semi-urban areas are another two-wheeler bastion, which will get dismantled by introduction of Nano car. More are more people are likely to dump three-wheeler autos and expensive SUVs for tata nano, which for some-time will have smooth run in the narrow lanes of small cities. But,

Personal Computers Manufacturers Facing Tough Market Scenario

Personal Computer market in India is facing tough times as the Q3 FY09 sales have dropped by 19% and market is expected to remain muted with no growth for overall FY09.

Personal computer sales for the period Oct-Dec 2008 stood at 1.4mn units down from the 1.7mn units a year ago. Amongst the personal computers desktops witnessed decline of 15% while sales of notebooks declined by 30%. Desktops constitute 70% of the total personal computer market and remaining is held by notebooks. Branded desktops player constitute over 60% of 5.1mn unit desktop computer market in India.

Consumption of personal computers in Oct-Dec quarter was largely led by sectors such as Telecom, Banking, education and e-governance requirement of central and state governments. But, declining demand was witnessed from sectors such as Retail, IT and SME sectors.

As large percentage of hardware component is imported, rising rupee has deteriorated the margins of personal computer manufacturers. MNC biggies such as HP and Lenovo together with Indian major HCL constitute almost half of the desktop market in India, and are facing pricing issues.

Personal computer manufacturers are expected to face rough ride ahead as economic downturn has already affected the individual demand for personal computers, corporates on the other hand are trimming not only expenditure on IT hardware but due to low capex spending in the near future they have restrained the demand for personal computers.

FICCI demands additional stimulus, fiscal package, criticizes US move for duty cuts

The Federation of Indian Chambers of Commerce and Industry (FICCI) asked the central government for more fiscal measures to tackle the current economic downturn, along with demanding more rate cuts from the Reserve Bank of India (RBI) to ease liquidity crisis and reduce cost of borrowing. The fiscal relief asked include, cutting the Cash Reserve Ratio (CRR) further to 4.5%, Repo Rate to 5%, Reverse Repo Rate to 4% and Statutory Liquidity Ratio (SLR) to 22% along with the all important reduction in bank interest rate by 100 bps.

Growth stimulus is now very important according to the industry body, especially with the slow down happening in the domestic economy, and inflation worries subsiding. The industry body has also asked for further rate cuts in home loans, re-imposition of countervailing duty and higher import levies.

For the housing sector the association has sought to raise the upper limit of loans to Rs 50 lakh in the existing Rs 5-20 lakh slab lower rates of interest of 9.25%, besides cutting the rates to 6-7% from 8.5% for home loans below Rs 5 lakh.
For the domestic steel industry, the association has asked for restoration of countervailing duty on imported steel items along with raising import duty to 15 % from the existing 5% to "prevent dumping" of cheaper products in India.

For the textile sector, the chamber asked for deferment of 8th quarterly installments of principal amounts on loans taken by the industry, besides asking for restoration of drawback rates that prevailed before reduction in September 2008.

Earlier this week, FICCI had sharply criticized the US’s move to seek zero duty commitments on sectors such as chemicals from India and other developing countries. The association further said that US-based National Association of Manufacturers (NAM), which has been consistently pressing for sectorals, has recently stated that WTO Ministerial Meeting must await consensus on sectoral agreements.

Sectoral talks relate to complete slashing of import duties in 14 identified industrial sectors. These cuts are additional to the proposed formula-based import duty cuts that every country will have to undertake, if the Doha deal is inked. Indian industry is wary of pressure by the US to make sectoral talks mandatory, as it could mean slashing of import duty on key sectors, including chemicals, industrial machinery as well as electrical and electronic goods. This would mean that cheap goods from abroad could flood the domestic market, causing problem to the Indian industry.

Domestic India automobile sales plummet, Exports provide some relief

India’s automobile sales plummeted in November, seeing one of the biggest falls, even as exports spiked by 62% during the month. According to the latest figures released by the Society of Indian Automobile Manufacturers (SIAM), tighter lending by banks and slowing economy have led to auto sales plunging by 18% in the domestic market in the month of November as against the figures in the same month last year.

Category wise, commercial vehicle sales almost halved (50%) in November to 20,637 units from 40,879 units in the same month last year, while passenger car sales dropped comparatively less (20%) to 83,059 units from 1,03,031 units in the same month last year. Demand for passenger cars in India has fell in four of the past five months.
In the two-wheeler segment, two-wheeler sales fell 15% to 5,67,502 units from 6,65,181 units in the same period last year while motorcycle sales fell 20% to 4,31,171 units as against 5,40,553 units in the corresponding month a year ago.

Exports have however been the saving grace this month, total vehicles exports rising by 62% to 146,337 units in November against 90,398 units in the same month last year, led by passenger vehicles, motorcycles, scooters and three-wheelers. Break up among the export figures show that, passenger car exports rose almost twice at 34,607 units compared with 15,464 units in the year-ago period. Two-wheeler exports jumped 52% in November to 89,245 units compared with 59,041 units in the year-ago period. And motorcycle exports rose a similar 51% to 85,549 units from 56,739 units in the corresponding month 2007.

However experts feel that this is not the right period to gauge the automobile sector’s performance. The picture would be clear only by February- March, as by then some impact of the excise duty cut would have been felt and if financing situation improves, sales could pick up.

The fall in sales in India came as a blow to carmakers who were hoping that emerging markets like India, China, Russia and South America would make up for falling demand in developed markets.

Sales have plunged hugely this year across developed markets like the United States, Japan and Europe, as well as emerging economies like China and Russia, forcing automakers to revisit their plans for developing markets.

What’s Wrong with Tata’s Global Footprint Strategy

Tata aggressive stance of acquiring companies globally and developing global presence has gone wrong. Tatas are now painfully recognizing the fact that they in for more trouble for their overleveraged acquisitions of giant steel and niche automotive player. Tata’s Jaguar & LandRover (JLR) unit has already asked for the £1 Bn of loan from the government, there were also news of Tatas picking up money from the market at higher interest rates to keep its JLR unit afloat. Tata Corus is already on cost cutting spree and has asked Dutch government for its staff realization program.

So, what went wrong with Tata’s strategy of developing Global presence and become a world player in almost every spree of its business?

Tata’s core strategy was evading regional and nation business cycles, to implement this strategy Tatas needed to generate revenue from world over and setup manufacturing units to ratonalise the cost. Tatas made assumption that if business cycle in a country/region goes through trough then its companies can survive on demand and revenue from other regions. Tata never thought what would happen if different regions go into recession simultaneously. The thought of global recession never concurred to Tatas as “decoupling theory” was very popular at that point of time.

The other major mistake that Tatas did was it has been unable to accrue production cost benefit from its takeover. It invested in highly niche automotive companies like JLR, which can’t be produced world over thus production cost are difficult to rationalise. The other acquisition, Corus, runs on thin margin and high costs; Corus hasn’t been able to cut costs yet, though it may be able to do it successfully in future but it is taking toll of Tatas.

Textile, Jewellery & Auto-components- Unemployment rises amongst India’s Forex Earners

The global economic slowdown has impacted different sectors with varied degree of severity. Textiles and Gems & Jewellery sector, which are one of the biggest contributor’s of India’s exports earnings, are in shambles. Both the sectors are tied with discretionary consumption of global clientele for their produce thus heavily dependent on global market. With discretionary consumption taking nose dive with economic uncertainty all over the world, consumptions of products likes jewellery and garments have fallen dramatically.

This has direct impact on the economic viability of business units related to these two sectors. As a large number of units in these sectors are small and medium size units and most of the workforce belong to unorganised sector. As the new orders have dried out, a large number of these SME units have shut shops leaving workers in lurch. Around 50,000 works have lost jobs in gems & jewellery industry, which expects job losses to go further. Textile industry also expects to cut 5 lakh employees in next five months. Adding to the woe is auto components industry, which in last few years had become darling of global automotive giants, as automobile industry faces question of declining demand the small components manufactures are already showing door to the contact labourers.

Automotive goes out of gear with drastic sales decline

Until recently, India's market had been racing ahead, posting double-digit growth, spurred by a fast-growing economy that had created a new, affluent group, Butt high borrowing costs and new tough loan conditions as a result of the global credit crunch has hit the economy growth, with the latest sector to face the brunt is the auto industry.

India's domestic car sales fell by 6.6% in October, the fastest drop in more than three years, as consumer loans dried up amid a global credit crunch, even as a festive season failed to revive the auto industry. according to the Society of Indian Automobile Manufacturers (SIAM). Cumulative vehicle sales growth for the seven months to October stood at 5.64% from 10.07% growth in the April-September period. Earlier this year, SIAM had forecast overall vehicle sales growth of 12-15% for the financial year to March 2009.

Close introspection of the figures released show that, car sales in the domestic market plunged in October with a 6.59% fall to 98,900 cars against 1.05 lakh in the same month last year. Motorcycles sales were down 18.17% to 5.38 lakh against 6.57 lakh last year. Similarly, trucks and buses sales fell 50% to 11,786 vehicles from 23,352 during the same period. Scooters and passenger three-wheelers were the only two segments that posted positive growth of 4.4% and 16%, respectively. Exports also grew 41.16% to 1.44 lakh in October against 1.02 lakh the same month last year.

SIAM will review its sales forecast for the year ending March 31 after the November figures are announced next month. SIAM has already cut its full-year growth forecast to between 8-10% from an earlier estimate of 12-13%.

Automotive Industry in India - India's automotive industry, produces 1.5 mn vehicles annually, and is worth $34 bn a year, contributing 5% of the country's GDP.

Nokia to Manufacture Telecommunications Equipment in Chennai

Nokia Siemens Network is also heading for Chennai to manufacture and distribute mobile communication infrastructure equipment. Earlier, another Telecom giant Motorola had chosen Chennai to set up it manufacturing base for mobile phones in India. The present investment by Nokia is not for mobile phones, but for the base station equipment.

Nokia would be investing USD 70mn in its Chennai facility to manufacture Base Station Controllers, Flexi EDGE BTS, Microwave Radio, Access line-card products and other telecom equipment. The company is also planning to increase the production of units to 4,000 per month in span of next six to nine months.

India is increasingly attracted electronics and telecommunications equipment manufacturers for several reasons including engineering design capabilities and also to cater the growing telecommunications market more efficiently.

Domestic automobile sales grows marginally in September

Half yearly (Apr-Sep) Sales also rise

Domestic vehicle sales show marginal increase in sales in both September as well as half year ended September. The pre-festival season sales for the automobile industry showed that most segments recording a marginal increase due to increased marketing initiatives, coupled with inventory push. As per the figures released by the Society of Indian Automobile Manufacturers (SIAM), domestic passenger car sales in the country increased by 2.8% to 108,823 units during September 2008, as compared to 1,05,822 units in the year-ago month, while motorcycle sales rose by 15.2% to 632,369 units, as against 548,816 units in the corresponding month a year ago. Total two-wheeler sales in September also soared by 14.5% at 7,78,424 units, compared with 6,79,766 units in the same month last year. Commercial vehicle sales, however, decreased marginally in last month to 42,698 units from 43,091 units in the year-ago period.

A company wise breakup of the sales figures show that companies such as Hyundai, Mahindra & Mahindra (M&M) and Hero Honda posted impressive growth in wholesale dispatches to dealers as they tried to push inventory for the Diwali and Navaratri festivals. Boosted by a healthy demand for its i10 model, Hyundai Motor India (HMIL) reported 23% growth for September, selling 22,311 units in the domestic market. M&M also reported an upswing in sales, registering 31% growth by selling more than 16,000 units of Scorpio, Bolero and other models. Demand for Logan, a product jointly manufactured by M&M and Renault, however, faltered as sales slipped by nearly 20% compared with those in the same period last year. Skoda Auto sold 1,213 units, recording growth of 34% against sales of 900 units in September 2007. Sales were generally helped by the Fabia hatchback. Maruti-Suzuki, the country’s biggest car-maker, however posted dismal growth of 2.5% for the month, selling 64,682 units in the domestic market.

Among companies with decline in sales, Tata Motors, posted a decline of almost 9% in domestic sales as a ramp-up in production of its new Indica Vista marred growth. The company sold 16,586 units of passenger vehicles during the month as against 18,216 units in the same period last year. General Motors posted a decline of 10% for the month under review, selling 5,154 units as against 5,751 units in the year-ago period. Honda Siel Cars India also saw a 45% drop in sales at 3,104 units compared with 5,674 units, mainly owing to a halt in production of the outgoing City model, which was replaced by a new model that was launched in the last week of September.

In the two-wheeler segment, market leader Hero Honda extended its lead over rival Bajaj Auto, recording a 22% rise in sales at 3.85 lakh units compared with 3.14 lakh units in the corresponding month last year. Second placed Bajaj Auto sold 2.18 lakh units, reported 6% growth. Meanwhile, TVS Motors, reported rise of 16% in the domestic market, selling 1.19 lakh units last month as against 1.02 lakh units in the same month last year.

For the half year to September, domestic passenger vehicles sales remained marginally high; car sales in April-September recorded a 5.39% increase at over six lakhs units despite the increase in interest rates on auto loans and commodity prices which kept many consumers away from buying vehicles. The sales of commercial vehicles during April-September remained challenging as medium and heavy commercial vehicle declined marginally 1.57% at 1.15 lakh units. As banks remained cautious in lending and credit became difficult to obtain, the demand of heavy commercial vehicles reduced. In contrast, light commercial vehicles recorded a robust 10% growth at 1.06 lakh units. Taking advantage of last year’s low volume base, two wheeler sales remained on a healthy track. Scooters sales grew 7.24% at 5.6 lakh units, motorcycles were up 12% at 30.63 lakh units, Mopeds grew by 6.05% and electric two-wheelers segment grew by 56.14%. Half yearly data ended September also showed production growth of 12.70% over similar period last year, which is higher than last year's growth in this period.

Indian Pharma Companies prescribe Contract Manufacturing for Growth

India’s contract manufacturing market is set to explode with a 41% growth in next three years to clock USD 2.6 bn by 2010 as per a study conducted by KPMG. This year India’s contract manufacturing industry is expected to reach turnover of USD 1.2 bn, up from USD 869 mn.

The report mentions the manufacturing activities in which Indian companies involved for contract manufacturing. It includes simple vaccines, solid & liquid dosage forms, active pharmaceutical ingredients and intermediates. Foreign acquisitions have helped Indian pharma companies in gaining global prominence and getting contract manufacturing deals.

Worldwide Contract manufacturing industry is expected to reach USD 50bn in 2009 and contract manufacturing of OTC and nutritionals is also expected to reach USD 110bn. The biggest players in this contract manufacturing market are expected to be India and China. India so far has been largely targeting US pharma companies for exploring contract manufacturing but regulatory changes in Europe would make it easier for the Indian companies to bag such contracts

Tata & Ambanis: Ethics Vs Acumen

In span of few months we have seen that one industry house has failed in its dealing with the government while other has succeeded in its endeavor to gain business. While, Tatas are sulking at the failure to break the political deadlock over its ambitious small car project; Ambanis have successfully negotiated with their political adversaries and twisted proposals for windfall tax.

Irony exists between the two industrial houses (well its three now but thinking more or less unites Ambanis). One of the oldest business houses, Tata, believe in more old fashioned way of creating wealth, setting up private ventures with financial institutions. But, they are quite modern about business ethics and governance. Ambanis, on the other hand are more flamboyant with creating wealth for themselves and public through public investment. Though, the same public (and even government) doesn’t have a hint about the company structure and shareholding pattern.

Both Ambanis and Tata pursue policy matters but Ambanis do it more aggressively, they manage to get politicians on every committee to lobby for them. The Ambanis have been maneuvering policies for their good; if something would adversely impact their business they never hesitate to reach out to the top. Tatas on the other hand wait for the policy announcement to come out. Tatas had to scuttle their aviation project with Singapore Airlines due to policy hurdle but Ambanis never had to. One Ambani kept windfall tax at bay; the other prevented scrapping of dadri power project and got into Pension Fund management, where it was not even shortlisted.

But, Ambanis had to pack up their retail biz in many states. Tatas to had trouble with land acquisition in past but not as much as it is in Singur. Also, Tatas seem to have been unable to use their experience in dealing with states that have had inconsistent economic policy (i.e.Bihar, Chattisgarh) with respect to Bengal. They really believed that communist would replicate china’s model without any trouble. Ambanis have been cleverer in continuously amending their offer for land acquisition in case of MahSEZ in new Mumbai. One thing that is visible is none of the Indian industrial houses have learned lesson to tackle is public unrest over industrial projects.

IIP Down but Employment still to Grow?

The latest industrial production data painted a gloomy picture on the growth of industrial production as IIP for the Q1 2008-09 fell to 5.2% (y-o-y). almost everyone is predicting contraction of industrial activity and slowdown in economic growth. However, the recent KPMG survey on business outlook shows as different picture. The survey showed that the manufacturers were expecting business activity, capacity utilisation and employment to rise. In fact, India was shown as the country with second biggest expectation of employment generation, much above China but below Brazil.

In India, around 50% enterprises were optimistic about adding new workforce to expand their business presence. This survey is in sharp contrast with the just released IIP figures, which were less optimistic and hinted in slowdown of industrial activity in future.

India ranks poorly in the top 50 of UNIDO’s global Industrial Competitiveness; Automobiles and Textile industry make it to the top

India has been ranked 41st in the latest industrial competitiveness report prepared by United Nations Industrial Development Organisation (UNIDO). The ranking is based on the competitive industrial performance of countries. It is based on two sets of components viz., industrial development indicators and the competitive industrial performance index. It benchmarks a country in the backdrop of liberalization and globalisation. The scorecard suggests about competitive performance of a country, which is measured in terms of manufacturing value added per capita and manufacturing exports per capita.

The scorecard also takes note of industrialization, which suggests share of manufacturing value added in GDP and of medium and high technology in manufacturing.
UNIDO, in an accompanying statement said, that the scorecard brings out a persistent pattern of performance over the years among regional groupings of countries, with industrialized countries leading the rankings and transition economies tightly grouped in the middle ranks.

Singapore topped the ranking followed by Ireland, Switzerland, Japan, Belgium, Sweden, Finalnd, Germany, Republic of Korea, Taiwan, France, USA, Hong Kong SAR, Austria and Slovenia in the top 15. India although ranked 41st fared better than its neighbours with Pakistan ranking at 55, Bangladesh at 67 and Sri Lanka occupying the 75th position.

However, India made it to the top 15 automakers of the world, and among the top five in the leading developing countries category of a separate UNIDO report on motor vehicle manufacturers, thanks to a growing auto industry. According to the report, India ranked 12th in the list of world's top 15 automakers, which is led by Japan followed by the US and Germany. In the leading developing countries category, India ranked fourth. The list is topped by Mexico, followed by Korea, Iran. Brazil held the fifth position.

Also, Indian textile industry came fifth amongst top 15 textile producing countries in the world and India also made it to the list of world's top 15 producers of chemicals, electrical machinery, basic metals (iron and steel, non-ferrous metals) and other products.