India Monitor

Country Analysis

Economic outlook, Markets, Deal activity

March 2023

© Cornhill Strategy 2023

 Economic outlook I

▪ Economy has recovered from the pandemic with real GDP growth of 8.7% in 2022
(IMF). However, in recent months, there is evidence of slowing growth and rising Quarterly GDP growth
inflation. Urban demand returned much more rapidly than in rural areas – though that
is now changing and maybe feeding into higher goods inflation 25%
▪ Quarterly GDP growth in Q3 2023 (Oct-Dec) declined to 4.4% from 6.3% in the 20%
previous quarter. 15%
▪ Economic issues include: 10%

% GDP change
5%
– Inflationary pressure;
0%
– Fallout from the Ukraine war; -5%
– Slower global growth; -10%
-15%
▪ Growth has benefited from improving labour market, better availability of credit, but
much of that impact was a one off linked to the end of the pandemic. -20%
-25%
▪ Inflation: RBI tolerates a range of 4% + 2% . Headline annual retail inflation was
6.52% (Jan 2023). The central bank raised its key interest rate by 0.25% in February -30%
and is likely to increase rates again in the near future. 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23

GDP forecasts GDP forecasts

10%
Forecast 2019 2020 2021 2022 2023 2024
8%
Moody’s 5.6 -8.9 8.3 7.0 4.8 6.4 6%

% GDP growth
S&P Global Ratings 8.5 7.0 6.0 6.0 4%
IMF 3.7 -6.6 8.7 6.8 6.1 6.8 2%

JP Morgan 5.0 5.0

0%
-2%
-4%
-6%
-8%
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Notes: GDP forecasts updated February 2023 2

 Economic outlook II

Budget
Inflation
▪ The economy is heavily dependent on domestic demand and both state and
corporate investment. Whilst the pandemic, and now higher inflation, are impacting
private consumption, the government has increased central capex.

▪ The 2023/24 budget (presented in February) had a strong focus on increased capital
investment (33% increase in central capex budget). Substantial increases in
investment in railways and road. The government has targeted net-zero emissions
by 2070 and increased capex on energy transition and security programmes.

▪ Personal tax cuts were modest (relief level increased from INR 500k to INR 700k).

▪ Planned divestment of shareholdings in various companies (BEML, IDBI and

Shipping Corporation of India).

▪ Russian oil now accounts for a significant share of India’s oil imports - according to
Vortexa Russian crude oil accounts for 35% of India’s oil imports (up from less than
1% before the Russian-Ukraine conflict).

▪ Low labour force participation remains a structural problem.

% Labour force participation (15+ age) Index of Industrial Production (IIP)

59%
% labour participation rate

57%

55%

53%

51%

49%

47%

45%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020

Notes: GDP forecasts updated February 2023 3

 Markets
12 month performance – major indices
▪ Over the last twelve months, India’s equity markets have been the best
performing in South Asia, partly due to the significant economic problems
facing the other three major countries (Pakistan, Bangladesh and Sri Lanka). Indices 12 mth change
Pakistan
▪ The spectre of high inflation and a lower rate of GDP growth are clouding the KSE 30 -7.77%
outlook for the Indian economy.
KSE 100 -4.12%
▪ The Indian rupee is forecast to fluctuate in the INR 80 – 85 range against the India
USD. Nifty 50 3.15%
Sensex 4.84%
Bangladesh
DS 30 -9.73%
DSEX -7.72%
Sri Lanka
CSE ALL -11.11%
SL 20 -22.76%

INR/USD rate (12 mths) Nifty 50 – 5 years

Notes: Data updated: 14 March 2023 4

Recent deal activity

Reported Acquiror - Value Investee

Acquiror Investee Investee - country Sector Commentary
Date country (USD mn) activities
Slice acquired a 5% stake in North East Small Finance Bank, a small
microfinance bank based in Guwahati. North East Small Finance
North East Small
Mar-23 Slice India India 3.42 Financial services Microfinance Bank is a subsidiary of RGVN (NE) Microfinance in the north east
Finance Bank
of India. Other shareholders include Pi Ventures, SIDBI Venture
Capital and Bajaj Group.
InCred Group-backed wealth management and asset
management platform, InCred Capital acquired a 20% stake in
Mar-23 InCred Capital India TeamNest India IT services HR software
TeamNest, a HR SaaS company. The investment forms part of the
Series A funding round.
Computer Age Think360 AI provides software solutions using advanced analytics,
Think Analytics
Mar-23 Management India India IT services AI and data machine learning, mobile and cloud computing on a SaaS
India
Services platform.
Pricol Limited is one of India's leading automotive components
Automotive
Feb-23 Minda India Pricol India 48.00 Auto and precision engineered products manufacturers head quartered
components
in Coimbatore.
UP Twiga, a glass wool insulation company, operates two
Building Fibreglass
Feb-23 Saint Gobain France UP Twiga Fiberglass India manufacturing facilities close to Delhi and Mumbai.. Saint-Gobain
materials manufacturing
India operates 33 manufacturing sites across India.
IFGL Sheffield Industrial SRL manufactures products for blast furnaces and the waste
Feb-23 India UK Industry
Refractories Refractories manufacturing energy industry.
the acquisition of production and post-production services assets
in India — including a studio complex with eight soundstages in
Feb-23 DNEG UK Prime Focus Ltd. India Entertainment Studio facilities
Mumbai — from media company Prime Focus Ltd. Financial terms
weren’t disclosed.
Lumax is a tier-1 automotive systems and component supplier.
Lumax Auto
IAC International IAC International Automotive IAC India is a tier-1 interior systems and components supplier to
Feb-23 Technologies India Auto
Automotive India Automotive Group components key automotive OEMs in India including Mahindra, Maruti Suzuki,
Limited
Volkswagen and Volvo Eicher Commercial Vehicles among others.

Cenexi is a contract development and manufacturing company

Injectable
which makes sterile and injectable pharmaceutical products, with
Jan-23 Gland Pharma India Cenexi France 124.00 Pharmaceuticals pharmaceutical
three manufacturing sites in France and one in Belgium. Gland
manufacturing
Pharma is owned by Shanghai Fosun Pharmaceutical Group.

Deal activity has been relatively muted in the first quarter of 2023

Source: Cornhill database

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E: Harjinder@cornhillstrategy.com
T: +44 (0) 79806 14738
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Notes