India Forum insights 2020

Forum presentation writeups, from CLSA Sales

Forum insights is a compilation of informal notes written by our sales

team that summarises all companies and expert speakers, as well as
CLSA webinars.

Day 1: Tuesday, 17 Nov 2

Day 2: Wednesday, 18 Nov 6

Day 3: Thursday, 19 Nov 11

Day 4: Friday, 20 Nov 15

Warning: This document is a compilation of writeups by sales/trading person(s) and not research analysts. It does not constitute research, nor should it
be interpreted as such, and is not intended to provide professional, investment or any other type of advice or recommendation. The views contained
in this document are the sales/trading person’s personal views, or the sales/trading person’s understanding of the company’s view, which may or may
not differ from the official views and interests of CLSA, including the views of the investment research department. See important notice on the final
page of this document.

 
  
 Day 1: Tuesday, 17 Nov
Forum presentation writeups, from CLSA Sales

Day 1 - Thematic webinars - India macro and ESG (17 Nov 2020)
12:30-13:25: Eric Fishwick, CLSA Chief Economist: 19:30-20:25: Natarajan Chandrasekaran, Chairman of
Rhyme and reasoning, second verse [Alex Oldfield] Tata Sons: Digital India & employment issue [Shant
Manoukian]
17:30-18:25: Gurdeep Singh, Chairman of NTPC;
Santhosh Jayaram, Global Leader, Sustainable Supply 21:30-22:25: Sanjeev Sanyal, Principal Economic
Chain Services of KPMG; Mahendra Singhi, MD & Advisor, Ministry of Finance, Government of India:
CEO, Dalmia Cement: ESG panel: India in a warming Reinvigorating Indian economy [Swagatam Biswas]
world [Damian Dwerryhouse]

 

 

Eric Fishwick, CLSA Chief Economist: Rhyme and
reasoning, second verse
[Sales writeup produced by Alex Oldfield]
Eric Fishwick reiterated his view that today’s economic
outlook remains very similar to the period after the
GFC at the 23rd CITIC CLSA India Forum. Although
YoY growth will appear to be V-shaped in 2021, the
post Covid rebound will leave a large output gap. He
expects Asia ex-Japan’s 2021 GDP to remain 7% below
the pre-Covid trajectory.
In the short term, the current reflation trade is
underway, reinforced by vaccine developments. Eric
expects the Treasury curve to continue to steepen and
US dollar to continue to weaken here, a positive for
emerging markets (EMs). However, EMs have only
recently exited Covid and are in a rebound period
when data improves fastest. In developed markets, we
are entering the second wave and there will be double-
dip recessions as services are shut down again.
Forecasts for 4Q20 growth will need to be cut.
Importantly, these markets are the key drivers of global
demand, with the Eurozone accounting for 25% and
USA for 14% of import volumes. Eric is also seeing
evidence of minimal pricing power, both in the service
and manufacturing sectors, resulting in inflation
undershooting current expectations.
In the medium term, Eric sees potential for an inflation
headfake (as commodity prices rise and oil rises
towards 50) but these commodity price effects will
reverse as the global growth rebound falters and
downstream/core price inflation remains absent. He
also believes any credit/monetary surge will be a one-
off as credit multipliers remain dysfunctional. The key
implications of this outlook are: low facilities
investment, which is already showing up in CRR’s
future investment plans SME survey; credit cycles will
be muted; loose monetary policy will persist, with
inflation as a goal and yield curves remaining flat; and
nominal growth will be weak.
Eric’s Asia ex-Japan GDP forecasts are also a rhyme of
the GFC and a V-shaped recovery in 2021 is inevitable
(due to powerful base effects), but this peters out
organically in mid-2021 and 2022 should slip below
trend. Inflation will show a headfake hump and
monetary easing will continue with tightening
happening “sometime never”. The US dollar will be
softer until mid-2021, but then the attraction of its
safe-haven status will reassert itself, leading it to
strengthen again.
In India, the dip in growth was more extreme than any
other country we have forecast, driven by the very
severe lockdowns. This resulted in a fall of the Markit
services PMI for April to just 5.4. However, the
rebound is correspondingly vigorous and does not
India Forum insights 2020
depend on the credit cycle. Eric believes inflation will
fall back towards the Reserve Bank of India (RBI) target
and monetary policy will be eased further. The post-
Covid environment of low inflation, low global growth
and loose global liquidity should favour India as it has
high trend growth and is internally, rather than
externally, driven.
Gurdeep Singh, Chairman of NTPC; Santhosh
Jayaram, Global Leader, Sustainable Supply Chain
Services of KPMG; Mahendra Singhi, MD & CEO,
Dalmia Cement: ESG panel: India in a warming world
[Sales writeup produced by Damian Dwerryhouse]
ESG and, moreover, incoming EU disclosure
regulations coming into force in 1Q21 have been
keeping many fund managers awake in 2H20. These
concern how they disclose sustainability risks as part
of their investment decision-making process and how
their investment decisions impact sustainability
factors. It goes without saying that ESG and
sustainable investing are moving to the top of investor
priority lists.
On Day 2 of our CITIC CLSA India Forum, our well-
versed panel comprised corporate CEOs Gurdeep
Singh, chairman of NTPC; Mahendra Singhi, CEO of
Dalmia Cement; and Santhosh Jayaram, global leader
in sustainable supply chains at KPMG. India, home to
some of the most polluted cities and water systems
globally, is no doubt starting from a low base, but is
fully signed up to the Paris Climate Change Agreement,
pledging by 2030 to reduce emissions intensity of GDP
to 33-35% below 2005 levels and to raise the non-
fossil fuel share of cumulative power generation
capacity to 40%. It is on track to meet this
commitment. With the power generation and cement
sectors comprising 50% of emissions, who better to
have on the panel than India’s largest power producer
NTPC (62 GW) and Dalmia Cement, now renowned as
a “climate defender” and pioneering the way globally
toward net-zero emission cement production by 2040.
NTPC provides reliable and affordable power to India,
but also aims to be a clean and green utility pioneer via
ambitious emissions reductions and a sustainable
energy transition programme. By using cleaner fuel
sources, Denox technology, and increasing renewable
generation capacity (ie, solar, hydro, green hydrogen)
to 30% of the mix by 2030, it will meet India’s growing
power needs in a reliable, affordable, cleaner and
sustainable manner. It has also committed to not
acquire any new land for new coal-powered plants
moving forward. As well, it will reduce water
consumption using condenser technology. In addition,
as part of the circular economy, it recently announced
the development of a new aggregate from waste Fly-
 

 

Ash that can be used for affordable housing. It is also
redeveloping old plant sites into eco parks, such as the
Badarpur Plant site in New Delhi by 2022 (larger than
Central Park), with as many as 200,000 new trees to
be planted and creating local employment
opportunities. So NTPC is working at both ends of the
net reduction spectrum to meet its goals. On Solar,
NTPC targets 30GW by 2022 via construction of mega
solar parks in conjunction with multiple state local
governments across India, and it believes that green
hydrogen will be a real game changer.
Dalmia Cement is now internationally recognised as a
global leader in green & energy-efficient cement
manufacturing, with a carbon footprint of 465 CO2 /T
versus global average of 900 CO2/T. It is targeting net
negative emissions production by 2040 whilst
reducing its costs by 40% over the same period – a
win-win for both the environment and profitability. It
aims to achieve this by using 100% renewables and
doubling energy productivity by 2030 (via use of
biomass waste to replace all fossil fuels/raw materials).
Dalmia is also looking to improve water conservation
by 20x by 2035. As well, it will sell CO 2 credits. All of
this will lead to cleaner and greener production whilst
being more profitable and sustainable. It is well on
track to meet its goals, partnering with numerous
international climate change agencies (to provide a
focused approach and find solutions). Dalmia is also
looking into planting government waste land with
bamboo to offset emissions.
KPMG’s Santhosh Jayaram has been active in ESG for
over 25 years and helps corporates remodel their
supply chains in a sustainable manner. He has seen the
debate change from protecting the planet to
protecting humanity. It is clear that the amount of
global money invested in ESG/sustainability principles
is growing rapidly in both the public (estimated
US$100tn) and private markets. Green funding via
loans and bond issuance is also rising in prominence
and scale. Most importantly, however, there is clear
evidence that ESG-based funds are outperforming
benchmarks; this is getting increasing attention, with
many FF-based or polluting sectors being dropped
from coverage or no longer meeting investment
criteria. Put succinctly, ESG issues are on a rising trend
for both corporates and investors alike, and this will be
an important driver of performance moving forward.
There are significant market opportunities in building
energy efficiency (US$12.5bn by 2025), water
management (US$25bn by 2025), and energy and
material efficiency (US$4bn by 2025) in India, which as
a country has a strong incentive to clean up to attract
global investment. The drive for a circular economy,
creating maximum value from output, will also be an
important part of the story. Of current emissions, 55%
are from energy and 45% from products; whilst the
former will be resolved by rising renewables, the latter
India Forum insights 2020
will be by the circular economy (45%) and carbon
capture, storage and dietary shifts/consumer
behaviour (55%). Waste-to-energy is a US$500m
market in the next five years, recycling US$2bn, co-
processing US$120m, and bio-renewables US$25bn
(5,000 bio-gas plants). So there are huge opportunities
out there, and the early movers will benefit most.
This thematic is only just beginning and will gain in
prominence. We point toward some of the excellent
work done on ESG by our Indian research team this
year and on NTPC (by Bharat Parekh). However, it is of
interest from the above panel discussion that many of
the companies currently being shunned by the market
are most pivotal to the problem. Surely, if they are
affecting the change required, they deserve our help
and support.
Natarajan Chandrasekaran, Chairman of Tata Sons:
Digital India & employment issue
[Sales writeup produced by Shant Manoukian]
Prior to becoming chairman of the board of Tata Sons,
Natarajan Chandrasekaran helped create TCS - one of
India’s most innovative and successful companies - so
he knows a thing or two about execution and success.
His book, Bridgital India, is a well-timed discussion as
the country is at risk of squandering its much-envied
demographic dividend. He firmly believes that
technology and policy must come together (and does
so now) to forge a better future for all.
India has a “missing middle”. Despite 1m people
coming into the job market every month, India faces an
acute shortage of capacity and resources to employ
them. University graduates settle for menial jobs, while
the poorly-educated remain trapped in the informal
economy and struggle to rise to the challenge.
The solution: Policy needs to change to allow
technology to thrive. For example, why does the law
still require doctors to be physically present to hand
out prescriptions to patients? Add to the mix a more
balanced educational system that moves away from
tertiary and towards primary/secondary/vocational,
and the right environment will be created to allow
technology to bridge the missing-middle gap.
Importantly, this pivot towards technology will not
come at the cost of jobs. Natarajan argues that, in
India, there are hundreds of millions of people who are
not being serviced, so the use of technology will
actually help create new markets and not necessarily
displace old ones. He emphasises that it is technology
that empowers low-skilled workers to become skilled.
He cites examples across industries, but most notably
in health and education. Specialised doctors can be
 

 

sitting in Mumbai and with the help of low-skilled local
individuals to offer medical advice to rural
communities. Meanwhile, in schools, technology can
give children access to compelling content never
available before. And if there has been one saving
grace from the pandemic, it is that it has demonstrated
how adaptable people are to adopting technology.
When 5G eventually arrives in India, it will serve to
further accelerate the process. Technologies that were
previously thought to be redundant will be brought
back to life. And while India has struggled in the past
to create an innovate platform, Natarajan firmly
believes India’s time is nigh.
Sanjeev Sanyal, Principal Economic Advisor, Ministry
of Finance, Government of India: Reinvigorating
Indian economy
[Sales writeup produced by Swagatam Biswas]
A familiar face to investors, Sanjeev Sanyal is known
for his candour and concise answers to difficult
economic questions. On Day 2 of our India Forum, he
outlined a barbell strategy to tackle Covid-19 and the
resulting economic disruption. On one hand, India
adopted an extreme lockdown approach, buying time
to assimilate knowledge from other countries and to
upgrade testing capability and medical assistance
availability. On the other hand, calculated risks were
taken with a phased economic reopening.
In the interim, on-demand food was available for close
to 800m people, moratoriums were provided on debt
and additional protection was provided to the most
vulnerable businesses. This approach helped keep
death rates among the lowest in the world. The
government had neither unlimited resources nor the
intention to provide a big top-down stimulus - as
Sanyal says, ‘We didn’t want to press on the
accelerator while one foot was firmly on the brakes.’
As most of the economy started reopening in late
August and early September, demand came back in full
force. Forex reserves grew in the interim, with the
rupee appreciating (actively controlled by the Reserve
Bank of India). Macro stability is apparent. Some rates
have been cut, but not in a runaway fashion, keeping
ammunition for the future.
India Forum insights 2020
To stoke demand, authorities are open to fiscal
stimulus in a targeted fashion. Sanyal gave examples of
how there have been offers to pay pension
contributions for businesses willing to rehire
employees. Production-linked incentives announced a
fortnight ago were designed to build resilience to
enable Indian manufacturing to effectively target
global supply chains.
The government’s approach has been to target supply-
side reforms – a contrast with most nations that opted
to fuel the demand side. Sanyal highlighted reforms in
business process outsourcing and information
technology enabled service (ITES), where outdated
telecom regulations were eliminated.
He feels it is naive to try to reinflate the post-Covid
economy to pre-Covid levels. Instead, we should look
at permanent habit changes that can drive business
behaviour. Front-office outsourcing is a clear
opportunity for India, given the availability of skilled
labour in all fields that can operate on the other side of
a video call – accounting, legal and many more. ITES
reforms are a supply-side push in that direction. As
Sanyal summed up, ‘We are supply-siders. We will give
demand stimulus; calibrated monetisation would be
followed. I am not a believer in “helicopter money”.’
Sanyal led a lively Q&A, highlights include: Most of the
country is seeing stabilisation of Covid-19 infections
so a nationwide lockdown is unlikely anytime soon.
India will likely bulk up, with mass production of
vaccines likely (for example, Dr Reddys will likely
manufacture vaccines for Russia). It is also preparing
logistics for the mass distribution of vaccines. In terms
of land reforms, land acquisition is not difficult for
infrastructure projects. It gets tricky when it comes to
acquiring land for manufacturing. Some states such as
Uttar Pradesh are doing this well. Public-sector
undertakings land is being opened up for businesses
seeking land to set up manufacturing. Land records are
being digitized: Farmers are getting land cards. On the
Regional Comprehensive Economic Partnership, India
has not signed up with China, but trade agreements
have been signed with lot of other countries -
geopolitical concerns are important and should be
considered. There have been efforts to be included in
global bond indices while managing the rupee and
Sanyal believes inflation spikes are not a concern;
rather, they are typically a process of economic
normalisation.
 

 
 Day 2: Wednesday, 18 Nov
Forum presentation writeups, from CLSA Sales

Day 2 - Thematic webinars - Disruption (18 Nov 2020)

12:30-13:25: Naveen Munjal, Managing Director,
Hero Electric Vehicles: Two-wheeler electric vehicles
- are we finally at an inflection point? [Anosh
Koppikar]
17:30-18:25: Dhruv Suyamprakasam, Founder & CEO
of iCliniq.com; Rajiv Gulati, Independent Pharma
Consultant: Healthcare panel: Evolution of the
healthcare delivery ecosystem over the next five
years [Nishant Kumar]
19:30-20:25: Lizzie Chapman, Co-Founder and CEO
of ZestMoney: Emerging fintech disruption [Shant
Manoukian]
20:30-21:25: Asian Paints - Company updates
[Nishant Kumar]
21:30-22:25: Himanshu Bajaj, Senior Partner of AT
Kearney; Rajat Tuli, Senior Principal of AT Kearney:
Retail consolidation & FMCG moat [Carl Reading]

 

 

Naveen Munjal, Managing Director, Hero Electric
Vehicles: Two-wheeler electric vehicles - are we
finally at an inflection point?
[Sales writeup produced by Anosh Koppikar]
On Day 2 of our virtual CITIC CLSA India Forum, we
welcome electric-bike pioneer Naveen Munjal to share
with us the latest updates in this exciting space. Munjal
is the managing director of Hero Electric Vehicles, a
dominant player, which is helping to drive the
electrification of India’s two-wheelers. From humble
beginnings, Hero now has 33% market share and is the
largest pan-India brand with over 500 touchpoints.
In exploring the industry overall, Munjal explained that
EVs have superior economics to traditional internal
combustion engine (ICE) in terms of the life of the
vehicle, power/torque and experience of riding and
maintenance costs. The upfront cost is the main
consideration. He also stated that disruption has
already begun and the industry is at an inflexion point.
There are massive tailwinds for electric mobility such
as the 85% fall in battery prices since 2010 and
policymakers have been supporting the need for
cleaner mobility in response to the targets set for
2030.
The opportunity in India is due to its size. The country’s
EV journey will ride on two-wheelers given its massive
market, the ability to get electrified easily and the
strong economic argument. Electric two-wheeler
penetration could be 10-20% by FY25, which equates
to 2-4m unit sales or Rs125-150bn. The breakdown by
type is: city speed 40-50%; low-speed 25-35%;
motorcycles 10-15%; and high-speed 10-15%. Low-
speed and city-speed e-2Ws offer 20-40% lower total
cost of ownership (TCOs) versus ICE 2Ws - naturally
that is where the opportunity lies.
Government policies are driving a positive change.
Potential headwinds include a lack of awareness, a lack
of financing, price acceptance, poor product and
service, and finally a mismatch between expectations
versus performance.
Dhruv Suyamprakasam, Founder & CEO of
iCliniq.com; Rajiv Gulati, Independent Pharma
Consultant: Healthcare panel: Evolution of the
healthcare delivery ecosystem over the next five
years
[Sales writeup produced by Nishant Kumar]
This expert panel session at the 23rd CITIC CLSA India
Forum provided eye-opening and refreshingly hopeful
insights on the innovative and disruptive healthcare-
delivery models that could help the country (where
India Forum insights 2020
healthcare spending is less than 4% of GDP) catch up
with other nations.
India’s healthcare lags World Health Organization
metrics significantly. Rajiv Gulati, a pharma expert,
believes the biggest challenge is that 50% of the
population has no access to a doctor or pharmacy.
India is an out-of-pocket payment country (ie, families
must sell assets to treat a critically ill member, often
falling below the poverty line in the process).
Telemedicine and ePharmacy are solutions that have
been working very well and the government is also
onboard to adopt these methods for low-cost
healthcare.
The ePharmacy discounts have been a growth lever
historically, and the lockdown provided a small boost
as retail pharmacies stepped in to supply medicine via
phone call. The biggest pharmacies were losing money,
and this has become a fundraising game with
consolidation now happening (eg, Reliance Industries
bought NetMeds; 1mg sold to Tata; Pharmeasy merged
with Medlife). Margins improved from 20% when they
bought from retailers to 24% from wholesalers; there
is potential to move to 28% when purchasing directly
from a company. Ways to make ePharmacies profitable
include: reducing discounts from 20-25% currently to
15% once a paradigm is established; moving from Rx
Gx to Gx Gx (Rx = branded generics/Gx = unbranded
generics), which could mean more money for both
customers and pharmacies; creating private label
brands; and data monetisation through millions of
generated prescriptions (ie, predict brand/molecule or
doctor switching, progression of diseases, educating
pharma companies to understand drug sales by
demographic).
Dhruv Suyamprakasam, founder of iCliniq, spoke more
on telemedicine with a greater focus on international
markets. The focus on India came on 25 March when
the government proactively brought in regulations.
Suyamprakasam says accessibility, affordability and
quality are the three tenets of any healthcare system
that can be well-addressed using telemedicine.
Many leading players are providing telemedicine for
free and making money crossselling other services like
diagnostics. However, this cannot be sustained. Two
initiatives to improve the three tenets are: Swasth is an
in-app doctor consultation initiative to progress
telemedicine in India; Bharat Health Stack (BHS) –
touted as Unified Payments Interface (UPI) for
healthcare – would connect customers to a network of
doctors, clinics, and hospitals to, lower the cost of
insurance claims, move patient records online, and be
interoperable between hospitals. It is even better in
terms of compliance as customer cannot get medicine
without a doctor’s prescription (a practice that is usual
in physical pharmacies).
 

 

The Q&A featured lots of discussion on telemedicine
and ePharmacies. Major regulatory support was a
highlight as the government now understands that
doctors are not going to villages/small.
Suyamprakasam thinks that is the way forward, and
even hospitals may become telemedicine hotspots. A
“futuristic” example: Binah.ai – a digital diagnostics
company iCliniq is working with – can even measure
stress levels using a camera (though it is expensive for
now). Data privacy and security are areas in which
India needs to learn from other countries when it
comes to digitising health records. Meanwhile,
generics need to be bioequivalent to the original drug
for the first four years and can get an easy approval
post that (without approving bioequivalence).
Lizzie Chapman, Co-Founder and CEO of ZestMoney:
Emerging fintech disruption
[Sales writeup produced by Shant Manoukian]
Lizzie Chapman is a veteran in the emerging fintech
arena, she is co-founder and CEO of ZestMoney,
India’s largest and fastest-growing consumer online
lending company. Drawing from her experience in
building global fintech businesses around the world,
she gives us four reasons why India offers the best
opportunity at the 23rd Annual CITIC CLSA India
Forum.
Data consumption has been up four-fold in as many
years and India is digitising at an exponential pace. By
and large, the country has leapfrogged the PC straight
to the smartphone, where content is being absorbed.
Second, the government rolled out a unique
infrastructure five years ago that introduced a Unified
Payments Interface (UPI) across India, allowing digital
transactions across all banks and consumers. Post-
demonetisation, consumer payment behaviour has
undergone a vast change: ie, more comfort with online
payments for daily expenses. Covid-19 has accelerated
this behaviour with US$2tn transacted in October.
Unlike traditional rails (ie, Visa, MasterCard, Amex),
these are free to access and therefore threaten
incumbents’ very existence. But their demise is Zest’s
opportunity as the cost of transactions falls and
lending opportunity opens up.
Chapman’s third reason is that there are over 300m
households in India, yet 70% of all formal credit is
going to just the top 24m. The next rung of c.200m
middle-class households is their target market where
they feel there is a US$610bn opportunity.
Finally, the fourth reason is a favourable regulatory
environment working closely with the banks to extend
credit where it is needed.
India Forum insights 2020
As demonstrated by the explosive UPI growth, India’s
digital payments market has already taken off, clearing
a path for consumer credit. Zest’s technology platform
has not been slow to capitalise. It allows the user to set
up an account, upload details, agree to credit limits and
automatic repayments, and then spend across
thousands of Zest’s partners (eg, retailers, education,
insurance, etc). Loans are then paid back in equal
monthly instalments.
Zest’s comparative advantage lies in technology and
the lack of a physical branch network. Its operational
costs are significantly lower than banks, yet by
partnering with banks, it is able to source a cheaper
cost of capital. Therefore, in the same way that
Hindustan Lever opened up the rural economy with its
5ml sachets, Zest is opening up new markets with its
loans as low as just Rs500.
This approach does have risk, though where it lies (ie,
with the banks or with Zest) was not discussed.
Chapman was keen to stress that with data analysis,
diversified loan books, and visible credit scoring, risks
were being mitigated.
Asian Paints - Company updates: R J Jeyamurugan,
Chief Financial Officer and Company Secretary;
Parag Rane, GM, Finance; Arun Nair, Manager of
Corporate Communication
[Sales writeup produced by Nishant Kumar]
Interest in Asian Paints is strong, which is why we
converted from a small-group meeting to a webinar. In
times when the building materials sector has been on
a tear – not only in India but globally – there couldn’t
have been a better company to get an understanding
of the trends going ahead. The company has 50+ years
of leadership in India with 150K+ retailers serviced
directly and is 3x larger than the nearest competitor.
We revisited the market conditions that prevailed in
India during the lockdown. GDP fell by 24% YoY in Q1
but conditions improved in Q2 as the lockdown was
lifted incrementally.
The company saw 11% volume growth in 2Q for the
decorative business. Demand recovery was centered
around economy, premium & some luxury ranges with
strong response to ‘Safe Painting’ services. Strategy to
strengthen the Décor play with introduction of
offerings in lightings, furnishings & furniture continues
to play well. GMs were supported by stable input
material prices as well as they continued to work on
driving sourcing/formulation efficiency. On the
international side, volume growth picked up across
markets in 2Q (except Nepal where restrictions were
still in place due to Covid).
 

 

Management guidance over festive season
sustainability was uncertain and would like to wait.
However, global recovery could support the export
sector in India. Expect rural to do some of the heavy
lifting given the good monsoon. Although stable
currently, currency & raw material prices need to be
monitored continuously.
Q&A was jam-packed. Highlights below:
Strategic shift to home décor & services, was set in
motion more than five years ago. Under AP homes –
they train contractors, enable 3D previews for
consumers & provide execution services – all under a
single roof. Today 13-14 shops in the country & have
seen tremendous response as customer gets
everything in one place.
q On market share & growth opportunities - capacity
utilisation is at c.65%. Operating leverage will kick-
in as capacity ramps up.
q Could be second-order beneficiary of
manufacturing base shifting to India. Could provide
boost to industrial segment but need to see how
this plays out.
q Upgrading the customer on repaint has been
another central theme as they’ve tried to move
customers from distemper to emulsion products.
q On waterproofing segment, it has 70-80 products
for various solutions. Sourcing the premium range
but manufacturing others in own plants to explore
synergies.
q On ESG, US/EU as a benchmark. Many premium
products already meet US/EU benchmarks. Actively
try to work towards end-to-end ESG initiatives
internally.
q For rural-urban split, it sells premium & luxury
segments in rural as well (company classifies tier
2/3 towns as rural too).
Himanshu Bajaj, Senior Partner of AT Kearney; Rajat
Tuli, Senior Principal of AT Kearney: Retail
consolidation & FMCG moat
[Sales writeup produced by Carl Reading]
Retail in India is growing fast and changing rapidly, in
particular the groceries segment potential is vast, and
everyone wants a slice of the pie. We hosted the AT
Kearney team at the CITIC CLSA India Forum for a
perspective on retail consolidation and FMCG moats.
The sector is seeing significant disruption with
digitisation of Kiranas (family-owned shops selling
groceries and other sundries), the rapid rise of
ecommerce (D2C and eB2B), and private-label
India Forum insights 2020
companies making market share gains. In addition,
mega distributors such as JioMart are leveraging
digital, which has impacted distributors, retailers,
FMCG companies, and, ultimately, the consumer.
Demographic and economic shifts in income
(especially post Covid-19), along with this surge in
ecommerce, has really impacted the sector. Retail has
adopted technology much faster and on a larger scale
than many other sectors. Ecommerce and D2C
penetration is expected to rise significantly over the
next five years from 0.4% (in 2020) to 3% by 2025,
which is still far behind China (15%) and South Korea
(20%) in terms of their current grocery ecommerce
penetration rate.
Traditional kiranas currently account for more than
80% of the retail market. Given the scale and diversity
in India, there is potential for different formats and
channels to coexist, and even collaborate into better
serving customers, but digitalisation seems to be at the
centre of everyone’s plans. Of the 13m Kirana stores
in India, less than 4% have adopted some form of
digitisation – through ordering platforms, payment,
digital inventory, or collection. However, more than
50% of Kiranas are considering working with tech
providers post-Covid, given the strong impact from
direct online sourcing, efficiency gains, and customer
interactions via WhatsApp-based ordering, digital
kiosks, and online payment facilities. Even offline
brands are now pushing D2C in a big way – though this
does require scale, traditional offline heavyweights
such as P&G, Hindustan Unilever, and Coca-Cola have
launched their own D2C platforms.
JioMart seems to be one of the biggest threats with its
upstream integration of the supply chain, sourcing
leverage and access to data, which gives it a large
competitive moat. Operating in 200 cities and with
400m WhatsApp users, it is looking to capture all parts
of the value chain from farm to fork. The direct
sourcing from farmers has led to dual benefits of
higher margins and fresher products. Similarly, bulk
buying goods from manufacturers gives margin
benefits that are partly reinvested into higher
discounts for JioMart’s customers. Those customers
generate more data, allowing the company to drive its
private label push. Reliance Retail generates 14% of its
revenues from private labels, whereby it leverages its
robust supply chain network and faces fewer barriers
compared to foreign competitors.
However, many new-age brands are becoming a threat
to traditional companies across categories. Look at
Sugar in the personal care space or Pepperfry.com in
furniture retail, which are more nimble in introducing
new products as customer trends change. The
omnichannel approach enables a focus on ecommerce
and helps generate higher engagement with
customers, especially via social media.
 

 

The underlying macro factors that have generated
India’s retail growth in the past 10 years are expected
to continue to grow steadily for the next decade.
Greater purchasing power, a steadying savings rate,
and growing consumerism will continue to generate
India Forum insights 2020
strong sales; however, with product choices and
customer engagement constantly evolving, it will be
fascinating to see how FMCG companies cope with
that threat as the ecommerce battle intensifies.
10
 

 
 Day 3: Thursday, 19 Nov
Forum presentation writeups, from CLSA Sales

Day 3 - Thematic webinars - Post Covid India (19 Nov 2020)

17:30-18:25: Ajay Adlakha, Founder of
ruralmarketing.in & CEO of Infinity Advertising
Services; Puneet Vidyarthi, Director Sales & Product
Marketing of CASE New Holland India; Sanjay
Panigrahi, Independent Expert; Benjamin Mathew,
Head of Strategy of Rural Marketing Consultancy
(MART): Rural panel: Winning the rural heartland
[Gary Hall]
20:30-21:25: HCL Technologies - Company updates
[George Hansom]
21:30-22:25: Jagdish Chandra Sharma, Vice Chairman
and MD of Sobha/Sobha Developers; Vinod Rohira,
CEO of Mindspace REIT; Anuj Puri, Chairman and
Founder of Anarock: India real estate: 2020 & beyond
[Bruce Clayton]

19:30-20:25: Abhay Kelkar, Vice President, Research

& Consulting of CIBIL India: Asset quality & credit
growth [Sujay Kamath]

11

 

 

Ajay Adlakha, Founder of ruralmarketing.in & CEO of
Infinity Advertising Services; Puneet Vidyarthi,
Director Sales & Product Marketing of CASE New
Holland India; Sanjay Panigrahi, Independent Expert;
Benjamin Mathew, Head of Strategy of Rural
Marketing Consultancy (MART): Rural panel:
Winning the rural heartland (Day 3)
[Sales writeup produced by Gary Hall]
The lockdown-induced weakness in urban demand has,
to a certain extent, been offset by a rosier picture for
rural consumption. This has been supported by good
rainfall, higher government procurement of crops, and
better rural spending. Obviously, no one can predict
the weather, but how sustainable are the other
factors? What role can technology play in driving rural
consumption, and what areas have the best growth
potential? Our rural panel sets out to answer these
questions at our 23rd CITIC CLSA India Forum.
Ajay Adlakha, of ruralmarketing.in, began with the rural
marketing opportunity. After an extensive breakdown
of India’s demographics and GDP, he highlighted that
rural communities have experienced large changes in
recent years when it comes to technology and
infrastructure. Internet and smartphone penetration
have increased significantly: there are now 277 million
internet users and 200 million smartphones in rural
India. Even AI is playing a part with automated
intelligent crop monitoring and irrigation systems.
More than 50% of the rural population now has a bank
account. And this is all thanks to government policy
support. That said, this must be put in a cultural
context. India is a very diverse country, so there is a lot
to consider (eg, different languages, dialects, food
habits) when trying to penetrate the rural areas. Rural
sales contribution is over 50% for FMCG, 43% for two-
wheelers, 6% for four-wheelers, 50% TVs and 35%
consumer electronics.
Sanjay Panigrahi highlighted the key reasons for
growth, against all odds, in rural FMCG consumption
this year. A good monsoon has definitely helped, with
not as much flooding as last year. Further Covid-19
government support has also helped. He does not see
demand relocation from urban areas as a major factor,
and as these areas recover, people will move back.
Wholesale demand shifted to rural areas. Rural FMCG
channels remain 85% traditional, 10% modern, and just
3-4% ecommerce. The major categories that are
performing well are health, nutrition, hygiene
immunity boosting, and DIY. Non-essentials have not
done well. Households are looking for greater product
variety, so across the popular categories there have
been 2,000 new product launches. Consumers
continue to buy larger, trusted brands; where they
need to down trade in the same brands, safety and
hygiene are key drivers.
India Forum insights 2020
Benjamin Mathew was asked about new policy around
agriculture and new opportunities. He points out that
since 2018, horticulture has exceeded agricultural
production and adds income to households. The
biggest creator of livelihoods in rural areas is
agriculture, followed by services and industries.
Mathew points out that farmers are moving away from
the traditional ownership model to custom hiring,
which allows for higher-spec machinery and better
utilisation. In terms of the impact of recent reforms on
the agricultural sector, he said this is no easy answer
given there is a lot of conflicting information. Price
increases are likely, and land aggregation is needed.
Puneet Vidyarthi’s comments centred on
mechanisation and the deficit in the non-wheat and
rice segments. He pointed out that the bulk of the
funding currently comes from farmers. Small-land
packages are an issue, with real income from
agriculture not going up in the past 10 years. He
believes now is the right time for mechanisation,
starting with the rental model, and the government has
already started to provide infrastructure to support
this. Precision farming practice will increase as will
agro-processing, which will mean export opportunities
can be realised.
During Q&A, the panel was asked: Do you believe rural
India will adopt electric two-wheelers over the next five
years? The response: Infrastructure in rural areas will still
take a decade to be good enough so electricity and other
infrastructure is going to take time. EVs may happen, but
it will depend on how the ecosystem develops.
Abhay Kelkar, Vice President, Research & Consulting
of CIBIL India: Asset quality & credit growth (Day 3)
[Sales writeup produced by Sujay Kamath]
Bank retail credit growth has soared over the past six
to eight years, says TransUnion CIBIL’s Vice President
of Research & Consulting, Abhay Kelkar, at the 23rd
CITIC CLSA India Forum. However, this came to a
standstill when Covid hit India in March. Surprisingly,
momentum has picked back up to 80-90% of pre-Covid
levels, and banks have surprised investors with
reassuring commentary.
Kelkar shared several data points on recent changes in
retail and SME credit activity. Owing to limited credit
activity during the lockdown, headline retail credit
growth slipped to a low 3% by July, yet it picked up to
low double-digits by September driven by a sharp
rebound in credit activity/demand. A rebound in credit
cards was helped by customer preference for digital
transactions, while record-low interest rates (7%),
12
 

 

pent-up demand, and attractive offers on finished
residential inventory drove new house purchase loans
and aggressive refinance. Interestingly, credit inquiry
volumes was led by public sector (PSU) banks (120%),
while NBFC/HFCs bore the brunt (58%) versus
October 2019 levels.
Fresh loan origination volumes witnessed a shift
towards existing customers (vs NTC customers) with
sharper recovery in asset finance products (mortgages,
loan against property (LAP), and autos/two-wheeler
loans) driven solely by PSU banks (140%). Private
banks and NBFCs including HFCs remained sharply
lower YoY, probably due to a higher concentration of
private financiers in metro areas versus a greater
presence of PSU in Tier 3 & 4 and semiurban where the
impact of Covid-19 was far lower.
Although Morat data is not available to CIBIL and data
showed was up to July 2020, customer-level
delinquency on retail loans has risen only marginally
(from 3.41% to 3.66%). Two-wheeler loans surprisingly
witnessed a fall (from 3% in Jully 2019 to 2.7% in July
2020), while LAP and credit card witnessed a spike.
Deterioration in delinquency has been sharpest for the
FinTechs (from 1.5% to 3.5%) as they cater to self-
employed and lower-income borrowers.
In terms of collection efficiency, mortgages and PL
witnessed sharper improvement in the early
delinquency bucket (30-60 DPD), while two-wheelers
and credit cards were at the other end of the spectrum.
Private banks were already ahead in collections, while
NBFCs and fintechs have picked up collections efforts.
Overall, the delinquency outlook remains complicated
and will take time to emerge due to the lagged effect
of financial conditions, relief programs, and shifts in
consumers’ payment priorities.
The declining growth of MSME credit took a turn for
the worse (-7% YoY), driven by medium enterprises (-
17% YoY), as lenders stay away. Micro SMEs (+2%
YoY) continue to be preferred by lenders. Given the
stark liquidity conditions, NBFC bore the brunt. Kelkar
shared that in terms of statewise growth in SME credit,
states with stringent containment measures (West &
South) have experienced higher contraction (-8 to -
10%) in balances.
Thanks to the government’s Rs3tn ECLGS scheme, the
volume of MSME loans sanctioned accelerated in June
2020 to 700k versus a monthly average of 200k as
banks, especially the PSUs (85% share as of June) took
advantage of the scheme while private banks preferred
to await further details. Micro enterprises are the
primary beneficiaries of the ECLGS scheme with the
number of loans sanctioned up 4x. As per CIBIL’s
India Forum insights 2020
analysis, 81% of MSMEs eligible under the credit
guarantee ECLGS scheme belong to higher-end
cohorts (ie, super prime and prime) of credit, which
gives CIBIL confidence on the use of ECLGS (Rs1.8tn
sanction to date).
In light of relief programmes and Morat, MSME NPA
rates have increased only marginally (from11.4% to
11.9%) compared to the previous year, probably a
factor the declining base of loans. It is interesting to
note that, across sectors, 65-70% of MSMEs belong to
super prime and prime.
HCL Technologies - Company updates:
C Vijayakumar, CEO (Day 3)
[Sales writeup produced by George Hansom]
HCL Technologies is the third-largest India-listed IT
services company and also one of the oldest.
According to Forbes, HCL is the highest ranked
multinational headquartered in India. It is also the
fastest growing-increasing in size by 60% over the past
four years. HCL is a global leader in its field with
150,000 ‘ideapreneurs’ operating in 50 countries
worldwide with revenue of nearly US$10bn.
Vijayakumar identified five broad trends and themes
that are relevant to the IT world now and in a post
pandemic world. 1) An acceleration towards
digitalisation of customer interactions and business
operations. 2) Artificial intelligence led services will
grow and be norm across all industries. 3) Cloud “as a
service” will see the strongest growth in the next few
years. 4) Demand for tech talent and niche acquisitions
will increase in automation, cloud, data & analytics, AI
and cyber security sectors. 5) A fluid work place
framework is needed to manage the increasing number
of personnel working remotely with zero compromise
on security and productivity.
HCL’s key growth drivers are as follows:
a) Hybrid cloud: This is the new computer. Both for
business and personal. Cloud adoption will drive
further demand for telecom infrastructure and 5G
led solutions as well as virtual entertainment, eg,
gaming and tourism.
b) Digital transformation: Continued innovative use of
digital channels and modernisation and automation.
IOT will play a central role in disrupting traditional
manufacturing.
c) Digital workspace: The trend towards a ‘Work from
Anywhere’ business model requires an intuitive
personalised and on-demand solution for an
intelligent workspace.
13
 

 

Currently HCL has a balanced portfolio of industry
leading services and products across three business
segments namely:
q IT and Business Services. The largest division with
revenues of over US$7bn and growing at 13% YoY.
Here, HCL delivers a comprehensive suite of end-
to-end digital offerings to address the traditional
and transformational needs of large corporations.
q Engineering and R&D services with revenue of
US$1.7bn.
q Products and Platforms with revenue of US$1.2bn.
HCL’s strategy for the future and its journey further
into the digital age was laid out by Vijayakumar as
having three legs:
1) Existing core services (as laid out above).
2) Accelerating new services such as Data and
Analytics, IOT, Cloud, Cybersecurity & GRC. This
area has been growing at a 25% Cagr over the past
four years.
3) Building new and reimaging mature products and
platforms using partnerships, carve-outs and co-
innovation programmes where necessary.
Existing partners include Google, Microsoft, Dell, IBM
Cisco and Intel, etc.
Jagdish Chandra Sharma, Vice Chairman and MD of
Sobha/Sobha Developers; Vinod Rohira, CEO of
Mindspace REIT; Anuj Puri, Chairman and Founder of
Anarock: India real estate: 2020 & beyond (Day 3)
[Sales writeup produced by Bruce Clayton]
We hosted three experienced property leaders at this
year’s virtual India Forum. With the industry already
significantly consolidating over the past four years, the
pandemic-induced slowdown will only accelerate this.
Big listed players with access to capital are likely to
emerge from the crisis even stronger.
Commercial Offices: Absorption was about 45m
square feet last year; India is on track to cross 20m
square feet this year due to Covid-19 disruptions. 90%
of demand comes from global tech companies with key
drivers remaining increased digitisation of services and
cost arbitrage (most office rents in India are below $1
per square foot). The panel members were confident
that demand growth would return in a few quarters
after a Covid-19 vaccine. However, the supply cycle
has been postponed with 70% of supply impacted by
lack of capital among the smaller developers. This is
causing a move towards Grade-A occupancy. The
work-from-home trend is unlikely to persist in post-
India Forum insights 2020
pandemic India, due to the challenges of innovating
without collaboration, large household sizes (average
4.5 people/household) crammed into tight residential
spaces, and poor internet connectivity at home.
Residential: Work-from-home has led more people to
focus on their homes and is driving upgrades.
Affordability remains strong with 7% interest rates,
while supply is shrinking as weaker developers lack the
capital to complete their projects. Buyers are
gravitating to organised developers like Sobha that are
able to complete their projects. Unless the government
provides access to cheaper long-term liquidity for
smaller developers, the market will consolidate among
the bigger players. Eventually we could see 4-5 players
dominate 50-60% of demand. While the overall market
will shrink, the listed players will see disproportionate
growth that could exceed 2019 levels. Those who
could afford it started buying in September, and
residential demand has been strong in the period
leading up to Diwali. The market should get a true test
of this demand from now until January 2021.
Retail: This has been a tough story with continued
consolidation in retail stores and mall developers.
Malls are seeing 25% of pre-Covid walk-in numbers,
but sales conversions are 50-60% of pre-Covid levels.
The people who are coming into the malls are serious
buyers. India’s lack of parks and museums in major
cities means that malls should remain popular
destinations in a post-pandemic world.
Reits: This is a strong and growing asset class in India.
Reits are attracting huge demand from high-net-worth
investors and international players seeking tax-free
yields. The ability to list Reits on the stock market is
giving these investors an exit and is driving fresh
acquisitions.
Data Centres: Demand is getting stronger, and the
panellists are seeing serious inquiries. Mumbai is
attractive for data centres due to its resilient power
grid, availability of optical fibre connections, and deep
customer bases. In 4-5 years, we could see 15-20 large
data centres there.
Developers have learned several lessons from the
pandemic. These include: financial discipline – debt is
not equity, meaning it is necessary to examine
developers’ ability to take on so much debt and change
debt provider behaviour; credibility is essential –
developers must focus on delivery and the customer;
professionalism – developers must run their
businesses professionally and take away efficiencies;
and technology – the application and use of
technology has enabled survival with minimum
interruption, allowing society to protect the maximum
number of jobs at the least cost.
14
 

 
 Day 4: Friday, 20 Nov
Forum presentation writeups, from CLSA Sales

Day 4 - Corporate webinars - Emerging leaders (20 Nov 2020)

12:30-13:25: Carwale and Cartrade - Company 17:30-18:25: PolicyBazaar - Company updates [Eilish
updates [John Agostini] Smith]

13:30-14:25: Delhivery - Company updates [Nishant 19:30-20:25: Nykaa - Company updates [Deeksha
Kumar] Chugh]

14:30-15:25: Deepak Bagla, MD & CEO of Invest 21:30-22:25: Zomato - Company updates [Sujay
India: Make in India [Stuart Thomson] Kamath]

16:30-17:25: Care Health Insurance - Company

updates [Anosh Koppikar]

15

 

 

Carwale and Cartrade - Company updates: Vinay
Sanghi, Founder
[Sales writeup produced by John Agostini]
It’s very difficult to work out where to start with what
was both a fascinating and very exciting presentation
from Vinay Sanghi today on India’s largest auto
ecosystem company that has ambitions to become the
next Mahindra or HDFC of the digital generation.
Listening to him today, I don’t doubt he will pull it off.
The company he has built has attracted shareholders
like Tiger Global, Warburg Pincus and Temasek who
can no doubt help with his ambitions - plus he has 22m
MAUs, is profitable already (with 35% profit margins)
and has a brand profile second to none in the auto
world. He completely gets that it will takes 20 years to
build a really large and successful company in India. He
flags that they are already in year nine, and highlighted
how he got to where they are and what their plans are
over the next 10 years to see his ambitions play out.
As he mentioned a couple of times, Cartrade is not just
the No.1 auto marketplace company, but a significant
(auto) software and data firm as well. Make sure to
have a chat with Amyn Pirani (CLSA’s autos analyst
who hosted today’s talk) and/or take Sanghi up on his
offer to share his presentation pack, at the very least.
The business was founded in 2009 initially as a B2B
online exchange to enable C2B and B2B for used car
dealers to buy and sell cars. Being a very fragmented
market with 15,000+ dealers in India who run out of
200ft shops with just 6-10 cars on the lot who weren’t
terribly IT savvy, it wasn’t easy to begin with. But being
a new avenue for sales, it received solid support form
sellers such that once supply was committed, dealers
had to come. By 2012, Tiger Global entered the fray in
Series A which enabled it to look more at the consumer
and allow B2C to happen on Cartrade.com as well,
which was a unique proposition as it allowed
consumers and dealers to sell to each other and vice
versa either C2B or B2C. With this, it began to realise
that building out a dealer management
solution/inventory/CRM software would help it build
valuable data plus help customers become more
profitable, which in turn forced dealers to start using
PCs more. About 500 salesmen helped this rollout and
helped train the dealers in turn to become better
customers.
The advent of smartphones in late 2013 changed
everything for everyone - it made it easier for dealer
customers to log in and buy from consumers and
businesses (banks/insurance, etc) and manage their
businesses, plus it forced the dealers to put all their
inventory on the app and thus Cartrade ended up
securing the best supply list available and the virtuous
circle that then creates. If you want to buy a car of
choice there can be 6-7k make/model variants so
selection quality became a cornerstone. And when in
India Forum insights 2020
September 2014, Warburg Pincus took a stake, it
enabled the firm to launch a certification product with
engineers certifying all the cars on the platform for
transparency. These car reports became very popular
and was another key differentiator. A pricing tool was
then added that used its data analytics, thereby
creating its own price book for used cars and what you
should pay as a consumer - another huge value
proposition and proprietary.
Having conquered the used car side of the business or
on the verge of doing so it next took a look at new cars
where Carwale.com dominated and as luck would have
it, it was able to buyout Axel Springer who owned this
business in late 2015 with some help this time from
Temasek coming on board. US$120m was a big price
to pay and the business was loss making, though had
great metrics and engagement, so integrating its tech
seamlessly and using one team across both sites helped
lower the losses. Next on the agenda was offline -
Shiriam Transport Finance had created a physical
business with 95x 20 acre parks (warehouses
effectively) with lots of inventory and needed a
strategic buyer fortuitously and combining both
complimented each other given now both online and
offline could also have warehousing capabilities.
This deal was completed in mid-2018 leaving it as No.1
in online, offline and inspection (1m cars pa). So piece
by piece, the business now has 22m buyers coming
onto the No.1 platform with 15k used car dealers along
with almost every OEMS (new & used) plus banks and
insurance company used offerings, which today
generates US$3bn GMV, c.US$60m net revenue (set
to grow at 35% pa) and c.US$20m profits (set to keep
doubling), which will see them among the most
profitable digital companies in India.
What about the next 10 years. There are massive
opportunities for Cartrade to become the major Indian
corporate that Sanghi has ambitions for. He cited
numerous opportunities it is looking for to fund
organically with the c.US$100m net cash on the
balance sheet, where it has set aside c.US$50m for its
ventures division. Think insurance; financing dealer
and consumers; trade-ins for used cars and trucks so
C2B2B opportunities for EG. Financing is a huge
opportunity set given there are no organised forms
available en masse in India, and knowing its
customers/dealers intricately given the data sets it has
built - it knows the right pricing; how many cars each
dealers stocks/sells; and it can also verify the cars
exist- this will become a major revenue/profit line in
time. In retail financing it is building the rule engines
for the banks to enable online processing/approvals,
something that has also not yet happened and it will
end up owning the data here also. It will also explore
setting up its own finance business too. Less than 5%
of customers use finance and when they do it’s too
16
 

 
 India Forum insights 2020

expensive anyways. The company will also use its q Their technology/data sciences team is largest
venture funds to look at new age opportunities via across EMs in the world. They own the technology
acquisitions, partnerships or incubations - think EVs, solutions & therefore, the data
connected, sharing etc as well - having created a
q Automated sorting capacity of 2.2m parcels per day.
leading digital company it intends to hold onto that
Closest competitor has less than half of that
mantle and be at the epicentre of all that is going on in
the autos sector. q Exportable ‘as a service’ in itself (It’s a separate
billion dollar company within Delhivery!)
Q&A:
q Last mile centres are updated as new hotspots
come up (say, a new college campus). No customer
Capex vs Opex? It’s all about opex as don’t own many
is more than 5km away from a last mile centre
assets so it comes down to marketing and people.
Impact: Cost of moving a 1kg parcel from Delhi to
Digital marketing - complimentary or competition vs
Mumbai was Rs100 in 2017 & is Rs50 now. Potential
what the OEMS are doing? We provide the tools for
to go to Rs40!
the OEMs who are already our partners for GE when
they launch a new car they use our data.
The growth runway
In B2C express parcel (Ecommerce mainly) - expected
Key entry barriers in Indian context? 20m MAUs for
to grow to US$6-7bn by FY23 (vs US$2bn today), now
starters is a great moat given the network effects that
could be even bigger accelerated by Covid. 20-25%
brings. Very difficult to do organically now; our
share of the overall market.
execution mind-set is huge and most competitors are
across just one vertical not all.
In B2B space (more exciting space now), warehousing
has been US$100bn market and highly fragmented
Impact of electrification? In India this will get
with top 10 players accounting for 12% of total
addressed on 2wheelers first and then commercial
market. Expected to grow to c.US$150bn in next few
vehicles before cars. The Government will mandate
years. Top supply chain companies in developed
trucks / commercial vehicles first. We see EV’s helping
markets like US are 100x the size of largest such
boost online buying and getting deeper into their
companies in India.
systems so it will be. We want to be involved also as
see EVs as a major opportunity.
In terms of financial health, FY20 ended with Rs27bn
in revenues. Back to normal monthly run-rate & should
What do you do for BMW in Asia? All its dealers in
end FY21 with a top-line of Rs38bn. Would’ve had a
Asia use our dealer management systems and
break-even year if not for complete washout in a
analytical tools. Our SaaS business is unique and we
couple of months this year. Expect to go back to 60%
see global opportunities for this down the track.
growth next year. Don’t need any capital for now.
US$250m more than enough for Capex & WC
requirements.
Delhivery - Company updates: Sandeep Barasia, CBO
Q&A highlights:
[Sales writeup produced by Nishant Kumar]
q Competition: There’s not a direct comparison with
Delhivery has become India’s largest third-party the players in India as they straddle across multiple
logistics services provider in less than 10 years. All this services. Four buckets:
with an asset-light model (don’t own trucks, but have a
n Ecomm (captives of Amazon & Flipkart): Large
customised fleet of 42ft tractor trailers from Volvo,
customers but don’t make up more than 7-8% of
which are 30% more efficient than the usual 32ft
its revenue
ones). No wonder its marquee set of investors have
poured millions into the company (Softbank, Tiger, n New age companies: focus on technology &
Carlyle, Fosun and Nexus). lowest cost (not the lowest price)
n Traditional (like BlueDart): Already significantly
With the vision to become the Operating System for
larger than them. In terms of tonnage & volumes,
Commerce in India, they walk the talk with a ‘full suite’
traditional players can’t compete. Large Indian
of supply chain services - transportation, warehousing
players (like Mahindra Logistics): Usually do
& technology. Covering 2.3K cities & 17.5k+ postcodes
contract logistics
with 3k+ delivery centres with lowest industry
shipment cost @ US$0.7/shipment is no mean feat. n Smaller players: work more like partners rather
How do they do it? Technology. than competition as they can work off of
Delhivery’s platform

17

 

 

q How easy is it for customers to sign up? A customer
making 10 bottles of Jam can sign up as well
without requiring any integration from their side.
On the other side, they work with Amazon as well
q Handle entire supply chains: E.g. Voltas doesn’t
have an in-house supply chain team. Has
outsourced the thing to Delhivery.
q On operating leverage: Combining hardware &
software automation. Industry does 25 packages
per agent vs 50-60 done by Delhivery in last mile.
Leveraging technology that decides the last mile
cluster (vs traditional approach of having a centre
each in North/South/East/West parts of the city).
q Last mile logistics: Using local kirana shops, gig
workers to deliver their products. They collect/drop
shipments from Delhiver’s own distribution centres
everyday
Something that’ll be music to public investors’ ears:
“We work like a public company & are ready to go
public anytime!”
Deepak Bagla, MD & CEO of Invest India: Make in
India (Day 4)
[Sales writeup produced by Stuart Thomson]
On Day 4 of our India Forum, we hear from Deepak
Bagla, the managing director and CEO of Invest India,
about India’s investment landscape. He began with
some statistics on the outbound FDI projects from the
USA and Asian countries over the past three years,
putting India up there with China and highlighting the
room for further growth.
Foreign direct investment (FDI) into India was
US$74bn for FY20, of which 40% was greenfield, and
making the country one of the top-10 greenfield
investments in the world.
When we look at recent statistics and comments from
leaders and politicians, Bagla believes it is apparent
that India is now back to pre-covid levels. He believes
that we likely over-estimated the negative impact the
virus would have on the economy and sees the bottom
of the U-shaped recovery getting shorter and
beginning to look more like a V.
On 25 March 2020, India went into the biggest
lockdown in history. The most interesting element here
was the impact to migration. Bagla says that for a
population of 1.3bn people, over 8bn people travelled
on trains last year. So the lockdown restrictions on
movement had a huge effect. Demographically, the
country has the youngest and most aspirational
population in the world as well as the fastest-growing
large economy.
India Forum insights 2020
Bagla portends that when India emerges, it will emerge
quickly with much of the pre-Covid fat trimmed, and
that if India was an opportunity prior to Covid, it is an
even bigger one today.
Invest India has four verticals: investment promotion
and facilitation; execution arm of Startup India; the
government’s science and technology initiative (fast-
tracking innovation through to commercialisation); and
national infrastructure pipeline. Thus Bagla has broad
insight into various sectors and stages of investment
across the entire economy. Things are growing rapidly.
The queries that are coming in today are not investors
testing the water or looking for first-stage information,
they are from companies wanting to know where and
when they can get their land and when they can start
their projects. Bagla mentioned a particular tech
investment scheme, the applications for which closed
in July, for which he claims every single major tech
company on the planet has applied.
Modi wants to make India the easiest place to do
business in the world. In that respect both local and
state governments are coordinating. There is now (or
soon will be) a single portal through which all FDI can
apply which will then take care of all applications and
approvals coordinated across local and state levels.
Already there is a portal where all land available can be
viewed. The goal is that FDI applications will have a
30-day turnaround with fines for delays.
The advantage and efficiency in India used to come
from SMEs. Since the early 2000s, India emerged as a
global IT hub, but the SME strength still exists and will
drive future transformation. There are 750m
“connected” people today, which will rise to more than
1bn by 2024. Small towns and villages are key to
driving things towards this vision of new India,
especially within the context of “work from anywhere”
that has been brought to the fore during Covid-19.
You can visit the Invest India website at
www.investindia.gov.in.
Care Health Insurance - Company updates: Anuj
Gulati, Founding MD & CEO; Nitin Katyal, Head-
Investments; Pankaj Gupta, Director Services & Chief
Financial Officer
[Sales writeup produced by Anosh Koppikar]
Uncertainty is what insurance thrives. Higher
hospitalisation, and high medical costs in private
hospitals have driven more Indians to sign up for
private health insurance.
Key drivers of Standalone Health Insurance (SAHI):
q India Healthcare 4% of GDP vs 5% for China and
6% for Russia; 65% is out of Pocket vs 32% for
China and 41% for Mexico
q Insurance Industry growth 21% since FY10
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Insurers m/s in FY20
Group @ US$3.6bn: PSU 55%, Private 33%, SAHI 12%
Retail @ US$2.8bn: PSU 34%, Private 16% SAHI 50%
Total @ US$7bn: PSU 48%, Private 26%, SAHI 27%
q Retail health insurance is the key driver of SAHI in
India.
q Gulati sees Care Health Insurance mirroring the
current growth trends of the health insurance
industry, if not outperforming it, in the coming days.
About Care Insurance
q Started operation July 2012, Religare is 72% stake.
8950 employees, 159 branches 25 products. All
claims are in house
q Group - annual contract, renewed every year +9%
FY20 vs FY19, 15% of business. Group 50m lives
covered
q Retail - fastest growing segment +31% YoY , 70%
of business ; First year contract comes with wait
period with some diseases; Year 1 claims ratios
lower and cost of acquisition is higher; Year 3
onward steady state claims ratio come up. Retail
insurance covers 30m lives – CARE chooses not to
go in lower income segment and sticks to mid to
upper income segment
q Not happy with Ayushman Bharat (16% of revenue)
except State of Chattisgarh
q Business Channel Mix: 28% Direct business, 23%
brokers, 30% individuals
q Leveraging technology to grow its business and has
500K customers using its mobile app.
q Care has recently concluded a funding round in
June including a primary infusion of Rs3bn from PE
firm Kedaara Capital.
PolicyBazaar - Company updates: Alok Bansal, CFO
[Sales writeup produced by Eilish Smith]
PolicyBazaar was established in 2008 and has become
India’s largest online insurance aggregator with more
than 10 million customers. It provides a digital platform
where customers are able to compare products from
major insurance companies.
During the first phase of evolution, PolicyBazaar took
the opportunity to:
1) Get to know India’s insurance market: how the
products work, distribution, who are key contacts
at each insurer.
2) Educate the customer about the need for these
products as part of their financial planning.
India Forum insights 2020
During this phase, the company began developing their
IT pipeline and so initially they had to pass customer
enquiries directly to the insurers. As their IT
infrastructure evolved, customers were able to spend
much longer on their platform and would only be
passed to the insurer for the final stages of purchasing
a policy (taking payment, for example). However, the
third evolution phases allows for the entire process to
be carried out on the PolicyBazaar platform which has
provided the customer with a much smoother
experience.
PolicyBazaar’s focus remains on protection products,
in particular on health and term insurance where they
have a market share of 12-13% and 30% of India
volume respectively. These two business lines
represent 55-60% of Policy Bazaar’s premium.
q Health insurance is typically sold 60% by agents,
20-25% by banks and 15% directly (of which,
PolicyBazaar has 12% market share). It is inevitable
that the volume of health insurance sold by agents
will come down as online penetration increases.
q Term, meanwhile, can be split into thirds across
agents, banks and online. However, agents are less
likely to sell term as a stand-alone product.
q The India auto insurance market is a tough segment
to break as it’s dominated by the auto
manufacturers, although Policy Bazaar do have 8-
10% market share.
q PolicyBazaar has only 1% market share in savings
insurance and do not see this segment as a major
source of growth.
The majority of PolicyBazaar’s business lines have passed
the 10% market share hurdle, and expect the next 10%
to be easier to achieve than the initial share. The India
health insurance market is extremely under penetrated,
and thus there’s plenty of scope to capture more market
share of the ever growing pie. Similarly, coverage for term
insurance is only just beginning in India and carries
further opportunity to gain market share.
In India, auto and savings have historically been the
main insurance products with very little innovation on
health and life. However, due to the vast amount of
sales data, PolicyBazaar is able to work closely with
insurers to jointly develop new products based on the
customer wants and needs, without taking any balance
sheet risk.
The company have not seen an ok impact on overall
growth from Covid measures, especially in the health
segment where policy uptake has increased. Alok
expects 30-35% growth this year in premiums, but
sees it unlikely to grow past 40%.
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Nykaa - Company updates: Anchit Nayar, CEO-Retail
and Chief Marketing office; Arvind Agarwal, Chief
Financial Officer
[Sales writeup produced by Deeksha Chugh]
Nykaa was founded in 2013 by Falguni Nayar who
started with online beauty business only to become an
lifestyle omnichannel platform now. It is now India’s
largest omnichannel beauty platflorm.
q Rs4,300 cr GMV annually
q Rs2,750 cr net revenue annualised run rate
q 33m app downloads as at October 2020 - 90%
business from app
q 75m monthly visits - 17 m monthly unique visitors
q Repeat customers 1m+ - 72%
q 17,500+ pincodes served
q Now above pre-Covid levels in beauty - 135%
Pillars of Nykaa
q Brand partnership : 2,500 brands
q Authenticity: To address cosmetics counterfeit
issue => work with an inventory led platform - 14
warehouses
q Ad platform: 75m customer monthly visit
q Rich content: Educating customers through expert
sessions + DIY videos
q Private label: Done very well + developed later after
selling various brands. Brought sheet masks to India
q Retail stores: To touch & feel brands - 74 stores
across India - experience centres ( 15 in FY 15 to 74
in October 2020)
Market sizing
Beauty
FY21: US$15bn - 8% online penetration - 33% Nykaa
share
FY26: US$25bn - 15% online penetration
Apparel
FY21: 75bn - 8% penetration - Nykaa share 1.3%
FY26: 105bn - 17% online penetration
Nykaa customers - Beauty aficionado (27-45yr), Short
on time(23-31yr), makeup newbie (19-24yr)
Brands
Luxury: 16% of revenue - 2.2x growth over 2 yrs
(Differentiated here)
Prestige: 30% of revenue - 1.8x growth over 2 yrs
Masstige: 54% of revenue - 1.5x growth over 2 yrs
India Forum insights 2020
Content
Beauty Book - 1m views
Nykaa TV - YouTube Channel - 1m subs
Nykaa Network - P2P platform - 2m subs
Explore Feed - Shopping directly from Feed - 8% cart
conversion
Delivery TAT
90% of metros : within 3 days
75% of non metros : within 3 days
Nykaa Fashion
Mid to high end - curation platform - Niche for
premium fashion brand in India.
Full range - Indian, western wear, accessories,
footwear & Lingerie
New initiatives
1-Imports - Beauty - brought 8 global brands to India
2-Nykaa Man - Nykaa.com for men
3-Fashion - Pvt label in fashion as well
4-B2b stores
5-International Distribution of Nykaa brand
Zomato - Company updates: Deepinder Goyal,
Founder & CEO; Akshant Goyal, Head of Corporate
Development
[Sales writeup produced by Sujay Kamath]
Until 2015, Zomato was a restaurant review and rating
platform just like Yelp in the USA. It expanded to 24
countries and monetisation was only through ads
visibility. It used to add content like photos, ratings and
review and kick of the flywheel for more users to come
on platform. In 2015, it changed gears and entered
food delivery as it required layers of transaction to be
added to its business and content business will take
them so far. It started table reservation and 4-5 years
and have seen these businesses evolve - effectively
Zomato has become a Yelp+ Opentable + Doordash on
a single platform.
Zomato has multiple use cases from users and
restaurants and this makes them much stickier. Food
delivery accounts for 70% of revenue and key driver
for growth for past three years. Dining out is the
remaining 20-25%. Today, it executes 1m orders a day
to 150,000 restaurants, delivered by 200,000 riders.
By comparison, Meituan in China does 25 million
orders a day and so the opportunity to grow is
immense. Zomato is in the process of monetising the
dining-out space by helping the customers look for
food, book a table and then make payment.
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From severe competition, the market structure has
changed dramatically from a four-player market to just
two. So, theoretically it can change again as it is only
scratching surface and the market is attractive for new
players. But Hyperlocal delivery, high frequency and
on-demand business would make it challenging for a
new player to enter the business. Tier 1 average order
value is 30% more than tier 2 and tier 3.
Tailwinds of Covid are helping it grow via acceleration
of digital adoption, and increase basket size due to
lesser dine-in. Post Covid given the hygiene conditions
some users are more comfortable ordering the food
and picking it up from restaurant which works well for
Zomato with restaurants with lower volumes. To get
higher restaurant participation, Zomato lowered take
rates on orders.
On productivity, the service quality of driver doesn’t
depend on his vintage. Despite the high rider churn -
continuous inflow of people who are moving out given
the wage inflation - the rider on boarding platform is
simple since they own their own motorcycles and
training is done via digital means.
Zomato earns 30-40% contribution margin on a per
order basis in cities where they do 60% market share.
The current economics of contribution margin net of
all variable costs is 30%. Even before Covid, take rates,
average order value, every revenue/cost line item has
trended in direction that has benefited Zomato and the
industry. With charging for delivery, net of cost of
India Forum insights 2020
delivery there is positive contribution. Restaurants
earn 60% gross margin on the incremental order so
sharing 20% of that is not a challenge for the
restaurant.
On the delivery mix, 90% of restaurants are standalone
restaurants while 95% of orders delivered by them and
5% by restaurants.
Large portion of new restaurants in new cities are dark
kitchens and cloud kitchen without physical fronts.
This optimises on real estate costs and helps in building
brands customised for food delivery. This improves
food economics and availability of foods and lower
delivery times.
Risk of Amazon? Amazon has entered the space six
months ago with deep pockets. Has not impacted the
company. It does around 100 orders a day in five pin
codes in India right now.
Hyperpure is a nascent B2B business opportunity,
where it supplies raw materials to restaurants. This ties
in with Zomato’s vision of improving quality of food a
restaurant produces. At the moment, the frequency of
consumption from restaurants is very low. The
procurement happens from unorganised suppliers and
wet markets. It’s a fairly asset-light model requiring
limited capital. It’s taken two years to fine-tune the
business model and it believes it can expand very
quickly.
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 India Forum insights 2020

Note: In the interests of timeliness, these writeups have not been edited.

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