On today’s episode, financial journalist Govindraj Ethiraj talks to Aniket Dani, a Director of Research at rating agency CRISIL as well as Rajesh Menon, Director General of the Society of Indian Automobile Manufacturers (SIAM).
- <00:51> Tatas to build a 40 GW battery cell factory in the UK
- <03:08> India’s mixed bag of corporate performance with a shadow of a slowdown with Aniket Dani
- <10:33> Indians are totally in love with utility vehicles as it becomes 55% of passenger vehicle market with Rajesh Menon
- <18:02> Reliance is back in finance, once again, this time with more gusto
NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.
Good morning, it’s Thursday, the 20th of July and I’m Govindraj Ethiraj coming to you from Mumbai, India’s financial capital and what feels like the most rained out city in the world right now.
Our Top Reports For Today
- Tatas to build a 40 GW battery cell factory, though in the UK
- India’s mixed bag of corporate performance with a shadow of a slowdown.
- Indians are totally in love with utility vehicles as it becomes 55% of the passenger vehicle market.
- Reliance is back in finance, once again, this time with more gusto
Tatas To Build A Gigafactory
I remember interviewing Ratan Tata of the Tata Group on going global. This was in the mid 2000s and most Indian business houses were looking to acquire internationally as they did. A strong rupee hovering in the Rs 40s to a dollar helped of course.
The Tata Group bought into steel, automobiles, beverages and many other businesses. As did others from India, large and small. All major brands and to its credit has digested most if not all of what it acquired, which may not have been the case with some others.
Tata’s mood in the interview was expansive and he spoke of the global opportunities that were opening up and how Indian companies were proudly venturing into areas not ventured before.
The last decade has seen a different mood. The focus has been about the domestic market and opportunities here. Businessmen may leave the country for tax and other reasons but the businesses are very much here, for all the obvious reasons we speak of almost everyday.
The Tata Group’s announcement yesterday of a $5.2 billion or 4 billion pound electric car battery factory in the UK making it one of the largest ever investments in the UK automotive sector is a looking back or forward of sorts, depending on how you see it.
The factory at 40 Gwh is set to create upto 4,000 new direct jobs and could provide almost half of the batteries the UK requires by 2030. This is the Tata Group’s first gigafactory outside India.
The new gigafactory will supply JLR’s future battery electric models including the Range Rover, Defender, Discovery and Jaguar brands, with the potential to also supply other car manufacturers. Production at the new gigafactory is due to start in 2026.
“This will be one of the largest ever investments in the UK automotive sector. It will not only create thousands of skilled jobs for Britons around the country, but it will also strengthen our lead in the global transition to electric vehicles,” British Prime Minister Rishi Sunak said.
The gigafactory will produce battery cells and packs for a variety of applications within the mobility and energy sectors, the statement said.
Indian Industry Fights Slowdown
Revenue growth has slowed for the fourth consecutive quarter or a year now. It’s the pace of growth not the growth itself which is estimated to have grown between 6-8% in the first quarter of the current financial year 2023-24, according to estimates from rating agency Crisil’s Market Intelligence & Analytics arm.
Growth slowed down, Crisil said, because of a fall in realisations and also a high base of the corresponding year-ago quarter. A reminder that we are now well past Covid 19 and the post Covid demand surge that many businesses and sectors saw.
Notably, Crisil says that of the 47 sectors and over 3oo companies they track, 14 showed a slowdown in growth in revenue while 15 saw moderation.
The overall prognosis for the rest of the year seems steady with revenues projected to grow 10-12%. This is of course despite a slowdown in major economies like North America and the Eurozone and interest rate hikes.
What’s working for India is India and its domestic consumption.
There are some interesting give-or-take scenarios. For example, take aluminium whose prices have fallen globally, reducing the input costs for many manufacturers who use this metal and thus improving their margins.
This has also meant that a company that manufactures aluminium has seen its bottom line get affected as it has to match lower prices.
Crisil says the revenue of aluminium makers declined by a sharp 14-16% on-year on account of an 18-20% fall in domestic prices and modest growth in volumes
It’s the same story for steel makers whose revenue is estimated to have decreased 7-9% on-year on account of sharp price.
What makes up of course is export-led industries like IT Services whose revenue is estimated to have increased 14-16% on-year,
So what more can we take away from these insights as we take a much higher, bird’s eye view, or at least try.
And what is the near term looking like.
To discuss that, I am joined by Aniket Dani, a Director of Research at rating agency Crisil.
From Macro View To Automobiles
India’s car sales are doing well but it is turning out that you may not be able to call them that any more because almost 55% of car sales are actually utility vehicle sales. In case you are wondering how we define it, utility vehicles are brands like Tata Nexon, Hyundai Creta, Maruti Ertiga and Maruti Brezza, these were also the largest-selling models in the last year. Mahindra has 5 models in this segment.
Passenger cars are typically Sedans and hatchbacks as you would have seen and used.
The trend of course is not new. India has had a growing fascination for utility vehicles in recent years. And manufacturers are responding to this in every possible shape, size and brand of car possible.
Not surprisingly, sales of utility vehicles have been creeping up in sales versus cars for a couple of years now but it is now that they are sitting at a clear majority.
And it is demand and supply-led because consumers prefer utility vehicles for, well, the utility of them and a sense of security while manufacturers are turning out more and more of them in as many variations of the same model.
While passenger vehicle sales numbers are strong, two-wheelers and commercial vehicle numbers are not as encouraging. Commercial vehicles actually have to still catch up with pre-Covid peaks, also an indicator of the overall state of the economy, at least from a mobility and logistics point of view.
Most manufacturers continue to ramp up production of utility vehicles and everyone is also watching to see how the electric market shapes up.
To get a sense of what these numbers are telling us and the consumer choices they reflect as well as the near-term outlook, I caught up with Rajesh Menon, Director General of the Society of Indian Automobile Manufacturers, the body that represents all the major car makers and began by asking him how he was seeing the car landscape. ic growth.
The country's top carmaker by volume Maruti Suzuki India's (MRTI.NS) overall domestic PV sales rose 8.5% year-on-year to 133,027 units.
Will you raise debt for expansion? I once asked Bajaj Auto founder Rahul Bajaj during a television interview.
The question was also somewhat relevant at the time then because many other business houses were going through various debt-led financial struggles. That of course has been the story for decades except maybe in the last few years.
“I have never done it and will never do it,” he told me. “Look at our balance sheet, we have money to start a bank if we want. Why should we take debt?
Turns out a year or two later he did start a bank, though not exactly a bank but a non-bank finance company as he ventured aggressively into financial services with Bajaj Finserv, which was demerged from Bajaj Auto in 2007 and went onto hold the group’s business in retail finance, insurance and others.
The business was also taken over by younger son Sanjeev Bajaj while Rajiv Bajaj continued to run Bajaj Auto.
To another sibling story now.
Dhirubhai Ambani, the founder of Reliance Industries died in July 2002 which led to a bitter battle between his sons Mukesh Ambani and Anil Ambani. The former took over as Chairman of the group. Dhirubhai did not leave a will.
Over time, the fortunes of the two brothers and their companies have gone in wildly opposite directions.
So much so that elder brother Mukesh has pretty much got back into each of the businesses younger brother Anil got in the separation which was electricity, telecoms and financial services. Except for electricity, so far.
In telecoms and entertainment which younger brother Anil also ran via investments in film production, radio and television, Mukesh has come in with a much larger scale and vision.
Reliance Jio was essentially set up again and over - including fibre optic networks across the country - from the original Reliance Infocomm. The energy which included Mumbai’s power company BSES was sold to Adani almost in the nick of time.
Almost all of Anil Ambani’s businesses are in bankruptcy, including Reliance Capital whose board was superseded by the Reserve Bank of India in November 2021 and appointed an administrator and a committee to run the company. Reliance Capital was set up in 1986. It owns several arms including Reliance Nippon Life Insurance and Reliance General Insurance
This brings us to the last major move by elder brother Mukesh and Anil, financial services, the last act which will play out in the form of Jio Financial Services which is getting demerged from the parent Reliance Industries.
Shareholders of Reliance Industries will get shares of Jio Financial Services which was seeded within Reliance Industries, the record date for which was yesterday.
Some 3.6 million Reliance shareholders will get 1 share of Jio Financial for every 1 share of Reliance.
Jio Financial will even have a special pre-open session this morning between 9 am and 10 am on the stock exchanges.
JFSL has been valued above the Rs 1-lakh crore mark. Brokerage estimates for JFSL vary between Rs 160-190.
Jio Financial is a pretty wide offering of financial services products but with a likely greater focus on payment solutions and products linked to the rest of its retail and consumer business.
That’s it from me for today, have a great day ahead and do stay in touch via our website and newsletter on www.thecore.in
Bye for now!