Monday, September 10, 2012

MOBILE MANUFACTURING: CRITICAL MASS

Mobile handset production in India has seriously lagged the Telecom Services Revolution. Current trends provide an opportunity to rectify this anomaly. Can India take it up when it matters? 

They are likely to follow the trail of the MNC giants before them and get into full fledged manufacturing. Sure enough, Micromax is expected to invest half of the money raised through its upcoming IPO to set up manufacturing in Chennai. Other players like Videocon, Lava, Wyncomm and Karbonn are planning to start manufacturing operations, while Spice has commenced trial production. In fact, even Chinese players like ZTE and Huawei feel that the 5-10% of benefit on shipping from China is attractive enough to set up operations here. “With most local companies including ourselves seriously considering manufacturing in India, the country seems to be emerging not only as the second biggest EMS location but also a mobile manufacturing hub,” says Arvind Vohra, Co-Founder & MD, Wynn Telecom Ltd.

There are major reasons for visualising India as a global manufacturing hub or production factory. Firstly, the cost effectiveness of manufacturing in India. Ganesh Ramamoorthy, Analyst, Gartner, states, “The opportunity is very high to set up manufacturing base in india. Two factors are involved for decision (to manufacture) – volume targetted by companies and business model used.” Mobile connections in India will grow by 27.3% in 2010 to reach above 660 million with revenue of $19.8 billion to be generated (mobile services). Along with this, mobile penetration for 2010 is projected at 55.9%, which is expected to reach 82% by 2014. Mobile production revenue in India is expected to grow from $10.14 billion to $28 billion at a CAGR of 18.1% (Gartner). According to Pankaj Mohindroo, President, ICA, “Around 135 million phones were manufactured in India last year, which is 11% of total global manufacturing. Out of this number, around 70 million were exported.” The plan is to take the share to 20%. There are people who contest these figures, saying that manufacturing in India is actually more of assembling.

S. N. Rai, Co-founder & Director, Lava International Ltd. admits, “In the long-run China will not be too competitive as compared to India. In order to get the ball rolling for manufacturing in India the players need to achieve a ‘Critical Mass Production and Market Base’ which will make manufacturing here profitable.” Now it’s up to the government to seize the opportunity and ensure that the local handset industry gets the required force and capability to meet the demands in future. One of the key demands of the industry is to be provided STPI as was done for the IT industry. For a manufacturing sector to grow, the most vital aspect is the ecosystem and supply chain, where China has a huge advantage. Presently, very little component sourcing is happening in India. Only electrical and mechanical parts are made here whereas electronic components are all imported. Just as handset manufacturers are showing interest, the government needs to attract component vendors to set up production here, which will help keep the handsets competitive. A thrust at this critical time can do wonders for mobile handset manufacturing in India. It is a bus we can ill afford to miss.


Source : IIPM Editorial, 2012.
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Saturday, September 8, 2012

MICHAEL PERSCHKE, HEAD, AUDI INDIA OPERATIONS

Michael Perschke, who took over Benoit Tiers, as the head of Audi India’s operations in July this year talks exclusively to B&E on how the three pronged strategy has helped them increase Audi’s market share in India
 Audi India witnessed a change of hands in July this year as 42-year-old Michael Perschke took over as the head of the luxury car brand in the domestic market. He succeeded Benoit Tiers (promoted to Head of Audi in France) who started India operations for Audi in 2007. Perschke, who hails from Germany, began with Audi AG in 2008 and has worked extensively in Europe and Asia. Interestingly, his earlier stint in India was as General Manager for Audi’s rival Mercedes-Benz between 1997 and 2000 when he was in charge of network development and regional sales. Here, in a candid conversation with B&E, Perschke shares his deep insights about the company’s rapidly growing India operations and how it is gearing up to fight the onslaught of other luxury car makers.

B&E: Considering the huge potential that India offers to luxury car makers, how much does Audi plans to invest in ramping up its production in India?
MP: We are looking forward to invest euro 30 million by 2015. In fact, 65% of it has already been invested by us.

B&E: Of late, competition in the premium car market has taken up a new shape. What strategy will Audi follow to maintain its success rate in India?
MP: A leading premium car manufacturer internationally, Audi is viewed as a progressive brand that offers the discerning car buyer with a truly luxurious experience, reflecting our brand philosophy of “Vorsprung durch Technik”. We believe that the Audi brand value, our highly energetic product line, quality services and customer-centric approach play an important role in the final purchase decision made by our customers. Further, we are focused to strengthen our network to enter into some of the other tier I and tier II cities to ensure that we reach out to our fast growing customer base.

B&E: The luxury car market in India has registered a fair amount of growth in the last few years and is growing at the rate of 25% per annum. How bullish are you on the segments growth in the near future?
MP: According to the World Wealth Report 2009 released by Merrill Lynch and consultancy major Capgemini, India has seen a significant increase in the number of millionaires in 2009. In fact, the list is swelling with rapid economic growth which means that there is no dearth of buyers in the market. Further, the emergence of a more ambitious middle class with increased purchasing power, that understands, values and aspires to own a luxury brand, is significantly contributing to the transformation of the luxury landscape in India. Given this scenario, there is clearly great potential in the luxury segment for growth and expansion in the country. The luxury car industry in India is no different. It’s too witnessing tremendous action with the consumer having a wide array of choice in the segment. In fact, over the last five years, India’s luxury car market has trebled, offering tremendous possibilities for further growth and expansion. Our estimation is that India will be the fifth-largest automobile market in the world by 2015. We believe that this is certainly an exciting time for the luxury car market in India and growth will continue to be fuelled from not just the metros but also the mini metros and rural India.


Source : IIPM Editorial, 2012.
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Thursday, September 6, 2012

BANKS ON THE MOVE:KVB

Ranked amongst the world’s top 1000 banks in 2009 by The Banker, London, Karur Vysya Bank is perhaps the least written about banks in India. But with an obscenely mammoth Rs.300 billion plus business being churned out an NPA ratio which is amongst the lowest across India, the bank can just not be ignored. B&E investigates what’s up with the bank?

But with greater market presence, would come the bigger danger of a hostile takeover. When the economic crash occurred, apart from the immediate biggies, those were the small banks that first collapsed. Even in India, the banking industry has seen a score of such small bank mergers/takeovers in the past few years. Kuppuswamy has dismissed the issue in the past too, depending more on the cash-richness and high profit figures of the bank to ensure the stock price stays unreachable high. KVB’s stock performance, for example, beat the BSE Bankex by close to an obnoxious 300% difference in the past year.

But the question always would remain on how they’d be able to put into action BCG’s recommendations in toto. Their past is ostentatiously well endowed; but we’ll be tracking them closely in the near future too, and would be counting the battle hits taken by and gifted to this regional giant. For now, we present the exclusive interview of the man who runs the show at KVB, P. T. Kuppuswamy, Group Chairman...

Read more....

Source : IIPM Editorial, 2012.
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Wednesday, September 5, 2012

THE WORLD: MDG

UN can’t do it alone, MDG requires a cumulative and concerted effort
 
There were 1.4 billion people (25% of the world population) living below the poverty line in 2005 ($1.25 a day), a marked improvement from 1.9 billion people (50% of world population) in 1981. But much of this betterment was purely of Chinese citizens. Female literacy rose considerably from 60% to 74% for age 15 years and over, between 1990 and 2004. In the same period, male literacy grew to 86% from 77%. There was an improvement in sanitation too, with 1.2 billion more people gaining access to it in the period. However, 2.6 billion people were still deprived of it as of 2004! Recently, Obama said that poor countries should not depend on foreign aid. Indeed, China’s poor have reduced to 278 million from 452 million over the past decade, and not due to foreign aid! Sub-Saharan Africa remains at the same level as it was 10 years ago – poverty there has reduced by only 1% despite gigantic aid from US and EU.

Annan initiated MDG, but slowly and surely, not only is this term becoming submerged into the background of global issues, the fact also is that the UN itself doesn’t seem to be quite serious in forcing developed nations openly to contribute towards achieving the goals. Clearly, this should be an issue more important for the UN than environment.
 

Source : IIPM Editorial, 2012.
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Monday, September 3, 2012

100% GROWTH IN THE LAST FEW YEARS

THE MICRO-FINANCE SECTOR IN INDIA HAS RECORDED MORE THAN 100% GROWTH IN THE LAST FEW YEARS AND THE GOOD RUN IS ATTRACTING FOREIGN FIRMS LIKE BLUEORCHARD FINANCE S.A., WHICH MANAGES CLOSE TO $1 BILLION IN ASSETS AND SPECIALISES IN MICRO-FINANCE. B&E’S AVNEESH SINGH TALKS TO CEO JEAN-PIERRE KLUMPP

B&E: But won’t the current micro-finance equity valuations, which are very low, restrict the entry of new private equity funds into the sector?
JPK: It’s actually difficult to say. I think the funds that have invested in MFIs have just started 2-3 years ago. However, a private equity scheme is generally for about 5-7 years or even up to 10 years. No doubt, a lot depends on investors’ expectations; but then you will only have the reality once these transactions materialise. But I have a feeling that this is good as it compels the investor to invest. If you are not bullish on your valuation, you will not attract investors. In fact, I think if you can’t go too far, you cannot find yourself a long term investor. If an MFI wants to enter say a rural area where there is no financial reach and one of the private equity investors says no because it will lower the return on equity, you lose the outreach. So you need to convince investors about the potential that this sector holds in the long run.

B&E: Who are the probable players that are building the investable MFIs of the future?
JPK: You have a top league of MFIs. I think they are natural players. The model you see is very similar and the products offered are similar as well. Sometimes, it’s the group and sometimes it’s the village to which the products are offered. The true leaders will be the ones who will be able to offer the complete range of financial products and services. Today, only deposits are a regulatory issue; but in the future, you will have to offer all the finance related services to the poor. They can borrow money for business, but they cannot save the money. So micro savings will be a big issue in the coming future. Today you have a great league of fantastic MFIs and there is enough competition to keep them on their toes all the time.

B&E: What are the risks related to private investments in micro-finance?
JPK: There are investors who do not want to stay invested for long and as such force strategic decisions on MFIs. They generally look out for short-term returns which is not good. Another risk is in case of difficulties faced by the stakeholders. Suppose if anything goes wrong and the investors are return-driven and they shut the MFI at the development stage, then the employees lose their jobs, the clients don’t have access to funds and this generally happens at the development stage. But once an MFI passes the development stage, things starts turning out much easier for all the stakeholders. 


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Breaks in women’s careers due to motherhood

Head-hunters believe that breaks in women’s careers due to motherhood could be costing them dearly. Could that be true?

So, if companies are bending over backwards to treat their valuable women employees well, why is there such a small percentage of women at the helm of companies? “It’s also women who are dropping out of the mainstream because of their own family pressures or starting up on their own,” says Archana. “I don’t think the companies have stopped them. In my case, I knew that with my children I could not survive in the mainstream, so I bifurcated and set-up my own company. But it was my decision,” says Archana, who is now Director of Maneuvers Consulting.

Perhaps there are lesser ladies in the boardrooms not because of lost opportunities due to career breaks, but because they never returned to their 9-5 schedule after the stork visited their home? Like Shalini Tiwari remarks, “Women who really want to excel both in career and at family bounce back into shape sooner than anticipated. With little support from family and workplace, they deliver wonders. Maybe women just need to believe in their dreams and learn never to give up. We will definitely have many more Indra Nooyis and Naina Kidwais in the corporate world.” What say mums?


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