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LG Electronics’ India unit IPO: valuation, strategy and sector implications

LG ‘s IPO Launch in India to help reach its $75 Billion goal

LG ‘s IPO Launch in India to help reach its $75 Billion goal

LG Electronics Inc. is exploring the possibility of an initial public offering (IPO) for its India business, aiming to capitalize on the country’s thriving stock market to help achieve its ambitious target of $75 billion in electronics revenue by 2030. CEO Cho disclosed that joining the Indian market is one of several strategies being considered to renew the company’s consumer durables business. It marks the first time in the South Korean electronics giant, a direct competitor to Samsung Electronics Co., has publicly addressed the prospect of an Indian IPO, a topic that has been the subject of persistent market speculation and media attention.

William Cho, LG’s CEO since 2021 and a 30-year company veteran, has set an ambitious goal for the electronics business. His goal is to reach an annual revenue of 100 trillion won ($75 billion) by 2030, marking a significant expansion for the tech giant. This target represents a significant increase from the company’s overall revenue of approximately $65 billion in 2023. To achieve this growth, LG plans to focus on increasing its revenue from enterprise clients, aiming to derive about 45% of sales from other companies by the end of the decade, up from the current 35%. While acknowledging the increased interest among global investors in a potential IPO in India, Cho emphasized that nothing has been confirmed at this stage, stating, “It is one of many options we can consider.”

The contemplation of an Indian IPO comes at a time when LG is experiencing rapid growth in the country. In the first half of this year, revenue at LG’s Indian unit surged by 14% to a record 2.87 trillion won, while net income saw an impressive 27% increase to 198.2 billion won. The robust activity in India’s capital markets is evident in this impressive showing. A total of 189 companies are set to raise $5.6 billion through initial public offerings this year, positioning India as one of the most vibrant markets for equity fundraising globally. The surge in demand, driven by domestic investment, has prompted at least 30 additional companies to explore potential listings. LG’s Korean counterpart Hyundai Motor Co. is also eyeing a major Indian IPO, with plans to raise up to $3.5 billion.

Cho disclosed that LG is closely tracking Indian market trends, especially concerning IPOs and comparable industry situations. However, he noted that the company has not yet calculated potential valuations for its Indian unit. This cautious approach underscores the strategic importance of the decision and the need for thorough evaluation before proceeding with any public offering.

Beyond the potential Indian IPO, Cho outlined his vision for nurturing new businesses that can each generate more than 1 trillion won in annual revenue. A key focus area is the heating, ventilation, and air-conditioning (HVAC) sector, where LG already operates 11 production sites globally. The company’s chillers, which are large air conditioners designed for buildings, have become particularly crucial for artificial intelligence data centers that are proliferating worldwide in response to the growing demand for generative AI capabilities. Over the past three years, LG has seen its overseas sales of chillers grow by an impressive 40% annually on average.

Another significant initiative is the expansion of LG’s subscription service for home appliances. In Korea, consumers can now rent products such as washing machines and laptops for periods ranging from three to six years by paying a monthly fee. The subscription model has proven popular, with 35% of consumers choosing this option. Building on this success, LG has launched subscriptions in Malaysia and aims to expand to Thailand, Taiwan, and India this year, with future plans for the US and Europe. The company projects that revenue from the subscription business will surge by 60% to about $1.3 billion in 2024.

LG is also setting its sights on the digital content and advertising space, with plans to invest 1 trillion won by 2027 to grow its webOS-based advertising and content business. This includes the expansion of free ad-supported streaming services, leveraging the company’s expertise in consumer electronics to create new revenue streams in the digital media landscape.

Reflecting on his career and vision for LG, Cho, who has worked with the company across North America, Germany, and Australia, emphasized the importance of understanding customers and creating innovative business models tailored to their needs. His global experience has shaped his approach to leading LG into new markets and business areas, positioning the company for growth in an increasingly competitive and rapidly evolving technology landscape.

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Rising Inventory Faces Dealer Dispatches To Slow Down

Rising Inventory Faces Dealer Dispatches To Slow Down

The stock levels of passenger cars have risen to dangerous levels, posing a serious inventory Situation for the Indian automotive sector. As of May 2024, inventory levels have reached between 55 to 60 days’ worth, translating to an estimated 550,000 to 600,000 unsold vehicles. This rise in inventory has become a pressing concern for auto dealers, who are already under pressure from extended high inventory levels.

The Inventory Challenge : The situation has been increased since the previous festive season when inventory levels exceeded 60 days. In response, the Federation of Automobile Dealers’ Associations (FADA) made an urgent request to Original Equipment Manufacturers (OEMs) and the Society of Indian Automobile Manufacturers (SIAM) to reduce stock dispatches. Despite these efforts, the inventory situation has not significantly improved, and dealerships continue to struggle with the financial strain caused by these high levels of unsold vehicles.

Financial Strain on Dealerships: The extended inventory holding periods are having a considerable impact on dealership finances. High inventory levels directly affect cash flow and increase interest costs, making it challenging for dealers to maintain their financial health. Dealerships rely on a steady turnover of vehicles to manage their finances effectively, but the current excess in inventory has disrupted this balance, leading to increased financial pressure.

FADA’s Response and Strategic Interventions: Recognizing the severity of the situation, FADA is planning to once again approach SIAM, advising its members on the need to moderate stock inflow and address the growing inventory surplus. This proactive stance by FADA highlights the urgency of the situation and the need for coordinated efforts between OEMs and dealers to stabilize the market.

The high inventory levels, combined with market uncertainties such as election-related delays and adverse weather conditions, are expected to dampen immediate sales performance. Though cautiously optimistic, there’s a chance that the impending holiday season could bring about a much-needed surge in demand, relieving some of the strain on inventories and stabilising the market.

The Road Ahead : The imbalance between supply and demand is highlighted by the present inventory levels in the Indian automotive industry. In addition to increasing dealership holding costs, the huge inventory of unsold cars indicates possible changes in the supply chain and market dynamics. To lessen these difficulties, OEMs and dealers must strategically coordinate their inventory management efforts. The proactive measures being taken by FADA, including seeking intervention from SIAM, underscore the urgency of the situation. Successfully managing and reducing inventory levels will be crucial for maintaining dealer profitability and ensuring overall market stability. Looking ahead, while the festive season may offer some relief through increased consumer demand, sustained efforts in inventory management and market adaptation will be necessary. The automotive sector must navigate these challenges carefully to balance stock levels and support the health of the industry. By doing so, the industry can mitigate the risks associated with high inventory levels and pave the way for a more stable and profitable future.

Regarding the large levels of inventory in the Indian automotive sector, sentiments range from cautious optimism to worry. Experts in the field praise FADA for taking the initiative to address the problem by interacting with SIAM and pushing OEMs to limit stock dispatches. The financial burden this inventory accumulation places on dealerships, especially in light of rising holding costs and cash flow issues, is a major source of worry. While it is hoped that the holiday season would increase demand and aid in the reduction of excess stock, the scenario highlights the necessity of improved communication and adaptable production techniques between dealers and manufacturers in order to avoid such problems in the future.

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India Hits Record 15 GW Solar Capacity in H1 2024

India Hits Record 15 GW Solar Capacity in H1 2024

India’s renewable energy sector has witnessed a remarkable surge in the first half of 2024, with the country adding a record 15 gigawatts (GW) of solar capacity between January and June. This milestone underscores India’s commitment to accelerating its transition towards a sustainable energy future and highlights the growing importance of solar power in the nation’s energy mix.

India has been progressively working towards expanding its renewable energy capacity over the past decade, with a strong focus on solar power. The country has ideal conditions for solar energy generation, including abundant sunshine, vast land availability, and a growing demand for electricity. These factors have made solar power a key pillar of India’s renewable energy strategy.

The addition of 15 GW of solar capacity in just six months is a testament to India’s aggressive push towards achieving its renewable energy targets. This new capacity marks a significant increase compared to the 10 GW added during the same period in 2023, reflecting a year-over-year growth rate of 50%. The rapid growth in solar installations can be attributed to a combination of favorable government policies, technological advancements, and increased private sector investment.

The Indian government has been proactive in promoting renewable energy, especially solar power, through various policy measures. Initiatives such as the National Solar Mission, which aims to achieve 100 GW of solar capacity by 2022, and the extension of this target to 280 GW by 2030, have created a robust framework for the sector’s growth. Additionally, the implementation of favorable policies, including subsidies, tax incentives, and low-cost financing options, has made solar power more accessible and attractive to investors and developers.

Innovations in technology have brought down the price of solar panels and related equipment considerably. In India, the cost of producing solar electricity has decreased by more than 80% in the last ten years, making it one of the most economical energy sources available. Both smaller-scale residential and commercial installations and large-scale utility projects have used solar power more frequently as a result of the falling prices.

The private sector has played a crucial role in the expansion of India’s solar capacity. Major domestic and international companies have invested heavily in solar projects, attracted by the sector’s growth potential and supportive regulatory environment. Public-private partnerships have also been instrumental in driving large-scale solar installations, particularly in states like Rajasthan, Gujarat, and Maharashtra, which have abundant solar resources and supportive state policies.

India has seen a remarkable increase in solar capacity; however, maintaining this pace would not be easy given various obstacles. One of the primary challenges is the availability of land for large-scale solar projects. While India has vast land resources, acquiring suitable land for solar installations can be a complex and time-consuming process, often involving regulatory hurdles and local community resistance.

The national grid’s incorporation of solar electricity presents another difficulty. Due to its intrinsic variability, which is influenced by the weather and time of day, solar energy can cause problems with grid stability. In order to secure the dependable and effective integration of solar power, India must make investments in energy storage technology, smart grid infrastructure, and grid infrastructure enhancements.

The solar manufacturing sector in India needs to be strengthened to reduce dependence on imports of solar panels and other components. Although the government has introduced initiatives to boost domestic manufacturing, such as the Production Linked Incentive (PLI) scheme, more efforts are needed to build a competitive and self-sufficient solar manufacturing ecosystem.

In Summary, India’s addition of 15 GW of solar capacity in the first half of 2024 is a landmark achievement in its renewable energy journey. This record growth not only reinforces India’s commitment to combating climate change and reducing its carbon footprint but also sets a positive example for other nations to follow. However, to maintain this growth trajectory, India must address the challenges of land acquisition, grid integration, and domestic manufacturing. With continued government support, technological advancements, and increased private sector participation, India is well-positioned to achieve its renewable energy ambitions and pave the way for a sustainable future.

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KPI Green Energy Secures Approval for 13.30 MW Solar Projects

KPI Green Energy Secures Approval for 13.30 MW Solar Projects

KPI Green Energy, a prominent player in the renewable energy sector, has recently made significant strides in its business operations and financial performance.

Sun Drops Energia Private Limited, a fully-owned subsidiary of KPI Green Energy, has reached a significant milestone by obtaining approval to develop solar power installations totaling 13.30 MW in capacity. These projects fall under the company’s ‘Captive Power Producer (CPP)’ business segment, highlighting KPI Green Energy’s commitment to expanding its renewable energy portfolio. The company has outlined plans to complete these projects in various tranches during the 2024-25 financial year, adhering to the terms specified in the order.

This development comes on the heels of KPI Green Energy’s impressive financial performance for the first quarter of the 2024-25 fiscal year. The company reported a remarkable two-fold increase in its consolidated net profit, which rose to ₹66.11 crore, up from ₹33.26 crore in the corresponding period of the previous fiscal year.

The company’s financial success extends beyond its bottom line, as evidenced by the significant uptick in its total revenue. The company experienced a substantial boost in its quarterly earnings, with figures nearly doubling from ₹190.56 crore to ₹349.85 crore year-over-year. This robust top-line growth of approximately 84% year-on-year demonstrates the company’s expanding market presence and its effectiveness in monetizing opportunities within the green energy sector.

Further analysis of KPI Green Energy’s financial metrics reveals impressive improvements in its operational efficiency. The company’s earnings before interest, tax, depreciation, and amortization (EBITDA) experienced a substantial increase of 91% on an annual basis, reaching ₹131.7 crore in Q1FY25, compared to ₹69 crore in Q1FY24. This growth in EBITDA was accompanied by an expansion in the EBITDA margin, which improved by 150 basis points to reach 38% in Q1FY25, up from 36.5% in the previous year’s corresponding quarter.

In a move that reflects confidence in its financial stability and commitment to shareholder value, The company’s leadership has declared a temporary shareholder payout of 0.20 paisa for each stock unit, valued at ₹5, applicable to the current fiscal period ending in 2025. The company set August 21, 2024, as the record date for the payment of this interim dividend, marking its first such distribution for the fiscal year.

KPI Green Energy’s recent successes and strategic moves reflect its deep-rooted expertise and long-standing presence in the renewable energy sector, built over years of specialized operations and market engagement. Founded in 2008 as a subsidiary of the KP Group, the company has positioned itself as a comprehensive solution provider in the solar and wind solar hybrid power project domain. KPI Green Energy’s business model encompasses the entire lifecycle of renewable power facilities, including development, construction, ownership, management, and maintenance services.

The company operates under two primary business segments: as an Independent Power Producer (IPP) and as a service provider for Captive Power Producers (CPPs). Through its ‘Solarism’ brand, KPI Green Energy has cultivated a reputation for delivering high-quality renewable energy solutions tailored to meet the diverse needs of its clientele.

As of the latest market data, KPI Green Energy boasts a market capitalization of approximately ₹12,010.33 crore, positioning it within the small-cap segment of the Indian stock market. The company’s shares have demonstrated significant volatility over the past year, with a 52-week high of ₹1,116 and a 52-week low of ₹255.46 per share, reflecting the dynamic nature of the renewable energy sector and investor sentiment.

The recent uptick in KPI Green Energy’s share price, following the announcement of the new solar power plant project, indicates positive market reception to the company’s growth initiatives. As of the most recent trading session, the company’s shares were trading at ₹915 per share, representing a modest increase of 0.78% during early market hours.

In conclusion, KPI Green Energy’s recent achievements, including the acquisition of new solar power projects and its strong financial performance, underscore the company’s growing prominence in India’s renewable energy landscape. As the nation continues to prioritize sustainable energy solutions, KPI Green Energy appears well-positioned to capitalize on emerging opportunities and contribute to the country’s green energy transition. Investors and industry observers will likely continue to monitor the company’s progress closely, as it navigates the evolving dynamics of the renewable energy sector and strives to maintain its growth trajectory in the coming quarters.

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ICRA Highlights Potential Profit Decline for Steel Sector For New Mining Cess.

ICRA Highlights Potential Profit Decline for Steel Sector For New Mining Cess.

The Indian steel industry is likely to face tougher times due to a new mining tax being considered by some states, following a recent Supreme Court decision. This tax is expected to reduce profits for steel producers. Impact on Steel Producers. According to ICRA projections, primary steel companies’ profits could drop by 0.6% to 1.8% as a result of the new levy. Secondary steel producers, who already have thinner profit margins, could see their profits drop by 0.8% to 2.5%, depending on how high the tax rate goes (between 5% and 15%).

Girish Kumar Kadam from ICRA noted that while exact tax rates are still unknown, any significant increase could hurt secondary steel producers the most, as they will bear the brunt of higher costs from suppliers. Odisha’s Key Role Odisha, The Orissa Rural Infrastructure and Socio-Economic Development Act, 2004 (ORISED Act) was introduced by Odisha and allows a fifteen percent cess on coal and iron ore. A major maker of minerals, is considering a charge of up to 15% on iron metal and coal. If fully implemented, this could raise the cost of iron ore by about 11%, making it more expensive for steel makers.

Jharkhand has already increased its tax by Rs 100 per tonne on iron ore and coal. This will only slightly impact profits, reducing them by about 0.3% to 0.4%. Other states might follow, but the overall effect may be small. Retrospective Tax and Broader Effects If states decide to apply the new tax retroactively, steel companies could face additional financial pressure from past taxes. However, the Supreme Court has allowed companies to pay these taxes over 12 years without extra charges, offering some relief. The tax could also affect other industries.

The power sector might see a cost increase of 0.6% to 1.5%, potentially raising electricity prices. Aluminium producers, who use a lot of power, might see their costs go up by about Rs 1,200 to Rs 1,300 per tonne, which is about 0.6% of current aluminium prices. Summary The impact of the new mining tax will depend on how different states implement it. Steel and other industries need to watch these developments closely and plan how to manage the financial challenges ahead.

Here are some potential opinions on the impact of the new mining cess: Positive for Government Revenue: The new mining cess could boost state revenues, helping fund local infrastructure and development projects. This is particularly relevant for states rich in minerals, which could see significant financial benefits.

Challenges for Steel Industry: The steel industry, especially secondary producers with already tight margins, might struggle with increased costs. This could lead to higher steel prices or reduced competitiveness, affecting the broader economy.

Uncertainty for Businesses: The possibility of retrospective taxation adds uncertainty, which could impact business planning and financial stability. Businesses may have unforeseen expenses and administrative workloads.

Potential for Broader Impact: Beyond steel, other sectors like power and aluminium could also face higher costs. This could translate into higher consumer prices, affecting households and potentially slowing economic growth. Need for Balanced Implementation: While the tax aims to generate revenue, its design and implementation will be crucial. States need to strike a balance to avoid stifling key industries while still achieving fiscal goals.

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Akasa Air Set to Plan IPO, Targets Profitability by 2028

Akasa Air Set to Plan IPO, Targets Profitability by 2028

One of the newest airlines in India, Akasa Air, plans to go public as part of its long-term expansion strategy. The airline, which started flying in 2022, has ambitious goals to grow and become a significant force in the highly competitive Indian aviation industry. “Going public is clearly a milestone for Akasa Air,” Dube stated. “The company aims to be profitable by 2028, and listing on the stock exchange is a natural step in our growth journey.”

The launch of Akasa Air was facilitated by the COVID-19 pandemic. CEO Vinay Dube admitted that he would not have considered starting the airline if not for the unique opportunities created by the pandemic. The drop in aircraft leasing prices and the availability of skilled pilots, cabin crew, and engineers allowed Akasa to quickly assemble a fleet of 24 aircraft in just two years. Dube declared, “The pandemic was the only time I would have started an airline.” Having the proper aircraft at the right price and in the right quantity was crucial, as these account for over 70% of an airline’s costs.

In its first two years, Akasa has gained attention with its new aircraft and popular in-flight menu. However, the airline has faced challenges, including losses exceeding ₹2,400 crore. These losses are primarily due to the lack of profitable metro routes and rising costs from hiring pilots who cannot be utilized due to delays in Boeing’s aircraft production. Despite these challenges, Dube remains positive. He sees the losses as part of the process of building a strong foundation for the future. Importantly, the initial investment of ₹250 crore from the family of the late stockbroker Rakesh Jhunjhunwala is still intact. “Initial business losses are common for startups. However, we have expanded our fleet, hired 4,000 new employees, secured significant agreements, invested in technology, and preserved our initial investment,” Dube said.

By 2028, Akasa hopes to become profitable and go public. Co-founder Belson Coutinho emphasized the airline’s focus on using technology to understand customer preferences and offer personalized services to build loyalty. Chief Commercial Officer Praveen Iyer noted that Akasa’s strategy of focusing on underserved destinations like Dehradun and Srinagar has been profitable, and international routes are also performing well. The airline is also working to increase its aircraft utilization, which is now over 13 hours a day. Akasa Air’s journey has had its ups and downs, but with a clear plan and strategic investments, the airline is determined to achieve profitability and become a major player in the aviation industry.

Vinay Dube further added that all startups experience financial losses initially. However, Akasa has secured two aircraft deals and long-term vendor agreements, achieved a fleet of 25 aircraft, hired 4,000 people, and invested in technology. Recently, a group of family offices, reportedly led by Azim Premji of Wipro and Ranjan Pai of Manipal Group, are in discussions to invest around $125 million.

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Sugar Industry Fears New Norms May Stifle Growth and Innovation

Sugar Industry Fears New Norms May Stifle Growth and Innovation

The Indian sugar industry is currently facing a significant challenge as it grapples with a draft amendment to the nearly six-decade-old regulation governing production, storage, and pricing of sugar. Industry players fear that the proposed changes may reintroduce some of the controls that have been gradually phased out over the years, contradicting the recommendations of the Rangarajan Committee.

The Ministry of Consumer Affairs, Food, and Public Distribution has proposed the draft “The Sugar (Control) Order,2024,” citing technological advancements in sugar production as a reason to update the existing Sugar (Control) Order,1966. However, the sugar industry is concerned that the new regulations may stifle growth, innovation, and competition within the sector.

The National Federation of Cooperative Sugar Factories (NFCSF) has planned a national-level brainstorming session with other industry associations to discuss the draft and formulate a joint response before the September 23 deadline. One of the key contentious points is a provision that empowers the Centre to direct producers to package sugar in jute bags. This provision is seen as a direct contradiction of the Rangarajan Committee’s recommendations for a gradual phasing out of mandatory jute packaging for the sugar sector.

In addition to the packaging requirement, the draft was formed by merging the Sugar Control Order of 1966 and the Sugar Price Control Order of 2018. The latter empowers the Central government to set the minimum selling price (MSP) of sugar.While some industry executives view this as a positive development, as it simplifies the Act, others express concerns about the potential for exploitation and misuse.

The provision that empowers the Centre to ask for information in a digital format from sugar producers or dealers and requires them to integrate their digital systems with the Centre’s system for data authenticity and compliance could give the government real-time information on sugar production and by-products. However, some industry players worry that this could also open the door for exploitation and misuse of data.

The draft also includes a provision that grants the central government the authority to regulate the price of sugar.The draft states that the Centre will consider the Fair and Remunerative Price (FRP) plus the average and approximate conversion cost for sugar production and revenue from by-products when issuing pricing orders. This is seen as a departure from the old method, which included interest and depreciation in the calculation of sugar pricing.

The draft also states that the FRP will be taken into consideration for pricing orders, potentially putting mills that follow the state-fixed Advised Price (SAP) at a disadvantage. These mills, primarily located in states such as Uttar Pradesh, Haryana, and Punjab, frequently have SAPs that exceed the FRP.

While the draft has some positive aspects, such as bringing the unorganized ‘gur’ and ‘khandsari’ sectors under the ambit of the sugar control order, industry players also express concerns about provisions that could hinder new product development or create unfair competition. For instance, the provision that brings under the Control Order any other alternative product affecting sugar production from sugarcane could potentially limit innovation and product diversification.

The sugar industry is wary of the potential consequences of these amendments.While some provisions may be beneficial, others are seen as a step backward in terms of deregulation and market-oriented policies. The industry is urging the government to carefully consider the concerns raised by stakeholders and make necessary modifications to ensure a balanced approach that promotes growth, efficiency, and fair competition within the sugar sector.

The Potential Consequences of New Regulations

The proposed regulations could have far-reaching consequences for the sugar industry in India.If these regulations pass, they could:-

Stifle Innovation: The industry fears that the new regulations could hinder innovation and product development, limiting the ability of sugar producers to adapt to changing market conditions and consumer preferences.

Create Unfair Competition: Some provisions in the draft could create an uneven playing field for sugar producers, potentially favoring larger companies or those with stronger political connections.

Reduce Exports: The new regulations could make it more difficult for Indian sugar producers to compete in the global market, reducing exports and limiting foreign exchange earnings.
Increase Costs for Consumers: If the new regulations lead to higher production costs, they could ultimately result in higher prices for consumers.

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NBFCs Eye Offshore Loans as Domestic Borrowing Costs Climb

NBFCs Eye Offshore Loans as Domestic Borrowing Costs Climb

The Indian financial landscape is witnessing a significant shift as companies increasingly turn to international markets for fundraising. This trend, highlighted by the Reserve Bank of India (RBI) in its recent monthly bulletin, is driven by a confluence of factors including heightened interest from global investors, improving liquidity conditions, and lower hedging costs. The move reflects a broader transformation in the domestic credit environment, influencing corporate strategies and reshaping the way Indian firms approach capital acquisition.

This pivot towards external borrowing is occurring against a backdrop of declining Foreign Direct Investment (FDI) in India. Foreign direct investment into India decreased sharply, dropping by over 40% between 2022 and 2023. This decline resulted in India slipping seven positions to 15th place in the World Investment Ranking, marking a challenging period for foreign investment in the nation.

To address the growing demand for corporate funding, Indian banks are taking proactive measures. Plans are underway to raise approximately Rs 40,000 crore in equity funds during the second half of the current fiscal year. These funds, which include qualified institutional placements, serve a dual purpose: strengthening balance sheets and supporting ongoing capital expansion initiatives. This move demonstrates the banking sector’s commitment to maintaining robust financial foundations while facilitating economic growth.

The diversification of funding sources has become a key strategy for both banks and non-banking financial companies (NBFCs). These institutions are increasingly issuing bonds in foreign markets, exploring new avenues for capital acquisition. The offshore syndicated loan market has emerged as a particularly attractive option for corporates, especially given the anticipation of a potential rate-cut cycle. This market has witnessed significant activity, with substantial issuances from both established borrowers and new entrants, underscoring its growing appeal in the Indian financial sector.

On the domestic front, banks have been actively raising funds through various instruments, including certificates of deposit, high-value savings accounts, and fixed deposits. However, the RBI has noted a potential challenge: the relatively low proportion of low-cost current and savings deposits in total deposits may limit banks’ ability to raise funds through higher-cost options. This situation could potentially squeeze net margins and necessitate a closer alignment between loan growth and deposit growth, leading to a recalibration of incremental credit-deposit ratios.

The shift towards international borrowing is particularly pronounced among NBFCs. These institutions are increasingly looking overseas for funds, driven by the high costs of domestic borrowing resulting from tight liquidity conditions and rising interest rates. In recent months, several major Indian NBFCs have successfully accessed international funding sources through various financial instruments. This strategic move is not only about cost considerations but also aligns with regulatory guidance on diversifying funding profiles, despite the slightly higher costs associated with overseas borrowing.

The RBI’s decision to increase risk weights for bank lending to NBFCs has been a significant factor in this trend. This regulatory change has led to a notable rise in domestic borrowing costs, prompting non-bank lenders to explore external commercial borrowings (ECBs) as a viable alternative. Furthermore, the domestic bond market has become increasingly crowded due to strong credit demand and high fund requirements, making offshore funding an attractive option for many NBFCs.

Industry experts emphasize that securing capital for continued operations and growth remains the top priority for financial institutions, even if it means accepting somewhat higher costs. The preference for offshore funding is partly driven by competitive pricing from global banks for hedging costs, as competition in this space intensifies. This trend is likely to persist, with many firms planning to continue or increase their overseas borrowing activities soon, aiming to diversify their funding mix and capitalize on global opportunities.

While credit and loan growth reached impressive levels of around 18% in FY24, projections suggest a moderation to 13-15% in FY25. Despite this expected slowdown, NBFCs remain focused on maintaining a steady capital pipeline. This approach is aimed at ensuring their ability to navigate both favourable economic conditions and potential challenges that may arise.

As Indian companies become more integrated with international financial systems, they are better positioned to leverage global opportunities. This internationalization of fundraising not only provides access to a wider pool of capital but also exposes Indian firms to global best practices in corporate finance and governance.
However, this shift also brings new challenges. Indian companies venturing into international markets must navigate complex regulatory environments, manage currency risks, and adapt to different investor expectations. The success of this strategy will depend on the ability of Indian firms to build credibility in global markets and demonstrate sound financial management.

As the Indian economy continues to grow and evolve, the financial sector’s ability to adapt and innovate in fundraising will play a crucial role in supporting this growth. The current trend of looking beyond domestic borders for capital represents a significant step in this direction, potentially reshaping the future of corporate finance in India.

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Boost of 40% in Demand for Gig Riders in Festive Season

Boost of 40% in Demand for Gig Riders in Festive Season

As the festive season approaches, the quick commerce sector is gearing up for a significant surge in demand, especially in terms of gig economy workers, such as delivery riders. This year, the demand for gig riders is projected to increase by 40%, driven by the need to cater to the rising consumer expectations and the convenience-driven shopping trend that quick commerce platforms offer. This article explores the factors contributing to this spike in demand, the challenges faced by the industry, and the potential implications for the gig economy and quick commerce businesses.

Quick commerce companies like Swiggy Instamart, Zepto, and Blinkit have revolutionized the market by offering delivery within a short window, typically between 10 and 30 minutes. This speed and convenience are particularly appealing during the festive season when consumers are often pressed for time, juggling multiple responsibilities and seeking efficient ways to complete their shopping. Consequently, rapid commerce platforms expect a spike in orders, which means that more delivery riders must be on hand to satisfy the demand.

The festive season, particularly in countries like India, sees a spike in consumer spending as people purchase gifts, decorations, food, and other celebratory items. This increased spending translates into higher order volumes on quick commerce platforms, directly impacting the demand for gig workers.

The appeal of quick commerce during the festive season lies in its promise of rapid delivery, catering to the time-sensitive needs of consumers. As quick commerce platforms expand their service areas and product offerings to capitalize on the festive rush, the need for more delivery riders becomes apparent. Moreover, many of these platforms roll out special promotions and discounts during this period, attracting more customers and further increasing the volume of orders. However, while the festive season presents a lucrative opportunity, it also brings unique challenges for the quick commerce industry.

Managing a sudden spike in demand requires robust logistical planning. Companies must ensure they have sufficient inventory to meet demand and that their delivery routes are optimized to handle potential disruptions. Workforce management is another critical aspect, as the anticipated 40% increase in gig rider demand means quick commerce platforms need to onboard and train new riders quickly. This can be a challenging task, especially when maintaining service standards and adhering to safety protocols. Additionally, as the pressure on gig riders increases to deliver more orders in less time, there are concerns about fatigue, stress, and potential accidents. It is crucial for companies to balance the demand for quick deliveries with the welfare and satisfaction of their riders.

The anticipated increase in demand for gig riders during the festive season highlights the growing importance of the gig economy in today’s retail landscape. For gig workers, this surge represents an opportunity to earn higher income through increased job availability. However, it also raises questions about job security, fair wages, and working conditions, which remain ongoing concerns in the gig economy. For firms that engage in fast commerce, the holiday season presents both an opportunity and a difficulty. It provides a platform to demonstrate their capabilities and build customer loyalty through exceptional service. It also compels these companies to think about how to make their operations sustainable and scalable.

Those quick commerce platforms that can successfully navigate the festive rush will likely strengthen their market position and enhance their brand reputation. However, the increased demand for gig riders also underscores the need for careful planning and effective management. As quick commerce continues to evolve, the lessons learned from this festive season will shape its future trajectory and the broader gig economy. It is essential for businesses to consider both the operational challenges and the human aspect of their workforce to ensure a successful and sustainable growth strategy.

In conclusion, there will be a notable increase in demand for gig riders in the rapid commerce industry over the impending holiday season. This shows how important it is to strike a balance between operational effectiveness and rider welfare, even as it offers gig workers and businesses significant opportunity. The capacity to sustainably manage this balance in the fast-paced environment of rapid commerce will be essential for long-term success as the sector grows.

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Nykaa’s Innovation and Expansion Fuel Impressive Q1FY25 Results

Mercedes-Benz to Boost Presence in India’s Growing Tier-2 Cities

Mercedes-Benz to Boost Presence in India’s Growing Tier-2 Cities

Mercedes-Benz to Boost Presence in India’s Growing Tier-2 Cities

Mercedes-Benz, the renowned German luxury automaker, is set to broaden its presence in India, especially in tier-2 cities, in response to the increasing demand in these growing markets. The company has announced its intention to open ten new service centers in 2024, prioritizing the improvement of its after-sales network before focusing on expanding its sales operations.

Santosh Iyer, the Managing Director and CEO of Mercedes-Benz India, highlighted the importance of these smaller markets in a recent interview with The Hindu Businessline. He pointed out that some of these mini-markets are growing faster than in previous years. For example, cities like Raipur and Nashik are expected to show significant growth. However, Iyer made it clear that when it comes to total numbers, major metro cities like Mumbai and Delhi, along with their surrounding areas, remain the biggest contributors to the company’s growth.

Mercedes-Benz’s expansion plan for emerging markets prioritizes establishing service infrastructure before ramping up sales efforts. According to Iyer, the company aims to deepen its presence in mini-markets, believing that increased accessibility will naturally draw more customers. The primary focus in these regions will be on developing service capabilities rather than aggressive sales tactics. To support this strategy, the company intends to launch 10 new service facilities in mini-metros and smaller urban centers by the close of 2024.

In addition to enhancing its service network, Mercedes-Benz is looking into producing some accessories locally to better meet the needs and preferences of Indian consumers. The company is also planning a major upgrade to its retail experience. This year, 25 of its existing retail outlets will be transformed into luxury boutiques that offer an improved customer experience.

Iyer elaborated on this retail strategy by saying, “We have moved away from larger showroom formats to smaller, customer experience-focused formats. These new showrooms will feature design studios, private consultations for our top-end vehicle customers, and customization options for vehicles.” These boutiques are designed to offer a more personalized and luxurious shopping experience for Mercedes-Benz customers.

The company is also working on improving its after-sales service to enhance customer satisfaction. Previously, Mercedes-Benz offered a premium service where routine maintenance could be completed in just three hours. A step forward is now being taken by the company. Iyer explained that if automobiles under contract are delayed in the factory for other than three days, clients will be handed over with a courtesy automobile during this period. This policy shows Mercedes-Benz’s commitment to minimizing any inconvenience for its customers.

When it comes to new products, Mercedes-Benz is continuing to introduce new models to the Indian market. Recently the company launched the Mercedes-AMG GLC 43 4MATIC Coupé and the CLE 300 Cabriolet AMG. Mercedes-Benz is set to expand its luxury electric vehicle lineup in India with the launch of its first electric Maybach, the EQS 680 SUV, scheduled for September. This launch will further expand the company’s electric vehicle lineup in the country, aligning with the global trend toward electrification in the automotive industry.

Mercedes-Benz’s expansion plans in India reflect the growing importance of the Indian market in the company’s global strategy. By focusing on tier-2 cities and improving both its sales and service networks, Mercedes-Benz aims to take advantage of the increasing demand for luxury vehicles in these emerging markets. The company’s approach of establishing service centers before sales outlets in these areas shows a long-term commitment to customer satisfaction and brand building.

Additionally, the shift towards smaller, more experience-focused retail formats and the localization of accessories demonstrate Mercedes-Benz’s efforts to tailor its offerings to the Indian market. These initiatives, combined with the introduction of new models and the expansion of its electric vehicle lineup, position Mercedes-Benz to strengthen its presence in India’s luxury car market.

As the company continues to navigate the changing landscape of the Indian automotive industry, its focus on customer experience, service quality, and market expansion is likely to play a key role in maintaining its position as a leading luxury car brand in the country. The success of these initiatives could set an example for other luxury automakers looking to expand their presence in India’s tier-2 cities and beyond

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Nykaa’s Innovation and Expansion Fuel Impressive Q1FY25 Results