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Sector Compendium

Consulting Club Faculty of Management Studies, Delhi University


Edition # 1 October, 2013
Telecom
3
Automotive
10
Infrastructure
14
Energy
18
Information Technology
22
FMCG
29
Retail
42
BFSI
48
HealthCare
59
Contents
2
Telecom
3
Telecommunications
Evolution
1947: Nationalization of all
foreign telecommunication
companies to constitute
the posts and telegraph
1950: Telephone
exchanges taken over from
the princely states
1981: Contracts with a
French company to merge
with the state-owned ITI, to
set up 5 million lines per
year
1985: Establishment of DoT
1986: Establishment of VSNL
and MTNL
1991: Telecom equipment
manufacturing completely
deregulated
1992: VAS opened to private
sector participation
1994: NTP 1994
1997: Establishment of TRAI
1999: NTP 1999
2000: Establishment of
TDSAT
2003: Unified Access Service
License (UASL); Interconnect
Usage Charges (IUC); and
calling party pays (CPP)
2004: Broadband policy;
universal licensing regime;
and guidelines for intra-
circle M&A
2006: DoT announces
criteria for additional
spectrum
2007: Cap on number of
players in a circle removed
2008: New licenses granted
by DoT
2010: 3G and BWA
spectrum auction
2011: MNP launched Pan-
India
1947-80
1980-90
1990-2000
2000-2005
2005-2011
4
Telecommunications
Sector Composition
Telecommunications
Wireless Wireline Internet Others
GSM CDMA Telecom Equipments Infrastructure
DTH
Players :

Wireless , Wireline, Internet: Airtel , Vodafone, RIM, Idea, Tata Teleservices, BSNL, MTNL etc
Telecom Equipments : Ericsson, Huawei, Alcatel-Lucent , NSN, ZTE
Infrastructure : Bharti Infratel, Juniper Networks, Cisco
DTH : Dish TV, Sun Direct, Airtel, Tata , Reliance
5
Telecommunications
Trends Shaping Future
Digital and Mobile Technologies Hold Keys to Growth
Digital and mobile-related markets are clearly an increasing priority for media and telecom companies. Industry leaders believe in the
exploding potential of digital and mobile technologies and expect their companies to aggressively pursue these markets over the next
year. However, as their sectors face dramatic transformational changes, they will need to shift focus and move quickly to adapt and
capture resulting new opportunities. There is a significant increase in the importance of smart phone and tablet market
Capital Spending and Investing
Major companies are sitting with excess cash in their balance sheet and are looking to start spending and a lot of significant
investments is already underway. The major areas where companies are looking to invest are new products and service, information
technology and business acquisitions.
A Challenging Market for Growth
Challenging market conditions have hampered growth initiatives across many industries. Moving forward, media and
telecommunications executives say they are most concerned about the economy (27 percent), their competitive position (24 percent),
and keeping pace with changing technology (22 percent).
Executives believe the most significant growth barriers for their companies over the next year will be lack of customer demand (37
percent), pricing pressures (35 percent), and staying on top of emerging technologies (29 percent).
The rural opportunity will drive growth
The draft NTP 2011 aims to increase rural teledensity from the current level of around 35 percent to 60 percent by the year 2017 and
100 percent by the year 2020. For the wireless segment, BWA technologies to be launched in 2012 will create additional voice as well
as data opportunities.10 The Governments intention to minimize the cost per site in rural areas will mean affordable services for rural
subscribers. For service and equipment providers, this means an opportunity to launch a host of new services and solutions
customised for the rural market.
Value-added services to drive growth
Non-voice, value added services, will drive future growth in the Indian wireless market. The launch of 3G services by telecom players is
expected to increase the demand for data services, especially in urban regions. While MVAS in urban areas will revolve around high-
end applications enabling better information, entertainment and communication (for example instant messaging, social networking,
high quality gaming, video sharing, streaming music, enterprise applications, etc.), in rural areas, empowerment of subscribers will
come through basic, but more utilitarian services such as m-healthcare, m-governance, m-banking, m-education, etc.
6
Telecommunications
Investment Opportunities
Capital expenditure
Telecom markets in the developed countries are highly saturated and fiercely competitive. Attracted by the favourable investment climate and encouraging
market potential, many global telecom service providers forayed into the Indian telecom market in the last decade. The entry of new players stimulated
investments in the sector, with capex by service providers growing at a CAGR of 20.6 percent during 2005-2010, to reach USD 7.3 billion.4
However, at a time when the country requires maximum capital infusion to expand networks and to meet roll-out challenges, capital expenditure has started to
decline with service providers putting their expansion plans on the back burner. The sector has already witnessed service providers failing to meet roll-out
obligations in many circles. Along with it, there has been a significant decline in FDI a 47 percent decline during April-December 2010 as compared to April-
December 2009.5 One of the new entrants in Indias telecom sector has already lowered the investment outlook to INR 8.1 billion from its earlier guidance of INR
12.2 billion
21.6
51
117.3
123.4
75.5
0
20
40
60
80
100
120
140
2006-07 2007-08 2008-09 2009-10 2010-11
8.2
12.6 12.5
10
7.3
0
2
4
6
8
10
12
14
2006-07 2007-08 2008-09 2009-10 2010-11
FDI In Telecom Sector (In INR Billion) FDI In Telecom Sector (In USD Billion)
Areas of investment opportunities
Telecom equipment manufacturing
The Indian telecom sector has witnessed a tremendous growth over the last decade, creating a huge demand for telecom equipments including towers, mobile
handsets and Customer Premises Equipment (CPE). In 2009-10, the demand for telecom equipment in India stood at INR 547.7 billion, accounting for 5.5 percent
of the global demand.
Technology and R&D
Strong R&D infrastructure, in addition to creating a large number of jobs, also increases competitiveness and creates intellectual property leading to self reliance
in strategic sectors. The government, with the aim of promoting R&D in the country, has set up the Telecom Equipment and Services Export Promotion Council
(TEPC) and the Telecom Testing and Security Certification Centre (TETC). A few major telecom equipment manufacturers have already set up their R&D centres in
the country and a few others are also contemplating the idea.
Green telecom
An ever increasing demand for telecom services has led to a significant increase in energy consumption. Since demand for energy is largely met using non-
renewable resources, posing the challenge of larger carbon emissions from the telecom sector. Also, the expenditure on energy accounts for a significant part of
the operational cost of these networks.

7
Telecommunications
Fact Sheet
8
Telecommunications
Fact Sheet
9
Automotive
10
Auto
Structure & Regulatory Environment
Auto
Automobile
2-Wheelers
(1.54 cr units ann.)
3-Wheelers
(9 lac units ann.)
Passenger Vehicle
(31 lac units ann.)
Commercial Vehicle
(9 lac units ann.)
Component
Engine
Transmission
Suspension
Electrical
Important Regulations
Manufacturing of vehicles and imports are free from
government licensing and approvals
100% FDI is permitted in the auto sector without any sort of
approval from the government
Removal of Quantitative Restrictions (QRs) from April 1, 2001
has allowed the import of vehicles, including in the passenger
car segment where one can freely import subject to certain
conditions notified by Directorate General of Foreign Trade
(DGFT)
To protect India from becoming a dumping ground for old and
used vehicles produced abroad, the custom duty on the import
of second hand vehicles including passenger cars has been
raised to 111%
Custom duty on Completely Built Units (CBU) has been
increased to force foreign brands to set up manufacturing
facilities in India

Facts
Sixth largest market after China, US, Germany, Japan & Brazil; Expected to become #3 by 2015
A robust growth rate of 26% in FY 11 & FY 12 but the growth has slowed down significantly in FY 13
Auto component industry was US$ 43 bn in 2012 and is expected to grow at a CAGR of 11% to $66 bn in 2016
The Passenger vehicle segment has grown at a 7-year CAGR of 14% while commercial vehicle grew at 18%
Penetration of luxury vehicles stands close to 1% compared to 4-5% in China and 14-15% in Germany




11
Auto
Major Players
45%
19%
14%
1%
15%
2%
3% 1%
2-Wheeler Market Share
Hero
MotoCorp
Bajaj Auto
TVS Motors
Mahindra
Honda
Suzuki
Yamaha
53%
30%
9%
4%
2%
2%
3-Wheeler Market Share
Bajaj
Piaggio
Mahindra
Atul Auto
TVS
Scooters
India
45%
14%
12%
9%
4%
4%
3%
3%
2%
1% 3%
Passenger Vehicle
Market Share
Maruti Suzuki
Hyundai
Tata Motors
Mahindra
General
Motors
Ford
Toyota-
Kirloskar
59%
27%
10%
1% 3%
Commercial Vehicle
Market Share
Tata Motors
Ashok
Leyland
Eicher
Swaraj
Others
AUTO COMPONENTS

Electrical Parts
Bosch
Cummins
Amara Raja

Tyre Manufacturers










Automotive Parts
Bharat Forge
Motherson Sumi
SKF
Amtek
Automotive Axle

23%
26%
18%
13%
20%
MRF
Apollo
JK Tyres
Ceat
Others
12
Auto
Drivers, Trends & Future outlook
Growth Drivers
Demographic Advantage: Huge working age population (target market)accounting for 60% of the total population
Rapid urbanization: Urbanization leading to greater demand in all segments; 140m rural population to move to urban areas by 2020
Large set of skilled individuals: Highest number of engineers in the world, Large pool of skilled blue-collared labor
Rising disposable incomes: Increasing disposable incomes mean greater share goes for major capital expenditure
Untapped rural markets: Low penetration in rural markets but increasing incomes and rising awareness creates a lucrative segment
Shrinking replacement cycle: Replacement cycles have declined due to enhanced and undesirable usage
Growing road infrastructure: Greater and better access to roads encourages purchase of vehicles in remote areas
Recent Trends
Joint ventures with foreign collaborations-Volvo-Eicher, Toyota-
Kirloskar and Ashok Leyland-Nissan (LCVs)
Indian automobile companies have increasingly acquired
businesses overseas to broaden revenue base, acquire
technology and leverage distribution network
India becoming part of the global strategy of foreign
companies who are setting up manufacturing bases in India
and exploring the option to use it as an export hub
To adopt higher technical and quality standards, Indian
companies are acquiring companies overseas to acquire skills,
technology and customers
Luxury car makers are lowering their entry price band to Rs.20-
25 lakh and lining up nearly half a dozen launches in the
premium segments to draw in Indias rich and rev up volumes.
Weakening freight rates have led to decline in volumes of
M&HCVs but the sales of LCVs has picked up
Surging raw material prices have put pressure on OEMs who
have in turn tried to pass the cost to auto manufacturers


Future outlook
By 2016, India will emerge as the destination of choice in Asia
for the design & manufacturing of automobiles and
automotive components. The output of the Indias automotive
sector will be $145bn by 2016, (from $34bn in 2006)
contributing to 10% of Indias Gross Domestic Product and
providing employment to 25 mm people additionally.
- According to Draft Automotive Mission Plan 2006-2016 by
the Ministry of Heavy Industries & Public Enterprises.
The niche luxury car segment, according to estimates of SIAM,
saw sale of close to 23,000 units in India in 2011-12, which is
slated to go up to 1,50,000 units by 2020 and growing at
annual average growth rate of 40%.
The Indian auto components industry is slated to grow to
$66.3bn by 2015-2016 further growing at a compounded
annual growth rate (CAGR) of~11% to reach at ~$115bn by
2021. Exports of auto components are slated to grow at a
CAGR of ~18.8% to reach $29bn by 2021
Global majors will redefine brand positioning while domestic
companies build R&D and optimize costs
13
Infrastructure
14
Infrastructure
Sub-Segments
Railways
The growth in rail infrastructure has not matched the demand, with many projects running behind schedule, leading to time and cost
overruns of more than 100%. Only 1,750 km of new lines was added from 2006 to 2011, as compared to 14,000 in China. The Indian
Railways launched Vision 2020 in 2009, which outlined needs and targets to be achieved by 2020. Some of the major issues affecting
the sector include insufficient funds, misplaced investment priorities, lack of timely reforms in organizations and inability to attract
private investments.
Ports
Indias 13 major ports and 60 operational non-major ports handle 95% of the countrys external trade by volume and 70% by value.
Port traffic has increased at CAGR of 8.1% to reach 884.6 million tones with an average utilization of ~90%, as compared to the
international average of 70%. The main issues faced by ports include the level of containerization, custom procedures and insufficient
connectivity to their hinterlands. The Maritime Agenda proposes an investment of INR1,280 billion in 424 projects in major ports and
INR 1,680 billion in non-major ports by 2020. It is proposed that more than 80% of the investment in major ports will be made by the
private sector.
Roads and Highways
Road infrastructure is of prime importance for the growth of the economy, since around 60% of freight and 85% of passenger traffic
moves by road in India. The National Highways only constitute around 1.7% of the road network, but carry 40% of the total road traffic.
Yet only 24% of the countrys national highways are four-lane and meet the required standards. The National Highway Development
Programme (NHDP) is the largest and foremost infrastructure program being undertaken in country. The program envisages upgrading
or strengthening of around 54,000 km of the highways in several phases with an investment of around INR3,000 billion.
Airports
Projects for upgradation, operation and maintenance for several major airports including the Delhi, Mumbai, Hyderabad and Bangalore
airports are already in the process of being executed/ have been executed. It is estimated that the total investment requirement for
expansion and modernization of the countrys airports to counter the aforementioned traffic increases is approximately US$ 10 billion.
Domestic and international air traffic over the past three financial years has been increasing at over 35% per annum.
Power
Increased manufacturing activities and a growing population are also causing a surge in power usage. India has the fifth largest
electricity grid in the world with 135 GW capacity, and the worlds third largest transmission and distribution (T&D) network. Large
investments are needed to meet growing demand and provide universal access. An investment of US$167 billion is projected for
electricity projects in the five year period from FY07-FY12. The massive number and scope of potential projects has attracted a number
of new investors, lenders and operators.
15
Infrastructure
Roadblocks & Overcoming them
Roadblocks
Land acquisition: The process needs to be streamlined, key policies and regulation reforms fast-tracked for enhanced
implementation, a robust dispute resolution framework put in place, enhanced monitoring of projects implemented and funding
facilitated.
Regulatory approvals and environmental clearances : These are the major hindrance for successful delivery of projects. Multiple
agencies are involved and various approvals required across the different stages of the project cycle.
Project Planning and pre-tendering activities : The relevant authorities often side-step crucial project milestones such as land
acquisition and prepare poorly planned projects in their rush to announce projects.
Funding : Increased reliance on the private sector to develop and maintain infrastructure projects that are capital-intensive and have
a long gestation period. Currently, developers and banks have exhausted their exposure limits to the infrastructure sector,
respectively.
Private Sector Capacity : The sector has financial and manpower constraints. Most large companies in India are now integrated
players that execute projects as developers and EPC contractors. However, the total number of such players is low and they have
already secured several projects, which limits their capacity to take up new projects. Lack of skilled manpower and shortage of
construction equipment further compounds the problem.
Overcoming Roadblocks
The Government should also issue clear guidelines for sponsoring agencies on land acquisition, e.g. mandatory acquisition of 90% of
the total land or 70% of the contiguous land, before offering projects for bidding. This will help agencies to be more rigorous in their
project planning and diligence processes before initiating bidding, and thereby, avoiding delays at a later stage.
The technical capabilities of consultants should be evaluated during the selection process and they should be selected on the basis
of their experience and expertise.
The dispute resolution process needs to be more effective and expeditious. The Government may consider setting up a single quasi-
judicial authority for all infrastructure sectors, which would have statutory powers to resolve disputes between the authorities and
private developers.
An institutional mechanism to monitor and enforce provisions in PPP and/or EPC projects should be established to enable regulatory
approvals to be speeded up. Government agencies often function independently and are minimally obligated to cooperate with
sponsoring authorities to expedite the approval process.
Setting up of Infrastructure Debt Funds (IDFs) and the reduction in Withholding Tax is expected to facilitate the flow of long-term
debt into infrastructure projects. The Government can also infuse additional capital in major public sector banks to augment funding
in short-term.
16
Infrastructure
Fact Sheet
17
Energy
18
Energy
Oil & Petroleum Products
India was the fourth largest consumer of oil and petroleum products as
well as the fourth largest importer of oil and petroleum products in
2011.
Majority of imports continue to come from the Middle East
Indian national oil companies (NOCs) are purchasing equity stakes in
overseas oil and gas fields in South America, Africa, and the Caspian Sea
region to acquire reserves and production capability.
Major Players
While state-owned Oil and Natural Gas Corporation (ONGC) and Oil
India Limited (OIL), control the majority of production and refining
activity in India, other companies like Cairn India, a subsidiary of UK
company Cairn Energy, controls 20 percent of India's crude oil reserves.
Reliance Industries (RIL) and Essar Oil have also become major refiners.
Downstream & Refining
India became a net exporter of petroleum products in 2010. India had
a refining capacity of 4.3 million bbl/d at the end of 2012. Jamnagar
refinery owned by Reliance is the largest refinery in the world and
accounts for nearly one-fourth of India's total refining capacity.

19
Energy
Natural Gas, Coal & Electricity
Natural Gas
Natural Gas serves as a substitute for coal for electricity generation in India.
It was the 6
th
largest importer in 2011, accounting for 5% of the world market.
Power and Fertilizer make up majority of demand at 45% and 28% respectively
India had 43.8 Tcf of natural gas reserves in 2012. About 30% of these are
onshore reserves, while 70 percent are offshore reserves.
The two biggest state-owned companies, ONGC and Oil India Ltd. (OIL),
dominate India's upstream gas sector
Coal
India has 5
th
largest coal reserves in the world.
Due to the gap between demand and supply, the imports have grown at 13%
annually since 2001
The power sector is the largest consumer of coal, accounting for 73 percent of
coal consumption in 2009
CIL remains the country's largest coal producer and produces about 80 percent
of the country's coal
Most coal reserves are located in the eastern parts of the country. Jharkhand,
Chhattisgarh, and Orissa account for approximately 70 percent of the country's
coal reserves

Electricity
India had 211 gigawatts (GW) of installed electricity generating capacity
Utilization rates in Indian power plants have fallen steadily since 2004 because
of insufficient fuel supplies
While 94 percent of urban households had electricity, only 60 percent of rural
households had access
The government established the Power Grid Corporation of India
(POWERGRID) to operate five regional electricity grids, while state transmission
utilities run most transmission and distribution segments

20
Energy
Challenges, Opportunities & Facts
Challenges
Securing fuel
Securing land and clearances
Issues related to competitive bidding
Worsening financial health of the
distribution sector
Project execution challenge
Changes in regulation in transmission
Competition from International OEM

Opportunities
Strong growth in generation
capacity led by per capita
consumption, urbanization
Alternative sources of energy
Investment in clean technology
Opportunity in power
evacuation
Gap in manufacturing capacity

21
Information
Technology
22
Information Technology
Evolution
By early 90s, US-based
companies began to
outsource work on low-
cost and skilled talent
pool in India
IT industry started to
mature
Increased investment in
R&D and infrastructure
started
India increasingly seen as
a product development
destination
The number of firms in
India grew in size and
started offering complex
services such as product
management and go-to
market strategies
Western firms set up a
number of captives in
India
Firms in India became
multinational companies with
delivery centres across the
globe (580 centres in 75
countries, as of 2012)
Firms in India make global
acquisitions
The IT sector is expected to
employ about 3.0 million
people directly and around 9.5
million indirectly, as of FY13
Indias IT sector is at an
inflection point, moving from
enterprise servicing to
enterprise solutions

Pre 1995
1995-2000
2000-05
2005-onwards
23
Information Technology
Sector Composition
Information
Technology
IT Services
Business Process
Management
Software products
and engineering
services
Hardware


Market Size: USD56.3
billion during FY13
Over 78 per cent of
revenue comes from
the export market
BFSI continued as the
major vertical of the
IT sector
Initially known as the
BPO sector
Rebranding as BPM:
Moving to a full-
service value provider
Market size: USD20.9
billion during FY13
Around 85 per cent of
revenue comes from
the export market
Market size: USD17.9 billion
during FY13
Over 79 per cent of revenue
comes from exports
Market size: USD13.3
billion during FY12
The domestic market
accounts for a
significant share
The domestic market is
experiencing growth as
the penetration of
personal computers is
rising in India
24
Information Technology
Facts about the sector
FY12
Market size: ~USD100 Billion
Growth Rate: ~7%
Exports (excluding hardware): ~USD 76 Billion
Contributes 8% to Indias GDP (1.2% in FY98)
Market Share
Company Market
Share
TCS 10.7%
Wipro 7.2%
Cognizant 6.8%
Infosys 6.3%
HCL Tech 4.2%
The top six firms contribute
around 36 per cent to the total
industry revenue, indicating
the market is fairly competitive
IT Services
largest
contributor to
revenue.
Hardware the
smallest
Revenue Contribution
Export Revenue Contribution Domestic Revenue Contribution
IT Services+ BPO largest contributor.
Hardware is negligible
Hardware is a major contributor
domestically
25
Information Technology
Facts about the sector
Key observations
BFSI followed by Telecom is the largest vertical
contributor to revenues
This is a trend both in exports and domestically
Highly dependent on US-UK for export revenues
Most exports come from the US (~60%) and UK
Non US-UK countries provide just 21%
India is emerging as the global delivery hub of IT Services
The number of global delivery centres of IT firms in India reached 580, spreading out across 75
countries, as of 2012
Global delivery
model
Increased focus on R&D by IT firms in India resulted in rising number of patents filed by them
The number of patents filed by the top three IT companies increased to 858 in 2012 from 150
in 2009
Increased R&D
focus
Large players with a wide range of capabilities are gaining ground as they move from being
simple maintenance providers to full service players, offering infrastructure, system
integration and consulting services
Large players
advantage
Increased emphasis on beyond cost benefits
IT firms in the current phase have moved up the value chain, providing innovation-led growth
to clients from SLA satisfaction and RoI calculations
Cost to value
play
Tier II and III cities are increasingly gaining traction among IT companies
Cheap labour, affordable real estate, favourable government regulations, tax breaks
Giving rise to the domestic hub and spoke model, with Tier I cities acting as hubs and Tier II,
III and IV as network of spokes (Jaipur, Trivandrum are doing well)
Emergence of
Tier II cities
Emerging trends in the IT & ITeS sector
New technologies
Cloud computing
Reduced capital footprint. Increased flexibility, efficiency,
scalability, ease of maintenance
Slow movement. Apprehensions, high risk
Platform BPO
Packaging a technology platform with a domain application
Reduced Total Cost of Ownership(TCO), pay-by-volume pricing
26
Information Technology
Growth Drivers and insights
Overshadowed by services. Small contributor to
overall sector revenues
The last decade has seen the number of Indian
product companies - not including captive R&D
centres grow in number
The software product segment is undergoing a
rapid change and is approaching a new phase of
accelerated growth
This sector has seen significant venture capital
and incubation to go with a growing market
Challenges
Entry barriers due to MNC presence
Lack of sufficient talent
Attractiveness of IT services

Banking sector has seen high quality products (Finacle,
FlexCube).
New products in education and training, logistics,
healthcare, cleantech, talent management and mobile
applications are showing a lot of promise
Software Product Industry : Something to look at
IT Sector : Growth Drivers
4.7 million graduates are estimated to have been added to Indias talent pool in FY13
Strong mix of young and experienced professionals
Talent Pool
Global IT offshore spending is expected to rise at a CAGR of 8.0 per cent during FY1113
Global BPM spending is estimated to expand at a CAGR of around 7.0 per cent during FY1113
Global Demand
Tax holidays for STPI and SEZs
Procedural ease and single window clearance for setting up facilities
Policy Support
Computer penetration expected to increase
Government likely to become a major contributor to domestic demand by 201314
Domestic Growth
Robust IT infrastructure across various cities in India such as Bengaluru
Delivery centres spread across various countries
Infrastructure
27
Information Technology
Conclusion
After the economic reforms of 1991-92, major fiscal incentives provided by the Government of
India and the State Governments, like,
liberalization of external trade
elimination of duties on imports of information technology products
relaxation of controls on both inward and outward investments and foreign exchange
setting up of Export Oriented Units (EOU), Software Technology Parks (STP), and Special
Economic Zones (SEZ)

For Start ups focussed on technology and innovation, Tax breaks on inhouse R&D expenditure
Various R&D projects have been funded through new schemes like Support International Patent
Protection in Electronics & IT (SIP-EIT), Multiplier Grants Scheme (MGS).
Government initiatives
Key factors that explain success of Indias software industry
Favourable conversion rates. Significant cost savings.
Software requires more of human capital. Limited infrastructure and capital investment. Has good
cash flows and highly profitable
India had an early mover advantage; repeated positive experience built trust in outsourcing and
validated the Indian brand
Early investments in engineering education and its privatization
Positive government policies
Large population created competition for engineering seats and jobs. Software industry faced no
internal competition for talent
28
FMCG
29
FMCG
Household care Personal care
Food &
Beverages
Health care
Fabric wash,
household cleaners
Oral care, hair care,
skin care,
cosmetics/deodorant
s, perfumes,
feminine hygiene
and paper products
Health beverages,
staples/cereals,
bakery products,
snacks, chocolates,
ice cream,
tea/coffee/soft
drinks, processed
fruits & vegetables,
dairy products, and
branded flour
OTC products and
ethicals
30
FMCG
Composition
31
FMCG
Evolution
Indian FMCG companies are consolidating their existing
business portfolios
Consolidation
Several companies have started innovating or customising their
existing product portfolios for new consumer segments
Product innovation
Consumers are becoming more brand conscious and prefer
lifestyle and premium range products given their increasing
disposable income
Brand consciousness
A number of companies are exploring the business potential of
overseas markets and several regional markets
Expanding horizons
Backward integration is becoming the preferred strategy for
increasing profit margins
Backward integration
Companies are now focusing on the rural market segment
which is growing at a rapid pace and contributes about 33 per
cent to the total FMCG market
Focus on rural market
Companies are now focused on improving their distribution
networks to expand their reach in rural India
Expanding distribution
networks
32
FMCG
Trends (1/2)
This approach has helped FMCG companies focus on front-end
marketing
Reservation of several items for SSI as well as additional tax
incentives have made third party manufacturing a popular
route for many big players
Third-party
manufacturing
Companies are increasingly introducing smaller stock keeping
units at reduced prices. This helps them to sustain margins,
maintain volumes from price-conscious customers and expand
their consumer base
Rising importance of
smaller-sized packs
Small towns are emerging as significant hiring zones. FMCG
companies are hiring field staff from areas such as Kalpa
(Himachal Pradesh), Mangaliya (Madhya Pradesh), Kota
(Rajasthan), and Shirdi (Maharashtra) to sell diverse products
Increased hiring from
tier II/III cities
FMCG companies entering Africa as it helps to be close to
consumption markets within Africa
Such foreign investments are encouraged by local governments,
as they offer incentives to enter the markets
Focus on enhancing
presence in Africa
FMCG players in India are increasingly focussing on reducing
their carbon footprint by creating eco-friendly products. They
generate the required energy from renewable sources and earn
CER credits for the same
Reducing carbon
footprint and eco-
friendly products
33
FMCG
Trends(2/2)
15.7
17.8
21.3
24.2
30.2
34.8
0
10
20
30
40
2006 2007 2008 2009 2010 2011
Trends in revenue (USD billion)
CAGR
17.3%
Source: Dabur, AC Nielsen, Aranca Research
43%
22%
12%
8%
4%
4%
2%
5%
Market break-up by revenues (2009)
Food products
Personal care
Fabric care
Hair care
Households
OTC products
Baby care
Others
Source: Dabur, Aranca Research
INSIGHTS:
Food products is the leading segment,
accounting for 43.0 per cent of the overall
market
Personal care (22.0 per cent) and fabric care
(12.0 per cent) are the other leading segments
34
FMCG
Revenue Trends
Increasing per
capita income
of rural & urban
consumers
Growing
popularity of
organized retail
Rise of rural
consumers
Governments
pro-industry
policies
FDI support
Per-capita income in the country expanded at a
CAGR of 12.5% over 2001-11
Strong income growth is set to continue in
future as well; IMF forecasts point to a CAGR of
8.8% over 2012-17 to USD 2,428.5
An important consequence of rising incomes is
growing appetite for premium products,
primarily in the urban segment
The Indian government has
been supporting the rural
population with higher MSPs,
loan waivers, and
disbursements through the
NREGA programme
These measures have helped
in reducing poverty in rural
India and have thus propped
up rural purchasing power
Growing awareness, easier
access, and changing
lifestyles has meant
growing consumer spending
in modern retail stores
Spending at modern retail
stores in India shot up by
31% in 2011 compared to
the previous year
Modern retail spending is
expected to shoot up to
USD5 billion in 2015 from
USD1.8 billion in 2011
The sector has been
witnessing healthy FDI
inflows over the years;
in fact, during FY01-13,
FMCG accounted for
1.9% of total inflows
Within FMCG, food
processing was the
largest recipient; its
share was 46.8%
35
FMCG
Growth drivers
GST for the purpose of integrating multiple indirect taxes under
a unified tax system is likely to be implemented in 2013
The rate of GST on services is likely to be 16% and on goods is
proposed to be 20%
Goods and service tax
(GST)
The current excise duty is 12%
However, for consumers, it is expected that there will be more
money to spend on FMCG products as income tax exemptions
limits have been hiked to INR 200,000
Excise duty
Industrial license is not required for almost all food and agro-
processing industries, barring certain items such as beer,
potable alcohol and wines, cane sugar, and hydrogenated
animal fats and oils as well as items reserved for exclusive
manufacture in the small-scale sector
Relaxation of license
rules
In October 2009, the government amended the Sugarcane
Control Order, 1966, and replaced the Statutory Minimum Price
(SMP) of sugarcane with Fair and Remunerative Price (FRP) and
the State-Advised Price (SAP)
Statutory Minimum
Price
The government recently approved 51% FDI in multi-brand
retail, which will boost the nascent organised retail market
It also allowed 100% FDI in the cash &carry segment and in
single-brand retail
FDI in organized retail
36
FMCG
Regulatory environment
Market Share of major players in few FMCG categories
37
FMCG
Major players (1/3)
It is Indias largest consumer goods company
based in Mumbai, Maharashtra.
It is owned by the British-Dutch company
Unilever which controls 52% majority stake in
HUL.
HUL was formed in 1933.
Its products include foods, beverages, cleaning
agents and personal care products.
Revenue 22,116 crore (US$4.03 billion)(2011-
2012)
Hindustan Unilevers distribution covers over 2
million retail outlets across India directly and its
products are available in over 6.4 million outlets
in the country. As per Nielsen market research
data, two out of three Indians use HUL products.
In 2012, HUL was recognised as one of the worlds
most innovative companies by Forbes. With a
ranking of number 6, it was the highest ranked
FMCG company.
It was formed in 1970 by Henry Overton Wills and
Yogesh Chander Deveshwar, (Chairman).
Headquarters in Kolkata, West Bengal, India.
In FMCG, ITC has a strong presence in :
Cigarettes: W.D. & H.O. Wills, Gold Flake Kings,
Gold Flake Premium, Navy Cut, Insignia, India
Kings, Classic (Verve, Menthol, Menthol Rush,
Regular,Citric Twist, Mild & Ultra Mild), 555,Benson
& Hedges, Silk Cut, Scissors, Capstan, Berkeley,
Bristol, Lucky Strike, Players and Flake.
Foods: (Kitchens of India; Aashirvaad, Minto,
Sunfeast, Candyman, Bingo, Yippee, Sunfeast Pasta
brands in Ready to Eat, Staples, Biscuits,
Confectionery, Noodles and Snack Foods).
Apparel: (Wills Lifestyle and John Players brands)
Personal care: (Fiama di Wills; Vivel; Essenza di
Wills; Superia; Vivel di Wills brands of products in
perfumes, haircare and skincare)
Stationery: (Classmate and PaperKraft brands)
Safety Matches and Agarbattis: [Ship ;
Mangaldeep; Aim brands]
Hindustan Unilever Limited ITC Limited
38
FMCG
Major players(2/3)
P&G is one of the largest and amongst the
fastest growing consumer goods companies
in India.
Established in 1964, P&G India now serves
over 650 million consumers across India.
Its presence pans across the Beauty &
Grooming segment, the Household Care
segment as well as the Health & Well Being
segment.
These include Vicks, Ariel, Tide, Olay, Gillette,
Ambipur, Pampers, Pantene, Oral- B, Head &
Shoulders, Wella and Duracell.
P&G operates under three entities in India -
two listed entities Procter & Gamble
Hygiene and Health Care Limited and
Gillette India Limited, as well as one 100%
subsidiary of the parent company in the U.S.
called Procter & Gamble Home Products.
Dabur India Limited is the fourth largest FMCG
Company in India with interests in Health Care,
Personal Care and Food Products.
It is public company listed in NSC and BSC.
It has 17 ultra-modern manufacturing units
spread around the globe and its products are
marketed in over 60 countries.
Products-Dabur Amla, Dabur Chyawanprash,
Vatika, Hajmola & Real.
It is most famous for Dabur Chyawanprash and
Hajmola.
Founded in 1884 and the Founder is Dr. S K
Burman, in Kolkata (West Bengal) and the
company headquarters are in Ghaziabad, Uttar
Pradesh.
Net income(INR) 1475 Crore (2008-09).
Total assets(INR) 1559 crore (2008- 09)
Employees3000 (Approx.)

Proctor & Gamble Dabur
39
FMCG
Major players(3/3)
40
FMCG
Key mergers and acquisitions
Leading players of consumer products have a strong
distribution network in rural India; they also stand to gain from
the contribution of technological advances such as internet and
e-commerce to better logistics
Rural FMCG market size is expected to touch USD 100 billion by
2025
Rural market
Indian consumers are highly adaptable to new and innovative
products. For instance there has been an easy acceptance of
mens fairness creams, flavoured yoghurt, and cuppa mania
noodles
Innovative products
With rise disposable incomes mid- and high-income consumers
in urban areas have shifted their purchase trend from essential
to premium products
In response, firms have started enhancing their premium
products portfolio
Premium products
Indian and multinational FMCG players can leverage India as a
strategic sourcing hub for cost-competitive product
development and manufacturing to cater to international
markets
Sourcing base
Low penetration levels offer room for growth across
consumption categories
Majors players are focusing on rural markets to increase their
penetration in those areas
Penetration
41
FMCG
Growth opportunities
Retail
42
Pre 1990s
Manufacturers
opened their own
outlets
199005
Pure play retailers
realised the potential of
the market
Most of them in apparel
segment
200510
Substantial investment
commitments by large
Indian corporate
Entry in food and
general merchandise
category
Pan-India expansion to
top 100 cities
Repositioning by
existing player
2010 Onwards
Movement to smaller
cities and rural areas
More than 56 players
with revenues more
than USD700 million
Large scale entry of
international brands
FDI in single-brand
retail up to 100 per
cent from 51 per cent
Approval of FDI limit in
multi-brand retail up
to 51 per cent
Rise in private label
brands by retail players
Increasing investments
in retail infrastructure
Initiation
Expansion
Conceptualization
Consolidation
43
Retail
Evolution
Departmental
stores
Cash & Carry
stores
Specialty stores Hypermarkets Supermarkets
Retail
Pantaloon has 65
stores

Trent operates 59
stores

Shoppers Stop has
51 stores

Reliance Retail has
launched Trends in
this format
Pantaloon Retail is
the leader in this
format with 160 Big
Bazaar stores

HyperCITY (4
stores), Trent,
Spencers (Spencer
Hyper), Aditya Birla
Retail (additional 14
stores) and Reliance
are other players
Aditya Birla Retail
(additional 509
stores)

Spencers (Daily, 220
stores)

Reliance Fresh (458
stores)

REI 6Ten (350 stores)
are the major
players in this
format
Titan Industries is a
large player, with
320 World of Titan,
130 Tanishq and 177
Titan Eye+ shops

Vijay Sales, Croma
and E-Zone are into
consumer
electronics

Landmark, and
Crossword focus on
books and gifts
Metro started the
cash-and-carry
model in India; the
company operates
five stores across
Mumbai, Kolkata,
Hyderabad and
Bangalore

Bharti Walmart
started its cash-and-
carry outlets in 2011
44
Retail
Composition (by store-type)
Market Share (2012)
In 2012, Food and Grocery
accounted for nearly 60.0 per
cent of total revenues in the
retail sector followed by Apparel
(8.0 per cent)
In 2011, 48 per cent of total
household income in India was
spent on food and groceries
Demand for Western outfits and
readymade garments has been
growing at 40-45 per cent
annually; apparel penetration is
expected to increase to 30-35
per cent by 2015

45
Retail
Composition (by product)
In 2006, FDI in Single brand retail was first allowed, upto 51%, with prior approval
FDI in multi-brand retail was first proposed in 2008
In 2012, Government approved 51 per cent FDI in multi-brand retail and increased FDI
limit to 100 per cent (from 51 per cent) in single brand retail
For Single brand retail, The requirements are
Products to be sold under the same brand internationally, and sale of multi brand goods is not
allowed, even if produced by the same manufacturer
For FDI above 51 per cent, 30 per cent sourcing must be from SMEs
Any additional product categories to be sold under single brand retail must first receive
additional government approval
For Multibrand Retail, the requirements are
Minimum investment cap is USD100 million
30 per cent procurement of manufactured or processed products must be from SMEs
Minimum 50 per cent of total FDI must be invested in back-end infrastructure
FDI in Retail
Regulations
Benefits
Removes the middlemen and provides a better price to farmers
Development in the retail supply chain system
Multi brand retail would keep food and commodity prices under control
Will cut agricultural waste as mega retailers would develop backend infrastructure
Consumers will receive higher quality products at lower prices and better service





46
Retail
Regulatory environment(1/2)
Goods and Services Tax
47
Retail
Regulatory environment(2/2)
BFSI
48
BFSI
Overview
Sector at a glance
Broadly, the BFSI sector can be broken down into the following main divisions as shown in Figure 1. The Indian financial sector
(including banks, non-banking financial companies, or NBFCs, and housing finance companies, or HFCs) reported a compounded annual
growth rate (CAGR) of 19% over the last three years and their credit portfolio stood at close to Rs. 49 trillion (around 62% of 2011-12
GDP) as on March 31, 2012.


Composition
Banks accounted for nearly 86% of the total credit, NBFCs for around 10%, and HFCs (Housing Finance Corporations) for around 4%.
Within banks, public sector banks (PSBs), on the strength of their country-wide presence, continued to be the leader, accounting for
around 76% of the total credit portfolio, while within the NBFC sector, large infrastructure financing institutions accounted for more
than half the total NBFC credit portfolio; NBFCs that are into retail financing took up the rest.


Banking
Banks accounted for nearly 86% of the total credit, NBFCs for around 10%, and HFCs (Housing Finance Corporations) for around 4%.
Within banks, public sector banks (PSBs), on the strength of their country-wide presence, continued to be the leader, accounting for
around 76% of the total credit portfolio, while within the NBFC sector, large infrastructure financing institutions accounted for more
than half the total NBFC credit portfolio; NBFCs that are into retail financing took up the rest.


49
Banking Sector
Evolution and growth
The Indian banking industry has its foundations in the 18th century, and has had a bumpy evolutionary growth path since then. The
industry in recent times has recognized the importance of private and foreign players in a competitive scenario and has moved towards
greater liberalization
Prior to 1950: Evolutionary Phase
I. The Three Presidency Banks: The Bank of Calcutta was the first part of the golden triangle- established in June 1806, it which was
renamed as Bank of Bengal in January 1809. This was followed by the establishment of the Bank of Madras in July 1843. The last
presidency bank- Bank of Bombay which was also last bank to be set up under the British Raj was established in 1868. The three
banks with their 70 branches were merged in 1921 to form the Imperial Bank of India which took on a triple role of a commercial
bank, bankers bank and government bank.
II. Establishment of RBI (1935): Established as the central bank under the Reserve Bank of India act 1934, this ended the Imperial
Banks role as the quasi central bank.
III. Banking Regulation Act (1949): The Act vested in the Reserve Bank of India the responsibility relating to licensing of banks, branch
expansion, and liquidity of their assets, management and methods of working, amalgamation, reconstruction and liquidation.
Thus giving RBI authority along with responsibility & igniting the first part of banking transformation in India.


1968-1980: Expansion phase
I. Nationalisation (1969 and 1980): 14 banks in 1969 and 6 banks in 1980 were nationalized bringing 90% of bank deposits under
government control. This was termed as First Banking Revolution in India.
II. Rapid branch expansion
III. Retail lending to risk prone areas at concessional rates

1950-1968: Foundation phase
I. Establishment of State Bank of India: In 1951, when the First Five Year Plan was launched, the development of rural India was
given the highest priority. In order to serve the economy in general and the rural sector in particular, the All India Rural Credit
Survey Committee recommended the creation of a state-partnered and state-sponsored bank by taking over the Imperial Bank of
India, and integrating with it, the former state-owned or state-associate banks. An act was accordingly passed in Parliament in May
1955 and the State Bank of India was constituted on 1 July 1955
II. Complex interest rates
III. Government adopted the system of planned economic development

50
Banking Sector
Evolution and growth
1985-1990: Consolidation phase
I. Lack of professionalism and transparency: Average return on assets in the second half of the 1980s was only about 0.15%, while
capital and reserves averaged about 1.5 per cent of assets. Given that global accounting standards were not applied, even these
II. indicators are likely to have exaggerated the banks true performance. Further, in 1992/93, non-performing assets (NPAs) of 27
public-sector banks amounted to 24 per cent of total credit, only 15 public- sector banks achieved a net profit, and half of the
public-sector banks faced negative net worth.
III. Series of policy initiatives taken with objectives of consolidation of banks: Understanding the fact that a sound banking system is
a must for development of every economy, the then government thus initiated the 'Banking Sector Reforms'. The first step
towards these reforms was taken in 1989 by setting up of Narasimham Committee.

1991 onwards: Reformatory phase
The year 1991 which is also called as the year of 'Banking Sector Reforms' opened the gates to the private sector & to foreign banks
which in turn significantly increased the level of competition . Seven new private banks entered the market between 1994 and 2000. In
addition, over 20 foreign banks started operations in India since 1994. By March 2004, the new private sector banks and the foreign
banks had a combined share of almost 20% of total assets.
In addition to above recommendation the other major contributors to the revamping of the banking sector was the progressive
lowering of SLR & CRR, introduction of Basel Norms, , deregulation of interest rate, redefining of priority sectors, Golden Handshake
Scheme & merger of the week banks with the stronger banks.

51
Banking Sector
Structure today
52
Banking Sector
The Rising Sun of Indian growth story
Current standing and Key features
I. The Indian banking industry has its foundations in the 18th century, and has had a bumpy evolutionary growth path since then.
The industry in recent times has recognized the importance of private and foreign players in a competitive scenario and has
moved towards greater liberalization
II. In todays scenario, Current and saving accounts (CASA) are the banks lifeline for profitable growth, but during FY2012 high
interest rate choked them of such deposits, slowing expansion to a five-year low of 7%
III. Credit growth of the Scheduled Commercial Banks (SCBs) slowed down to 18.10%1 on FY2012, which was 22.90% in FY2011 on
account of the slowdown of the general economy. It is expected that the credit growth in FY2014 will be in the range of 16-18%2
as there is increasing demand for working capital loans and refinancing of FOREX loans by Indian corporates
IV. The growth of total deposits of the (SCBs) stood at 14.92% on FY2012, Vs 18.31% in FY2011. The deposit growth is expected to
moderate to 14-17% over FY 2013-15 with stable Net Interest Margins (NIM). NIM of SCBs in FY2012 was 2.90% on average
V. In the present competitive scenario, Private banks are targeting the faster growing retail loans and also improving the growth rate
in fee income by increasing transaction fees, where as Public Sector Banks are targeting to push for higher recoveries and
upgrades in Non Performing Loans (NPL) and also improving their deposits mix by reducing the share of bulk deposits
Current players
I. Indian banks consist mostly of Scheduled commercial bank (SCBs), which includes both Public Sector Banks, and the Private Sector
Banks. In Public Sector Banks, the government must retain a 51% stake
II. Old Private sector banks are those banks which were not nationalized at the time of bank nationalization that took place during
1969 and 1980. Most of the old private-sector banks are closely held by certain communities and their operations are mostly
restricted to the areas in and around their place of origin. e.g Federal Bank, Dhanalaxmi Bank, ING Vysya Bank
III. New private sector banks include those that were established in the past twenty years such as Yes Bank, Axis bank and existing
institutions that were converted into commercial banks, such as the former development institution ICICI and specialized lenders
such as HDFC
IV. Cooperative banks are small-sized units registered under the Co-operative Societies Act., that essentially lend to small borrowers
and businesses. Eg. Punjab & Maharashtra Co-op. Bank Ltd., New India Co-op. Bank Ltd
V. Regional Rural Banks are mainly focused on the agro sector. These banks are in every corner of the country and extend a helping
hand in the growth of the country. Eg. National Bank for Agriculture and Rural Development (NABARD), Haryana State Cooperative
Apex Bank Limited
53
Banking Sector
Financial Products

54
Banking Sector
Financial Products

Retail Banking
I. Typical mass-market banking in which individual customers use
local branches of larger commercial banks. Services offered
include savings and checking accounts, mortgages, personal loans,
debit/credit cards and certificates of deposit (CDs)
II. Retail banking is a buzzword in India that focuses strictly on the
consumer market. Most bank have retail portfolios as part of their
total lending portfolio (18.4% on average). This sector has been
growing at a high rate of 30 to 35% per annum
III. As per a survey conducted by CLSA, Consumer credit penetration
is only 8% of the GDP in India, which is expected to rise further
quickly
IV. The growth is mainly led by growth in credit card receivables and
other personal loans
V. Housing loans continued to constitute almost half of the total
retail portfolio of banks
Wholesale Banking
I. Wholesale banking provides services to large corporate bodies,
mid-sized companies, international trade, other banks and financial
Institutions. This service contributes 30% to India's total banking
revenues, with ROE in the range of 15% to 30%
II. From $16 billion in FY 2010, wholesale banking revenues are
expected to rise to a whopping $35 billion to $40 billion by FY 2015
III. To sustain Indias economic growth, the Planning Commission
therefore envisages that $1 trillion (about 10% of GDP) will be
spent on infrastructure during the 12th plan from 2012 to 2017
IV. Infrastructure development, simplified FDI and globalization in
Indian Companies are key drivers of wholesale banking
55
Banking Sector
Financial Products

Treasury Banking
I. The core function of a treasury is the measuring, monitoring, and controlling of interest
rate risk (IRR). Typically the department would employ a variety of standard and
proprietary models to measure this risk
II. Traditionally, the treasury function in banks was limited to funds management i.e.,
maintaining adequate cash balances to meet the day-to-day requirements and
deploying surplus funds from operations
III. The scope of treasury has now expanded beyond liquidity management and it has now
evolved as a profit centre with its own trading and investment activity
IV. Treasury activity in a bank depends on its size, complexity of operations, and risk
profile
56
Banking Sector
Looking ahead

Opportunities
I. High growth of Indian economy: The growth of the banking industry is closely linked with the growth of the overall economy.
India is one of the fastest growing economies in the world and is set to remain on that path for many years to come. This will be
backed by the stellar growth in infrastructure, industry, services and agriculture. This is expected to boost the corporate credit
growth in the economy and provide opportunities to banks to lend to fulfil these requirements in the future
II. Rising per capita income: The rising per capita income will drive the growth of retail credit. Indians have a conservative outlook
towards credit except for housing and other necessities. However, with an increase in disposable income and increased exposure
to a range of products, consumers have shown a higher willingness to take credit, particularly, young customers
III. New channels: Mobile banking is expected to become the second largest channel after ATMs. After ATMs, mobile banking is
expected to give another push to this industry growth in a big way; with the help of new 3G and smart phone technology. This can
be looked at as branchless banking and so will also reduce costs. This will help in acquiring new customers, mainly in rural areas
IV. Financial inclusion: Currently, in India, 41% of the adult population doesnt have bank accounts, which indicates a large untapped
market for banking players. Under the Financial Inclusion Program, RBI is trying to tap this untapped market and the growth
potential in rural markets by volume growth for banks. Financial inclusion is the delivery of banking services at an affordable cost
to the vast sections of disadvantaged and low income groups.
Challenges
I. Basel III: As per the norms, banks will have to augment the minimum core capital after a stringent deduction. In this scenario, the
bank would not be supposed to use its earnings to make discretionary payouts such as dividends, shares buyback, etc. The counter
cyclical buffer, achieved through a pro-cyclical build up of the buffer in good times, is expected to protect from system-wide risks
arising out of excessive aggregate credit growth.
II. Increasing non-performing and restructured assets: Due to a slowdown in economic activity in past couple of years and
aggressive lending by banks many loans have turned non-performing. Restructuring of assets means loans whose duration has
been increased or the interest rate has been decreased. The key challenge going forward for banks is to increase loans and
effectively manage NPAs while maintaining profitability.
III. Intensifying competition: Due to homogenous kind of services offered by banks, large number of players in the banking industry
and other players such as NBFCs, competition is already high. Recently, the RBI released the new Banking License Guidelines for
NBFCs. So, the number of players in the Indian banking industry is going to increase in the coming years
IV. Managing Human Resources and Development: Banks have to incur a substantial employee training cost as the attrition rate is
very high. Hence, banks find it difficult manage the human resources and development initiatives.
57
Banking Sector
Exhibits

58
Healthcare
59
The Healthcare Industry in India functions through 5 segments
Hospitals

This sector includes
Government
Hospitals PHCs,
District Hospitals ,
General Hospitals
and Private Hospitals
nursing homes,
mid tier and top tier
private hospitals.

Hospitals account for
71% of the
Healthcare industry
by revenues.

Private sectors share
in hospitals and
hospital beds is
estimated at 74%
and 40%,
respectively.
Pharmaceutical

It includes
manufacture,
extraction,
processing,
purification and
packaging of
chemical materials
for use as
medications. Also
includes Bio-pharma

The countrys
pharma industry
accounts for about
1.4 % of the global
pharma industry in
value terms and 10 %
in volume terms

Generic Drugs form
the largest segment
of this sector with
72% share
Diagnostics

It comprises
businesses and
laboratories that
offer analytical or
diagnostic services,
including body fluid
analysis.

This market is valued
at roughly $800
million and is
growing at a CAGR of
around 20%.

The key growth
products include
haematology,
reagents, molecular
diagnostics (40% of
the market), and
speciality
diagnostics.
Medical
Equipment and
Devices

It includes
establishments
primarily
manufacturing
medical equipment
and supplies

Indias medical
devices market was
worth $3 billion in
2011 and grew at
roughly 15 per cent
annually in that year.

It is expected to
grow at a 16 per cent
compounded annual
clip during the 2010-
2015 period.
Medical
Insurance

It includes health
insurance and
medical
reimbursement
facility, covering an
individuals
hospitalisation
expenses incurred
due to sickness.

The health insurance
market is expected
to grow 32.5% in the
next few years till
2015. The share of
population having
medical insurance is
likely to rise to 20 %
by 2015 from the
present 2%
60
Healthcare
Composition
Shift from
Communicable to
Lifestyle Diseases


Emergence of
Telemedicine

Increasing
penetration
of health
insurance

Export Revenue
Expansion by
Indian
players abroad

Historically communicable diseases have formed a major portion of the overall Indian disease profile. However,
with shift in lifestyles, non-communicable diseases are likely to overtake as the major cause of ailments. In
2006, cardiac, oncology and diabetes collectively accounted for 13% of the hospitalization cases. In terms of
value these three ailments accounted for 36% of the inpatient revenues.
Telemedicine is a fast-emerging sector in India; many major hospitals (Apollo, AIIMS, Narayana Hrudayalaya)
have adopted telemedicine services and entered into a number of PPPs. In 2012, the telemedicine market in
India was valued at USD7.5 million, and is expected to rise at a CAGR of 20 per cent, to USD18.7 million by 2017.
Telemedicine can bridge the rural-urban divide in terms of medical facilities.
With less than 15% of the Indian population covered by some form of health insurance, which includes
Government-sponsored schemes, the majority of BPL families are unable to access healthcare facilities. In such
cases, health insurance can ensure the poor have better access to healthcare. From under 2% of the total
population in 2005 to more than 20% (expected) in 2015-16, Healthcare insurance has grown a long way.
The pharmaceutical export market in India is thriving due to strong presence in the generics space.
Pharmaceuticals Exports Promotion Council expects pharma exports to reach USD25 billion in 2016 from the
present level of US $14.6 billion. The Government has also planned a Pharma India brand promotion action
plan spanning over a three-year period to give an impetus to generic exports.
Drug manufacturers are currently the most aggressive overseas investors of all Indian industries. They are
pursuing foreign acquisitions due to their need to: - Improve global competitiveness - Move up the value chain
- Create and enter new markets - Increase their product offering - Acquire assets and new products
- Consolidate their market shares - Compensate for continued sluggishness in their home market. 61
Healthcare
Emerging trends
Increasing Spend on Healthcare: The government should step up its spend on healthcare from a current
low
of 1% of total GDP, to 3%.

Health Insurance: The focus of the government should be on the increase in penetration and access of
health insurance.

Improvement in infrastructure: All forms of infrastructure, medical, educational and physical, need
improvement through PPP programmes.

Innovation: Work towards the launch of made in India novel drugs.

Creating enabling policies and regulatory framework for the launch of innovator products: Focus on
price monitoring rather than price control, along with resolution of data exclusivity laws will help in
increasing confidence among foreign companies.

Out of the box thinking: Expansion into the high potential rural and peri-urban markets will require an
out of the box thinking to tailor strategies to fit these markets. Companies will be required to build a
networked operational model with various stakeholders in order to squeeze

Using technology to increase efficiency: Technology capabilities can be used to increase efficiency across
the value chain, and increase medical services accessibility. An example of this is the Telemedicindia
project that has been set up by the School of Telemedicine and Biomedical Informatics, SGPGIMS,
Lucknow, India, and Sony.
62
Healthcare
Critical success factors
Sector is growing at a rapid pace with a CAGR of 15% Hospitals form a huge chunk of this sector
Government Hospitals spending on Healthcare has come down considerably, Top Tier hospital shares by comparison have
seen a significant improvement
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Healthcare
Additional insights
Per Capita expenditure on healthcare to rise up 35%
from current levels
Trend points towards an increase in the cases of
lifestyle diseases
Supportive Government Policies have resulted in a large
volume of FDI coming in
Private Hospitals have shown a growth rate of 26.9%
CAGR fuelled by growth in Tier II and III towns
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Healthcare
Additional insights
Presence of world-class hospitals and skilled medical professionals has strengthened Indias position as a
preferred destination for medical tourism (For e.g. Wockhardt, a major Hospital Chain has a performed in excess
of 20000 surgical procedures with a 98% success rate (surpassing US and EU standards)

Medical tourism market is expected to expand at a CAGR of 27 per cent to reach USD3.9 billion in 2014 from
USD1.9 billion in 2011

Inflow of medical tourists is expected to cross 320 million by 2015 compared to 85 million in 2012

Yoga, meditation, ayurveda, allopathy and other traditional methods of treatment are major service offerings
that attract medical tourists from European nations and the Middle East to India
The growth in the
sector is underscored by
the cost advantage that
India provides to
patients from
developed countries.
Notably, India also
attracts medical tourists
from developing
nations due to lack of
advanced medical
facilities in many of
these countries
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Healthcare
India an emerging destination for Medical Tourism
Growing at a CAGR of 17.4%, the industry is expected to
reach 36 billion USD by 2016
Net exports have grown more than 4 fold over the last 7
years (CAGR = 22.6%)
Pharma sales to constitute 27% of sales up from 18.9%
in 2008
With 72% of the pharma sales being driven by Generics, it
is clearly the single largest segment in the pharma industry
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Healthcare
Pharmaceuticals a major growth story
Healthcare Infrastructure: Number of hospitals, including primary health centres, dispensaries in India is estimated at over
200,00046 with total bed capacity of around 900,000. The bed capacity in terms of population is lower at 89 per 100,000 persons,
as compared to many other developing countries. India needs to increase its bed capacity by at least 100,000 in the next 5 years to
catch up with China.

Low Spending on Healthcare: India spends roughly 4.8% of its GDP on healthcare, far less than advanced countries.
Government accounts for roughly 1/4
th
of this infrastructure.

Accreditation: Although, India has established a national accreditation system for healthcare establishments, very few hospitals
have applied for accreditation. There are only few hospitals that have been accredited by international agencies such as Joint
Commission International.

Low Level of Medical Insurance Coverage: Major reasons for low penetration of commercial health insurance include low
level of innovation in health insurance products, exclusions and administrative procedures governing the policies, and chances of
covariate risks, such as epidemics, which keep the premium high.

Negative Perceptions: The negative perceptions about India, with regard to public sanitation / hygiene standards, prevalence of
contagious diseases in India, quality of healthcare services provided in public sector hospitals, and wastage management practices
adopted in India, counter the positive vibes created by the cost competitiveness of Indian healthcare system

Shortage of Hotel Accommodation: The availability of hotel rooms is considered to be lower as compared to other countries.
In addition, the cost of accommodation and dual tariff system are also hindrances to international travellers visiting India.

Shortage of Medical and Para-medical Staff: There is a shortage of qualified specialist nurses and paramedical professionals
as also qualified hospital administrators. Number of nurses per doctor in India is estimated to be 1.33, as compared to 5.27 in UK
and 4.67 in Canada.
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Healthcare
Major challenges
Contributors
Prajata Das Chowdhury
FMS Delhi Batch 2014
prajata.c14@fms.edu

Aparajita Puri
FMS Delhi Batch 2014
aparajita.p14@fms.edu


B Queenie
FMS Delhi Batch 2014
queenie.b14@fms.edu


Keshav Jangra
FMS Delhi Batch 2014
keshav.j14@fms.edu


Mahesh Shetye
FMS Delhi Batch 2014
mahesh.s14@fms.edu


Vinay Prithiani
FMS Delhi Batch 2014
vinay.p14@fms.edu

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Special thanks:
Jayshree Jain, FMS Delhi Batch 2014