india: new opportunities abound
TRANSCRIPT
INDIA
NEW OPPORTUNITIES ABOUND
June 2016
CONTENTS OF THIS DOCUMENT
è Executive briefing
è India by the numbers
è The reform agenda
è A market in transition
è Opportunities and challenges
è About MXV Consulting
MXV Consulting 2
Executive Brief
INDIA PROVIDES A LARGE OPPORTUNITY FOR MANY COMPANIES
MXV Consulting 3
India is the fastest growing large economy
India’s demographic dividend, increasing urbanization and wealth will continue to fuel economic growth for the next two decades
Governmental reforms are attracting investors and Foreign Direct Investment (FDI) to India
Acceptance of global brands, an increased share of organized retail and e-commerce is changing the market structure
Besides an R&D and outsourcing hub, India is also positioned to become a major manufacturing and export hub
Global models rarely work in totality. Companies will have to overcome unique challenges and complexities posed by the Indian market to become successful
THE INDIA GROWTH STORY –INDIA IS RISING UP THE LADDER IN GDP RANKINGS
MXV Consulting
477
834
1,708
2,199
3,131
2000 2005 2010 2015f 2020f
4
Source: World Bank, Ministry of Statistics and Programme Implementation; MXV Analysis
Real GDP ($bn)
Rank 9
Rank 9
Rank 13
Rank 13
Rank 5
Despite infrastructure bottlenecks and challenges, the country has been able to grow faster than most other economies. The real GDP growth has been steady despite depreciation of Rupee by more than
35% over 2011-15. As per the latest data released (May 2016), India grew at 7.6% in 2015-16.
7.3%CAGR
INDIA MAY BE AMONG THE TOP 5 GLOBAL ECONOMIES BY 2020
MXV Consulting 5
Source: World Bank; MXV Analysis
0
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6
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$tn
Real GDP (2014)
2005
20102015
2020f
From 2015 to 2020, India’sGDP is forecasted to growthe fastest globally at7.3%
7.3%
CAGR
INDIA IS THE 3RD LARGEST ECONOMY IN GDP BY PPP
MXV Consulting 6
0
2
4
6
8
10
12
14
16
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US
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$tn
GDP in PPP (2014)
PPP or PurchasingPower Parity is thenumber of units of a
country's currencyrequired to buy the
same basket of goodsand services in thedomestic market as
U.S. dollar would buyin the United States. It
gives a measure of thepurchasing power ofthe consumers in that
country.
Source: World Bank
INDIA IS STILL A YOUNG COUNTRYAllowing The Country To Benefit From A Long-term Demographic Dividend
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Source: Census 2011, NSS Survey 2011-12, World Bank
Median Age – The median age of the Indian population is 27 years. America and Japan had the samemedian age in 1970 and 1965 respectively
Demographic Dividend – India’s working population was 474mn in 2012 and is projected to rise to537mn by 2020
Literacy Rate – Literacy rate in India was 74% in 2011 and should reach over 80% by 2020. India alsohas a large skilled workforce with 2.5 million people graduating from college every year
0% 2% 4% 6%0%2%4%6%
India 2015
0-4
5-9
10-14
15-19
20-24
25-29
30-44
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
85+
80-84
75-79
Working population
27 YearsMedian age
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0% 2% 4% 6%0%2%4%6%
US 2015
0-4
5-9
10-14
15-19
20-2425-29
30-44
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
85-90
80-84
75-79
Working population 37 Years
Median age
90-95
95-100
0% 2% 4% 6%0%2%4%6%
0-4
5-9
10-14
15-19
20-24
25-29
30-44
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
85-90
80-84
75-79
Working population 46 Years
Median age
90-95
95-100
Japan 2015
IN CONTRAST, THE US AND JAPAN HAVE SKEWED DEMOGRAPHICS
Population inboth US andJapan is ageing.
Japan has anacute problem
where thedependentpopulation is
increasing atvery a fast pace.
Source: US Census, IPSS Japan
RAPID URBANIZATION IS CREATING NEW CENTRES OF GROWTH
MXV Consulting 9Source: India Census 2011
29% 31% 36%
2000 2010 2020f
Urbanization in India
Increase in standard of living – Urbanization is leading to increase in consumption. Yearly percapita expenditure for the urban top decile has increased from $550 in 2004 to $1,400 in 2011.
Million plus metropolitan areas
8
34
45
58
105
Japan
EU
US
India
ChinaUrbanization
Centres of growth – 377mn people live in the 8,000 urban centres in India. These urban centres willact as new centres of growth
RISING HOUSEHOLD INCOME AND WEALTH ARE INCREASING DISCRETIONARY SPENDING BY CONSUMERS
MXV Consulting 10
*Basic spend includes food, clothing, gross rent while rest of the spend by a consumer is included in the discretionary spendSource: Income Tax Data, Global Wealth Report Credit Suisse, CSO, MXV Analysis
6,05815,401
43,583
2000 2010 2020f
Increase in household average net worth ($) Consumption spend* (%)
5043 38 33
5057 62 67
2005 2010 2015 2020f
• Household wealth has increased at aCAGR of 11%
• Discretionary spending has increasedfrom 50% to 62% in the last 10 years
22.2
4.6
4.1
0.5
- 5 10 15 20 25
0-$4k
$4k - $10k
$10k - $30k
>$30k
Discretionary Spend
No. of tax payers^ in income brackets - FY15 (mn)
Basic spend
^Tax numbers are an underrepresentation as the latenteconomy is generally estimated
to be at least 25% of total GDP
CAGR
RISING INCOME LEVELS ARE LEADING TO INCREASED DEMAND FOR CONSUMER DURABLES…
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Consumer durables refer to Air Conditioners, refrigerators, washing machines, TVsSource : FICCI
1.0 1.8 3.9 1.0
1.3
3.3
1.5 1.4
3.5
6.4
9.3
19.5
2010 2015-f 2020-f
Washing Machine
Refrigerator
Air Conditioner
TV
Market for consumer durables in India ($bn)
3%9%
21%
60%60%70%
85% 89%
Air conditioner
Washing machine
Refrigerator Television
Penetration level for consumer durables, 2014
• India is still underpenetrated inconsumer durables compared toglobal levels
• Rapid growth being witnessed ashousehold income increases
India
Global
CAGR
25
17.4
53.4 3.4 3 2.7 2.4 2.3 1.9 1.8
China
USA
Japan
Germ
any
India-2020
UK
India-2015
Brazil
France
Canada
SouthKorea
…AND ALSO FOR PASSENGER VEHICLES
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Source: SIAM, World Bank
Even with a low penetration of passenger cars – 18 cars per 1,000 people (Global average: 168 per 1,000 people), India is
one of the top 10 car markets in the world
Units Sold Passenger vehicle, 2015 (mn)
2.5 2.73.4
2010 2015 2020 (f)
Passenger Vehicles, Units Sold (mn)
Passenger Vehicle refers to 4-wheel automobiles
CAGR
INTERNET AND MOBILE GROWTH IS BRINGING A REVOLUTION IN THE CONSUMER MARKET
MXV Consulting 13
Source: World bank, CIA World Factbook, Emarketer
209267
349
583
2013 2014 2015E 2018E0.00
100.00
200.00
300.00
400.00
500.00
600.00
Second largest internet population
in the world
Number of internet users (mn)
125mn
100mn
60mn
Facebook Users in India
WhatsApp users
YouTube unique users
31
32
34
40
45
46
123
171
279
483
Mexico
South Korea
Russia
Brazil
Indonesia
Japan
India
US
India 2018
China
0 200 400 600
Smartphone users (mn)
India will have the second largest population of
smartphone users by 2018
2
Glo
ba
l R
an
k
1
2
MXV Consulting 14
CONSUMER HABITS AND SPEND PATTERNS ARE CHANGING RAPIDLY
Awareness
Lifestyle
Credit availability
Technology
Society
• Increased travel and social media has created awareness about global brands• Consumers are looking for more variety and options before purchasing
• As standard of living rises, aspiration for luxury products is also increasing• The changing household structure - from the multi-generation family to married
couples (135mn in 2001 to 172mn in 2011) is impacting consumption patterns
• Growing credit card penetration and availability of loans has helped in increasing consumer spends
• The market is still underpenetrated on consumer credit – presenting continued opportunities for growth
• Low costs has helped in rapid penetration of technology in the lives of people• Digital media has democratized information and changed the way how
companies interact with customers
• Modern, aspirational youth are looking for better products• Increasing number of educated, working women is changing how families live
and spend
Source: India Census 2011
TO FACILITATE GROWTH, GOVERNMENT IS COMMITTED TO REFORMS
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• $454bn to be spent in the next 5 years• Highways worth $93bn have been announced• Waterways, for the first time, are being
developed as an alternate medium of transport• Railways are being revamped to include
modern amenities• 100% electrification of villages with an impetus
on solar energy
• E- governance push to reduce red tape• Rationalization of export - import documentation• Amendment in Companies Act to simplify
regulatory requirements• Dedicated investor facilitation cell to help
investors• Removal of archaic laws
• Corporate tax structure is being simplified andthe rate is being reduced to 25% by 2019 toattract investors
• Avoidance of retrospective taxation• GST (Goods and Service Tax) is being
implemented to simplify movement of goodswithin the country
• New bankruptcy law have been passed• Tighter monitoring of inflation by fiscal
measures• UIDAI cards and opening of bank accounts of
population to minimize subsidy leakages• Labor reforms to improve working conditions• 100 smart cities being planned to improve
urban living
INFRASTRUCTURE REFORMS EASE OF DOING BUSINESS
TAX REFORMS OTHER REFORMS
Source: World Bank, IMF, DIPP, Government reports
UIDAI – Unique Identification Authority of India
GOVERNMENT IS GIVING INCENTIVES TO GROW MANUFACTURNG
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The aim is to revive manufacturing so that its share in GDP increases from 18% in 2015 to 25% in 2022
4
Liberalization of FDI norms in defence, telecom, single brand retail, railways, medical devices, insurance etc
1
Corporates have promised more than $400bn of investment in various national and international investor summits
2
Simplification of rules and regulations to help companies setup facilities
3
Increase share in GDP
Liberalization in FDI norms
$400bn of investment
Simplified rules
MAKE IN INDIA is inviting global manufacturers to setup their manufacturing facilities in India
Source: DIPP
FDI – Foreign Direct Investment
VARIOUS SECTORS HAVE BEEN OPENED FOR FDI
MXV Consulting 17Source: DIPP
Sectors FDI Limits
Telecom Sector 100%
Single brand retail 100%
Asset reconstruction companies 100%
Construction, operation and maintenance of specified activities of the Railways sector 100%
Private sector Banking - except branches or wholly owned subsidiaries 74%
Satellite establishmentand operation 74%
Ground handling services – Civil aviation 74%
Air Transport services – schedules air transport, non schedules air transport 74%
Credit information 74%
Petroleum refining by PSUs 49%
Power exchanges 49%
Infrastructure companies in securities market 49%
Commodities exchanges 49%
Private Security agencies 49%
Cable networks 49%
Print Media with news and current affairs 26%
Broadcasting content services – FM Radio, up-linking of news and current affairs channels
26%
Insurance and sub-activities 26%
Public sector banking 20%
Tea plantation sector Restrictions removed
FDI INFLOW HAS BEEN INCREASING OVER THE YEARS
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Source: RBI, World Bank, FDI Markets, DIPP
23
35
42
33
29
33
27
31
34
20
06
-07
20
07
-08
20
08
-09
20
09
-10
20
10
-11
20
11
-12
20
12
-13
20
13
-14
20
14
-15
FDI inflow in $bn
FDI in India grew by 13% annually from FY’13 to FY’15. Inflow of investments in greenfield projects was highest in the first half of 2015
7
7
7
8
14
14
16
27
28
31
Australia
Malaysia
Spain
Vietnam
Indonesia
Mexico
UK
US
China
India
Capex FDI Inflow $bn (H1 2015)
MANY GLOBAL PLAYERS HAVE A PRESENCE IN INDIA
MXV Consulting 19
Pharma
BankingConsumerGoods
Aviation ITInsurance
AutoRetail E-commerce Mobile
THE STRUCTURE OF THE DOMESTIC MARKET HAS CHANGED
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Organized market
Infrastructure
Technology
Credit
Innovation
• Organized employment* has increased from 13% (2004) to 17% (2012)
• Improved supply chain and logistics• Strengthening of the transportation and electricity infrastructure
• Low cost of technology has helped increase corporate adoption• Internet boom has transformed the way companies are operating and
connecting with consumers
• SME and corporate loans are easily available• Increased availability of venture funding has led to the rise of entrepreneurs
• Companies are developing local solutions for the Indian consumer• The resultant innovation is being fed to other countries (e.g. Harman)
* Organized employment covers establishment in the Public sector irrespective of their size and non agricultural establishments in the Private sector employing 10 or more personsSource: NSS Survey; HBR
MXV Consulting 21
DIGITAL REVOLUTION IS ALSO TRANSFORMING THE MARKET AND MAKING CONSUMERS MORE ACCESSIBLE
Size of Indian retail e-commerce ($bn)
Startup funding in 2014 and 2015
4.77.2
383
760
-100
100
300
500
700
900
0
2
4
6
8
10
2014 2015
Number of startups funded
$bn Funding
Source: World Bank; IAMAI; TRAI; ComScore; Morgan Stanley; MXV Analysis
• Indian retail e-commerce will reach$30.3bn in 2020
• Apart from the tier I cities, tier II and tierIII are also contributing to ecommercegrowth due to limited access to brandsand high aspiration of the consumers
• For Amazon, India is a key growthmarket with more than $5Bn pledged
• India is among the top 5 countries innumber of startups funded
• Most of the large VCs have a presence inIndia
• Strong cultural bridge with Silicon Valley
7.6
30.3
0.50%
3%
0%
1%
2%
3%
4%
5%
0
5
10
15
20
25
30
35
2015E 2020
% o
f to
tal re
tail s
ale
31%CAGR
MXV Consulting 22
INTERNET PROLIFERATION ENABLING CONSUMER OUTREACH
Sales and Distribution
via 3rd party platform
Own distribution
Own WebsiteJV / franchise
Physical presence Online presence
Consumers
m-Commerce
Many companies are using
omni-channel strategies
WITH THESE CHANGES, INDIA CAN NOW BECOME PART OF THE GLOBAL VALUE CHAIN IN SEVERAL WAYS
MXV Consulting 23
Research & Development
Manufacturing and Export
Outsourcing
Consumer base
Global firms started shifting their R&D centres to India in 90’s. India now houses
the biggest R&D centres of many Fortune 500 firms
Due to availability of low-cost labor, global firms started setting up
manufacturing facilities in the early 2000s. This trend
has gained pace
India as an outsourcing centre of the global economy is not new to the
world. It has enjoyed its dominant position for the
last 2 decades
A large population and rising income levels is creating unprecedented
domestic demand. Companies are flocking to
India to capture this consumer wave
INDIA AS A CONSUMER BASE
MXV Consulting 24
1990 2000 2010
Entered India independently in2009 and today has an 8%share in the baby foods market.
Its brand Protinex is a leader inthe adult food supplement
space. Has a 5% share of thetoughly contested yogurtmarket.
Diakin was a late entrant compared toits Korean rivals, setting up amanufacturing unit in 2009. It is now
the second largest player and claimsleaership in the commercial segment.
Its revenues have risen 5X to $300mnin 2014 in 5 years.
Entered India in the late 90s andis now the second largestautomobile manufacturer with a
21% market share. It is also thetop automobile exporter from
the country and has exported amillion units in over a decade.
Amazon started Indiaoperations in 2013 and crossedthe revenue run rate (GMV) of
$1bn in 2014. Amazon hasidentified India as a high
priority market and hascommitted to invest $5.5bn toexpand the India business.
Source: Company Reports
INDIA AS A PRODUCER AND EXPORT HUB
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1990 2000 2010
United Colors of Benetton sources almostall of its product lines from India for itsunits globally. In the coming years, it plans
to substantially increase sourcing fromIndia for the global markets
Entered India in 2004 and holds a6% share of the $1bn Indianchocolate market. India is fast
emerging as an export hub withnearly half of the local production
exported
Merck Limited was set up in Indiaas Merck’s first Asian subsidiary in1967. The company exports to
Asian and African countries.Pharma exports grew by 6% in
2014, and contributed 5% to totalPharma Segment sales
JCB dominates the domestic earthmoving segment and has seenexponential growth in exports in the past
few years (82% in 2013 and 85 % in2012). JCB India also functions as a
global manufacturing hub and exportsfinished machines to Africa, Middle -East,South-East Asia as well as the Indian
sub-continent
India’s geographic location is helping it in becoming the central hub for export to ASEAN and African countries
Source: Company Reports
INDIA AS A SERVICES OUTSOURCING HUB
MXV Consulting 26
1990 2000 2010
CISCO Systems, ventured into Indiain 1995, reported $1.6bn inrevenues (FY’15) and employees
10,200 people. Company isexpecting the IoT* segment in ‘smart
cities’ to be the next growthopportunity.
British Airways has outsourced itsteam of IT technician to TataConsultancy Services (TCS) in
India. TCS is expected to get on-board from June 2016.
IBM India commenced operations in1992 and clocked $3.5bn in revenues inFY’15. IBM dominates the Indian
outsourcing market especially in theTelecom sector. IBMs global delivery
model has led to a workforce of150,000 employees in India (33% of itstotal workforce and higher than its
workforce in the US)
TransUnion in partnership with CIBIL, hasbeen active in India since 2003. Itgenerated the first generic credit score for
India in 2007. TransUnion’s databasecontains information on over 200mn
consumers and over 10mn businessentities in India. Its customers include all ofthe top 15 private Indian banks.
As of FY’16, approximately 3.7mn people work in the outsourcing sector. Annual revenues are approximately $143bn and are growing at 8.5% contributing 6% to India’s GDP
*IoT – Internet of ThingsSource: Company Reports
INDIA AS AN INNOVATION CENTER
MXV Consulting 27
It is estimated that there are over 750 R&D subsidiaries of multi-national companies employing 200,000 engineers and scientists in India
1990 2000 2010
Airbus set up a research centrein Bangalore in December 2009with the opening of an
innovation centre. For Airbus,this is third such facility outside
Europe and second in Asia(after Singapore).
In 2013, Mercedes Benzopened Research andDevelopment Center India,
its biggest outsideGermany. The centre has
filed over 50 patents in theautomotive domain
Xerox Research Center India(XRCI) is a relatively recentaddition to the Xerox network
and is only a few years old (itwas started in 2010). It’s the
first Xerox research center inan emerging market.
Harman’s R&D centre(2009) has helped it makeinroads into the local
market through frugalinnovation
Source: Company Reports
ALL SECTORS PROVIDE OPPORTUNITIES FOR GROWTH
MXV Consulting 28
Value in Rs bn 2000% Share
in GDP ‘002015
% Share in GDP ‘15
Sector-wise
CAGR
Agriculture, Forestry and Fishing 4,504 24% 15,923 15% 9%
Mining & Quarrying 425 2% 3,080 3% 14%
Manufacturing 2,805 15% 18,139 18% 13%
Electricity, Gas, Water Supply & Other Utility 454 2% 2,293 2% 11%
Construction 1,087 6% 8,676 8% 15%
Trade, Hotels, Transport, Communication and Services Related to Broadcasting
4,101 22% 19,799 19% 11%
Financial, Real Estate and Professional Services 2,405 13% 22,002 21% 16%
Public Administration, Defence and Other Services 2,771 15% 12,908 13% 11%
Total 18,555 100% 102,826 100% 12%
Over the past 15 years, all sectors have seen a healthy growth rate. However, their share in the GDP has changed considerably. Agriculture, which had the dominant share in the GDP, has been replaced by the
service sector. Manufacturing also saw an increase in share from 15% to 18%.
Source: RBI
AGRO BUSINESS VALUE CHAIN WILL NEED IMPROVEMENT AT EVERY STAGE TO FULFILL THE CONSUMER DEMAND
MXV Consulting 29
INPUTS PRODUCTION STORAGE PROCESSING RETAILING
Contract farming –After success of contract farming by
MNCs, government is promoting private
sector participation
Seeds & fertilizers– Huge demand for quality graded seeds
and fertilizers. The market is highly
underpenetrated as only 25% of famers use commercial
seeds
Storage facilities –Cold storage capacity needs to
grow rapidly to reduce wastage.
Government is supporting operators with subsidies and
credit facilities
Processing - Food processing sector is a $258bn sector.
With 42% accounted by the unorganized
sector, there is an opportunity to consolidate the
market
Retailing – There is a rising demand for Indian products in
the international market
Foreign Companies doing contract farming in India
Wheat, Maize and Soya bean
Wheat
Chilies, groundnut, seaweed, tomato
• 100% FDI allowed in storage andwarehousing including cold storage
• 100% FDI in development of seeds• Export earnings are exempt from corporate
tax
Policy incentives
Source: Ministry of Food Processing Industries, Company Reports
LOW COST, SKILLED LABOR PROVIDES VARIOUS OPPORTUNITIES IN THE HEALTHCARE INDUSTRY
MXV Consulting 30
Diagnostic and pathology services –High cost differential in India allows foroutsourcing of pathology and laboratorytests by foreign hospital chains.
Clinical trials – India offers both a hugepatient pool, favourable regulatoryenvironment and cost advantage forconducting clinical trials
Health Insurance – Less than 25% of theIndian population is covered by any kindof health insurance providing opportunityfor new players
Equipment – There is a large untappedmarket of medical equipment in thecountry. Medical equipment has only 9%share of the overall healthcare market
INDIA ADVANTAGES
Skilled professionals – India has a vast ofpool of skilled medical professionals
Cost advantages – Cost of surgery in Indiais one tenth of that in US or Europe
FDI limits – 100% FDI is allowed viaautomatic route
144,000
50,000
28,900 19,800
15,121 12,297 11,430 7,000 5,200 6,200
Heart Bypass Knee Replacement
US KoreaThailandMalaysiaIndia
Cost of surgery in different countries ($), 2014
OPPORTUNITIES AREAS
Source: Ministry of Health, Medical Tourism Association; HBR
Medical Tourism – India saw 3.2mnmedical tourists in 2015. This is expectedto grow further due to “low cost - highquality” services available (e.g. NarayanaHridayalaya, Arvind Eye Hospitals)
FINANCIAL SERVICES SECTOR GROWING RAPIDLY AND OPENING UP NEW BUSINESS AREAS
MXV Consulting 31
• Wealth Management –Indian wealth managementindustry is an emergingsegment. It has the fourthlargest ultra high net worthhouseholds in the world. By2020, India will have morethan 30,000 millionaires
• Insurance – As foreignplayers come in with new andinnovative products, theinsurance sector will find newgrowth. Sectors such asagriculture, auto and healthare highly under-penetratedand will see high growth in thefuture. This will be enabled bythe increase in composite capon FDI from 26% to 49%
• Rural market – 2/3rd of theIndian population lives in ruralareas. The financial serviceshave made limited inroads inthe rural areas.
• Financial inclusion –Government push for financialinclusion through JAM (Jan-dhan Aadhar Mobile) schemeis linking 1.2bn bankaccounts, 900mn mobilephones and 1bn Aadhar cards
• Attractive segments – Ruralcredit market, rural householdsavings and agricultural andweather insurance areuntapped areas and can besizeable opportunity areas
NICHE SECTORS RURAL MARKET
Source: MoF, MXV Analysis, DIPP, Fintech India- Genesis
FINTECH
90%73%
10%27%
2015 2020
Digital
Non-Digital
Banking transactions
• 50% penetration of digitalbanking by 2022; more thana quarter of bankingtransactions to be digital by2020. This is set torevolutionize the financialservices market
TRAVEL AND TOURISM HAS BENEFITED FROM A RICH CULTURAL HERITAGE AND FAVORABLE POLICIES
MXV Consulting 32
3.9
5.8
7.8
10.7
2005 2010 2015 2020
5%
Number of foreign tourist visiting India (mn)
Market size - $114bn
Domestic travelers contributed $93bn andforeign travelers contributed $21bn to thetourism industry in India
Medical tourism – India’s earningfrom medical tourism is set to exceed$8bn by 2020
Hotel infrastructure – Due to thesurge in number of foreign tourist anddomestic travelers, the demand forhotel rooms is increasing
Heritage and natural tourism – Indiais rich in culture and bio-diversity
• 100% FDI allowed in the tourism industry viaautomatic route
• Some of the growing segments are outlinedbelow
Source: World Travel & Tourism Council’s Economic Impact 2015, Ministry of Tourism
Policy and Opportunities
LARGE, UNMET DEMAND IN THE POWER SECTOR
MXV Consulting 33
Policy incentives
• Foreign Investment in power exchangesregistered under the CERC Regulations,2010, allowed up to 49 per cent (FDI-26 percent and FII-23 per cent)
• 100 per cent FDI is allowed under automaticroute for power sector except atomic energy
Potential opportunities
• Renewable energy, especially solar, windand hydro is emerging fast as a major source
• Private equity investments have surged withinvestments from Goldman Sachs, GEEnergy Financial Services in wind and hydropower sector
1,174
1,647
2015 2020
Electricity demand forecast (TWh)
5,650
4,297
1,031 1,064 1,061615 614
Ch
ina
US
Ind
ia
Ru
ssia
Ja
pa
n
Ca
na
da
Ge
rma
ny
World’s leading electricity producers in 2014 (TWh)
Source: International Energy Agency, Enerdata
MXV Consulting 34
TO CAPTURE THE MARKET, COMPANIES WILL HAVE TO MAKE THEIR WAY THROUGH THE COMPLEXITIES AND CHALLENGES
• Multicultural – India is a home to largenumber of ethnic and religious groups
• Multilingual – India has 122 majorlanguages (1600 in all). This makes India oneof the most diverse nations in the world
• Standard of living – India’s wealthpyramid is very different from western markets
• Buying process – The buying process isintricate to the local culture and a deepunderstanding is required of the purchaseprocess
• Regulations – Each sector is governedby different regulations. Tax norms may varyby state
• Competition – Local companies arestrong and can compete well with MNCs
• Legal – Despite reforms, there are several
procedural challenges in the legal system
• Cultural Integration – Differences inforeign and Indian working styles createscomplexities in business integration
Consumer Market
DIVERSITY OF CUISINES PROVIDES A GOOD ILLUSTRATION OF THE CHALLENGES OF A MULTI-CULTURAL COUNTRY
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South Indian: many classic dishes, use coconut, spices, curry leaves
Malabar coast: The original spice trail, several specialty snacks
Andhra: Mughal impact, pickles, papads and chutney powders
Goa: Portugese and South Indian coastal influences
Rajasthani: Desert conditions, dried / preserved foods, dry fruits / snacks
Bengali: Bold flavours, classic sweet items
Gujarati: Unique blends of sweet and spice; several popular savouries and sweets
Source: MXV Casework
COMPANIES CAN ENTER INDIA WITH DIFFERING MODELS
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Operating Model
Risk RewardsCapital
investmentChallenges Achievers
Greenfield Investment
High High High
• Takes a longer time to reap the results• Companies need to understand the country’s
regulations, culture and working style
• Strong local management required
• Hyundai• Uber• Amazon
• Unilever
Acquisition High High High
• Finding a good buying opportunity• Post-merger integration takes longer• Improving operations can be a challenge
• Issues un-discovered during due diligence
• Vodafone• Lafarge• Daiichi
Franchising Low Medium Low• Risk of brand dilution• Strong monitored systems and need for good
partners
• McDonalds• Gold’s Gym• Dominoes
Joint venture Medium Medium Medium
• Finding the rightpartner• Risk of conflict in working styles• Later date conflicts
• Loss of IP
• Suzuki• Singapore
Airlines
• Prosegur
Distribution Agent
Low Low Low• Loss of market share to more aggressive
competitors• Agent conflict at a later date
• Apple• Acer• Fujitsu
WHAT SHOULD BE YOUR MODEL?
ABOUT MXV CONSULTING
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• MXV Consulting (www.mxv.in) is a strategy and management consulting firm based out of Bangalore in India. Our focus is on building sustainable competitive advantage for our clients and helping them become industry leaders
• We have the experience of working across multiple industries and functional areas - enabling us to bring in fresh ideas and a strategic perspective to every engagement. Our insights are backed up by a rigorous process of analysis and solution development. This ensures that our recommendations are well researched, practical and tailored to an organisation’s requirements. In many instances, we also take on the role of implementation managers
• Our clientele includes leaders across various industries. We believe in long term relationships with our clients, and have worked on multiple engagements with most of them
• MXV has worked on more than a 150 assignments to-date. Our clients are global in nature –including India, the US, Middle East, Europe and Asia Pacific
• In 2014, MXV Consulting was listed among the most promising business consultants in India
AN OVERVIEW OF OUR SERVICES FOR GLOBAL COMPANIESOver 150 Projects Completed In the Indian Ecosystem
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Opportunity evaluationUnderstand the market size, segmentation, competitive situation,
regulations, financial viability and return on investment
Go to MarketPositioning opportunities, operating model and ecosystem design,
partnership possibilities, and implementation roadmap
OrganizationOverall organization structure, staffing sources, corporate governancestructure, performance management, and integration
Operational ImprovementProcess design, supply chain and working capital improvements, andcost reduction
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WE HAVE WIDE RANGING INDUSTRY EXPERIENCE
Manufacturing Energy & Infrastructure Financial services Retail
• Chemicals• Construction steel• Distilleries
• Electrical products• Farm equipment
• Insulators• Sponge iron• Textiles
• Aviation• Batteries• MRO
• Oil and gas• Power
• Real estate• Water
• Banking • Insurance• Capital markets
• Private equity• Venture capital
• Investment banks• Online retail financial
services
• Payments• Micro-finance
• Financial services• Telecom• Computing
• Jewellery• E-commerce
• Apparel• Furnishings• Cinema exhibition
IT and ITES Consumer goods Education Other services
• IT products• IT services• IT infrastructure
• Cloud services• Internet services
• BPO• Analytics
• Beverages• Music• Food products
• Electrical appliances• Solar appliances
• Lighting
• K12• Supplementary
education / test
preparation• Online tutoring
• Colleges• Assessments• Software products
• Government• Hospitality • Food testing services
• Publishing & printing• Design
• Architecture• Automotive• Security
• Facilities Management• Public Relations
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AND EXPERIENCE WITH CLIENTS ACROSS THE GLOBE
Atlanta
Washington
Mauritius
New Delhi
Mumbai
Bangalore
Chennai
San Francisco
Melbourne
Singapore
London
Bahrain
Sydney
Sao Paulo
Paris
Miami
Copenhagen
Hyderabad
Tel Aviv
New York
Local presence
© MXV Consulting, 2016 www.mxv.in Follow us on LinkedIn
Authors of this report
Kim Bingham
Kamesh VenugopalAshutosh Kedawat
For a further discussion, please contact
Amit [email protected]
Kim BinghamNew York and [email protected]
Shalabh AgrawalNew [email protected]