Industry Outlook from Biggies…
We recently concluded the annual ENAM Investor Conference at Mumbai and it seldom gets bigger than this ! Promoters/ directors of 66 companies (~$210bn= ~1/3 of India’s market cap) had 1×1 meets with ~450 investors representing 165 funds over two days. The distinctive feature of the 2nd Annual Enam conference was executive participation from the topmost levels of India Inc. A thematic summary of the group presentations follows along with corporate insights acquired during the 1×1s in the enclosure.
- Infrastructure: Mr Anil Ambani of ADAG & Mr Navin Agarwal of Sterlite both stressed how with the global slowdown, construction costs & execution timelines would get massively telescoped. And this would offset even the adverse exchange rate. Even some of the largest EPC contractors are now bending forward. At their least cost operations, Mr Agarwal said he would be the last man standing !!! Both emphasised their having cash and thus their massive advantage over others who will have difficulties in financial closures. Mr Satnam Singh of PFC confirmed, that based on actual project execution that they monitor, the 11th plan for Power would have a shortfall of only 10% vs the earlier expected 45% !!! Mr Ameet Desai of Mundra stressed that cargo capacity is at >90% utilisation at the 12 major ports, & even at 7% GDP growth rate, the handling capacity shortage would remain. The current crisis would exacerbate the investment shortfall in new port facilities.
- Consumption: Mr Kishore Biyani of Pantaloon, who has revolutionalized retail in India exuded confidence over India’s consumption story driven by demographics, rising incomes & more importantly rising aspirations. While he accepted that there were signs of down trading, he also pointed out to robust retail sales during Diwali as reflected in Pantaloon sales and also that of other players such as Titan, LG & Samsung. At least 2-3% of the population is joining the $400bn p.a consumption pie every year. And only a negligible portion of the population is affected by the stock markets as far as their consumption is concerned. Not only that, this year will see a huge slosh of money in people’s hands, with the 6th pay commission, rural debt waivers, employment guarantees, increase in farmer support prices & tax benefits. Mr Jalaj Dani of Asian Paints also confirmed this view of growth in discretionary spend of late, with 20%+ growth in demand last 2 quarters. In direct contrast to the above, Mr Amit Kalyani of Bharat Forge pointed out the inventory build up in the auto industry.
- Competitiveness: Mr Alok Agarwal of RIL comforted that refining margins could not sustain at the currently near-marginal cost of production & unviable global smaller units would cut production. He also slapped down analyst views that the advantage of complex refineries would reduce over time. Mr Keki Mistry of HDFC stressed on their ability to consistently match asset-liability profiles by appropriate shifting between bulk & retail deposits. He expected overall property prices to fall by 15%+. Unlike the West, home borrowers have low loan/ value ratios, are debt-averse to the extent of pre-paying loans. Mr Mallya of Bank of Baroda stressed that incremental risks were more from Realty exposures vs Retail.
- Realty: Mr Neel Raheja of K Raheja Corp and Mr Sushanto Roy of Sahara both emphasised that a slowdown is inevitable in the immediate term, but this will lead to a beneficial weeding out of weaker players
- Managing Businesses: Mr Alan Rosling of the Tata group shared his insights on managing a hugely diversified conglomerate in a challenging global environment. Mr Analjit Singh of Max explained his philosophy in how he focusses on diverse businesses and takes them to the highest levels of competence.
- Strategy & Leadership: The conference was signed off with a fitting finale where Mr Vallabh Bhanshali, chairman of Enam engaged Mr Narayan Murthy of, …. well, of Narayan Murthy, on such a wide range of issues .. that You just had to be there … any attempt to summarize would be an injustice to them.
