Exports Rise 3.49% in Dec, but Trade Deficit Widens to Over $10 billion

The recovery in exports that helped arrest the slide in India’s external balances seems to have lost some steam with shipments rising at the slowest pace in six months in December, but the seventh successive monthly decline in imports, led once again by gold, helped contain the trade deficit to just over $10 billion. 
Exports rose 3.49% in December from a year ago to $26.35 billion, data released on Friday showed, while imports fell 15.25% to $36.49 billion, yielding a trade deficit of $10.14 billion compared with $9.22 billion in November. Gold and silver imports dropped 68.83% in December. The export number was softer on account of lower petroleum product shipments amid a planned refinery shutdown at Reliance Industries. The Indian currency strengthened to 61.9 to the dollar on the hopes that the current account deficit is likely to be well below even the revised government forecast of $60 billion and that exports will pick up again. 
“We now believe that CAD would be lower than earlier anticipated, in the range of $35 billion-$40 billion,” said Shubhada Rao, chief economist, Yes Bank. India Ratings expects the CAD in the October-December quarter at 1.1% of GDP, while Rohini Malkani of Citi has pegged it at 2.3%. The dramatic slide in the rupee to just short of 69 to the dollar in August from around 54 at the beginning of FY14 had forced the government into a desperate fight to contain the CAD, which had touched a record high of 4.8% of GDP in 2012-13. Freeing up fuel prices and imposing stiff curbs on gold imports aided by the timely revival of exports helped ease the situation with the CAD expected at around 2.5% of GDP for the year.

Source: The Economics Times 

FRENCH CONNECTION Lactalis to Buy Tirumala for 1,750 cr World’s largest dairy products maker will acquire 74% from 3 owners and remaining 26% from PE investor Carlyle

World’s largest dairy products-maker Le Groupe Lactalis of France will purchase Tirumala Milk Products by buying out the stakes of three owners and PE investor Carlyle’s growth capital fund for $275 million (. 1,750 crore), two people with direct knowledge of the development said. 
The deal gives the French company an entry into the world’s largest dairy market, which produces 123 million tonnes of milk now and slated to grow to 190 MT by 2015. Family-owned Lactalis, with annual sales of €15.7 billion (. 1.33 lakh crore), signed an agreement last week and will make it public soon. 
“We always wanted to build the largest dairy product company. I am sure Lactalis Group which is the largest company in the world will make the Tirumala the largest in India also,” said Danda Brahmanandam, Tirumala’s founder and managing director who along with three partners own 74% stake. Carlyle owns the rest 26%.
Lactalis, with its first acquisition, will seek to look at more such opportunities for growth across India to capture a larger share of the dairy market which is expected to grow at a compounded annual growth rate of anywhere between 13% and 15% until FY20 from $10 billion (. 60,000 crore) now. The Indian dairy market commands 20% of the global milk production. “For Lactalis, this acquisition is the first step. We believe India is a land of great opportunities. We will expand in other parts of the country,” Lactalis spokesperson Michel Nalet told ET. 
Four farmers from Andhra Pradesh, who were partners in an automobile finance company, later built Tirumala with an initial capital of . 2.5 lakh to an annual sales of . 1,427 crore in fiscal ended March 2013 and a net profit of . 70 crore. 
“We could in our generation, as friends, promote, nurture and develop the company as one of the leading players in the Indian dairy industry as we could gel well together,” said Bolla Bramha Naidu, one of the founder partners in an earlier interaction with ET. “Now, the next generation of promoters’ families are not gelling that well together like us and they are not keen to continue in the dairy business.” “Four of us used to fill the milk in sachets and sell at four locations in Chennai those days,” Naidu said on building the company. 
Rothschild advised Le Groupe Lactalis while Tirumala’s banker was Barclays. 
The PE fund, which invested $22 million in May 2010 valuing the company at $85 million, made a net profit of $50 million, a 225% return on investment. 
“Carlyle has always believed in supporting good companies and in helping them improve systems and processes to take it to the next level. This is something in which we are very good,” said Shankar Narayanan, managing director, Carlyle India. Carlyle has invested and committed approximately $1.1 billion in India until September 30, 2013. 
cr.sukumar@timesgroup.com 

Source: The Economics Times

By: CR SUKUMAR & ARUN KUMAR

Real truth about compact Sedan

According to lore, Americans dig big cars, Europeans love their hatchbacks, Australians love pick-ups. And the Indians? Indians love sedans. The sedan is a status symbol for most in India. It provides a feeling of accomplishment. It also costs more. A sedan does not cost much more to make than its hatchback platform cousin.  What makes a sedan more costlier are the taxes we have to pay.

The Indian government wants to promote small cars as they are eco-friendly and consume less fuel. They are easy to park and maneuver. They take less space on the road and help in reducing traffic congestion. If you visit India, you will notice that the infrastructure growth is not keeping pace with the GDP growth. This makes small cars extremely important, and the Government of India is leaving no stone unturned to promote them. But how do they do that?

All cars measuring under 4-meters in length and having an engine capacity of less than 1.5-litres (diesel) / 1.2-liters (gasoline) are classified as a small car and attract only 12% excise duty. All other cars cost you (well, us) 27%. Now what if you want a sedan, but not the tax? This is where the compact sedans come in.

The first company to develop a compact sedan was Tata. The owners of Jaguar Land Rover made the Indigo CS (Compact Sedan), which measured less than 4-meters in length and was powered by a 1.4-litre diesel engine. This helped Tata Motors save 15% excise duty, which they passed on to the buyer, resulting in the Indigo CS becoming the cheapest sedan in the country.

The next company to follow the Compact Sedan craze was Maruti Suzuki (Suzuki’s Indian operations), which developed the Swift DZire (a Swift with a 316 liter trunk). In comparison, the Honda Jazz has a trunk space of 399-liters. But still the Swift DZire (gasoline) sells almost twice that of the Jazz (the Jazz is only available in gasoline).

The compact sedan craze is quite high and growing. This is the reason why Mahindra (which now owns the rights to the Renault/Dacia Logan and has renamed it Verito) is planning to cut the bumpers of the Verito to make it a sub 4-meter car.

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Many others are planning similar things with their MUVs and SUVs.

It looks like India will soon be awash with stout cars with a little rump.

Source: http://www.thetruthaboutcars.com

By: Faisal Ali Khan

DOUBLE DIGIT GROWTH FOR COMPACT SEDANS

Even as demand for utility vehicles is unlikely to abate in 2014, the Indian passenger vehicle market is expected to witness a strong resurgence from the sub-4 metre sedan segment, as newer models by Hyundai, Ford and Tata Motors are slated to be launched in the coming months. The sub-4 metre segment (. 5.52 to . 8.5 lakh) saw competition finally emerging when Honda Amaze was launched. It is expected to get more competitive with the South Korean car maker Hyundai Motor India readying to launch its sedan based on its successful Grand i10 platform. And close on the heels is Tata Motors, sub-4 metre X1 platform based compact sedan code-named Falcon 5 which will compete with other leading car makers to take on undisputed market leader Maruti Suzuki’s Swift Dzire, which still continues to post record numbers. 
Some of these new launches, will spill over to 2015, when Ford India (based on B562 platform) will join the fray with a sub-4 meter sedan and Tata Motors adds to its sub-4 metre portfolio by introducing a sedan based on the X0 platform. Volkswagen is also exploring the possibility of a sub-4 metre Vento. 
Rakesh Srivastava, senior VP, sales and marketing, Hyundai Motor India says the sub-4 meter sedan segment is the first step up choice for the users of compact cars as it is very high on value proposition with aggressively priced products. “The segment has current volumes of 31,000 units a month and is growing in strong double digits. Hyundai with its strong performance in bigger sedan segment would like to have a sizeable presence as the new product would be a strong choice for any aspiring customer,” added Srivastava, stating that the response to Grand i10, has given them the confidence. 
Not surprisingly, post the launch of Amaze in 2013, the sub-4 metre sedan market grew by 27% against the compound annual growth rate of 8-10% from 2007-2012. With the launch of new cars from Hyundai and Tata Motors, the choice in the segment is set to widen further and the double digit growth is expected to continue. 
According to Tata Motors, the segment size has doubled in the last three years as increasing number of people want to own a car that offers them a boot space, but at an affordable price. “This segment will continue to grow rapidly and we will continue to have significant play here, with existing and new brands,” said the Tata Motors spokesperson. 
And if one includes the entry-level sedans like Toyota Etios, Mahindra Verito and Ford Classic, the compact sedan segment has grown even faster. According to data from IHS Automotive, a leading automotive consultancy the affordable sedans have grown substantially by 70% from 2 lakh units in 2012 to 3.4 lakh in 2013. The consultancy however says, the compact sedan segment will face competition from compact SUV space. "The growth is expected to continue in 2014 and 2015 due to introduction of new models from Hyundai, Ford and Tata. However the growth rate may slowdown to single digit as on one side there is consumer shift from hatchbacks to sedans but simultaneously many sedan consumers are moving to compact SUV segment," cautions Puneet Gupta, associate director, IHS Automotive. 
The sub-4 metre sedan segment is unique to India and was created to meet the government's small car definition to avoid higher excise duty. The smaller sedan enjoys excise benefit over 12%-15% over bigger sedans. The segment today accounts for almost 15% of the overall car market and has found increasing number of buyers who want to upgrade from their small car to an affordable sedan.
While Tata Motors was the first to come out with a sub-4 meter Indigo CS (compact sedan), it was the market leader Maruti Suzuki with its Dzire that has ruled the segment since 2007. Over the last six years Maruti Suzuki has sold over 6.6 lakh Dzire and boasted a waiting list, before new capacity got commissioned. 
Despite the launch of Honda Amaze, Maruti Suzuki has held on to its numbers and in fact has grown its Dzire volumes. 
Mayank Pareek, COO, marketing & sales at Maruti Suzuki says the Indian market is evolving fast and there are various sub-segments bound to get created. With over 3 million small cars sold over the last 7-8 years, many of them are now looking to graduate to bigger cars. For some, switching directly to a mid-size sedan is not viable and the sub-4 metre sedan at a price point falls into a nice sweet spot, says Pareek. “Many car buyers at the entry level who were single or had young families have seen their families getting bigger. The sub-4 metre sedan delivers all that a mid-size sedan can at a lower price. We expect the segment to grow by double digits in the coming years,” added Pareek. 
ketan.thakkar@timesgroup.com 

Source: The Economics Times

By: Ketan Thakkar