TOP 1000 Companies : Financial Review For FY21

Methodology

Presented herewith is the vital financial data of the top 1,000 companies by market capitalisation. This is in response to requests from our valued reader-investors for financial data and keeping our promise, we have laid out the relevant data that covers 24 sectors in an easily readable format. We are sure that the financial data by sectors along with the detailed view on sector dynamics will be an interesting read for you! We have sourced our financial data from Ace Equity. Please note that our list of the top 1,000 only includes companies that have reported their FY21 numbers as of June 10, 2021. We have also taken into consideration companies having year ending as of June, September and December, and have used TTM financials (ending March 2021) to maintain consistency. Such companies are marked with an asterisk (*).
Compiled by - Yogesh Supekar, Shreya Chaware, Geyatee Deshpande, Apurva Joshi, Anthony Fernandes, Shruti Dahiwal, Ganesh Vaybase, Abhinav Lahoti

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Agriculture

Agriculture is the mainstay of the Indian economy. Blessed with a large area of fertile, cultivable land, diverse agro-climatic conditions along with a plethora of weather conditions and soil types, it forms the source of livelihood for majority of the population. India is the largest producer of milk, spices, pulses, tea, cashew and jute, and the second-largest producer of rice, wheat, oilseeds, fruits and vegetables, sugarcane and cotton. The country tops the list of producers of mango, banana, sapota, acid lime and cauliflower.

It is one of the few sectors that exhibited resilience during the first wave of the Coronavirus pandemic and registered a positive growth of 3.4 per cent during FY21. During the same year, its share in India’s Gross Domestic Production (GDP) stood at 19.9 per cent, up from 17.8 per cent in the previous year. Horticulture production in FY21 was estimated at 326.58 mt, a rise of 5.81 mt over FY20. On the other hand, the manufactured dairy products output was estimated to rise by 10 per cent to INR 283,000 crore.

Earlier this year, the central government passed three heavily debated farm bills in Parliament- the Farmers Produce Trade and Commerce bill, Farmers Agreement of Price Assurance and Farm Services Bill and an amendment to the Essential Commodities Act, 1955. As per the central government, these bills were passed with aim of liberalizing and deregulating the agrarian market but was met with a severe backlash from farmers across country. Consequently, a stay order was passed by the Supreme court which deterred the implementation of the laws.

Financials
Bombay Burmah Trading Corporation Ltd., which has a market capitalization of Rs 9082.56 crore amongst 26 companies chosen for analysis, reported a net revenue of Rs 13,139.50 crore in FY21 as against Rs 11,729.02 crore in FY20, registering 12.03 per cent growth YoY. The net profit for the year stood at Rs 1,542.55 crore as against Rs 1,147.51 crore in FY20, marking 34.43 per cent growth YoY. On the basis of highest YoY growth in net sales, BCL Industries Ltd reported a 55.86 per cent growth in net sales to Rs 1,431.29 crore in FY21. The net sales of Gokul Agro Resources Ltd. rose 50.10 per cent to Rs 8386.59 crore in FY21. It was followed by Kriti Nutrients Ltd, which reported a 32.61 per cent growth YoY and clocked net sales of Rs 690.06 crore in FY21.

Outlook- The untapped potential of the sector has caught the attention of various individuals, big companies, startups and entrepreneurial ventures which has led to enhanced focus on inventions, innovations, research and development in this sector.

The organic food segment in India is expected to grow at 10 per cent CAGR during 2015-25 and is estimated to reach Rs 75,000 crore by 2025 from Rs 2,700 crore in 2015. On the other hand, the domestic food processing industry which employs nearly 18 lakh people, is expected to reach US$ 535 billion by 2025-26. These estimates draw support from government initiatives such as planned infrastructure worth US$ 1 trillion and Pradhan Mantri Kisan Sampada Yojna. Additionally, the sector allows 100 per cent FDI under the automatic route.

Given the rising population, increasing average income and globalization effects, demand for agricultural production is rising rapidly. Huge emphasis is being given by the government on increasing the agricultural production. This is being done by way formulating various schemes and incentives. For instance, in the Union Budget of 2021-22, Rs 4,000 crore was allocated towards implementing Pradhan Mantri Krishi Sinchayee Yojana (PMKSY-PDMC) while the Ministry of Food Processing was allocated Rs 1,308.66 crore. Further, acknowledging the potential of horticulture industry, the Ministry of Agriculture and Farmers Welfare allocated Rs 2250 Crore for ‘Mission for Integrated Development of Horticulture’ (MIDH), a centrally sponsored scheme. The government also aims to empower the farmers by providing agriculture loans, various schemes for soil health conservations and credit facilities for buying agricultural equipment. Thus, considering the demand-supply dynamics, the sector is poised for huge growth.

Auto Ancillary

The automotive ancillary industry is the other side of the automotive industry, dealing with the manufacturing and selling of intermediate parts, equipment and chemicals, among others. The automotive ancillary supply chain members are original equipment manufacturers (OEMs), Tier I, Tier II, Tier III manufacturers and intermediaries. OEMs deal in high-value instruments and dominate the market whereas the unorganised sector caters to the aftermarket and deals in low-value products. The Indian automotive ancillary market is diversified on the basis of component supply to OEMs which include passenger vehicles, two-wheelers, medium and heavy commercial vehicles, light commercial vehicles, tractors, three-wheelers and others.

On the basis of type-wise market segmentation, engine parts contribute majorly to the market turnover. The Indian automotive ancillary industry is known to be among the key industries in India and contributes 2.3 per cent to the total GDP. The industry is mainly led by the strategic alliance and in-house research and development setup of industry players. The industry has an employment of as many as 1.5 million people directly and indirectly. The fortunes of the automotive ancillary sector are linked to those of the automotive sector. The swing and shifts in demands in any of the segments such as cars, two-wheelers or commercial vehicles have an impact on demand for automotive ancillary products.

The domestic as well as international markets almost replicate each other in terms of market share breakup. The Indian automotive components industry has portrayed healthy growth over the last few years. It zoomed up by a CAGR of 6 per cent over FY16 to FY20 to reach USD 49.3 billion in FY20. However, in FY20, the revenue dropped by 12.8 per cent YoY. Domestic OEM supplies contributed almost 51 per cent to the industry turnover followed by exports and domestic after-market at nearly 29 per cent and 20 per cent, respectively. The pandemic across the globe caused demand shock both in domestic and overseas market in H2FY21. This drying up of demand squeezed total exports of automotive components by 4.6 per cent YoY to USD 14.5 billion as against a rise of 2.7 per cent seen in H1FY20.

Financials
Looking at the performance of 78 companies in the automotive ancillary sector, including such well-known companies as Motherson Sumi Systems, Bosch, Balkrishna Industries, Bharat Forge and MRF, it is found that they have portrayed a mixed performance during the last two fiscal years. Analysing the net sales growth in FY21 as compared to FY20, Balkrishna industries was leading the top companies by depicting a positive 20.20 per cent growth as compared to net sales growth posted by Motherson Sumi (-5.52 per cent), Bosch (-1.27 per cent), Bharat Forge (-21.35 per cent) and MRF (-0.47 per cent). 

As for the improvement in operating profit, again Balkrishna Industries and MRF registered positive numbers at 30.26 per cent and 16.35 per cent whereas Motherson Sumi, Bosch and Bharat Forge recorded de-growth of 5.95 per cent, 17.99 per cent and 20.88 per cent in net operating profit, respectively. In terms of growth in net profit, Motherson Sumi reflected a growth of 32.06 per cent, Bosch reflected a growth of –17.8 per cent, Balkrishna Industries recorded a growth of 22.7 per cent and MRF reflected de-growth of 10.23 per cent.

Outlook
The rapidly globalising world is posing newer opportunities for the transportation industry, especially during the transition towards electric, electronic and hybrid cars, which qualify to be more efficient, safe, and reliable mode of transportation. In future, this will lead to newer verticals and opportunities for automotive component manufacturers, who would need to internalise change via systematic research and development. The Automotive Component Manufacturers Association of India (ACMA) predicts that automotive component export from India is expected to record USD 80 billion by 2026. The shift in global supply chain can cause the Indian global automotive component trade to improve at 4-5 per cent by 2026. The Indian automotive components industry has pulled up its socks to become the third-largest in the world by 2025.

Automobile 

The automobile industry in India is the world’s fifth-largest. The Indian automotive industry, including component manufacturing, is expected to reach Rs 16.16-18.18 trillion (USD 251.4-282.8 billion) by 2026. The industry attracted foreign direct investment (FDI) worth USD 25.40 billion between April 2000 and December 2020, accounting for 5 per cent of the total FDI during the period, according to data released by the Department for Promotion of Industry and Internal Trade (DPIIT). The Government of India encourages foreign investment in the automobile sector and has allowed 100 per cent FDI under the automatic route.

In the Union Budget 2021-22, the government introduced the voluntary vehicle scrappage policy, which is likely to boost demand for new vehicles after removing old unfit vehicles currently plying on the Indian roads. The Union Cabinet outlaid Rs 57,042 crore (USD 7.81 billion) for automobiles and automotive components sector in production-linked incentive (PLI) scheme under the Department of Heavy Industries. The Indian automotive industry has been reeling under a series of unprecedented problems since March 2020 that has crippled production, productivity and sales.

Between the challenges of the transition to BS-VI norms, the corona virus pandemic, nationwide lockdown, supply chain constraints and labour migration, the industry has been beset with economic uncertainty. However, though the year began with zero production and negligible sales, the sector has got back on its footing faster than expected with sequential growth in month-on-month sales. The revival can largely be attributed to pent-up demand, preference for personal mobility during the pandemic, easing of supply chains, labour availability, new launches, pushing up of stocks at dealerships and the high expectations from the festive season towards the end of the year.

As per the latest data by the Society of Indian Automobile Manufacturers (SIAM), in the financial year FY20-21 there was a de-growth in sales of all segments compared to the previous years: (-) 2.24 per cent for passenger vehicles with sales of 27.11 lakh units; (-) 13.19 per cent for two-wheelers with sales of 151.19 lakh units; (-) 20.77 per cent for commercial vehicles with sales of 5.69 lakh units; and (-) 66.06 per cent for threewheelers with sales of 2.16 lakh units. If we look at the fourth quarter of January-March 2021 sales which might include some deferred sales from previous quarters, only the passenger vehicle segment at 9.34 lakh sales was marginally above the previous high of the January-March 2018 quarter at 8.62 lakhs.

Commercial vehicles sales at 2.10 lakhs in January-March 2021 were below 2.82 lakhs in January-March 2018. Similarly, twowheeler sales in January-March 2021 stood at 43.54 lakhs against January-March 2018 figures of 51.13 lakhs. The three-wheeler segment was the worst-hit with sales of 0.86 lakhs in this quarter compared to 1.97 lakhs in January-March 2018. Two-wheelers and passenger vehicles dominate the domestic Indian automobile market. Passenger car sales are dominated by small and mid-sized cars.

The two-wheeler segment dominates the market in terms of volume owing to a growing middle-class and young population. Moreover, the growing interest of the companies in exploring the rural markets further aided the growth of the sector. India is also a prominent automobile exporter and has strong export growth expectations for the near future. In addition, several initiatives by the Government of India and major automobile players in the Indian market are expected to make India a leader in the two-wheeler and four-wheeler markets in the world.

The electric vehicle (EV) market is estimated to be an Rs 50,000 crore (USD 7.09 billion) opportunity in India by 2025. Several technology and automotive companies have expressed interest and made investments in the India EV space. Automotive companies such as Hyundai, MG Motors, Mercedes and Tata Motors, have launched EVs in the market. A recent study conducted by Castrol found that most Indian consumers would consider buying an electric vehicle by the year 2022. The study also highlighted that for an average Indian consumer, price point of Rs 23 lakhs (USD 31,000), a charge time of 35 minutes and a range of 401 km from a single charge will be the tipping points to get mainstream EV adoption.

A cumulative investment of about Rs 12.5 trillion (USD 180 billion) in vehicle production and charging infrastructure would be required until 2030 to meet India’s electric vehicle (EV) ambitions. A report by India Energy Storage Alliance estimated that the EV market in India is likely to increase at a CAGR of 36 per cent until 2026. In addition, projection for the EV battery market is forecast to expand at a CAGR of 30 per cent during the same period. However, with relaxation in lockdown norms globally, exports have improved in the recent past.

Financials
An analysis of FY21 results of 11 listed automobile companies forming part of the top 1,000 companies listed by market capitalisation shows that there was a decline in net sales of 7.91 per cent among the companies under our coverage. There was on an average a 0.08 per cent decline in PBIDT except OI with Tata Motors, Force Motors and SML Isuzu posting losses in the last fiscal year. On the other hand, companies like Mahindra and Mahindra and Escorts outperformed the rest of the group, recording growth in operating profitability of 66.65 per cent and 69.36 per cent, respectively.

Outlook
On the demand side, while retail sales have been impacted across segments, we expect demand in the PV segment to recover faster post lockdown relaxations as inventory levels are below normal and there is a high waiting period in fast-selling models. The two-wheeler demand may remain subdued with high dealer inventory. However, exports continue to remain strong. The CV cycle recovery will sustain and gain momentum with the pandemic situation normalising and the economy gradually reopening.

The slowdown in tractor demand is seen due to the impact of the pandemic in the rural parts, constraining customers’ movement and smooth operations of dealerships. On a positive note, in the last few days of the month, the ground situation has eased to some extent and we expect it to normalise soon, supported by expectations of a normal monsoon. The bus and three-wheeler segments will remain under pressure due to the closure of schools, colleges, offices and lower use of public transport.

Banks

The global pandemic has emerged as a ‘black swan’ event which has called for extraordinary measures from governments across the globe to help resume economic stability. The effect was seen on the Indian banking industry with bank credit growth moderating to 5 per cent in FY21 from 6.8 per cent in FY20 due to the adverse effects of severe economic disruptions caused by this crisis. Data published by the RBI has shown that lending to industry, services and retail segments has moderated in FY21, with only the agriculture and allied segments seeing growth rising to 12.1 per cent in FY21 from 4.1 per cent in the previous year.

Reports have indicated that credit growth was weak in the first half of the year and only gathered steam from October 2020 in tandem with slight economic recovery. The second wave of the pandemic which struck soon after has brought about uncertainty in the near-term outlook for credit demand. Indian banks saw their balance-sheets come under pressure in FY21 and this was visible with weak loan growth and the increase in stressed loans. This has particularly been problematic for public sector banks which have seen worsening of their legacy bad loans.

According to former RBI Deputy Governor Rakesh Mohan, the second wave of the corona virus may go on to worsen stressed assets in the banking system, adding pressure on financial stability. The effect of the legacy bad loans worsening was seen in FY21 results with an analysis of listed banks showing that the outstanding gross non-performing asset (NPA) pile of public sector banks was more than three times that of private sector lenders. Much of this is because of troubled legacy corporate accounts. On the other hand, the stress on private sector bank balance-sheets has been limited. This can explain why the Nifty PSU Bank index has barely crossed its pre-pandemic high in February 2020, but the Nifty Private Bank index and the broader Nifty have gone on to touch higher levels.

Financials
Our list of top 1,000 companies includes 11 public sector banks and 22 private sector banks. Out of the total 33 banks analysed, 17 reported an increase in total income during FY21 as compared to FY20. The pick of the lot was public sector banks like Union Bank Of India, Indian Bank and Punjab National Bank which reported yearly growth in total income of 84.93 per cent, 82.74 per cent and 49.07 per cent, respectively. While among the private sector banks were CSB Bank, Equitas Small Finance Bank and AU Small Finance Bank, recording gains in the total income of 24 per cent, 20 per cent and 15 per cent, respectively. 

These added some vitality to the banking industry’s health.

Banking heavyweights such as the State Bank of India, HDFC Bank and ICICI Bank reported total income growth of 3 per cent, 5 per cent and 5 per cent, respectively, with the bottomline increasing by 33 per cent, 16 per cent and 81 per cent, respectively. More importantly, the growth in these three majors was led by core fundamentals such as credit growth, rise in deposits, etc.

Outlook
While the pandemic has hit all banks equally, what may set lenders apart in FY22 is the amount of provisioning they have and the large recoveries in troubled corporate accounts. A key point to note here is that the average provision coverage ratio among public sector lenders stands at around 80 per cent, while that for the private sector lags at around 70 per cent. Moreover, many public sector lenders have fully provided for large troubled corporate accounts. To that extent, we might see public lenders turn the corner in FY22.

Cements
India is the second-largest producer of cement in the world. The Indian cement sector continues to deliver a strong performance. The country accounts for 8 per cent of the global cement production installed capacity. Out of the total capacity, 98 per cent lies with the private sector and the remaining share with the public sector. As India has a high quantity and quality of limestone deposits throughout the country, the cement industry promises huge potential for growth. In the Union Budget 2021-22, the government extended benefits under Section 80 IBA of the Income Tax Act, until March 31, 2021, to promote affordable rental housing in India.

The budget outlays Rs 1,18,101 crore for the Ministry of Road Transport and Highways. Most of the cement manufacturers have either cut down or deferred capital expansion expenditure for the fiscal year given the need to conserve their cash flows and fall in demand. For our analysis of the performance of the cement sector in FY21, we have taken into consideration 25 companies which form part of the cement and construction materials sector in the top 1,000 companies listed as per market capitalisation.

The average sales revenue has increased by approximately 5.41 per cent during FY21. In terms of operating profitability, companies forming part of the analysis recorded a 37.97 per cent increase in PBIDT, except OI. Healthy pricing and all-round cost reductions bolstered the industry’s FY21 unitary PBIDT. The industry proved its cost agility as it cut discretionary expenditure, explored digital marketing and sweat up production productivity – all of which helped contain cost inflation despite soaring diesel and fuel prices.

Financials
Major players such as Ultratech Cement and Shree Cement reported 24.29 and 12 per cent growth in PBIDT, except OI. Others such as ACC Ltd., Heidlberg Cement and Star Cement saw a decline in operating performance during the period. In FY21, Dalmia Cement, UltraTech Cement and Shree Cement topped the industry in terms of volumes and margins. Almost all companies reported leaner working capital, which accelerated gearing reduction. FY21 is a special year when the industry reduced its working capital, which bolstered free cash flows and led to gearing reduction. The various cost rationalisation measures and overhead controls undertaken by cement manufacturers as regards supply chain management, contract renegotiations and fuel efficiency greatly benefitted the industry. 

Outlook
Looking forward, the government’s thrust and spend on infrastructure is one of the key drivers for the recovery of the cement industry. The eastern states of India are likely to be the newer and untapped markets for cement companies and could contribute to their bottom-line in the future. In the next 10 years, India could become the main exporter of clinker and gray cement to the Middle East, Africa, and other developing nations of the world. Cement plants near the ports, for instance the plants in Gujarat and Visakhapatnam, will have an added advantage for export and will logistically be well-armed to face stiff competition from cement plants in the interior of the country.

A number of foreign players are also expected to enter the cement sector owing to the profit margins and steady demand. Given how fiscally strained the government finances are at the moment, not all infrastructure projects have resumed construction, which is putting a halt to new investments towards infrastructure creation and thus affecting the demand for cement. However, in the long term, the prospects of the industry are intact. It is likely that rural demand will be the major driver for cement considering the monsoons have been favourable in most parts of the country. This could translate in an inflow of cash in the rural economy which could match infrastructure creation, thus augmenting the demand.

Chemicals

India’s chemical industry is extremely diversified covering more than 80,000 commercial products and can be broadly classified into bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers and fertilisers. Globally, India is the fourth-largest producer of agrochemicals after the United States, Japan and China. India accounts for ~16 per cent of the world production of dyestuffs and dye intermediates. Indian colorants industry has emerged as a key player with a global market share of ~15 per cent. India exports chemicals to US and Europe. In terms of imports, India is a net importer of chemicals from China as imports account for ~20 per cent of domestic consumption.

During the first half of FY21 when the corona virus cases were at a peak, domestic demand plunged, with most end-use sectors grinding to a halt following the nationwide lockdown. Exports also declined significantly led by trade restrictions and a global slowdown. Those chemical companies which were heavily dependent on the automobile sector were the worst hit during this period. Demand dropped significantly in the personal care segment like perfumes and cosmetics for which chemicals are required. However, the ones supplying to hygiene, healthcare and pharmaceutical sectors outperformed and the pandemic proved to be a blessing in disguise for such companies.

The petrochemicals segment suffered as the crude oil prices dipped to a record low level due to steep dip in demand. However, gradually the rebound began in November 2020 when the situation started going back to normal. Despite these tough market conditions, some of the strong players from the sector are undertaking capex plans to increase their capacities to fulfill the domestic and export demand. Some companies are planning to become import substitutes over the upcoming years.

Financials
For the purpose of sector analysis, we have analysed 85 companies in the chemical sector according to their market capitalisation. The aggregate revenue of these companies increased by 4.6 per cent and aggregate operating profit increased by 17.4 per cent during FY21. Also, the aggregate net profit of these companies grew by 23.1 per cent in FY21. Of the various sub-segments of the chemicals sector, the agrochemicals segment outperformed. PI Industries’ revenue and net profit grew by 36 per cent and 61 per cent respectively. BASF India too delivered significant growth with revenue and net profit increasing by 26 per cent and 2,316 per cent respectively.

The paints’ segment also delivered good growth with giant companies like Asian Paints and Berger Paints’ revenue growing by single digit and net profit in lower double digits. From other chemical segments, Balaji Amines was an outperformer with its revenue and net profit growing by 40 per cent and 150 per cent respectively. Some of the companies witnessed a turnaround and earned net profit in FY21 as against net loss in FY20. These included INEOS Styrolution India, DCW, Jayant Agro-Organics, Kanoria Chemicals and Dai-Ichi Karkaria which incurred net loss in FY20 as against net profit in FY19. Of all the 85 companies, only one company named Chemfab Alkalis incurred net loss in FY21 as against net profit in FY20.

Outlook
Under the Union Budget 2021-22, the government has allocated ~Rs 233 crore to the Department of Chemicals and Petrochemicals. The Government of India is considering launching a production linked incentive (PLI) scheme in the chemical sector to boost domestic manufacturing and exports. It has launched 12 PLI schemes for different sectors which will directly or indirectly benefit the chemicals sector. According to the Department of Chemicals and Fertilizers, the Indian chemicals and petrochemicals industry is growing to new heights and an investment of Rs 8 lakh crore is anticipated in the sector by 2025.

India’s growing importance in the pharmaceutical and fine chemicals sector will support the industrial chemicals segment especially after the onset of the pandemic. Also, the dependence of US and Europe might shift from China (closure of plants due to environmental concerns) to other Asian countries like India post-pandemic for specialty chemicals, thereby placing ample opportunities to the various companies of the sector. As per industry experts, the specialty chemicals market is likely to grow at CAGR of 12-13 per cent over the next five years. The agrochemicals market would grow at 8-10 per cent CAGR till 2025. The petrochemicals segment in India is expected to see a domestic demand growth of 8 per cent CAGR over the next decade.

Construction

The construction sector in India is the second-largest employer after the agriculture sector, representing around 13 per cent of the global GDP. It is responsible for giving employment to many. But the pandemic led to lockdowns which resulted in halting of construction activities, thus disrupting the sector’s growth. While the first wave of the pandemic and the year 2020 were very stressful for the construction sector, activities picked up pace when the economy started to open up. In Q1FY21 which was one the most heavily impacted quarter by the pandemic-induced national lockdown, approximately 5.16 million sq. feet of space was sold by a few of the top listed realty players.

Later, in Q2FY21, there was recovery seen in the sector but being on the lower side the quarter coincided with the inauspi- Construction cious ‘shraad’ period when many new buyers prefer to postpone property purchases. After the roll-out of structural policies, including RERA and GST, organised and branded players’ dominance has risen exponentially. Homebuyer demand has tilted towards branded products. Both listed and leading developers have been catering to this new demand with projects for the affordable and mid-income segments rather than playing only to the luxury homes gallery. This demandsupply equilibrium has helped keep sales momentum going during the pandemic, when housing demand rose significantly. FY21 saw private equity investors focus majorly on portfolio deals across multiple cities and assets rather than on specific projects or cities.

The graph compares the PAT growth YoY in FY21 to FY20 for some of the companies in the construction sector.

According to Anuj Puri, Chairman, ANAROCK Property Consultants,

"Homebuyer preferences changed perceptibly post the pandemic. The previous ‘walkto- work’ concept no longer led home buying decisions – instead, bigger and more affordable properties in greener, less polluted areas found favour, driven by work-fromhome and e-schooling compulsions as well as safety concerns. Developers quickly changed track and those with land banks in the peripheries, and even otherwise, saw it an opportune time to launch new projects there."

A boom of suppressed demand was seen during the festive quarter of Q3FY21. An increase of 77 per cent in area sold was witnessed during Q3FY21 compared to approximate 10.27 million sq. feet area cumulatively sold by some of the top listed players in the sector in Q2FY21. Sales in Q2CY21 stood at approximately 24,570 units across the top 7 cities, registering an increase by 93 per cent YoY.

According to a report by ANAROCK Property Consultants, overall housing sales share of the top eight listed realty players, namely, Brigade Enterprises, Godrej Properties, Kolte Patil, Mahindra Lifespaces, Oberoi Realty, Prestige Estates, Puravankara and Sobha increased significantly YoY.

Such portfolio deals constituted 73 per cent of the overall share, with approximately USD 4,583 million invested via portfolio deals in multiple cities. It is thought that the latest second wave coupled with extended ‘work-from-home’ may further prolong office leasing recovery in India. But, the prospects of commercial office leasing for 2022 look positive, aided by the recent spurred hiring trends which bodes well for the increasing overall office space demand expected during 2022 and 2023. For real estate developers, the need of the hour is to undertake meaningful transformation through the use of alternative construction technologies and practices which has risen to the forefront due to the pandemic.

Outlook
Disruptions during the pandemic have fuelled the need to realign changes in strategies, business models and operating models. The construction sector is likely to witness increased investment in technology-oriented construction such as use of prefabricated and modularised components, digitisation of products and processes through BIM (building information modelling) modules, automation in off-site production and on-site assembly, among others. Although these technologies will probably also lead to an increase in construction capex, they may offset the labour costs and reduce construction completion timelines.

The domestic construction sector hosts multiple attractive growth opportunities as well. Currently around 24 per cent of the National Highway Network in India is four lane hence, it presents immense scope for growth. Additionally, in March 2021, the Parliament had passed a bill to set up the National Bank for Financing Infrastructure and Development (NaBFID) to fund infrastructure projects in India. Overall, the sector's outlook remains positive with increasing investments by top players encouraging overall PE/VC opportunities in India.

Consumer Durable

The Indian consumer durables market is broadly segregated into urban and rural markets and attracts marketers from across the world. The sector comprises of a huge middle-class, relatively large affluent class and a small economically disadvantaged class. Global corporations view India as one of the key markets from where future growth is likely to emerge. The growth in India’s consumer market would primarily be driven by a favourable population composition and increasing disposable income. According to Department for Promotion of Industry and Internal Trade, between April 2020 and December 2020, exports of electronic goods from India stood at USD 8.77 billion.

The Indian appliance and consumer electronics (ACE) market is expected to increase at 9 per cent CAGR to reach Rs 3.15 trillion (USD 48.37 billion) in 2022. Demand growth is likely to accelerate with rising disposable income and easy access to credit. Increasing electrification of rural areas and wide usability of online sales would also aid growth in demand. The Indian government has been encouraging to consumer durable brands to ‘Make in India’, thereby expecting they should be self-reliant for the future; consumers too are showing an affinity towards home-grown products.

The Government of India has allowed 100 per cent foreign direct investment (FDI) under the automatic route in electronics systems design and manufacturing sector. FDI into single brand retail has been increased from 51 per cent to 100 per cent; the government is planning to hike FDI limit in multibrand retail to 51 per cent. On November 11, 2020, the Union Cabinet approved the production-linked incentive (PLI) scheme in 10 key sectors, including electronics and white goods, to boost India’s manufacturing capabilities, exports and promote the ‘Atmanirbhar Bharat’ initiative.

The PLI scheme for air-conditioners and LED lights is to be implemented over FY22 to FY29 with a budgetary outlay of Rs 62.4 billion i.e. 4-6 per cent incentive on incremental sales over base year FY20. Given the contours of the scheme, we believe this shall promote onshore manufacturing of critical components like compressors, motors, PCBs and LED chips, amongst others. We remain unsure on the participation of local brands like Voltas, Havells, etc. given the capital intensive nature and the need for large economies of scale for these components. Nevertheless, creation of a robust component ecosystem by ancillary entities remains a positive for brands as it shall help accelerate import substitution and shrink lead times, thereby reducing working capital requirements.

Financials
Considering the revenues of the companies on an average, the sector was up by 3.48 per cent in FY21 as compared to FY20. Ease in lockdown has driven recovery across categories. B to C demand continued to be the key driver of growth, and companies are focusing on new product launches and improving distribution reach. The early onset of summer, pent-up demand and pre-buying aided growth for cooling products. Among the leading companies mentioned, Dixon Technologies saw the highest growth in revenues i.e. around 46.55 per cent followed by Tejas Networks, Stove Kraft and Butterfly Gandhimathi Appliances. Seeing the operating profit changes in FY21 compared to FY20, the greatest change was seen by Stove Kraft of around 210.95 per cent growth followed by Butterfly Gandhimathi Appliances and Bajaj Electricals. Considering the PAT of the companies on an average, the sector was up by 220.53 per cent in FY21 as compared to FY20.

Outlook
The appliance sector has seen a sharp recovery during 2HFY21, driven by easing of restrictions, pent-up demand and consumers spending more on convenience products. However, the rising fear of further restrictions across several states can potentially impact the demand for appliances, particularly cooling products, considering that lockdowns could impact the peak season. Leading players gained market share across categories in FY21. Commodity prices of raw materials viz. copper, aluminium, TDI and polyol used in PU foam continued to rise during the quarter which will adversely impact the gross margins.

Company managements have indicated passing on the price hike to the customers while contract manufacturers were in negotiation to revise the price contracts with brands and OEMs. Dealer check also suggests price hikes across categories such as air-conditioners, FMEG goods and cables and wires. There is a lot of scope for growth from the rural market with consumption expected to grow in these areas as penetration of brands increases. The demand for durables like refrigerators and consumer electronic goods is likely to witness an increase in the coming years.

This will be so especially in the rural areas as the government plans to invest significantly in rural electrification. Growing awareness, easier access and changing lifestyle have been the key growth drivers for the consumer market. Improved availability of labour and liquidity has led to faster execution. New projects have also picked up pace as postponed projects from 2020 are being undertaken. Real estate demand has been robust in the affordable homes’ category, which indicates strong growth for categories like wires, cables, switches, switchgears and lighting.

Electrical Equipment

Post the pandemic, the global as well as domestic electrical equipment market has assessed the shift in consumer behaviour and additionally has also identified and explored the upcoming trends and drivers that the vendors can capitalise on to support prompt business decisions. Set to grow by around USD 33.74 billion during 2021-2025, research reports estimate the electrical equipment market in India to register a CAGR of almost 9 per cent. Recently it has been seen that a number of infrastructural projects which either are commercial or residential buildings are on a rise in the country primarily owing to factors such as population growth and support from government bodies.

Growth in population has also created an increased need for residential and commercial spaces. Such developments have resulted in surge of demand for electricity, which has been driving the need for power generation as well as transmission and distribution equipment in India. Hence, this indicates that the electrical equipment market growth in India may be substantial. It is known that in India the electrical equipment market is quite fragmented with ABB, Siemens, Havells India, V-Guard Industries, HEG, Hind Rectifiers, etc. being the most prominent players. Hence, a rise in the power generation segment and boost of the power sector will surely augur well for the growth of the companies in the electrical equipment sector.'

Financials
Prominent market leaders such as Havells India posted 10.77 per cent growth in net sales in FY21 at Rs 10,457.30 crore compared to Rs 9,440.26 crore in FY20. The company gained net profit of Rs 1,044.31 crore in FY21, a rise by 41.97 per cent from Rs 735.61 crore gained in FY20. On the other hand, Polycab India witnessed a mere growth of 1.09 per cent in sales during FY21 at Rs 8,926.54 crore compared to Rs 8,829.96 crore in FY20. Its net profit surged by 14.63 per cent in FY21 at Rs 886.14 crore from Rs 773.03 crore in FY20. The pandemic-related uncertainty and slumped growth resulted in decline of net sales for ABB during FY21.

Its net sales figures for FY21 came in at Rs 5,757.17 crore, which is a contraction by around 20.36 per cent compared to the net sales of Rs 7,229 crore reported in FY20. Subsequently, net profit also declined by around 23.75 per cent to Rs 230.44 crore in FY21 from Rs 302.23 crore in FY20. Considering the financial performance of the top 10 companies according to market capitalisation, the average net sales declined by 7.94 per cent while net profit was down by 5.47 per cent. Though bigger companies are thought to be sustainable during rough times, it is these who have been hurt the most by the pandemic and are taking a longer time to recover and cross the pre-pandemic levels.

Outlook
A rise in power generation from renewable energy sources will offer more growth opportunities. To leverage the current opportunities, market vendors must strengthen their foothold in the fast-growing segments while maintaining their positions in the slow-growing segments. Further, it was seen that in 2021, cables made up of the largest market share in the electrical equipment market in India. Hence, a growth in cross-border electricity trading will result in a significant influence on the growth of the electrical equipment market in India, thus offering several growth opportunities to companies in the sector.

Engineering

The engineering sector qualifies to be one of the largest of the industrial sectors in India and is categorized into two parts, namely, heavy engineering and light engineering. The share of India’s engineering is recorded at 27 per cent of the total factories in the industrial sector and is a proxy for 63 per cent of the overall foreign collaborations. It has also proved to be the largest contributor to the country’s total merchandise exports. India, on its quest to become a global superpower, has taken significant efforts towards developing its engineering sector. Engineering Export Promotion Council (EEPC) has been appointed as the apex body by the government, which will be in charge of promotion of engineering goods, products and services from India. 

Globally, India exports transport equipment, capital goods, other machinery or equipment, and light engineering products such as castings, forgings and fasteners. The Indian semiconductor industry bears an attractive growth potential area, as industries which source semiconductors as inputs are witnessing a boost in demand. Capacity creation in sectors such as infrastructure, power, mining, oil and gas, refinery, steel and consumer durables is attributed to rise in demand in the engineering sector. The sector has a comparative advantage in terms of manufacturing costs, market knowledge, technology and creativity.

Intense competition is driving domestic players to focus on areas like improving their capabilities, become more quality conscious and upgrade their technology base in line with global requirements. A majority of the Indian companies are expanding their global footprint. Cheap labour is giving these companies a ray of confidence in higher wage economies. In addition to targeting developed economies across Europe and North America, Indian companies are also focusing on the developing markets of Africa, South America and the Middle East.

In the Union Budget 2021, the finance minister mentioned manufacturing as one of the focus areas of the budget. The production linked incentive (PLI) scheme is the flagship scheme of the government concentrating at boosting domestic manufacturing and helping Indian companies enter the global supply chain. The government announced an outlay of Rs 1.97 lakh crore to be spent on various PLI schemes over the next five years. The amount does not include Rs 40,951 crore announced earlier for PLI in the electronic manufacturing sector. The government has announced that it has charted to set up seven mega textile parks with integrated facilities in three years to make Indian exporters globally competitive.

Up to 100 per cent foreign direct investment (FDI) is allowed through the automatic route, which has led major international players seeking growth opportunities to enter the Indian engineering sector. FDI inflow to the engineering sector was reported at USD 3.6 billion during the period April 2000- March 2020. Talking about the recent changes in the engineering sector, in March 2021, Hitachi ABB Power Grids Ltd. bagged orders worth Rs 160 crore (USD 21.66 million) to supply transformers to the Indian Railways.

In January 2021, Tesla, the electric car maker, set up a research and development centre in Bengaluru and registered its subsidiary as Tesla India Motors and Energy Private Limited. In December 2020, Schindler joined hands with Larsen and Toubro Technology Services Limited (LTTS) to enhance its innovative digital engineering capabilities. Under this partnership, LTTS would provide services and solutions for product development, innovation and engineering that will assist Schindler in further elevating its digitisation and connectivity initiatives.

Financials We have covered the data of 38 listed companies in this sector and have analysed the financial performance of wellknown and top six companies according to market capitalization, namely, Larsen and Toubro Technology Services, AIA Engineering, Thermax, Praj Industries, GMM Pfaudler and Engineers India. In the last two fiscal years, in terms of net sales, the greatest YoY growth was shown by GMM Pfaudler at 69.37 per cent followed by Praj Industries which posted a growth of 18.35 per cent in net sales. AIA Engineering, Engineers India, Larsen and Toubro Technology Services and Thermax Limited registered de-growth of 2.27 per cent, 2.85 per cent, 3.01 per cent and 16.4 per cent individually. The growth in operating profit also portrayed a somewhat similar trend to the growth in net sales.

which posted a growth of 18.35 per cent in net sales. AIA Engineering, Engineers India, Larsen and Toubro Technology Services and Thermax Limited registered de-growth of 2.27 per cent, 2.85 per cent, 3.01 per cent and 16.4 per cent individually. The growth in operating profit also portrayed a somewhat similar trend to the growth in net sales.

GMM Pfaudler and Praj Industries clocked growth of 38.69 per cent and 27.77 per cent, respectively, in the operating profit numbers. AIA Engineering was also able to record a positive growth of mere 0.64 per cent in the operating profit. Whereas, Larsen and Toubro Technology Services, Thermax and Engineers India saw declining numbers and posted de-growth of 12.01 per cent, 8.54 per cent and 24 per cent, respectively. The PAT numbers for these companies had a bit different story to tell. Apart from Praj Industries which registered a growth of 15.11 per cent in net profit, the other five companies registered negative growth numbers in net profit: Larsen and Toubro Technology Services (-18.96 per cent), AIA Engineering (-4.17 per cent), Thermax (-2.76 per cent), GMM Pfaudler (-10.86 per cent) and Engineers India (-39.74 per cent).

Outlook
The Indian engineering sector holds a crucial place in the economy which can be traced to its intense integration with other industry segments. The sector has been de-licensed and enjoys 100 per cent FDI. In order to boost the manufacturing sector, the government has relaxed excise duties on factory gate tax, capital goods, consumer durables and vehicles. Recently, in April 2021, under the Development cum Production Partner (DcPP) programme, Defence Research and Development Organisation (DRDO) gave a nod for private sector firms to develop and produce missile systems such as vertical launched surface and air missile system programmes to highlight the domestic defence industry.

The upcoming new textile policy (in draft version as of February 2021) is likely to aim at setting up manufacturing hubs for textile machineries with the help of FDIs. In addition, the Indian government’s ‘Make in India’ clause in tenders of public sector undertakings (PSU) establishments will benefit the engineering sector as it looks to promote local manufacturing, thus putting entry barriers to players with imported offerings. Besides, in the capital goods sector, the demand for machine tools is expected to remain high; specifically the computer numerically controlled machine tools due to the industry’s rising demand for higher productivity, superior precision, accuracy and low-cost manufacturing solutions.

Entertainment

The Indian media and entertainment industry is one of the fastest growing industries which comprises television, radio, print, films, digital advertising, music, OOH (Out Of Home), animation and VFX, gaming and live events. India is the second-largest television market in the world and has a large broadcasting and distribution industry, comprising approximately 900 satellite TV channels, 6,000 multi-system operators, around 60,000 local cable operators, seven DTH operators and a few IPTV service providers. India has 1,18,239 registered newspapers and periodicals and close to 2,500 multiplexes.

The entertainment industry has grown at a CAGR of 11.8 per cent over FY 2016-21. The television segment contributes about 44.2 per cent, advertising segment contributes about 38.1 per cent and the print media contributes about 24 per cent towards the total revenue of the media and entertainment industry. The year 2020 has been a tough year for all the industries not only in India but across the world due to the pandemic. The media and entertainment industry also faced the brunt and film and television segments were the biggest losers. During 2020, only 441 films were released in Indian cinemas as against 1,833 during 2019 due to nationwide lockdown and social distancing restrictions.

Consequently, the film sector revenues fell about 62 per cent and about 1,000-1,500 cinema screens are estimated to have shut down permanently, reducing India’s overall screen count to around 8,000. The television segment fell approximately 13 per cent due to reduced advertising revenues. However, the biggest gainer from this situation was the online or digital platform which is commonly known as the OTT platform. Digital subscriptions went up from 10.5 million in 2019 to 28 million in 2020 leading to about 49 per cent growth in subscription revenues.

subscriptions went up from 10.5 million in 2019 to 28 million in 2020 leading to about 49 per cent growth in subscription revenues.

Financials

To gain an overview of the entertainment segment, we have analysed 19 major companies. During FY21, the aggregate sales of these companies declined by 25.1 per cent and the aggregate operating profit of these companies declined by 23 per cent YoY. Also, aggregate PAT declined by 21.1 per cent YoY. The major contributors to this de-growth were PVR and Inox Leisure whose revenue dipped by 92 per cent and 94 per cent YoY respectively. Both the companies incurred net loss during the year as the cinema halls were completely shut during a major period of the year. 

UFO Moviez India too incurred net loss during the year and its revenue dipped by 83 per cent. Printing and publishing company Jagran Prakashan’s revenue and net profit declined by 39 per cent and 72 per cent, respectively, due to decline in advertisements. Navneet Education’s revenue and net profit fell by 45 per cent and 73 per cent, respectively, as schools and colleges have been shut since March 2020.

Outlook

The year 2021 began on a positive note with hopes of revival and the media and entertainment industry was predicting its business to recover close to the pre-pandemic levels. However, the second wave of the virus hit the country and again a majority of states imposed lockdowns and various restrictions from March 2021. The film segment has again been impacted due to closure of cinema halls. All other segments are operational but not at full capacity. Thus, the June quarter of FY22 is expected to be disappointing.

However, gradually as the lockdown restrictions would be lifted, gradual recovery in all the segments of this sector can be expected. The film segment might take more time to recover and get fully operational to reach the pre-pandemic levels. Over the medium term, the sentiments are encouraging and as per the FICCI-EY report, the Indian media and entertainment sector is expected to reach Rs 2.23 lakh crore by 2023 at a CAGR of 17 per cent.

Fertiliser

Agriculture and industry move hand-in-hand. The agro industries get all their raw materials from agriculture and agriculture receives many materials for farming from industries like fertilisers, pesticides, machinery, etc. Thus, the fertiliser sector is one of the essential segments of the Indian economy. In 2020, due to the pandemic, nationwide lockdown was imposed which led to a temporary shutdown of all economic activities. But food being a basic necessity, the central and state governments ensured that agriculture activities remained absolutely normal during various stages of the lockdown.

The fertiliser sector has been under the Essential Commodities Act and hence was exempted from lockdown restrictions. Also, the availability of sufficient fertilisers was ensured for sowing of Kharif crops during April-July and for sowing of Rabi crops during October-December. Overall, the fertiliser sales in India have increased by 9.6 per cent last year. India is the second-largest consumer of fertilisers and the third-largest producer of fertilisers in the world. Urea accounts for around 55 per cent of fertiliser consumption. Also, 67 per cent of the total fertiliser subsidy is paid for urea. The sector is governed by a myriad of policies. The urea industry suffers from underrecoveries under various heads of both fixed and variable costs.

Over the last 4-5 years, the Government of India has been planning to revive five closed fertiliser plants, of which four are of Fertiliser Corporation of India Ltd (FCIL) in Talcher, Ramagundam, Gorakhpur and Sindri and one is of Hindustan Fertiliser Corporation Ltd. (HFCL) in Barauni. This is being done by setting up new ammonia-urea plants with a capacity of 12.7 LMT (lakh metric tonnes) per annum. The government expects that with the commissioning of the above plants, it can increase indigenous urea production significantly by at least 63.5 LMT per year, leading to a substantial reduction in imports and thereby reducing dependence on imports in the upcoming years.

Financials
For the purpose of sectoral analysis, we have considered 11 leading companies. The aggregate revenue of these companies dipped marginally by 1.6 per cent during FY21. However, the aggregate operating profit for FY21 grew by 32 per cent and the aggregate net profit grew by 91.8 per cent in FY21. Out of them, Deepak Fertilizers and Petrochemicals and Rama Phosphates were the major contributors. Deepak Fertilizers and Petrochemicals’ revenue and net profit grew by 23.9 per cent and 356 per cent, respectively. Also, Rama Phosphates’ revenue and net profit increased by 29.4 per cent and 138 per cent respectively. National Fertilizers witnessed a turnaround as it earned net profit of Rs 249.6 crore in FY21 as against net loss of Rs 171 crore in FY20. Zuari Agro’s net loss narrowed down from Rs 382 crore in FY21 to Rs 38.6 crore.

Outlook
The central government has decided to increase the fertiliser subsidy outlay for the year by Rs 14,775 crore which will take the total subsidy outlay for 2021-22 to Rs 94,305 crore from a budgeted outlay of Rs 79,530 crore. Also, additional funds of Rs 65,000 crore have been allocated under Aatmanirbhar Bharat 3.0. As per ICRA, these funds are expected to be adequate for the urea sector while the phosphatic fertiliser sector is expected to witness marginal shortfall. The announcement of keeping the domestic natural gas price unchanged at USD 1.79 per mmbtu for the period of April to September 2021 will be beneficial for the fertiliser sector as it will keep the cost of production and the subsidy requirement for the urea players low. Healthy growth is expected in FY22 led by a normal monsoon as predicted by the India Meteorological Department and abundant availability of water supply. The current forecast for Kharif season in 2021 projects a 5 per cent increase this year as compared to last year. As per industry experts, the Indian fertiliser market is expected to register a CAGR of 11.9 per cent during the period from 2021 to 2026.

Finance

India possesses a diversified financial sector which is undergoing rapid expansion, both in terms of strong growth of existing financial services firms as well as entering of new entities in the market. The finance sector is made up of commercial banks, insurance companies, non-banking financial companies, cooperatives, pension funds, mutual funds and other smaller financial entities. However, the financial sector in India is predominantly a banking sector with commercial banks accounting for more than 64 per cent of the total assets held by the financial system.

Some of the measures taken by the government to give a push to this sector include launching a Credit Guarantee Fund Scheme for MSMEs, issuing guidelines to banks regarding collateral requirements and setting up a Micro Units Development and Refinance Agency (MUDRA). Coupled with the push by the government and the private sector, India is no doubt one of the world’s most vibrant capital markets. As of March 2021, the AUM managed by the mutual funds industry recorded at Rs 31,42,764 crore (USD 425.87 billion).

Inflow in India’s mutual fund schemes via systematic investment plan (SIP) were Rs 96,080 crore (USD 13.12 billion) in FY21. Equity mutual funds recorded a net inflow of Rs 8.04 trillion (USD 114.06 billion) by end of December 2019. One of the key components of India’s financial industry is the insurance industry which has been accelerating at a fast pace. The total first year premium of life insurance companies reached Rs 2.59 lakh crore (USD 36.73 billion) in FY20.

Financials
There are 77 companies listed in this sector and we have extracted the data for the same. Among them the six leading finance companies in the sector are Housing Development Finance Corporation, Bajaj Finance, Bajaj Finserv, SBI Cards and Payment Services, HDFC Asset Management Company and Muthoot Finance. For the fiscal years FY20 and FY21, financial performance-wise, the net sales grew in positive numbers for Housing Development Finance Corporation (2.56 per cent), Bajaj Finance (0.95 per cent), Bajaj Finserv (16.55 per cent), SBI Cards and Payment Services (0.18 per cent) and Muthoot Finance (19.33 per cent).

Meanwhile, HDFC Asset Management Company reported de-growth in net sales of 7.52 per cent. The operating profit growth figures were quite mixed with HDFC recording de-growth of 11.48 per cent, Bajaj Finance recording a decline of 7.95 per cent, Bajaj Finserv being positive at 7.77 per cent, SBI Cards and Payment Services squeezing by with 20.55 per cent and HDFC Asset Management Company and Muthoot Finance reporting a rise in operating profit by 5.89 per cent and 24.11 per cent, respectively. The growth in net profit figures was recorded as follows: HDFC (-20.58 per cent), Bajaj Finance (-16.03 per cent), Bajaj Finserv (22.94 per cent), SBI Cards and Payment Services (-20.91 per cent), HDFC Asset Management Company (5.02 per cent) and Muthoot Finance (20.52 per cent).

Outlook
India is mending its way to be the fourth-largest private wealth market globally by 2028. There have been some recent developments in this sector. For instance, in February 2021, the Reserve Bank of India (RBI) cleared the Rs 34,250 crore (USD 4.7 billion) acquisition of Dewan Housing Finance Corporation (DHFL) by the Piramal Group. In January 2021, Sundaram Asset Management Company announced the acquisition of Principal Asset Management for Rs 338.53 crore (USD 46.78 million). Also, in January 2021, the National Stock Exchange (NSE) launched derivates on the Nifty Financial Service Index. This service index will cater to the needs of institutions and retail investors and also provide more flexibility to manage their finances.

FMCG

Fast moving consumer goods (FMCG) makes for the fourth-largest sector in the Indian economy. There are three main segments in the sector: food and beverages, which accounts for 19 per cent of the sector; healthcare, which accounts for 31 per cent of the share; and household and personal care, which accounts for the remaining 50 per cent share. Growing awareness, easier access and changing lifestyles have been the key growth drivers for the sector. The urban segment, which accounts for a revenue share of around 55 per cent, is the largest contributor to the overall revenue generated by the FMCG sector in India.

However, in the last few years, the FMCG market has grown at a faster pace in rural India compared to urban India. Semiurban and rural segments are growing at a rapid pace and FMCG products account for 50 per cent of the total rural spending. The retail market in India is estimated to reach USD 1.2 trillion by 2021 from USD 840 billion in 2017, with modern trade expected to grow at 20-25 per cent per annum, which is likely to boost the revenue of FMCG companies. The revenue of the FMCG sector reached Rs 3.4 lakh crore (USD 52.75 billion) in FY18 and has crossed USD 110 billion in 2021. From October 2020 to December 2020, the FMCG market rose 7.1 per cent, driven by food items, health, hygiene and rural areas. Rise in rural consumption will drive the FMCG market.

It contributes around 36 per cent to the overall FMCG spending. In the third quarter of FY20 in rural India, FMCG witnessed double-digit growth recovery of 10.6 per cent due to various government initiatives such as packaged staples and hygiene categories, high agricultural produce, reverse migration and a lower unemployment rate. Consumers prioritised spending on essential commodities during the pandemic period. However, non-essential commodities in the home care and personal care segment also saw growth post gradual uplifting of the lockdown, suggesting a revival in the industry. 

The rural market recovered faster than the urban market led by higher monsoon and Kharif sowing.

The Indian online grocery market has exceed sales of more than Rs 2,25,000 crore (USD 3.19 billion) in 2021, a significant jump of 76 per cent over the previous year. Many FMCG brands partnered with e-commerce platforms such as Dunzo, Flipkart, Grofers and Big Basket to deliver products at the doorstep of consumers during the pandemic. It is expected that despite the easing of restrictions, the online grocery delivery is supposed to rise further. There have been various government initiatives to tackle the effects of the pandemic and increase the consumer spends of the customers. Developments in the packaged food sector will contribute to increased prices for farmers and reduce the high levels of waste.

In order to provide support through the PLI scheme, unique product lines—with high-growth potential and capabilities to generate medium to large-scale jobs—have been established. The Government of India has approved 100 per cent FDI in the cash and carry segment and in single-brand retail along with 51 per cent FDI in multi-brand retail. The Goods and Services Tax (GST) is beneficial for the FMCG industry as many of the FMCG products such as soap, toothpaste and hair oil now come under the 18 per cent tax bracket against the previous rate of 23-24 per cent. Also, GST on food products and hygiene products have been reduced to 0-5 per cent and 12-18 per cent respectively. This is expected to transform logistics in the FMCG sector into a modern and efficient model as all major corporations are remodelling their operations into larger logistics and warehousing.

In order to provide support through the PLI scheme, unique product lines—with high-growth potential and capabilities to generate medium to large-scale jobs—have been established. The Government of India has approved 100 per cent FDI in the cash and carry segment and in single-brand retail along with 51 per cent FDI in multi-brand retail. The Goods and Services Tax (GST) is beneficial for the FMCG industry as many of the FMCG products such as soap, toothpaste and hair oil now come under the 18 per cent tax bracket against the previous rate of 23-24 per cent. Also, GST on food products and hygiene products have been reduced to 0-5 per cent and 12-18 per cent respectively. This is expected to transform logistics in the FMCG sector into a modern and efficient model as all major corporations are remodelling their operations into larger logistics and warehousing.

Financials
At a time when the majority of the sectors faced the impact of the deadly pandemic, this sector came in as a help to many of the investors. The revenue of all the top five companies increased on a YoY basis in FY21. The Indian giant leader in the FMCG segment, Hindustan Unilever posted the strongest numbers among the top five. The revenue of the company was up by 18.05 per cent YoY in FY21. This was followed by Godrej Consumer Products (11.29 per cent), Dabur (9.86), Nestle (8.09) and ITC (3.66). EBIT growth was also in positive figures for all the companies except ITC which de-grew 10.17 per cent YoY in FY21 as its other verticals didn’t perform well.

Again, the leader was HUL with a growth of 14.71 per cent followed by Dabur (11), Godrej Consumer Products (8.87) and Nestle (5.5). As the cost of materials increased, the price of FMCG products also increased, leading to better profitability. The PAT of HUL grew by 18.27 per cent YoY in FY21 which was followed by Dabur (17.3), Godrej Consumer Products (15.05) and Nestle (5.79). The PAT of ITC de-grew by 14.08 per cent. The top five FMCG companies account for almost 59 per cent of the total revenue of the FMCG sector.

In order to provide support through the PLI scheme, unique product lines—with highgrowth potential and capabilities to generate medium to large-scale jobs—have been established. The Government of India has approved 100 per cent FDI in the cash and carry segment and in single-brand retail along with 51 per cent FDI in multibrand retail.

Outlook
Growing awareness, easier access and changing lifestyle are the key growth drivers for the consumer market. The focus on agriculture, MSMEs, education, healthcare, infrastructure and tax rebate under Union Budget 2019-20 was expected to directly impact the FMCG sector. Rural India should fare better than urban areas because of higher proportion of essential products consumed, government doles, eased restrictions on agriculture activities and the likelihood of a normal monsoon. What also augurs well is that prices of key inputs used in packaging, as well as sugar, wheat and palm oil have softened recently on lower demand. Besides, selling and advertising spends are likely to be kept under check, with lower discounts and innovative use of cost-effective digital advertising.

Leveraging technology, automation and cost management coupled with growing the core portfolio will help the companies deliver sustainable and profitable volume growth and gain market share. E-commerce also plays a major role in the growth of the companies. E-commerce is likely to contribute 5 per cent or USD 4 billion to FMCG sales by 2022. The gross merchandise value (GMV) of the online grocery segment in India is expected to increase 18 times over the next five years to reach USD 37 billion by FY25. With the share of unorganised market in the FMCG sector declining, the organised sector’s growth is expected to increase with the rising level of brand consciousness due to growth in modern retail.

Hospitality

India is one of the most culturally and religiously diverse nations in the world. It is well-known for its rich history and a plethora of cultures, religions, languages, dance, music and cuisines. This vibrancy attracts millions of tourists every year from all over the world. A strong believer of ‘Atithi Devo Bhava’ which translates into ‘Guest is God’, the country has witnessed tremendous growth in the tourism and hospitality sector. A steadily growing middle-class, coupled with rising levels of disposable income has further aided the industry’s growth. In FY20, the sector accounted for 39 million jobs, representing 8 per cent of the total employment in the country. By 2029, this number is estimated to rise to 53 million. 

According to the World Travel and Tourism Council (WTTC), in 2019, the sector contributed USD 194 billion to the country’s gross domestic production. An important and inseparable part of the travel and tourism industry is the hospitality sector. This sector is poised for huge growth and hence, is often called as the ‘sunrise sector’. The hotel industry, which falls under the umbrella of the hospitality sector, is largely fragmented with numerous small and unorganised players occupying majority of the market share. It can be categorised into independent or unbranded hotels, alternate accommodations, new-age hotel chain and branded or traditional hotels. The independent or unbranded segment accounts for approximately 70 per cent of the total available hotel rooms and is followed by alternate accommodations.

This can be attributed to the rising popularity of home stays among tourists. In 2019, the Indian organised hotel industry market occupied 5 per cent of the market share and was estimated at USD 1.7 billion. The share of the organised sector is expected to increase further to 8 per cent in 2025 owing to the growing pipeline from bigger brands and inventory reduction in unbranded hotels due to the pandemic. The average annual revenue per room (ARR), the industry’s key performance indicator (KPI), stood at Rs 5,458.68 in FY 2020 as against Rs 5,671 in FY 2017. It is expected to grow at a compound annual growth rate (CAGR) of approximately 2.49 per cent between FY21 and FY25 and reach Rs 6,292.85 by FY 2025.

On the other hand, the revenue per available room (RevPAR), another key performance indicator, stood at Rs 1,951.34 in FY20 and is expected to rise further to Rs 3,336.28 by FY25. The year 2020 saw the ascent of the corona virus wave which created havoc across the globe. The curbs on international and intra-national travels owing to the pandemic-induced lockdowns restricted the movement of tourists. This impacted the industry severely. Foreign tourist arrivals (FTA) in 2020 dropped down from 10.93 million to 2.68 million, representing a decline of approximately 75 per cent YoY.

The development of vaccines towards the end of 2020 led to relaxation in the lockdown restrictions. Following this gradual lifting of restrictions, the industry saw a rise in staycation (aimed for leisure vacations), bizcation (business vacations) and workation (work vacations). This was a response to adapting to the changing consumer behaviour and demand post the pandemic. Here, the rationale was that hotels that are in close proximity to the cities would be the first ones to recover. The reason being that people would choose to drive for a couple of hours to stay in hotels that are in close proximity to the cities instead of taking flights due to the fear of contracting viral infection. Due to the surge in demand for staycations, an increasing number of hotels and luxury resorts are designing their stay packages in a similar fashion to attract potential customers.

Financials
To study the hospitality sector, we have taken into consideration the performance of 12 of the top companies in this industry and compared their performance in FY21 with that in FY20. In FY21, all the 12 companies witnessed YoY topline de-growth. Barring Mac Charles (India) Ltd., all the companies reported net losses. This included big names such as Mahindra Hotels and Resorts India, Lemon Tree Hotels, Thomas Cook India, Oriental Hotels and EIH Ltd. In FY21, Mac Charles (India) Ltd. reported revenue of Rs 27.82 crore. It clocked an operating profit of Rs 15.89 crore, which was 0.33 per cent growth YoY. The company’s PAT for the year came in at Rs 1.44 crore as against a net loss of Rs 3.41 crore in the previous year.

Outlook
Recognising the industry’s potential to grow further, the government has taken several initiatives to make India a global tourism hub. This will benefit the hospitality sector directly as it thrives on the travel and tourism industry. In the Union Budget 2021-22, the government allocated to the Ministry of Tourism an outlay of Rs 2026.77 crore as against the outlay of Rs 1260 crore in 2020-21, representing a 61 per cent increase. Of this, Rs 950 crore was designated for creation of tourism infrastructure at different destinations spread over different states and about Rs 670 crore would be spent on tourism promotional activities. The infrastructure development will lead to better road, air and train connectivity to tourist destinations in the country and provide more business opportunities to the hospitality sector. This might not pose an immediate relief to the hospitality sector in the current scenario which is still reeling from the effects of lockdowns. But an enhanced focus on infrastructure spending, ramping up of the vaccination drives, broader focus on increasing consumption will help revive the hospitality sector in the long term.

Information Technology

The significance of the IT sector in India is increasing continuously with the sector contributing around 8 per cent to the Indian GDP and the IT workforce accounting for more than 4.5 million employees currently. Being one of the largest offshoring destinations for different IT companies across the world, the business process management (BPM) market in India is of considerable importance. BPM is more like a discipline than a process that incorporates methods to improve, analyse, automate and improve business processes. The importance of the IT sector has significantly increased due to the pandemic as companies stress on automating many processes.

Apart from easing operations, IT provides with security, encryption, analytical insights and convenience, which are the most demanding factors in the current scenario. The application application of IT in current businesses has no more remained an option for people. NASSCOM’s report states that enterprises are re-balancing their technology spend to prioritise digitisation. Adding to it, there has been a shift to offshore and work-fromhome models post the pandemic. The attrition rate dropped by 50 per cent in the second half of the 2020 calendar year compared to the first half.

The Indian IT-BPM industry has been the flag-bearer of India’s exports over the last 20 years. While 1999-2000 to 2009-2010 was a decade of growth, the last decade has been that of consolidation and the industry succeeded in decoupling revenue and employee growth. Over the last decade, the industry grew by 102 per cent, reaching USD 190.5 billion in revenues in 2019-20. It also added 1.8 million employees, up 70 per cent over the last 10 years. India is the leading sourcing destination across the world, accounting for approximately 55 per cent market share of the USD 200-250 billion global services sourcing business.

The IT and BPM industry’s revenue is estimated at USD 195 billion in FY21, an increase of 2.3 per cent YoY. The domestic revenue of the IT industry is estimated at USD 45 billion and export revenue is estimated at USD 150 billion in FY21. As we can see, 77 per cent of the revenue is generated from exports while just 23 per cent of the total revenue comes through imports. Indian IT and BPM companies have set up over 1,000 global delivery centres in 80+ countries across the world. Deal value for cloud was up 80 per cent YoY in the first fiscal. Digitally skilled IT workforce now comprises 26 per cent of the over employee strength which was a mere 8 per cent three years ago with a major focus on cloud computing and data analytics. Leading Indian IT firms like Infosys, Wipro, TCS and Tech Mahindra are diversifying their offerings and showcasing leading ideas in blockchain and artificial intelligence (AI) to clients using innovation hubs and research and development centres to create differentiated offerings. The government is providing its complete support to help the industry grow at a good pace. It has launched several initiatives to boost the interest of global companies. In order to establish an enabling environment for the IT industry, in April 2021, the Development of Advanced Computing (C-DAC) launched three innovative technologies – Automatic Parallelizing Compiler (CAPC), Cyber Security Operation Centre (CSoC) as a service and the indigenous high-performance computing software solutions, Parallel Development Environment (ParaDE).

In the Union Budget 2021, the government has allocated Rs 53,108 crore (USD 7.31 billion) to the IT and telecom sector. The Department of Telecom, Government of India and Ministry of Communications, Government of Japan signed a MoU to enhance cooperation in areas of 5G technologies, telecom security and submarine optical fibre cable system. In 2020, the government released ‘Simplified Other Service Provider’ (OSP) guidelines to improve the ease of doing business in the IT industry, business process outsourcing (BPO) and IT-enabled services.

Financials
Although FY21 was not a good year for a majority of the sectors, it was different for the IT sector. Looking at the top five IT companies, all of them posted positive growth numbers YoY in terms of revenue, EBIDTA and PAT. Infosys showed the highest growth with an increase in revenue by 10.66 per cent YoY in FY21, followed by HCL Technologies (6.65 per cent), TCS (4.6 per cent), Tech Mahindra (2.68 per cent) and Wipro (1.51 per cent). The combined revenue of these companies for FY21 sums up to `4,39,826 crore, which is 82 per cent of the total IT sector revenue.

In the Union Budget 2021, the government has allocated Rs 53,108 crore (USD 7.31 billion) to the IT and telecom sector. The Department of Telecom, Government of India and Ministry of Communications, Government of Japan signed a MoU to enhance cooperation in areas of 5G technologies, telecom security and submarine optical fibre cable system. In 2020, the government released ‘Simplified Other Service Provider’ (OSP) guidelines to improve the ease of doing business in the IT industry, business process outsourcing (BPO) and IT-enabled services. 

Looking at the EBIT numbers, Infosys registered the highest growth of 20.02 per cent followed by HCL Technologies (17.15 per cent), Wipro (13.90 per cent), Tech Mahindra (13.17 per cent) and TCS (6.38 per cent). Infosys recorded the highest growth in revenue, EBIT and PAT for FY21 on a YoY basis. The PAT of the company grew by 16.73 per cent YoY to Rs 19,423 crore. This was followed by Wipro and Tech Mahindra; both grew by more than 11 per cent. HCL Tech’s PAT grew by a mere 1 per cent. India’s largest IT giant TCS recorded a growth of just 0.35 per cent. 

Outlook
The road ahead is bright for the IT sector. India is the topmost offshoring destination for IT companies across the world. The industry is expected to grow to USD 350 billion by 2025 and BPM is expected to account for USD 50-55 billion of the total revenue. According to Gartner estimates, IT spending in India is estimated to reach USD 93 billion in 2021 (7.3 per cent YoY growth) and further increase to USD 98.5 billion in 2022. The Indian software product industry is expected to reach USD 100 billion by 2025. Indian companies are focusing to invest internationally to expand their global footprint and enhance global delivery centres. In line with this, in February 2021, Tata Consultancy Services announced its plan to recruit 1,500 technology employees across the UK over the next year. The development would build capabilities for TCS to deliver efficiently to its UK customers. The data annotation market in India stood at about USD 250 million in FY20, of which the US market contributed around 60 per cent to the overall value. The market is expected to reach USD 7 billion by 2030 due to accelerated domestic demand for AI. Having proven its capabilities in delivering both onshore and offshore services to global clients, emerging technologies now offer an entire new gamut of opportunities for top IT firms in India.

Metals

The metal sector is considered to be essential as it provides key raw materials which are required for India’s infrastructural development. Mining is one of the core sectors and is a key driver of the Indian economy. Minerals and ores provide the basic raw material to several other important industries. Some of them are power generation (thermal), iron and steel for construction activities, cement, petroleum and natural gas, petrochemicals, fertilisers, electrical and electronic equipment, glass, ceramics, and many more. This sector was poised for robust growth in FY21 on the back of rising demand from end-use sectors and fresh investments announced by mining companies. However, the spread of the pandemic at the beginning of the financial year caused severe disruptions across the metal and mining sector and those sectors dependent on this industry.

During the initial phases of the lockdown, mine owners and operators faced numerous problems in the way of restarting mining activities. These included business disruptions and operational difficulties like non-availability of the workforce, restriction on the free movement of men and material, disruption of port operations, etc. This was only worsened by the fall in demand from downstream industries and manufacturers of white goods. The second half of the fiscal year did bring about some positives for the sector, particularly for the domestic steel players, which came in the form of an unprecedented rally in domestic steel prices, a rally that has continued even in FY22.

Domestic flat steel hot rolled coiled (HRC) prices are up 40 per cent since April 2020, while prices of long steel (TMT) are up by 30 per cent as of March 2021. Steel prices went on to set record highs month after month. In April 2021, HRC was priced at Rs 59,700-60,000 per ton from Rs 36,950 per ton in April 2020. This is the highest level seen since 2008 – the year of another financial crisis. The upward cycle in domestic steel prices is supported by the bullish trend in the global steel prices and revival in domestic demand since the easing of lockdown restrictions.

In FY21, India’s production of crude steel and finished steel fell by 5.9 per cent and 7.3 per cent to 103 million tons and 95.1 million tons, respectively. This is attributed to the pandemic which hampered production in Q1FY21. There was a recovery in the second half of FY21 on the back of increased international steel demand and a revival of domestic demand. By Q2, domestic crude steel production had reached 96 per cent of the pre-pandemic levels and by Q3 production was up 7.5 per cent YoY. Q4, which is a seasonally strong quarter, saw production increase by 8.8 per cent as manufacturers ramped up production. It was only until the end of the fiscal year in March 2021 did the lockdown cause another disruption and lower production.

The demand for zinc in the country is largely dependent on the steel market as well. The metal is used to galvanise steel to protect it from corrosion and this galvanising industry itself consumes around 57 per cent of zinc, following by coatings (16 per cent), die-casting alloys (14 per cent), oxides & chemicals (7 per cent) and extruded products (6 per cent). Since the demand for steel-consuming sectors like automobiles and construction remained weak in Q1FY21, Zinc production fell by 8 per cent during this period as compared to FY20. This affected companies such as Hindustan Zinc, which is the primary producer of zinc and dominates the domestic zinc industry. The fall in consumption of the metal was in line with the slowdown in domestic steel production and the general slowdown in manufacturing activity. However, with the unlocking process from June 2020, Zinc made a strong recovery. Higher domestic and international prices resulted in a sharp 8.6 per cent YoY growth in Q2FY21 and a 2.2 per cent growth in Q3FY21. On the other hand, Aluminium production was not affected adversely during the year and just fell by 2.9 per cent in the period from April to December 2020, mainly due to the robust export demand which constitutes around 50-55 per cent of the total demand of the metal in India. Moreover, the increased availability of coal in the domestic market due to a fall in demand from the power sector meant lower prices which benefitted the primary aluminium companies and kept their smelters operational.

Some of the major initiatives taken by the Government of India to promote the metals sector are:

✓To increase the availability of iron ore in India, the government has announced mining and mineral policy reforms to ramp up production and maximise capacity utilisation by government mining companies.
✓In Union Budget 2021, the government reduced customs duty to 7.5 per cent on semis, flat and long products of non-alloy, alloy and stainless steels to provide relief to MSMEs.
✓To boost the recycling of copper in India, the government announced a reduction of import duty on copper scrap from 5 per cent to 2.5 per cent in the Union Budget 2021.
✓The National Steel Policy aims to boost per capita steel consumption to 160 kg by 2030-31. The government has a fixed objective of increasing rural consumption of steel from the current 19.6 kg per capita to 38 kg per capita by 2030-31.

Financials
Analysing the companies based on their market capitalisation, Some of the major initiatives taken by the Government of India to promote the metals sector are:  To increase the availability of iron ore in India, the government has announced mining and mineral policy reforms to ramp up production and maximise capacity utilisation by government mining companies.  In Union Budget 2021, the government reduced customs duty to 7.5 per cent on semis, flat and long products of non-alloy, alloy and stainless steels to provide relief to MSMEs.  To boost the recycling of copper in India, the government announced a reduction of import duty on copper scrap from 5 per cent to 2.5 per cent in the Union Budget 2021.  The National Steel Policy aims to boost per capita steel consumption to 160 kg by 2030-31. The government has a fixed objective of increasing rural consumption of steel from the current 19.6 kg per capita to 38 kg per capita by 2030-31. JSW Steel, which is the largest by market capitalisation in the sector, reported an increase in net sales for FY21 by 9.76 per cent to Rs 78,059 crore as against Rs 71,116 crore reported for FY20. Subsequently, its net profit for FY21 almost doubled to Rs 7,872 crore for FY21 as compared to Rs 4,009 crore for FY20. Hindustan Zinc also posted an impressive 20.40 per cent growth in revenue to Rs 22,071 crore in FY21 from Rs 18,332 crore in FY20. Its net profit also grew by 17.27 per cent to Rs 7,890 crore in FY21 from Rs 6,805 crore for FY20. Tata Steel saw moderate growth of 4.93 per cent in revenue to Rs 1,53,308.39 crore in FY21 from Rs 1,53,308.39 crore in FY20. Its bottom-line grew by 698.63 per cent during FY21 to Rs 7,862.45 crore from Rs 984.49 crore in FY20.

Outlook
India is all set to utilise the disruption caused by the pandemic to lead a phase of rapid industrialisation and the mining sector is the key to recovery in the post-pandemic world. In the Union Budget for 2021-22, capital expenditure was hiked by a massive 34.5 per cent to Rs 5.54 lakh crore to push growth. The budget’s thrust is on infrastructure creation and manufacturing to propel the economy. Therefore, enhanced outlays for key sectors like defence services, railways, and roads, transport and highways would provide impetus to steel consumption which is expected to cross 100 million tons for the first time in FY22. In FY22, production is expected to reach 112-114 million tons, which would be a growth of 9-11 per cent YoY, with the upward cycle in steel prices expected to continue. Infrastructure projects will continue to provide lucrative business opportunities for steel, zinc and aluminium producers. On the whole, the Indian mining sector expected to show positive growth in 2021 compared to 2020.

Petroleum

The oil and gas sector in India is one of the eight core industries and plays a major role in influencing decision-making for all other important sections of the economy. Since the economic growth engine is closely tied to a country’s energy demand, the need for oil and gas is projected to grow rapidly in a developing country like India, thereby making it a sector that is very conducive for potential investment. According to India Energy Outlook 2021, primary energy demand is expected to nearly double to 1,123 million tonnes (MT) of oil equivalent, as the country’s gross domestic product (GDP) is expected to increase to USD 8.6 trillion by 2040. Similarly, India’s natural gas consumption is forecast to reach 143.08 MT by 2040. Indigenous natural gas production caters to about 51 per cent of the country’s requirements, while around 85 per cent of the country’s crude oil is imported. Gas Authority of India Limited (GAIL) had the largest share (69.39 per cent or 11,884 km) of the country’s natural gas pipeline network (17,126 km) whereas IOC is the largest domestic refiner with a capacity of 70.1 MT. The impact of disruptions caused by the pandemic along with various other factors has resulted in India’s crude and natural gas production plummeting during the fiscal year ended March 31, 2021. According to ministry reports, cumulative crude oil production during FY21 was 30.5 MT, which is 5.65 per cent lower than the target and 5.22 per cent lower than the corresponding period last year.

Similarly, domestic natural gas production fell 8.1 per cent YoY to 28,670.6 million standard cubic metre (mscm) in FY21. Domestic natural gas output had fallen 2.8 per cent to 31,168.4 mscm in FY20, reversing the growth trend recorded since FY18. Natural gas production of 2,683.9 mscm in March 2021 was, however, the highest monthly output recorded in 24 months. The high output in March 2021 can be explained by the commencement of production from Reliance Industries and BP’s ultra-deep-water field in the KG D6 Block of the Krishna Godavari basin on the east coast. This new field started production in December 2020 at 1.3 mscm per day (mscmd) and ramped up to 9.6 mscmd in March 2021.

Production has also started in the neighbouring field owned by ONGC and the state-run company has recently floated a tender for supplying 2 mscmd gas from the field starting June 30, 2021. Domestic production was falling due to the ageing of existing fields and a muted response from the industry to take up new projects, mainly due to a lack of adequate incentives. Other reasons for lower output include lack of buyers, inadequate evacuation infrastructure and other technical constraints in hostile geographical terrains. In response, the government has adopted several policies to fulfil the increasing demand and production. It has allowed 100 per cent foreign direct investment (FDI) in many segments of the sector, including natural gas, petroleum products and refineries among others.

According to the data released by the Department for Promotion of Industry and Internal Trade Policy (DPIIT), the petroleum and natural gas sector attracted FDI worth USD 7.91 billion between April 2000 and December 2020. Some of the major initiatives taken by the Government of India to promote the oil and gas sector are:

✓In February 2021, Prime Minister Narendra Modi announced that the Government of India plans to invest around Rs 7.5 trillion (USD 102.49 billion) on oil and gas infrastructure in the next five years.
✓In Union Budget 2021, the government allocated funds worth Rs 12,480 crore (USD 1.71 billion) for direct benefit transfer of LPG (liquefied petroleum gas) and Rs 1,078 crore (USD 147.31 million) to feedstock subsidy to BCPL.
✓In Union Budget 2021, the finance minister announced to provide 1 crore more LPG connections under the Pradhan Mantri Ujjwala Yojana (PMUY) scheme.
✓The Ministry of Petroleum and Natural Gas released a draft LNG policy that aims to increase the country’s LNG re-gasification capacity from 42.5 million tonnes per annum (mtpa) to 70 mtpa by 2030 and 100 mtpa by 2040.
✓The government is planning to invest USD 2.86 billion in upstream oil and gas production to double natural gas production to 60,000 mcm and drill more than 120 exploration wells by 2022.

Financials
We have taken into consideration 16 companies in the petroleum and natural gas sector and analysed their FY21 results. Companies involved in the production of crude and natural gas on the whole reported revenue de-growth in FY21. On average these companies have seen their revenue reducing by 14 per cent as compared to FY20. Oil-to-telecom conglomerate Reliance Industries (RIL) reported a 34 per cent increase in consolidated net profit at Rs 53,223 crore at the end of the financial year ended March 31, 2021. The Mukesh Ambaniled company had posted a net profit of Rs 39,773 crore at the end of the previous fiscal. Adani Total Gas (ATGL), a leading private player in developing city gas distribution (CGD), networks reported an 8.2 per cent growth in net profit to Rs 471.95 crore in FY21 on a standalone basis.

This was because the company utilised lower natural gas prices amid a drop in demand during lockdowns. Following the industry trend, the revenue from sales dipped 10.4 per cent annually to Rs 1,784.5 crore in FY21. Bharat Petroleum Corporation reported the highest growth in profits, posting more than a seven-fold increase in net profits to Rs 17,645.36 crore in FY21 despite a 7.74 per cent decline in the top-line. The profit included a one-time gain of Rs 6,992.9 crore during the quarter on account of the sale of its entire shareholding in Numaligarh Refinery.

Outlook
The overall outlook for the sector remains stable during FY22, driven by strong demand revival for petroleum products and sound liquidity. Higher crude prices and gas pricing reforms, along with higher production, is likely to drive up the profitability of upstream producers. Whereas, higher domestic gas prices can impact the margins of CGD players who will continue to benefit from the competitive position with respect to other fuels. The overall production of natural gas is to rise on the back of scale-up natural gas production from the KG basin block. Given the government’s thrust towards propagating the use of natural gas, consumption is to be supported by the increase of its use in the CGD network and the demand for natural gas is likely to be on the rise.

Pharma

The pharmaceutical sector is very important for the Indian economy. Not only does it generate export revenues but it also gives India the distinct advantage of being a global leader in a field that serves humanity. This sector, since the advent of the current pandemic, has been continuously in the limelight. In fact, the sector has seen re-rating since March 2020 and the kind of wealth creation that has happened on the bourses in this sector is mindboggling. The Indian pharmaceutical industry is further estimated to grow by around 8-10 per cent YoY in size during FY22. 

While businesses were affected by the pandemic, the pharmaceutical sector stood strong during such tough times. To ease any kind of burden on the sector, the Indian government has constantly been supporting the domestic pharmaceutical sector’s growth. Digitalisation was a huge step in the pharmaceutical industry with e-pharmaceuticals being a big trend. While many were forced to stay at homes, e-pharmacies became a hotspot. Increase in internet penetration and smart phone ownership, along with the ease of ordering medications through e-commerce platforms and an increase in chronic diseases are some of the key growth drivers for online pharmaceuticals. A large number of players in the industry seem to jumping into the digital space.

Financials
For FY21 Laurus Labs reported net sales at Rs 4,813.51 crore which is a jump by 69.99 per cent compared to net sales of Rs 2,831.72 crore reported for FY20. Net profit for FY21 rose significantly by around 285.40 per cent to Rs 983.82 crore from Rs 255.27 crore posted in FY20. Laurus Labs, Venus Remedies, Bajaj Healthcare, Morepen Laboratories, Divis Laboratories, etc. are some of the top performing companies in FY21 in terms of gain in net sales YoY. Well-known pharmaceutical players such as Lasa Supergenerics, Indoco Remedies, Laurus Labs, Glaxosmithkline Pharmaceuticals, Strides Pharma Science, etc. reported a strong jump in net profit during FY21 as compared to FY20. Lasa Supergenerics gained net profit of Rs 22.78 crore in FY21, which is an increase by around 527.55 per cent compared to the net profit of Rs 3.63 crore gained in FY20. Indoco Remedies posted a jump of 285.78 per cent YoY in its net profit of Rs 93.05 crore gained in FY21.

Outlook
Going forward as well the pharmaceutical sector is expected to witness strong growth. One of the major focus points for domestic pharmaceutical companies is becoming self-reliant and self-sufficient in terms of APIs to reduce its dependency on China. While globally economies and companies are looking towards de-risking their exposure to the Chinese supply chain, the Indian pharmaceutical sector has a good opportunity to boost its market share since Indian companies offer a competitive advantage over others given their long history of supplying APIs and formulations, better quality and regulatory compliance along with better supply reliability.

Plastic Products

The Indian plastics industry, which commenced with the production of polystyrene, has recorded considerable progress while growing and diversifying at a fast pace. The industry extends all over the country and ties more than 2,000 exporters. Over time, the plastic industry has been able to employ over 4 million people and comprises more than 30,000 processing units, of which the small and medium-sized enterprises contribute around 85-90 per cent of the total processing units. India is well-known as a plastic hub in the world owing to its low-cost production. Cheap labour, easy availability and the low cost of raw materials coupled with weak currency are the factors that are driving the plastic industry. The products produced by the industry include varieties of plastic ranging from raw materials, laminates, plastic-moulded extruded goods to electrical accessories, travel ware, laboratory and medical surgical ware, and others.

Financials
Among the 28 companies listed in the plastic industry, we have chosen the top six companies according to market capitalisation, namely, Astral, Supreme Industries, EPL, Prince Pipes and Fittings, Polyplex Corporation and Jindal Poly Films. The financial performance of these companies for FY20 and FY21 was observed to be decent. The growth figures in net sales, operating profit and net profit were favourable. On a YoY basis, in terms of growth in net sales, highest rise was posted by Prince Pipes and Fittings at 26.65 per cent followed by Astral at 23.21 per cent. Supreme Industries and Jindal Poly Films registered growth in sales almost close to each other at 15.34 per cent and 15.14 per cent, respectively.

The net sales of EPL and Polyplex Corporation rose by 11.96 per cent and 9.61 per cent, respectively. The growth numbers in operating profit were attractive. On a YoY basis, the highest growth was posted by Jindal Poly Films at 67.89 per cent followed by Prince Pipes and Fittings at 60.88 per cent. The operating profit growth numbers for Supreme Industries, Astral and Polyplex Corporation were at a short distance at 54.13 per cent, 52.99 per cent and 51.51 per cent, respectively.

The lowest growth in operating profit was shown by EPL at mere 9.60 per cent as compared to the other five companies. The net profit growth numbers had a strong story to tell. Prince Pipes and Fittings recorded a 97.16 per cent growth in net profit numbers whereas Supreme Industries gave a 90.78 per cent rise in net profit. Polyplex Corporation, Astral and Jindal Poly Films saw 74.55 per cent, 65.29 per cent and 61.85 per cent growth in its net profit numbers, respectively. Similar to the growth in operating profit scenario, EPL posted lowest growth in net profit at 15.55 per cent as compared to the other companies.

Outlook
The recent announcement by Indian Railways to provide complete logistical support also comes as a ray of hope to the industry. Logistics form an integral part of export costs to plastics processors – increased number of containers, efficient supply chain and lower costs therein will provide a push to global competitiveness of plastics exporters. Indian Railways announced that it is further enhancing Prime Minister Narendra Modi’s ‘Vocal for Local’ initiative and also increasing its contribution in exports by providing safe, swift as well as economical logistic solutions.

The Plastics Export Promotion Council (PLEXCONCIL), which is the apex trade body of plastics exporters, has reported that plastics exports have grown in January 2021 at 12.2 per cent on a YoY basis and February 2021 at 3.2 per cent on a YoY basis, thus continuing the growth curve in plastics exports in 2021. All in all, it can be seen that the Indian plastic industry bears high potential in terms of production capacity and market demand. That said, there is a need of addressing the implementation of an effective integrated plastic waste management and recycling system for sustainable development.

Power

Power is among the most critical component of infrastructure, crucial for the economic growth and welfare of nations. The existence and development of adequate infrastructure is essential for sustained growth of the Indian economy. India is the thirdlargest energy consumer in the world after the US and China. However, despite being the most populous country, it just holds a share of 5.8 per cent of the world’s primary energy consumption. The Indian energy consumption basket is mainly dominated by coal and crude oil. India’s power sector is one of the most diversified in the world. Sources of power generation range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable non-conventional sources such as wind, solar, and agricultural and domestic waste.

Electricity demand in the country has increased rapidly and is expected to rise further in the years to come. In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is required. The Indian power sector is undergoing a significant change that has redefined the industry’s outlook. Sustained economic growth continues to drive electricity demand in India. The Government of India’s focus on attaining ‘Power for All’ has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing in both the market and supply sides (fuel, logistics, finances, and manpower).

As the country faces the second wave of the deadly pandemic which has resulted in a fresh round of countrywide lockdowns, electricity and power consumption has been affected badly. The opening of the economy boosted the power consumption lately but was again interrupted with partial lockdowns. Even after this, electricity generation in FY21 was just marginally lower than that in FY20 with lower output from conventional sources. Consumption too was slightly lower than a year ago owing to the lower demand in the first five months of FY21. In FY21, domestic electricity generation was at 1,380 BU, 0.6 per cent less than FY20

This fall was mainly on account of the lower output from conventional sources (thermal, hydro and nuclear), which accounts for around 90 per cent of the total generation. On the other hand, electricity consumption in the country contracted by 0.8 per cent in FY21 versus FY20. This is mainly due to lower demand from the industrial and commercial sector consequent to the lockdown. Power consumption witnessed a contraction on a year-on-year basis during the first five months of FY21 (April to August). There was a gradual increase in demand following the unlocking process starting June 2020.

Capacity addition to conventional as well as renewable power generation slowed in FY21. During April–February of FY21, 9.7 GW of new generation capacity was installed. This has been the lowest annualised addition in 12 years. The decline in annual capacity addition was higher in the case of conventional energy sources (54 per cent decline YoY) than that on renewable energy (47 per cent lower YoY). The lower capacity addition can be attributed to the lockdown led to supply side disruptions, labour shortages as well as the constrained finances and liquidity pressures faced by the developers.

New power generation capacity addition in 2020-21 has been led by renewable energy. Up to 6.2 GW of renewable energy generation capacity has been added during April-February of FY21 versus 3.5 GW of conventional energy. In FY21, the total thermal installed capacity in the country stood at 234.72 GW. Installed capacity of renewable, hydro and nuclear energy totalled 94.43 GW, 46.21 GW and 6.78 GW, respectively. Prices surged in the short-term electricity market in March 2021. The average price of electricity in the DAM (day-ahead market) on the IEX power exchange during the month was Rs 4.07 per unit, which was a 20 per cent increase from the 3.39 per unit in February 2021 and 66 per cent increase from year ago (Rs 2.46 per unit in March 2020).

Increase in electricity consumption with higher levels of economic activity and the onset of summer have propelled the prices to a higher level. There has been a sustained increase in prices since December 2020 and prices have risen by 44 per cent in the four months to March 2021, reflective of the growing electricity demand. According to the Union Budget 2021-22, 139 GW of installed capacity and 1.41 lakh circuit km of transmission lines were added and 2.8 crore households were connected in the past six years. 

Solar tariffs in India have reduced from ~Rs 7.36 per kWh (US 10 cents per kWh) in FY15 to Rs 2.63 per kWh (US 3.57 cents per kWh) in FY20, thus promoting renewable energy. As of December 2020, over 36.69 crore LED bulbs, 1.14 crore LED tube lights and 23 lakh energy-efficient fans have been distributed across the country, saving nearly 47.65 billion kWh per year. India’s rank jumped to 22 in 2019 from 137 in 2014 on World Bank’s ‘Ease of Doing Business - Getting Electricity’ ranking.

Financials
The power sector companies showcased mixed results. As the importance of renewable energy is increasing, Adani Green Ltd. posted a growth of 19.71 per cent YoY for FY21 in terms of revenue. Tata Power also posted a growth of 11.43 per cent YoY. In the top five power companies, apart from these two companies the other three companies displayed negative sales growth. Sales of Torrent Power was down by 10.76 per cent, followed by NTPC (-3.6) and lastly Adani Power (-0.93).

Looking at their operating profit figures, Adani Green posted a growth of 77 per cent YoY in FY21, followed by Adani Power (50.11) and NTPC (2.6). The other two companies, Torrent Power and Tata Power, showed negative growth in EBIT of 3.39 and 4.07 per cent, respectively. PAT of Adani Green and Adani Power came into positive figures in FY21 from negative in FY20. While Torrent Power recorded a positive growth of 9.92 per cent YoY in PAT, Tata Power and NTPC recorded degrowth of 21 per cent and 14.29 per cent, respectively.

Outlook
Power generation and consumption is expected to improve in FY22 with the anticipated higher levels of economic activity amid optimism that the vaccination programme would facilitate normalisation and stimulate economic recovery. The Government of India has released its roadmap to achieve 227 GW capacity in renewable energy (including 114 GW of solar power and 67 GW of wind power) by 2022. The central government is preparing a ‘rent a roof’ policy for supporting its target of generating 40 gigawatts (GW) of power through solar rooftop projects by 2022. It is focusing more on renewable sources of energy which is gaining importance every day.

Service

The services sector is not only known as the dominant sector in India’s GDP but has also saw an inflow of significant foreign investment and has contributed significantly to export along with provision of large-scale employment. A variety of activities are covered by the Indian services sector such as trade, hotel and restaurants, transport, storage and communication, financing, insurance, real estate, business services, community, social and personal services, and services associated with construction. According to RBI, in February 2021, service exports stood at USD 17.54 billion while imports stood at USD 10.61 billion. The year 2020 was a peculiar year tagged by the pandemic and consequent nationwide and worldwide lockdown measures implemented since March 2020.

Consequently, the contact-intensive services sector was severely impacted, particularly sub-sectors such as tourism, aviation and hospitality. There was almost 16 per cent contraction in the first half of FY 2020-21 in the services sector. This decline was a result of sharp contraction in all sub-sectors, particularly trade, hotels, transport, communication and services related to broadcasting, which contracted by 31.5 per cent in H1 FY 2020- 21. As per the first advance estimates, the gross value added (GVA) of the services sector was estimated to squeeze by 8.8 per cent in 2020-21 as against its growth of 5.5 per cent in 2019-20. Sub-sectors such as trade, hotels, transport, communication and broadcasting services; financial, real estate and professional services; and public administration, defence and other services were estimated to contract by 21.41 per cent, 3.68 per cent and 0.82 per cent, respectively.

It is important to note that while the services sector contracted by over 20 per cent in the first quarter of FY 2020-21, the contraction reduced to 11.4 per cent in the second quarter (Q2) of FY 2020-21. This pace of recovery was attributed to the high frequency indicators that pointed to a gear up in economic momentum with the opening up of the economy from June 2020. India’s services sector activity, which had contracted for five consecutive months since March as the pandemic dented demand, has started to pick up since September 2020.

Financials
There are 38 companies which are listed in the services sector. Some of the popular and top companies in terms of market capitalisation are Adani Enterprises, Adani Transmission, Adani Ports and Economic Zone, Container Corporation of India, Sundram Fasteners and CRISIL Ltd. In the last two fiscal years i.e., FY20 and FY21, the net sales reflected the negative impact on services sector due to the pandemic. The YoY growth in net sales figures were reported to be 8.91 per cent by Adani Enterprises, -13.5 per cent by Adani Transmission, 5.70 per cent by Adani Ports and Economic Zone, -1.72 per cent by Container Corporation of India, -1.64 per cent by Sundram Fasteners and 14.44 per cent by CRISIL.

On the flip side, the growth in operating profit figures gave some optimistic views regarding the services sector. On a YoY basis, Adani Transmission posted a rise of 9.80 per cent, Adani Transmission recorded a rise of 12.09 per cent, Adani Ports and Special Economic Zone Limited saw an increase of 36.77 per cent and Sundaram Fasteners and CRISIL posted a rise of 11.36 per cent and 12.32 per cent, respectively. Container Corporation of India was the only company among the six companies to post negative growth in operating profit at –32.36 per cent. Even the YoY growth in net profit bore cheerful expectations. Adani Transmission bagged the highest growth in net profit by posting 112.07 per cent followed by Adani Ports and Special Economic Zone recording 33.63 per cent growth in net profit. The net profit for Container Corporation of India, Sundaram Fasteners and CRISIL grew at 27.92 per cent, 11.08 per cent and 3.13 per cent, respectively. Adani Enterprises observed negative growth in net profit at –6.48 per cent.

Outlook
There have been some significant developments in the Indian services sector. A cumulative foreign direct investment (FDI) worth USD 85.86 billion between April 2000 and December 2020 was locked by the service sector. The services category ranked 1st in FDI inflow as per data released by the Department for Promotion of Industry and Internal Trade (DPIIT). In April 2021, the Ministry of Education (MoE) and University Grants Commission (UGC) started a series of online interactions with stakeholders to streamline forms and processes to lower the compliance burden in the higher education sector as a follow-up to the government’s focus on ease of doing business to enable ease of living for stakeholders.

On March 17, 2021, the Health Ministry’s eSanjeevani telemedicine services went beyond 3 million (30 lakh) teleconsultations since its launch, helping patient-to-doctor consultations from the confines of their home and doctor-to-doctor consultations. In April 2021, Elon Musk’s SpaceX began accepting pre-orders for the beta version of its Starlink satellite internet service in India for a fully refundable deposit of USD 99. Currently, the Department of Telecommunications (DoT) is screening the move and more developments will be unveiled soon.

The Government of India focuses on the importance of promoting growth in services sector and provides several incentives to sub-sectors like healthcare, tourism, education, engineering, communications, transportation, information technology, banking, finance and management, among others. In the Union Budget 2021-22, the government allocated Rs 7,000 crore (USD 963.97 million) to the BharatNet programme to boost digital connectivity across India. On January 15, 2021, the third phase of Pradhan Mantri Kaushal Vikas Yojana (PMKVY) commenced in 600 districts with 300+ skill courses. Spearheaded by the Ministry of Skill Development and Entrepreneurship, the focus of this new phase will be on new-age and pandemic-related skills.

PMKVY 3.0 expects to train eight lakh candidates. India’s digital economy is expected to reach USD 1 trillion by 2025. By the end of 2023, India’s IT and business services sector is expected to reach USD 14.3 billion with 8 per cent growth. In addition, implementation of the Goods and Services Tax (GST) has created a common national market and has led to reduction in overall tax burden on goods. Hence, reduction in cost is expected in the long run on account of availability of GST input credit, which will result in the reduction in prices of services.

Textile

The Indian textile industry is one of the largest and finest textile industries in the world. This is reflected by the fact that each region has its own special textile industry. For instance, Kalamkari textile of Andhra Pradesh, Banarasi silk of Varanasi, Chikankari embroidery of Lucknow, and so on. With a rich history that can be traced back to the Indus Valley civilisation, the textile industry is the second largest employment generating sector in the country and provides direct employment to approximately 4.5 crore people across the country. It contributed around 2.3 per cent of the country’s gross domestic production in FY20. 

The textile industry can be segmented into various categories such as by application type (clothing, industrial or technical applications and household applications), by material (cotton, jute, silk, synthetics and wool), by process (woven and nonwoven) and by geography (North America, Europe, Asia-Pacific, Latin America and the Middle East and Africa). Various studies estimate that the global textile industry would grow at a compound annual growth rate (CAGR) of 6 per cent from USD 654.7 billion in 2021 to USD 821.7 billion in 2025. It is expected that the North America region will be the fastest growing region. 

Country-wise, China continues to be the world’s leading producer and exporter of both raw textiles and garments. On the other hand, the United States happens to be the top importer of raw textiles and garments. The Indian textile industry ranks third globally. In FY20, the Indian textiles and apparel industry was valued at USD 108.5 billion. Of this, USD 75 billion comprised domestic consumption while the remaining USD 28.4 billion was exported to the world market. The Indian textile export industry is expected to grow at a CAGR of 11 per cent to reach USD 65 billion in value by FY26.

In recent times, the pandemic necessitated the production of PPE suits for doctors and frontline healthcare workers. Following this need, India has become the second-largest manufacturer of PPE in the world. At present, more than 600 companies in India are certified producers of PPEs. The global market worth of this business is expected to cross USD 92.5 billion by 2025, up from USD 52.7 billion in 2019. The domestic textile industry has certain advantages over its counterparts. These advantages include abundance of raw materials, presence of complete value chains, competitive manufacturing costs and availability of skilled manpower. Factors like the rising per capita income, increasing disposable incomes and enhanced focus on technical textiles aid the industry’ growth.

The Indian textile industry has its own share of challenges. The country lacks good infrastructure facilities that, on the contrary, its global counterparts have access to. These infrastructure bottlenecks create an obstacle in attaining the desired capacity and efficiency of production. The textile factories in the country continue to remain labour-intensive as opposed to the textile factories abroad that are automated. Further, approximately 95 per cent of the weaving sector continues to remain unorganised. The closing down of some textile manufacturing units in China and Europe jeopardized the supply chain. This caused an unprecedented rise in the prices of basic raw materials in international markets. As a consequence, the prices of dyes went up. The pandemic worsened the woes of the industry. Owing to the trade restrictions and decline in consumption due to the lockdowns imposed by governments across the globe, the supply chains were severely disrupted. 

Financials
For this report we have considered the top 40 companies in terms of market capitalisation to assess the financial performance of the textile industry in FY21. The total market capitalisation of these companies is roughly about Rs 1.45 lakh crore. The net sales in the textile industry de-grew by over 9 per cent on YoY basis as against a decline of nearly 3 per cent in the previous year. The operating profits grew by 2.32 per cent when compared to the previous year as against a decline of 3.34 per cent in FY20. On the other hand, the net profit for the period fell down to negative Rs 2,295 crore. Sport King India, Indo Count Industries and Nitin Spinners are the top three companies with the highest YoY increase in net profits at 583.90 per cent, 240.81 per cent and 189.13 per cent, respectively.

Outlook
The Government of India acknowledges the contributions made by the textile industry to the country’s GDP. It recognises the potential of the industry to create employment opportunities and its role in making India self-reliant. The government allows 100 per cent FDI in the sector under the automatic route. In the Union Budget 2021-22, the textiles and clothing sector received a grant of Rs 3,614.64 crore, which was 10 per cent higher than the allocation of Rs 3,300 crore in 2020-21. The government allocated Rs 700 crore for Amended Technology Upgradation Scheme (ATUFs) against Rs 545 crore in the previous year.

In the budget, the government strongly emphasised on infrastructure development and research and capacity building. Also, a proposal was made for setting up of seven mega textiles parks under MITRA and duty reduction on nylon raw materials. An outlay of Rs 10,683 crore was allocated to the industry under production linked incentive (PLI) scheme for boosting India’s manufacturing capabilities and encouraging exports. Thus, the industry has strong support of the government which is reflected by the above-mentioned policies.