There are noises from all sections of the analyst community that recovery of the economy is taking much longer than anticipated. There is pressure on the government to perform, as its efforts are not getting converted into results. After the new government was elected last year, there was a lot of expectation to quickly revive the economy by framing the right policies, strategis- ing, planning and better monitoring.
While a lot of changes have started happening, the pace at which these reforms are implemented is much slower than anticipated. There are concerns over earnings growth. Most analysts are now expecting earnings growth to be muted in the ongoing earning season. There are talks of a possibility of downgrades post this earnings season. Investors who were gung-ho about a quick revival of the Indian economy, now have more realistic expectations.
The NIFTY has corrected sharply by over 8 per cent from an all- time (intraday) high of 9119 on 4 March 2015 to 8377 on 21 April 2015, in about 30 trading sessions. The mood has now changed from being overly optimistic to cautiously optimistic.
The recent correction has removed the excess froth from markets.
The fall in NIFTY is being attributed to various factors such as debt worries in Greece, uncertainty over applicability of MAT for previous years for foreign investors, the possibility of an earlier-than- expected rate hike in the US on the back of the Chinese downturn, ongoing war in Yemen, risk of earnings downgrades, etc.
While these factors have soured sentiment, the primary reason for this correction seems to be a sharp rise in markets resulting in stretched valuations. The market has run up too fast in the last one year. The NIFTY is richly valued and is trading at a premium to other emerging markets, despite lower-than-expected earnings growth.
But, should investors worry too much about this ongoing correction? Various economic indicators are pointing towards revival. Since the beginning of CY15, the RBI has cut interest rates twice, by
50 bps to 7.5 per cent. Commercial banks, which were hesitant to pass on the rate cuts, have started cutting lending rates. Lower interest costs will improve profitability of the corporates. WPI inflation, which remained a major cause of concern during the last few years, has been decelerating. It has fallen for the fifth straight month, plunging into a negative zone, thanks to the sharp fall in global crude prices. The IIP number is positive and is steadily inching up – indicating improvement in manufacturing activity. Commercial vehicle sales are on a rise. Foreign exchange reserves are near all-time highs of $340 billion, providing a cushion to the Indian currency. The Indian rupee is one of the best performing currencies globally and has shown resilience to strengthening of the US dollar against other currencies. Corporate earnings growth is expected to pick up pace over the next couple of quarters.
The NIFTY is retracing from higher levels and is undergoing consolidation, which will make markets technically stronger for the next up move. The NIFTY is currently trading above 200 day moving average (200- DMA) which is around 8180 levels. 200-DMA is a widely tracked technical indicator and is considered a major support for markets.
The chart shows that the NIFTY crossed 200- DMA in early September 2013 and since then has remained above that level, taking support at 200- DMA. The gap between the NIFTY and 200-DMA has kept widening post the BjP’s thumping victory last year. It is only now, after almost a year, that the NIFTY is again inching towards 200-DMA.
Looking at the signs of improvement in the economy and expected revival in earnings over the next few quarters, the NIFTY is not likely to fall below 200-DMA. This correction provides an excellent opportunity for investors to increase exposure to equities to make the most of the next up move. Indian equities are in the structural Bull Run and once the clouds of uncertainty disperse, the NIFTY will most likely touch the five digit mark for the first time in its history in the months to come. ♦
Disclaimer: The views expressed in this article are personal and the author is not responsible in any manner for the use which might be made of the above information. None of the
contents make any recommendation to buy, sell or hold any security and should not be construed as offering investment advice
APRIL 27-MAY 10, 2015
Change of guard
Dilip G. Piramal, vice-president (2014-15), Indian Merchants’ Chamber (IMC), has been elected the Chamber’s president for 2015-16, with Deepak Premnarayen replacing him
Piramal: top honour
as vice-president for 2015-16. They will be ushered into their new offices in June 2015, when Prabodh Thak- ker, president, steps down from office. Piramal, chairman, VIP Industries Ltd, began his business career in Morar- jee Mills, a Piramal family concern. Piramal is also involved in various professional and social fora. He is a former president of The All India Plastic Manufacturer’s Association, The Organization of Plastics Processors of India and the Rotary Club of Bombay Mid-Town. He is involved with the Piramal Education Trust in Bagar, Rajasthan, which runs a School and College for deserving students.
Premnarayen is the founder of the ICS group, focussing on real estate, asset management, financial services and hospitality. He has led the group’s ventures into diverse sectors and continues to serve as the executive chairman of the group. Premnarayen also serves on the board of FirstRand Limited, a banking and financial services group from South Africa listed on the Johannesburg Stock Exchange and is also a member of the Directors’ Affairs and Governance Committee. He is convenor of the India-South Africa CEOs forum, co-chair of Cll National Committee on GCC and MENA countries and member of CII India – Qatar CEOs Business Forum.
Wipro last fortnight announced that it has expanded its Group Executive Council, a forum for the core group of Wipro leaders to deliberate and strategise the long-term vision for the corporation, with the induction of four additional members: Abid Ali Neemuchwala, group president & chief operating officer; Anand Padmanabhan, chief executive & president, energy & utilities; G.K. Prasanna, chief executive & president, global infrastructure services; and Bhanumurthy B.M., chief executive & president, business application services. “The Group Executive Council carries the charter of providing thought leadership across the Wipro group and is the driving force behind shaping its strategic priorities. These leaders bring with them a rich global experience and we are confident their induction will bring more plurality of ideas and add more heft to the deliberations of the Council,” said Azim Premji, chairman, Wipro Ltd, and non-executive chairman, Wipro Enterprises Ltd.
Angel on board
Omaxe Limited, one of India’s leading real estate companies, headquartered in Delhi, has named Padmaja Ruparel as an independent director on the board of the company. As a current member of Omaxe’s Board of Directors, she brings more than two and a half decades of industry experience to the role. Ruparel, an entrepreneur and an Angel Investor, is today the President of Indian Angel Network (IAN), building it from just a gleam in the eye to India’s first and Asia’s largest group of business angels, comprising the who’s who of successful entrepreneurs and dynamic CEOs from India and overseas, she operationalised the TiE Universe’s best chapter – TiE Delhi chapter – and revived the Indian Venture Capital Association.
Zee Entertainment Enterprises Limited (ZEEL) has appointed Piyush Sharma as CEO, new initiatives for India and APAC. He will lead Zee’s new initiatives, which will showcase programming and content across multiple media platforms including TV, web, mobile and an on-demand streaming service. Prior to this role, Sharma was serving as CEO for India operations of Burda International, a German multinational operating in 18 markets with more than 300 consumer magazine brands.
Strong on tech
Flipkart has announced that Peeyush Ranjan will join the company as senior vice-president and head, engineering. Ranjan spent the last nine years at Google in its Mountainview, Calif, headquarters, where most recently he managed Google’s Android One engineering group. He has also managed Motorola’s Value Devices engineering group and was Managing Director of Google India for research & development. Ranjan will work closely with Mukesh Bansal, head, Flipkart Commerce Platform, and the Commerce Platform’s leadership team to build on Flipkart’s strong technology expertise and support its commitment to excellence as a world-class technology company.
Nissan last fortnigt announced the appointment of Satinder Singh Bajwa as vice-president, sales, network & customer relations, effective 13 April 2015. Bajwa will report to Arun Malhotra, managing director, Nissan Motor India Pvt Ltd. He will be responsible for accelerating sales, expanding the reach and ensuring customer satisfaction for both Nissan and Datsun across India. Bajwa comes to Nissan with an impressive 20-year experience in functions like sales, marketing, dealer management and key account management in the automobile industry. Prior to joining Nissan, he has worked with Hyundai Motor India Ltd as group head, sales..
The power generation scenario in the country has improved over the past few decades. But the ongoing industrialisation process will always ensure a demand-supply gap. Alternative power backup is, therefore, inevitable. There was sea change of the power genset industry – from dependence on imported electrical goods in the beginning to indigenous manufacturing to introduction of sound proof genset with focus on engine technology. Right in front of this change is a closely held Delhi company, Jakson Limited, promoted by the Gupta family.
Sameer Gupta, the eldest son of the family and an electronics engineer from Pune University, joined the business of his father Satish Kumar Gupta in 1990. He later did a short management course in IIM Ahmedabad and later at ISB Hyderabad. In the business, he began by taking charge of tender filling. Soon, for the first time, the company began to participate in tenders outside northern India. “My first order through tender was for the Kol- kata-based EPIL, worth ?10 lakh. I was excited about it but when my father saw the purchase order he pointed out that we would lose money; however, his advice was that the commitment must be honoured. So, the order was executed on time. It was a great learning for me,” recalls Sameer Gupta, managing director, Jakson group, now 48 years old.
A young and energetic Gupta realised that nothing big can happen if the company sticks only to the genset business. He fought against all odds to diversify into a turnkey project division in the field of powergen, attending all large tenders across India with focus on intuitional customers. His ‘oomph’ moment came when the company received an order worth 14 crore for a 4 MW diesel genset from the Faridabad-based Superior Air Products in 1995. “In those times, it was one of the largest orders in the segment,” Gupta says. “I, along with my brother Sundeep, stayed from early morning to late night at the site for almost a month. It was a tremendous learning experience in the domain.”
In the late 1990s, as the competition was warming up, Gupta used his
MANAGING Dl JAKSON GROUP
Born: 11 December 1966
Education: Electronics engineer from Pune University; a short management course in IIM Ahmedabad and ISB, Hyderabad Career: joined the family business under his father as in-charge of tender filling (1990); managing director of the company (2001)
business DNA and a canny sense to take Jakson slowly up the value chain and work towards backward integration like control panels, switch- gear and other value-added items for genset manufacturing. There were big companies like Batliboi, Parry & Co and Escorts in this area but, by 2000, most of them had dropped out because of cut-throat competition affecting their higher overhead costs. “Our business strategy of backward integration, experience and assembly facilities, resulting in reliability, put us ahead of completion,” says Gupta.
From 125 crore revenue with a single business vertical in 1990, Gupta has grown the business to ?1,600 crore at present. Jakson, a diversified power solution company now, has 1,800 people in its rolls across India, Nepal and Bangladesh. And the group is today a leading business conglomerate with four verticals – genset manufacturing, electrical EPC, solar energy and hospitality. But Gupta does not take all the credit. “My father is a repository of wisdom,” he says. “He, along with my younger brother Sun- deep, has given me constant support to achieve the goal.” Sundeep, a computer engineer, is responsible for manufacturing, solar business, EPC and finance.
Jakson’s track record in the industry, quality and engineering excellence have helped the company to become one of three OEM partners, along with engine major Cummins India, in 2000. Cummins holds about 50 per cent market share in the ?6,000 crore genset sales in the country. Kir- loskar, Mahindra, and Leyland are the other big players in the industry. Gupta was the face of the company initiating the tie-up with Cummins. “Initially, my father had some reservations about the deal, but when he saw the business growing at 23 per cent, his view changed,” Gupta recalls.
“Jakson has been a close strategic partner to Cummins India for a long time. Over time, our association has broadened and deepened. The relationship has been sustained on a foundation of shared core values and trust,” says Anant Talaulicar, chairman & managing director, Cummins India. Looking at his business acumen and some of Gupta’s moves, which have brought good fortune to the business, his father gave him complete freedom to run the business. In 2001, Sameer Gupta became managing director of the company His father, now 77, fully devotes his time for the social cause through Jakson Foundation.
While visiting an exhibition overseas, Gupta realised that noise pollution would be a major issue in the future in the genset industry. Gupta had been building up competency in manufacturing steel and insulation acoustic enclosures for sound-proofing since 1998 in Noida. The great game changer for the business came around 2003, when government pollution laws made noise level regulation compulsory under pollution control laws. Jakson was ready to ride the boom and quickly opened new plants in Daman to cater to the market growth.
“We were the first to introduce silent diesel genset in the industry,” claims Gupta. It impacted the profit margin up by 30 per cent. The design of a single unit with acoustic enclosure and chassis also gave Jakson the ‘ready to use’ (RTU) gensets, which can now be found everywhere on the backs of trucks and are used in ‘plug and play’ power supply in minutes.
Jakson-Cummins diesel gensets range from 7.5 kVA to 3 MVA, while the smaller gas-driven gensets vary from 40 kVA to 2 MVA. For power plant applications, these generating sets can be configured to deliver power output even up to 200 MW. It currently produces 8,000 units of genset per annum. The company has three integrated manufacturing facilities, with acoustic production and genset assembly line at Dhabel in Daman, Kalsar in Gujarat and Kathua in Jammu.
rakson offers a complete turnkey solution to power houses and power backup facilities in apart- ent buildings, offices, factories and any other establishment. They also provide power solutions for special application for the defence and oil sectors. The company has been the system integrator for sensitive areas like IT facilities for fail-safe power. “We were the only India company who successfully designed, manufactured and executed fire retardant silent generating sets for launching of rockets for ISRO,” claims Gupta.
Jakson undertakes turnkey contracts which include extensive design, supply and erection of power handling equipment. It has its own
service network in 25 towns and cities across its territories including being a sole distributorship to Cummins and its own products in Bangladesh and Nepal having a revenue of ?300 crore and growing.
As the genset growth was hit by recession and growth rates slowed down. Gupta had convinced the board to enter into the field «of solar energy – a sunrise industry. He also hired Ernst & Young as consultant. “The situation provoked us to diversify into solar power segment in 2010,” Gupta explains. “Since we are in power business, solar was a natural choice for us.”
The company had commissioned the first IPP (independent power producer) project a 20 MW crystalline solar cell power generation plant built on a 100 acre area in Bap near the Sun City, Jodhpur, Rajasthan, costing ?200 crore, under the Jawaharlal Nehru National Solar Mission (JNNSM) policy Phase I. The 20 MW of power produced is being sold to National Vidyut Vyapar Nigam, an NTPC subsidiary, under a 25-year power purchase agreement (PPA).
Recently, it has also commissioned a 10 MW solar IPP in Lalitpur, Uttar Pradesh, at a cost of ?85 crore. The company is shortlisted for another 30 MW power plant to be set up in Jhansi, Uttar Pradesh, and has already signed a PPA with the government of UP before March 2015. The company plans to have 100 mw of IPP in the next 2-3 years. In the solar epc business, Jakson has successfully executed various solar roof-top and land-based projects. Currently, the company has an order book worth f 150 crore in EPC.
“Gupta is a visionary,” says S. Sun- derasan, former finance director of the company. “Diversifying into the solar energy was a perfect decision at an appropriate time. It helped the company to balance the revenue. The company never felt the heat of the sluggish genset market.”
The company also manufactures solar products like mobile solar generator, solar water purifier, solar home and street lighting systems in Noida and has received overwhelming response in the market. The solar business has demonstrated an encouraging growth. In the next one year, it expects 50 per cent revenue from the solar segment.
“Solar is a green power and the segment is likely to play a major role for an energy-deficit country like ours. We want to be part of prime minister’s vision to have 100,000 MW solar power country in the next 10 years,” says Gupta.
However, Jakson has no plans to go public in the near future. Gupta brought a major cultural change in the company, transforming it from a typically owner-driven unit to a professionally run company. “He is transparent and believes in delegating power,” says Sundaresan.
Jakson has also ventured into the hospitality sector. It has set up the first hotel – Jakson Inns in Phaltan, 110 km from Pune, with an investment of ?50 crore last year. The 74-room, three-star hotel wants to cater to business travellers. “Pune is our first milestone in hospitality,” says Gupta. “Our next hotel will be at Sanand in Gujarat. Our focus will remain on B towns.”
Gupta has diversified into other businesses, but he keeps a clear focus on the core business of genset. ‘Growth of genset market is inevitable, with the government’s move to rejuvenate industrial expansion,” says Gupta, also chairman, CII, Uttar Pradesh.
A workaholic to the core, Gupta does not find much time for socialising. An avid reader of spiritual books, he and his wife Bhawana enjoy spending time with family and friends. Their two sons, Ragav and Siddhant are perusing studies in electrical engineering in the US.
♦ SAJAL BOSE [email protected]