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I played it a little safe in the past: Nicole Kidman


Hollywood star Nicole Kidman says she 'played it safe' with her career in the past but now always looks for roles that will challenge her. The actor said she is happy to make 'spontaneous and random' decisions now, reported Contactmusic.

'I think maybe I played it a little safe in the past, and went for the work I thought I was meant to do, which spoke to the idea of what and who an actress is supposed to be. But, for the most part, I've followed my spirit, which motivates me to go against the grain.

'I'm completely spontaneous and random in my decisions. Never let it be said that I don't have diverse taste. I love jumping into the deep end. Why not? That's my favourite saying, I think it has such potential and choice, why not?' Kidman told Psychologies magazine.

The actor said life experiences have made her a better performer and she is happy to find her footing as a character actor.

"I've been doing this since I was 14, more than 35 years working is quite a number to say out loud. It's gratifying and comforting because I have a deep well of emotion that only comes with life experience and I can call on that, call on those memories I didn't have when I was in my 20s.

'I am a character actor, which was my goal. I wasn't educated at drama school with the aim of being a movie star," she said.             —PTI

I played it a little safe in the past: Nicole Kidman

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Facing populist assault, global elites regroup in Davos


As the world's financial and political elites convene here in the Swiss Alps for the World Economic Forum, their vision of ever-closer commercial and political ties is under attack — and the economic outlook is darkening.

Britain’s political system has been thrown into chaos as the country negotiates a messy divorce from the European Union.

Under President Donald Trump, the United States is imposing trade sanctions on friend and foe alike, and the government is paralyzed by a partial shutdown over immigration policy that forced Trump and a high-level US delegation to cancel the trip to Davos.

A year after getting a standing ovation from the elites at Davos, French President Emmanuel Macron is sinking in the polls as he contends with “yellow vest” protesters who have taken to the streets to call for higher wages and fairer pensions. Nationalist political movements are gaining strength across Europe.

And the economic backdrop is worrying: experts are downgrading their forecasts for global growth this year amid rising interest rates and tensions over trade.

“Judging by the state of the world right now 10 years on from the financial crisis, and the dysfunctional state of global politics I would suggest that these annual events have achieved the sum total of diddly squat,” said Michael Hewson, chief market analyst at CMC Markets UK. The collective worries have sent a shudder through global financial markets: The Dow Jones industrial average is down nearly 9 per cent from Oct. 3. David Dollar, a senior fellow at the Brookings Institute, said the buckling market “represents a lot of anxiety that we're seeing from the corporate elite who meet at Davos.”

How times have changed. For most of the past quarter century, the worldview symbolized by the World Economic Forum — of ever-freer world trade and closer ties between countries — had dominated. Then came a backlash from Americans and Europeans whose jobs were threatened by low-wage competition from countries like China and who felt alienated at home by wealth inequality and immigration.

The Davos confab has always been vulnerable to snark: hedge fund billionaires flying into Davos in fuel-guzzling private jets to discuss the threat of climate change; millionaire CEOs discussing inequality while downing cocktails; endless conversations between people who describe themselves as “thought leaders.”

Access to the elite gathering, for businesspeople anyway, doesn't come cheap. It first requires a WEF membership, which starts at 60,000 Swiss francs ($60,259) and rises up to the "Strategic Partner" level at a cost of 600,000 ($602,605). But getting into the Davos event requires an invitation and an extra fee, which spokesman Oliver Cann said is 27,000 francs ($27,117) per person.

That's just for corporate chieftains. Civil society, non-governmental groups, UN leaders and governmental officials don't pay: They get in free. Lodging during high-rent Davos week, however, is another matter.

Although Davos is seen as a redoubt for global elites, populists have come, too. Trump got a polite reception when he showed up in 2018, and he had planned to come again this year before the shutdown intervened. Brazil's newly installed president, the populist Jair Bolsonaro, will attend this year.

Davos serves as a global stage for world leaders and executives, and the conference center transforms into a warren of public and private meetings. Executives talk possible deals. Government leaders either meet and greet each other or seek to iron out differences — mostly quietly. Academics and chiefs of non-governmental groups speak out in webcast panel sessions or comb corridors looking to rub elbows with decision-makers.

Facing populist assault, global elites regroup in Davos

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Earnings, global cues to dictate market trend: Experts


City: 

The ongoing corporate results season, movement of the rupee and global cues will set the tone for the domestic equity markets this week, experts said.

  "The market will closely watch supervision and management commentary of the companies coming out with their earnings," said Mustafa Nadeem, CEO, Epic Research.

Indices may also react to results posted over the weekend. Wipro announced its results after market hours Friday, while HDFC Bank

Saturday reported a 20.3 per cent growth in net profit to Rs 5,585.9crore for the December quarter.

Kotak Mahindra Bank, InterGlobe Aviation, Bank of Maharashtra, Yes Bank and Maruti Suzuki India are among the major companies set to announce their results this week.

"In terms of Q3 results, most IT companies have beaten the estimates in terms of topline growth. Also, the commentary from IT companies management has been positive, so the momentum in topline growth is likely to continue albeit, at the cost of margins.

"Other Nifty companies that reported results this week also have seen a neutral to positive reaction by the analysts, indicating that the start of the results season has been positive," said Viral Berawala,  CIO, Essel Mutual Fund.

According to analysts, global trade issues would also impact the trend, while lack of major triggers in the domestic market could  see range-bound movement in the near term.

Earnings, global cues to dictate market trend: Experts

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Lupin, Sun Pharma, Glenmark recall products in US


City: 

Indian drug majors Lupin, Sun Pharma and Glenmark Pharmaceuticals are recalling various drugs from the

US market for a variety of reasons. As per the latest Enforcement Report published by the US Food and Drug Administration (USFDA), Lupin is voluntarily recalling 55,000 vials and 1,60,241 boxes of anti-bacterial drug Ceftriaxone for injection in various strengths.

The recall has been initiated by Lupin Pharmaceuticals, Inc, a subsidiary of the Mumbai-based firm.

The products have been manufactured at the company's facility in  Mandideep, Madhya Pradesh.  The company is recalling specific lots of drugs due to the presence of particulate matter.

"Product complaints received of grey flecks, identified as shredded rubber particulate matter from the stopper observed in reconstituted  vials," USFDA said.

The ongoing voluntary nationwide recall has been classified as Class-I.

Such recalls are for dangerous or defective products that predictably could cause serious health problems.

Lupin Pharmaceuticals is also recalling 2,87,784 bottles of Cefdinir for Oral Suspension, used to treat bacterial infections, for CGMP (Current Good Manufacturing Practice) deviations.

The USFDA has classified it as a Class-II recall, which is initiated in a "situation in which use of or exposure to a violative product  may cause temporary or medically reversible adverse health consequences  or where the probability of serious adverse health consequences is remote".

 Similarly, Sun Pharmaceutical Industries is voluntarily recalling  13,918 cartons and 1,39,180 vials of Vecuronium Bromide for Injection,  used as part of general anesthesia, due to presence of particulate matter.

Besides, Glenmark Pharmaceuticals is recalling 96,240 applicators of its product Estradiol Vaginal Inserts for defective delivery system.

The USFDA has termed it as a Class-II recall.

Lupin, Sun Pharma, Glenmark recall products in US

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Jack Bogle: Change agent of investors


FC INVEST pays tributes to the man who exposed drawbacks of stock-picking and built a $5 trillion asset management company

Jack Bogle knew how to make a nuisance of himself. “What he meant to most people in the investment business was that he was a royal pain in the bottom,” said Jeremy Grantham, co-founder of Boston-based Grantham Mayo Van Otterloo, or GMO.

By the time of Bogle’s death, on Wednesday at age 89, his victory was nearly total. Low-cost index funds, the idea he championed, are everywhere, from giant pensions and endowments to millennials’ 401(k) accounts. Vanguard Group, the firm Bogle founded, is now a $5 trillion giant.

This year, the investing industry will hit a symbolic tipping point: The amount of assets in U.S. index funds is almost certain to surpass the amount in actively managed products for the first time. Meanwhile, Vanguard collected inflows of $218 billion in 2018, Bloomberg data show. The rest of the U.S. fund industry lost $237 billion.

Bogle, who suffered the first of six heart attacks at age 31 and ended up with a heart transplant, didn’t seem like such a threat to Wall Street when he started Vanguard back in 1975.

Few Allies

People thought he was crazy. Practically his only allies were academics, economists like Nobel Prize winner Paul Samuelson and Princeton University’s Burton Malkiel, who thought the idea of index funds made a lot of sense. Money managers were charging big fees for the privilege of racking up mediocre returns. Bogle’s concept was simple. Since it was nearly impossible to consistently beat the market, why try? Just buy a large basket of stocks (or bonds), skip the cost of hiring an investment pro, and patiently collect the market return as the savings from those lower fees compounded.

Nice idea, but could anyone make money offering it? Other investment firms experimented with index funds, to underwhelming results. Clients didn’t seem to be clamoring for the product at a time when Wall Street’s marketing was all about investing prowess. Batterymarch Financial Management, a firm Grantham co-founded before GMO, tried it. One barrier, beyond client skepticism, Grantham says, was that “it was destined to be a very, very low profit business.”

And that –- low fees, low profit margins, letting investors keep more of their money –- was Bogle’s entire point.

Standard Load

The first-ever index mutual fund, accessible to all investors, not just institutional clients, was a flop. With Bogle expecting investment of as much as $150 million, Vanguard launched it with just $11.3 million. Even his fans in academia weren’t pleased. Samuelson complained about the fund’s 6 percent sales load, which was standard at the time. Loads were used to pay for kickbacks to financial advisers so they’d recommend the funds to their mostly unaware clients. Vanguard eliminated its loads in 1977, a virtuous move that nonetheless made it harder, at least at first, to attract assets.

Perhaps more disappointing was the fund’s performance. In the late 1970s, three-quarters of active-fund managers were still delivering better returns than Bogle’s index fund. By the early 1980s, half were outperforming the index fund, despite the lower fees. Then, later in the 80s, the tide turned, and Vanguard’s index fund began outpacing the vast majority of active funds.

Technology’s Role

Technology played an underappreciated role. Index funds have to buy and sell hundreds of securities every day, to deal with investment flows, re-invest dividends and generally keep up with the index they’re meant to track. Vanguard’s first fund could only handle about half of the Standard & Poor’s 500 index. By 1992, computers and trading systems had advanced to the point where Vanguard could launch its Total Stock Market Index Fund, which is now a $672 billion behemoth that buys every single U.S. stock, 3,500 in all, for fees as low as 0.04 percent per year.

Another reason Vanguard was able to turn the tide was the fierce competition active-fund managers started facing from each other. Investors were eager to jump into the surging markets of the 1980s and 1990s. Celebrity fund managers multiplied, and they were also up against new, high-tech hedge funds, which built powerful computers and hired scientists and math Ph.D.s to run them. The arms race made it more and more difficult to outsmart the market.

Finance Joke

By now, it’s become almost a joke on Wall Street. Every so often, some pundit predicts that this year, finally, will be a “stock-picker’s market,” when skilled individual stock selection can finally triumph over the quants and the indexes. But with each passing year, mutual funds, and even hedge funds, fall further behind the plain old index fund.

As Vanguard won more and more assets, along with the respect of many personal-finance experts, it was competing against a financial industry that loved to steer clients into higher-fee products. Vanguard, which Bogle had set up as a cooperative, would periodically cut fees, passing the savings from efficiencies and economies of scale to its customers. Other fund companies mostly held the line.

Then, investors started asking about fees, particularly after the steep market declines of 2000-2002 and 2008. Only the most unsophisticated investors would still put up with an adviser who recommended load funds. Pensions, endowments and, crucially, 401(k) retirement plans pushed more and more assets into index funds.

Fee War

Suddenly, Vanguard started facing serious competition of its own. A fee war broke out, with players like Fidelity Investments and Charles Schwab angling to cut costs closer and closer to zero.

The craze for indexes took on qualities that made Bogle unhappy. In his later years, when he was no longer in charge at Vanguard, he railed against exchange-traded funds, or ETFs, which are index products that can be bought and sold like stocks. He worried ETFs encouraged the sort of wasteful trading that hurt investor returns. Few agreed with Bogle –- even at Vanguard, which offered its own ETFs –- and the funds now hold $3.5 trillion in assets in the U.S.

Bogle’s Philosophy

Still, Bogle’s philosophy -- that trying to beat the market was futile, especially i

Still, Bogle’s philosophy -- that trying to beat the market was futile, especially if you’re an investing amateur –- was winning the day. His advice became conventional wisdom for big companies setting up 401(k)s. They encouraged workers to buy and hold index funds with low fees, and discouraged them from getting in their own way by trading too much. Today, a generation of workers is plowing its retirement savings into index funds, whether they realize it or not.

The ultimate savings for the American investor from Bogle’s persistence may amount to more $1 trillion, according to an estimate by Bloomberg ETF analyst Eric Balchunas. And the windfall will continue to rise as the benefits of lower fees compound year after year after year.

Bogle was a folk hero to investing nerds and an outspoken enemy of stock-pickers and self-serving financial advisers. But he wasn’t a household name. The biggest beneficiaries of Bogle’s invention are regular investors who might have no idea who he was.

—Bloomberg

Jack Bogle: Change agent of investors

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FPI outflow crosses Rs 4,000 cr in Jan so far


City: 

Foreign investors have pulled out more than Rs 4,000 crore from the Indian capital markets so far in January, highlighting their cautious stance towards the country.

This comes following a collective net inflow of over Rs 17,000 crore in the capital markets both equity and debt  by Foreign Portfolio Investors (FPIs) during November and December.

Prior to that, they had pulled out a massive Rs 38,905 crore in October.

According to data available with the depositories, FPIs withdrew a net amount of Rs 3,987 crore from equities and a net sum of Rs 53 crore from the debt market, taking the total outflow to Rs 4,040  crore during January 1-18.

Market experts  believe that FPIs are continuing with their 'wait and watch' approach towards India.

Going ahead, the focus would be on the budget, progress on the economic  growth front and general elections, they added.

Other factors such as movement in crude prices and currency as well as US-China trade relations will also play a role in FPI flows, they added.

Harsh Jain, COO at Groww, an online MF investment platform, said 2019 is likely to see a lot of volatility because of the rate hikes and dollar instability, but the Indian markets may be able to weather the storm.

"India offers better investment opportunities due to consistent growth, supportive global factors and attract valuations. We should expect positive inflow in coming months," he added.

FPI outflow crosses Rs 4,000 cr in Jan so far

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A blissful 2019 for consumer appliances industry


The replacement cycle of consumer appliances market is shortening, which could drive growth in some product segments, boltering volume growth

Rising spending habits, improved electricity availability, technology advancement and evolving lifestyles are driving demand for consumer appliances in India. Exposure to global technologies and lifestyle has created a shift in perception, with consumer durables no longer just viewed as utility products. Indians today are seeking better designed products for comfort and convenience. For more insight on emerging trends, we organised a consumer durables conference, Ghar Maange More, recently where we invited contract manufacturers, consumer durables & electricals companies, modern retail stores and experts in the appliances & electricals industry.

A blissful 2019

The Year 2018 was expected to be washout year for the consumer appliances industry, owing to unseasonal rains, a weak festival season (Onam & Diwali) and floods in South India. The rise in customs duty and currency depreciation further dampened overall market sentiments. Looking at the trends of the past seven years suggest every bad year is followed by a good year. If this trend were to continue, which is believed by industry participants, 2019 would be a blissful year. The consumer electronics and household appliances market size currently stands at Rs 900 billion, according to Indian Brand Equity Foundation (IBEF), and is expected to post a CAGR of 8% to Rs 2 trillion by 2030.

Shortening of replacement market cycle

The replacement cycle of consumer appliances market is shortening, which could drive growth in some product segments. This is expected to bolster volume growth over the medium term. The replacement cycle has reduced over the past decade with TV at five years, washing machine at 8-10 years and mobile phones at 2-3 year.

Lights up on volume but down on prices; few firms to remain in the long run

India’s lighting industry is expected to grow by 15-20%, according to Electric Lamp and Component Manufacturers Association (ELCOMA), driven by strong volume growth due to shift to LED lighting from CFL & incandescent bulbs. However, increased competition, low barriers of entry, and fall in raw materials prices are leading to a decline in product prices. Although prices have hit bottom in LED bulbs, there is still a room to reduce prices in other LED luminaries by 10-20% due to change in design. In the long run, only 6-7 firms will remain in the lighting industry, just as in the CFL industry.

In-house manufacturing & outsourcing over imports

Lower penetration of consumer appliances goods, uptick in demand, sustained product quality, inventory management, rise in customs duty and currency depreciation have led companies in India to reduce dependence on imports and look to alternatives, such as domestic outsourcing and in-house manufacturing.

Online to grow faster than offline

In the home appliances segment, the online channel share is expected to jump two-fold to 7-8% in 2018 vs 3% in 2017. Further, the share is expected to rise to 10% by 2019 and 12% by 2020 according to the consumer durable company industry Online channel constitutes ~30% of total mobile phone market and expect its share to touch 40% by 2020. The online platform is expected to grow by 25-30% over the same period while overall industry to grow by 10%. Implementation of GST has led to better warehouse facilities, pickup in volume, cost efficiency and improvement in overall supply chain along with removal of price differences across states.

Crompton Greaves Consumer Electricals

Crompton Greaves Consumer Electricals (CG Consumer) is the demerged entity of Crompton Greaves, a leading capital goods company in India. Crompton is one of the oldest brands in the consumer electricals space in the country. The company was demerged in October 2015 and listed in May 2016. It has split its product portfolio into two business heads: 1) lighting & luminaries, and 2) electrical consumer durables, which covers fans, pumps and household appliances, such as geysers, mixer grinders, toasters and irons. Over the past two decades, it has become a market leader in fans, domestic residential pumps and street lighting. The company has six manufacturing units across four states: Goa, Gujarat, Maharashtra and Himachal Pradesh. It has 100,000 touchpoints. CROMPTON operates an asset-light business model with 50% of revenue from outsourcing. The company has 1,530 employees.

Key highlights

*The company has hiked prices in the LED bulbs segment by 2% in Q3FY19 vs expectations of 5%.

*Revenue growth in Q3FY19 is expected to be along similar lines in Q2FY19. Revenue grew by 8% in Q2FY19.

*The strategy is to recoup margin by 400bp in the lighting segment through cost reduction initiatives, such as 1) in-house design, 2) direct sourcing from China than aggregators in India, 3) purchase via eAuction, 4) indigenization of the LED lighting portfolio (LED bulbs outsourced at 20% in Q2FY19 vs 80% in Q2FY18), and 5) price hikes.

*Ad spend stood at INR 388mn in FY18 largely towards creating awareness in the minds of young population and attracting customers. However, ad spend currently is aimed towards communicating new, innovative and differentiated products.

*Reduction in the LED lighting prices is largely due to lower cost. The company does not anticipate another big price erosion in the LED lighting segment, which could impact margin.

*Initiated intervention (cross-selling of product portfolio) to increase distribution and reach. For eg, started promotion of fan dealer channels to drive increased sales of water heaters.

*Premium fans market constitutes 26-27% of the total market.

*Gross margin from lighting sales to EESL stood at ~15-16% as there was no marketing spend and lower distribution cost. Gross margin is lower in the government program for the lighting business, but hails similar on a net margin basis.

*The company would continue to focus on its existing product portfolio, where it believes there is a further scope to increased penetration, rather than adding new product categories. Within its existing product portfolio, the focus would be on driving sales from premiumization in fans & pumps and introduction of new & differentiated products in the marketplace (such as Antidust & Air360 Degree fans and LED lighting).

*After the launch of water heaters and air coolers in the appliances segment in 2018, the company is working on the kitchen appliances portfolio.

*Over the past 2.5 years, the company was able to save cost in the range of INR 1.0-1.2bn pa through various cost reduction measures.

*One of the highlights of the go-to-market strategy is to have a single distributor or maximum of 2-3 distributors in each state. The primary benefit would be to help in uniform pricing and ensure price stability across the markets.

Voltas

Voltas, a part of the Tata Group, is an engineering solutions provider and India's leading room air-conditioning company with a market share of 22.1% at multi-brand retail outlets in FY18. The company’s three business verticals are 1) electromechanical projects, engaged in turnkey projects, comprising HVAC, refrigeration & electrical power, 2) engineering projects that cater to sectors, such as textiles machinery & mining and construction equipment, and 3) unitary cooling products that assembles room & split air conditioners, commercial refrigeration & air coolers. Voltas entered into 50:50 JV with Arçelik AS (a household appliances subsidiary of Turkey-based KOC Group) to access the INR 350bn consumer durables market in India, which is growing at 10-12%, according to the management. The JV would launch products, such as refrigerators, washing machines (WM), microwaves and dishwashers under the brand, VOLT BEKO.

Key highlights

*Owing to a weak festival season and higher carrying inventory of 2.0-2.5 months in the room air conditioner (RAC), the company expects volume growth to remain weak in Q3FY19 but return to normal by March 2019.

*The past seven years’ data trend shows that every bad year is followed by a good one. The company expects 2019 to be a good year for the air conditioner industry in India. Accordingly, it expects Q1FY20 to grow by 18-20%.

*The RAC industry is expected to witness volume growth of 10-12% over the next five years.

*There has been the twin adverse impact of rise in customs duty in air conditioners (compressor hiked from 7.5% to 10.0% & RAC from 10% to 20%) and the currency depreciation on working capital as the payment cycle is from May to September in the unitary cooling products segment.

Landed RAC cost is higher YoY, but it is lower than in Q2FY19

Despite the rise in customs duty and currency depreciation, the company has not taken any price hikes while peers have raised prices by 5%.

§ According to the company, Voltas maintains its leadership position in the RAC segment, with a market share of 25%, followed by LG Electronics at 15%, Lloyd at ~9-10%, Hitachi & Daikin in the similar range of 8-9% and Samsung at 5%.

Key reasons for the rise in market share of Voltas in the past six quarters are: 1) strong brand recall, 2) attractive marketing (Mr Murthy with All Weather AC), 3) dealer push, 4) consumer pull, and 5) highest distribution reach at 15,000 retail outlets (11,000 retail outlets five years ago).

The company continues to be asset light with an assembly unit of RAC at Pant Nagar, Uttarakhand. It does not have high cost items, such as compressor and paint work.

Recently, three franchisee-based exclusive brand outlets were opened at Bokaro & Ranchi in Jharkhand and Faridabad in Haryana.

The Sanand manufacturing unit of the VOLTBEKO JV is expected to be operational by Q2FY20. Refrigerator will be manufactured followed by WM. Currently, the four appliances are imported from Thailand, Turkey and China. In WM, semi-automatic would be locally outsourced and front-load would be imported.

The refrigerator industry is expected to post a value CAGR of 9-10% over the next five years, with a penetration level at 27-30% while WM is expected to grow faster, owing to penetration of 22-25%, according to the company. Currently, order inquiries are high.

VOLTBEKO products are available in select Croma stores and online at Tata CliQ. They are expected to be available across all modern format retail stores by January 2019.

Of the domestic orderbook of INR 28.5bn as on September 2018 in the electro-mechanical projects business, one-third is towards rural electrification, one-third is urban infrastructure (metros, airports, educational institutions & hospitals) and the rest towards private projects, including large projects of convention centre. Metro orders are underground work at Chennai, Bengaluru, Kolkata and Ahmedabad. Smart cities, water management, education institutions, hospitals and metros are expected to drive inflows in the domestic market.

International orderbook of INR 20bn as on September 2018 comprises INR 2bn towards ventilator order from Singapore and the rest from Abu Dhabi, Dubai & Oman. It has reduced exposure in Qatar and expects lower business from the Middle East region in the medium term.

V-Guard Industries

V-Guard Industries is one of India’s leading consumer electricals company. Incorporated in 1977, the firm was set up by K Chittilappily, with the manufacturing and marketing of voltage stabilisers under the brand, VGuard. Over the past four decades, the company has diversified into other consumer-related products to become a multi-product firm. The products portfolio consists of voltage stabilisers, digital UPS (inverters) & inverter batteries, electric & solar water heaters, domestic & agricultural pumps, industrial motors, switchgears, wire, induction cooktops, mixer grinders & fans. The company has seven manufacturing facilities: two at Tamil Nadu, one at Uttarakhand, two at Himachal Pradesh and two at Sikkim. About 60% of product sales are through outsourcing. The southern region sales constitutes 65% of total revenue in FY18.

Key highlights

*The Year 2018 is expected to be bad year, owing to a weak Summer, muted festival season (Onam & Diwali) and floods in its home market, Kerala (25% of total revenue in FY18).

*With the recovery in Kerala, H2 is expected to be much better than H1.

*Overall revenue CAGR of 15% over five years, driven by increased penetration in non-south region, rise in distribution network and entering into new product categories (over the past 10 years, the company has added nine products in its portfolio).

*Non-south revenue is expected to grow by 22-23%, according to the management.

*The revenue share from the non-south region for stabilisers, inverters and fans is in the range of 35-60% whereas kitchen appliances, switchgears and wires are small.

*As the product replacement cycle is shortening, volume growth is expected to rise over the medium term.

*The in-house manufacturing share has increased to ~45% currently from 40% in FY16, owing to increased production from its two facilities at Sikkim and Himachal Pradesh. Outsourcing constitutes about 55%.

*India’s fans market size is at INR 70bn, according to management. About 65-70% of the fans market is the economy class of INR 1,000-1,200. The mid-range is priced at INR 1,200-2,000 and fans price above INR 2,000 are in the premium segment. Recently, it has introduced Brushless DC (BLDC) fans, which reduces power voltage.

*Demand drivers vary across products segments. Wires are driven by new housing demand, fans largely due to replacement (aesthetics, color and energy efficiency), stabilisers largely dependent on the sale of air-conditioners, which depends on weather. In the water heater segment, 15% of revenue is from the replacement market.

*Water heaters are sold through two distribution channels: 1) electrical stores, and 2) sanitaryware stores. Around 90% of sales is from electrical and retail outlets.

*eCommerce is ~2% of total revenue. Two product categories, i.e. water heaters and stabilisers, are sold through the online platform. Margin is higher in the online channel.

*Kitchen appliances cover products, such as induction cooktops (the largest), mixer grinders, rice cookers and gas stoves. Revenue from kitchen appliances stood at INR 440mn in H1, largely comprising the South India market.

*The company’s distribution network is 700+ strong, largely from the non-southern region, with 6,000+ direct dealers and ~30,000 retailers across India.

*It plans to add products in the kitchen appliances categories, such as the ovens, toasters & grills market, which is estimated to be INR 8bn and electric kettles with a market size of INR 5bn, according to management.

eCommerce Expert

The expert is head of the eCommerce division of one of the largest consumer durables firms in India.

Key highlights

*The mobile phones market in India is expected to post a value CAGR of 10% to $16.5bn by 2020 from $13-14bn in 2017, according to management.

*Online channel constitutes ~30% of total mobile phone market (equivalent to most developed markets) and expect its share to touch 40% by 2020. The online platform is expected to grow by 25-30% over the same period.

*Implementation of GST has led to better warehouse facilities, pickup in volume, cost efficiency and improvement in overall supply chain along with removal of price difference across states.

*In the home appliances segment, online channel share is expected to jump two-fold to 7-8% in 2018 vs 3% in 2017. Further, the share is expected to rise to 10% by 2019 and 12% by 2020 according to the company.

*Currently, online volume share in TV is at ~20% and refrigerator at ~8%.

*The branded companies are concerned about oligopoly of Amazon and Flipkart. Therefore, these companies are pushing sales on their own websites.

*Debit card EMI will be positive for the durables industry as it will expand the market and reduce cannibalization from traditional credit card purchases.

*Top 3 online financiers are HDFC credit card, Bajaj Finance & ICICI Bank. Total financing share would be ~30% in online and ~40% in offline financing.

*The replacement cycle of TV is five years, washing machine is about 8-10 years, mobile phones is one year (renting is an upcoming market for devices with a two-month security deposit).

*Around 40-45% of total festival season sales comes via online channels.

*At Flipkart 50-60% of sales is still cash on delivery for mobiles. The high growth segment in mobiles is priced at INR 10,000-15,000.

*The online sales of washing machines have grown by 30%+ in H1CY18.

*Xiaomi is expected to launch washing machines in the online market in 2019.

*Online sales starts from the metro and then picked up by Tier I & II cities.

*Higher display area and high SKU (for product comparison) has led to a significant shift in buying from individual retail stores to modern format stores.

Lighting expert and electrical distributor

The expert is a retired professional with 36 years of experience. As vice president of one of India’s leading consumer electricals company, the individual was part of the core team of the company’s consumer business and was credited to turn around the manufacturing unit. Currently, the person is a distributor of Crompton Consumer products.

Key highlights

*The lighting industry is INR 210bn industry currently with light source constituting ~50% of industry and the rest luminous fittings, according to ELCOMA.

*The LED lighting business is growing while the CFL lighting business is on the decline. One key reason in the shift from CFL to LED is pricing as prices of LED and CFL are similar.

*Pricing pressure in the lighting industry is due to increased competition and low entry barriers. Firms in the industry earn ~5-6% margin due to competition. Currently, retrofit lamps have no margins. Companies like Phillips are unable to make more than 6% margin.

*LED lighting industry is estimated to post a value CAGR of 15-20% over the medium term, driven by replacement of LED lighting.

*In the current lighting market, there is a price gap of INR 40 between market retail price and market operating price.

*The price flow structure of the LED lights is as follows: the cost of production is at INR 40-45. The cost to distributer is at ~INR 70, which is sold by distributer at INR 77. The retailer sells LED lights at INR 100 to final consumer, with a MRP of INR 140.

*The LED bulbs prices have hit bottom, and there is no scope for further price correction.

*Under the government program, UJALA, it had targeted to distribute LED bulb of 770mn units until 2019, but currently only 44% or 317mn units of LED bulbs have been distributed to date. The lighting industry distributed LED bulbs of 970mn units to date.

*From May 2018, LED bulbs are required to have star rating to ensure quality of the product.

*The grey channel from China is a big cause or concern, which is expected to reduce owing to steps taken by the government.

According to the survey conducted by the Lighting Association, around 74% of products are non-compliant with regulatory requirements.

Over the next several years, lighting products are expected to be standardized (mostly for 7W-18W). Standardization would lead to margin compression and may lead for only Top 5 companies to sustain while smaller firms would phase out.

In luminaries, critical components are control gear, optics, thermal management & light source.

There is scope of further reduction in LED luminaries (ex LED bulbs) by 10-20%, due to change in product design.

In the long run, only 6-7 firms will remain in the lighting industry just as in the CFL industry.

About 47% of total lighting revenue is from South India as brand recall is strong.

Rural markets are still serviced by the wholesale channel in the lighting industry.

Modern Retail Format Store in Maharashtra

Currently, the company has 33 modern retail stores across Mumbai, Thane and Pune in Maharashtra. The company has plans to add 20 more retail stores over the next two years. It plans to expand stores in other neighboring states like Gujarat, Madhya Pradesh and Chhattisgarh. Around 60% of total stores are mature and contribute ~70-75% of total business. The retail stores have consumer durables products, such as air conditioner, LED TV, refrigerator, washing machine, air purifier, water purifier, mobile phones, and small appliances. In refrigerators, major brands are LG, Samsung, Whirlpool, Voltas and Haier. In LED TV, major brands are LG, Samsung, Sony & Panasonic and other brands such as VU, TCL and Akai. In washing machines, major brands are Samsung, LG, Whirlpool and IFB Industries. In air conditioners, major brands are Voltas, Daikin, Blue Star, LG, Lloyd, Whirlpool and Eureka Forbes. Retail format stores revenue stood at INR 3.5bn in FY18.

Key highlights

*Out of 33 stores, about 88% are EBITDA -positive and rest which have been recently opened are expected to turn EBITDA-positive over the next year.

*Same store sales growth of retail outlets was at 4% YoY. About 50% of revenue is derived from the sale of air conditioners and refrigerators.

*Retail outlets gross margin stands at 14% and net margin is about 4%. At the product level, gross margin in air conditioner is ~17%, TV at 15% and mobile phones at 8%.

*According to the store owners, less than 10% of customers come with a pre-conceived notion of buying a particular brand.

*About 60% of total sales are financed with 50- 55% are financed through NBFC, such as Bajaj Finance and 12-15% are financed through credit card sales.

*Bajaj Finance is the best at financing, followed by Capital First (which has currently merged with IDFC).

*The air conditioner industry is expected to witness the fastest growth in the consumer durables industry. LED TV are expected to witness strong growth of 8-10%; however, the distribution network is expected to shift from offline to online retail, owing to lower prices. The refrigerator industry is expected to grow at 10-12% YoY and washing machine by 4% YoY.

*Over the upcoming years, brands from China are expected to perform well as some are already in the process of setting up manufacturing plants in India.

*In case of India brands in the durables industry, Godrej and Voltas are doing well. Onida’s revenue is declining due to management issues. If management issue is resolved, it can perform better.

*Whirlpool is performing well, driven by the right brand, and price strategy and also good inventory management.

*The LED TV industry is expected to post a revenue CAGR of 8-10% over the long term. Currently, the TV industry is witnessing a downward price trend (prices have declined by 40% YoY). However, the downward price trend is offset by strong volume growth.

*Demand for new products categories, such as air and water purifiers are expected to perform well over the long term. The IoT-based products are seeing increased traction.

The stores have 1m customer base

*During NBFC financing issue, the company had faced a minor issue with one of the NBFC, which had frozen its limits for a period of ~10-15 days, but the situation has since returned to normalcy.

*Online sales constitutes 6% of total sales with channel partners such as Amazon & Flipkart.

A blissful 2019 for consumer appliances industry

Click here to Read full Details Sources @ http://www.mydigitalfc.com/deep-dive/blissful-2019-consumer-appliances-industry

Look for growth and scale


Hiren Ved is the co-founder and chief investment officer of Alchemy Capital Management, a boutique wealth management company managing about $1 billion of assets of high net worth individuals. Alchemy Capital Management was founded in 1999 with Hiren Ved joining as partner and chief investment officer.

Prior to joining Alchemy, Ved worked with Prime Securities as part of the fund management team responsible for investing the firm’s proprietary funds in public markets as well as private equity. Ved started his career with K . Choksey & Company as part of the research team and was later designated head of research. He has over two decades of experience in the equity market.

Ved has created a reputation in bottom-up research and stock picking with extensive coverage of companies across sectors through management/company meetings. A qualified cost accountant, Hiren also holds a diploma in banking & finance.

Investment strategy

Currently Hiren is also the fund manager of Alchemy High Growth –Select Stock fund. Investment objective here is at generating long-term returns by investing in equities across market capitalisations, with a mid-cap bias and concentrated portfolio of between 5 to 10 stocks with the BSE 500 as the benchmark. For this fund there is no sector-specific limits whereas individual stock exposure is limited to 25 per cent.

The other two funds that Hiren supervises as CIO are Alchemy High Growth

and Alchemy Leaders. Alchemy High Growth fund's strategy aims at generating long-term returns by investing in equities across market

capitalisations but with a strong mid-cap bias. “Through a combination of top-down and bottom-up fundamental research, it is our endeavour to identify and invest in

growth companies which will enable long term wealth creation.”

A typical portfolio consists of 20-25 stocks. Indicative asset allocation is less than 25 per cent in large-cap stocks, more than 10 per cent in small-cap stocks and balance in mid-cap stocks.

Alchemy Leaders fund focuses on companies with market capitalisation of more than  Rs 5,000 crore. “This universe gives us an opportunity to invest in larger mid-caps and large cap companies across the leading sectors,” says Ved.

 “The philosophy behind this strategy is to invest in growth companies which have achieved scale and have either reached or have potential to be amongst the leaders in their field/industry segments.”

Look for growth and scale

Click here to Read full Details Sources @ http://www.mydigitalfc.com/fc-supplements/invest/look-growth-and-scale

Coffee market awaits monsoon report from Brazil


Coffee prices have not seen any major recovery after having fallen to 12-year lows last year. The price movement of the commodity will now depend upon the rains in Brazil and how much it supports the new crop. The market is waiting for a clearer picture that will emerge in February. 

In September last year, Arabica coffee futures in Intercontinental Exchange (ICE) had declined to touch 97.3 cents per pound, lowest since July 2006. Prices have been falling from 140 cents in 2017 due to good crop in three large coffee producing countries- Brazil, Vietnam and Columbia. At that time, the global crop was estimated to be 5.7 per cent higher without a similar growth in consumption.

The stock levels in the global market also had gone up after these large producers were selling off their produce to make most of the weak currencies. Global exports had reached record high levels when prices slipped to 12-year lows.

In the next two months, a slight recovery was witnessed in the coffee market. Multi-year low prices were attracting investor interest in the commodity.

However, prices have not seen any major recovery ever since. Arabica prices are currently trading around 102 – 103 cents per pound in ICE, which is just 5 cents more than the 12-year low levels.

‘Going ahead, much will depend upon the rainfall in Brazil and how it shapes up the crop in that country. Brazil has just started receiving rains. By February, we will have a better picture of the rainfall and the crop estimates too will arrive by then,” said Ramesh Rajah, president, Coffee Exporters Association.

Though Indian coffee is currently priced at a slight premium over the international rates, they are still much lower than the cost of production.

“An efficient zero-debt farm can produce a bag of Arabica for Rs 8000. But currently Arabica fetches only Rs 7000 per bag at the farm-gate level. The cost of production is not getting covered by the current price levels,” said Rajah.

However, farmers are holding on to their produce in anticipation of better prices. Hence the exports in the first half of the year is expected to be at least five per cent lower than last year levels. Lower prices and lesser carryover stocks due to smaller crop last year also will hit the exports this year.

In 2018, coffee exports from India declined 7.36 per cent on a year-on-year basis to 3.50 lakh tonnes. Initially when the rupee had weakened against the US dollar, exporters were shipping coffee in large quantities. When rupee fell to multi-year lows, the coffee stocks had started depleting. In the subsequent months, lower coffee prices as well as recovery in rupee rates led to shrinkage in coffee exports, leading to an overall decline.

The market is awaiting news from Brazil to understand the movement in the prices. “If Brazil has lower rainfall and smaller crop, prices can move up by 10 to 20 per cent. But on the other hand, if rains support a good crop, prices can further fall by 10 to 20 per cent. Indian prices too will follow the international trend,” said Rajah. If prices fall by 10 to 20 per cent coffee will once again see multi-year low prices in 2019.

Columnist: 
Sangeetha G.
Coffee market awaits monsoon report from Brazil

Click here to Read full Details Sources @ http://www.mydigitalfc.com/fc-supplements/invest/coffee-market-awaits-monsoon-report-brazil

Sugar production could fall


There are wide spread apprehensions that India’s sugar production might fall in 2019-20 as farmers are struggling to plant cane, thanks to a drought like situation in two of the country’s top sugar cane producing states. If it so happens, the drop in production would not only slash exports from the world’s second-biggest sugar producer, it would also support global prices that have fallen nearly 15 per cent so far in 2018.

Interestingly, around mid-2018, it was expected that sugar output in India would reach a record level as timely showers helped boost yields in the world’s top consumer. Around April-May, 2018, Indian Sugar Mills Association (ISMA) expected that production may total 31.5 million metric tonne in the year that began on October 1, against 29.5 million tonne, as estimated in March, 2018 and the previous record of 28.36 million tonne in 2006-07.

That’s not all. Analysts had thought at that time (April-May, 2018) that a bigger harvest in the world’s second-largest producer might further pressure prices that had been trading at the lowest since September 2015. Global sugar prices that have tumbled more than 30 per cent in the past year could fall further, analysts had thought. And now with the projections of a significant drop in output, whole things will change. Industry sources said that many farmers couldn’t plant cane in Maharashtra and Karnataka due to water scarcity and this will reflect in next year’s production. Significantly, Maharashtra is the country’s second-biggest sugar producer, while Karnataka ranks third. As per projections, Maharashtra’s production could fall as much as 16.7 per cent to 7.5 million tonne in the next season. The sugar marketing year runs from October to September.

Maharashtra received 23 percent less rainfall than normal this year during the June to September monsoon season, while the rainfall deficit in Karnataka’s cane growing region was 29 percent during the period. Apart from water scarcity, an infestation of white grubs will curtail production next season.

Meanwhile, the Centre’s support on sugar in recent past has helped the industry to bring down the outstanding arrears of the farmers in some states like Uttar Pradesh. But there is an aberration related to the fixed minimum selling price (MSP) of Rs29/kg and there are many analysts who are of the view that this MSP should be taken up to Rs34-35/kg. The present MSP, according to many, is not sufficient to make the industry profitable. And that, indirectly, is likely to have an impact on the farmers, who will not be able to earn profits on his product and will not be able to receive their payments on time.

There is another school of thought that thinks that any rise in the MSP will affect exports. That line of thinking is based on the fact that India is home of world’s surplus sugar and is in a position of being a price marker, not a price taken at present. In fact, these analysts think that the world will have to buy sugar at high prices from India and that, in turn, can be an opportunity for India.

It is pertinent to mention there that following a record production in the 2017-18 sugar year, Indian mills were struggling to export the surplus and sought help from the government for overseas sale and to support local prices. A decline in sugar output, if it so happens, could lift local prices and prompt the government to halt export incentives, analysts think.

Columnist: 
Ritwik Mukherjee
Sugar production could fall

Click here to Read full Details Sources @ http://www.mydigitalfc.com/deep-dive/sugar-production-could-fall

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