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Falling Rupee chokes the Indian Economy but presents Investment Opportunities

Kaushambi — Wed, 23 May 2012 05:55:10 +0000

Indian rupee has been free falling against the US Dollar for a while and yesterday it touched a new all time low of 55.39 rupees against the American dollar. Whilst there have been recent reports about how the Indian economy is pegged to grow at 7.5% in 2012, depreciation in the value of rupee is not a good sign.

One of the first hits that the economy takes when rupee tumbles is the rise in cost of imports. India imports roughly 70% of its crude oil requirements and a falling rupee means that the government will have to pay more.

Although oil and petroleum prices are controlled, the end consumer may very well bear the brunt of this increase in costs.

US Dollar Vs Indian Rupee [ 1 Year Chart]

In fact, Petroleum Minister S Jaipal Reddy talked about an immediate increase in fuel prices yesterday when the rupee dipped to new lows. He said "If rupee depreciates by one against the US dollar, our oil companies lose Rs 8,000 crore (annually)"

Some Negatives of Falling Rupee

We know that higher fuel prices can spiral into increase in inflation as industries across the board take a hit. This dreadful cycle of higher costs for crude oil resulting in losses for government units and higher fuel costs for industries and the end consumer is a challenging situation for the Indian economy.

The falling rupee also hits companies which rely heavily on foreign currency outflows to keep business operations running. Take for example the airline industry. For airlines that service international routes – International airport fees, lease of airplanes, salaries of expat pilots, jet fuel prices and many more relatively fixed costs are dollar driven. Such outflows in dollar terms become costlier when realized when local currency falls.

A further hit in demand for foreign travel is taken as the common man is likely to cancel outbound overseas trips during these times. Flights, hotel stays and every other service in foreign countries becomes more expensive as the purchasing power of rupee falls.

Even domestic airlines scramble to keep fuel and airline lease costs under tab by implementing measures like avoiding flying at high altitudes, sourcing cheaper on-flight meals, hire local pilots and taxing aircrafts with one engine only.

A falling rupee is also bad for the share market as the negative trend not only portrays a grim picture from a pure number crunching approach but also weighs in on investor sentiment. Foreign Institutional Investors (FII) may suddenly go on sell mode if fear of future losses outweighs likelihood of gain.

On the upside, times like these are excellent buying opportunities. The stock market is currently trading in the vicinity of 4 month lows and blue chip stocks are bottoming out.

There could be an enormous gain potential for such stocks in the long run. Investors who have made their millions from the share markets wait month after month for opportunities like these to buy-in at lower prices and sell when markets rebound.

Some Positives of Falling Rupee

In the midst of this chaos as the rupee tumbles, industries with dollar dominated revenues may in fact benefit from the depreciation of local currency. A prime example is the Indian IT sector which relies heavily on overseas revenue.

As a majority of revenue comes from overseas markets, companies like Wipro, Infosys, TCS, etc may witness higher realization of their dollar dominated revenue. However with low global demand and weaker growth forecasts, the full potential of the upside of rupee depreciation for the IT sector is yet to be seen.

Sectors like domestic travel could witness a boost as travellers will prefer to stay away from foreign destinations where they will get a subdued bang for their buck for the time being. Even Indian expats living and working abroad benefit from rupee depreciation. If they are paid in dollars, the realization potential of their salary in rupee spikes.

The rupee has lost about 22% since the beginning of 2012 and more than 11% since February this year.

Certain analyst camps blame the downfall on global concerns while other claim domestic woes are fuelling the drop. The government and mainly the RBI will need to intervene and clamp down on the sliding rupee to add stability to already volatile markets.

The poor performance of rupee is a drag on the Indian economy however there are definitely certain upsides to a falling currency which represent gain opportunities if investment decisions are taken at the right time.

Per Capita Consumption of Electricity in India [State-wise Chart]

Arun Prabhudesai — Mon, 21 May 2012 11:25:33 +0000

Government of India recently released per capita consumption of Electricity in India and it makes for an an interesting reading.

The State of Goa (2004.77 kWh) & Puducherry (1864.5 kWh) account for maximum per capita consumption of electricity. While states of Bihar (117.48 kWh), Manipur ( 207.15 kWh) & Assam (209.20 kWh) show the lowest per capita consumption. The National Average per capita electricity consumption is 778.63.

15 states in India show lower annual per capita power consumption in comparison of national average!

The above graph does not include 2 Union Territories – Dadra & Nagar Haveli, Daman & Diu – as the consumption of electricity in both these places is ten times that of National average. One of the reasons being that these are ports & Industrial places with very less residential consumption of Electricity. So the figure in those 2 UT’s show unusually high.

It is interesting to note that on national level, India’s energy consumption is already one of the lowest in the world. And if you consider states like Bihar, they live on fraction of electricity as compared to developed world!

Taxiforsure.com raises funding from Accel, Helion & Blume

Arun Prabhudesai — Mon, 21 May 2012 09:04:31 +0000

Looks like online car rental companies are hot right now – In last 6 months alone more than 5 startups in similar space have raised funding.

Taxiforsure.com, the online taxi booking service run by Serendipity Infolabs Pvt. Ltd., is the most recent one to have done so. They have raised venture capital funding from Accel Partners, Helion Venture Partners and Blume Ventures. As part of the transaction Anand Daniel of Accel and Ritesh Banglani of Helion have joined the board of the company. The company did not disclose details of the financial transactions.

Taxiforsure.com is currently operational only in Bangalore and this venture funding is expected to help them expand across other cities in India. According to their website,Taxiforsure plans to offer wide range of choices to travelers which includes chauffeur driven, self-drive car rentals and radio taxis across India.

Taxiforsure.com does not plan to have its own fleet of cars, but have network of taxi providers under their umbrella. They will tech-enable and bridge the gap between consumers and local taxi providers.

Travellers need to follow 4 stage process on taxi4sure site – Search, Select, Details and Pay for booking pre-paid taxi service. They can also call their helpline number @ 080 – 6060 1010 (sixty-sixty-ten-ten) and do the taxi booking. Travellers can also directly make the payment on the website using following payment options – Credit card / Debit card / Net banking/ Cash card or they can directly pay cash to the driver during the time of travel.

As mentioned earlier, online cab booking services are on the rise. Taxiguide, Olacabs, Savaari and YourCabs.com have all raised funding in past few months alone. With Taxiforsure also joining the pool this space seem to be getting crowded. There are atleast 3 other startups in similar space who are also looking for funding at this point of time.

Would love to know from readers – Does this space have room for so many operators / aggregators?

India PC Market Share jumps 7.7%, Lenovo Tops!

Kaushambi — Fri, 18 May 2012 09:53:19 +0000

Faster growth in semi-urban India is driving growth in the PC Market in India as it expanded by 7.7% in Q1 2012 over Q4 2012. Even as compared to the first quarter of 2011, shipments of PCs grew 3.5%. In the period January-March 2012, 26.3 lakh PCs were shipped, according to a press release by IDC.

As the PC market in India is revived by a boost in commercial as well as consumer spending, Lenovo emerged with top market share for the first time. Until now Dell had a command over the market share but with 15.8% of total shipments, Chinese manufacturer Lenovo has nudged past Dell.

In Q4 2011, Dell had the highest market share with 17.6% of total shipped PCs in India. In Q1 2011, Dell lost 2.6% and fell to 15%. Lenovo was second and 10% and HP trailed third. In Q1 2012, Dell had a 14.9% market share. One of the fundamental drivers of this nearly 5.8% surge for Lenovo as compared to Q4 2011 is the ELCOT deal. At a 15.8% against total shipments of 26.3 lakh, Lenovo alone would have shipped about 4.2 lakh PCs in India.

Lenovo recently secured the ELCOT deal with the Tamil Nadu government to supply laptops in schools. Besides the TN government, many other states are on their way to incorporate and increase existing IT facilities and infrastructure. If the trend continues and governments like UP and Punjab rise up to election promises, we may very well witness a further growth in the PC market in India.

Of the total PCs shipped, consumer segment grew about 19.6% in Q1 2012. Adwaita Govind Menon, Associate Research Director, IDC said "Consumer-led sales are a healthy sign" However not everyone in the industry is delighted with these numbers. Amar Babu, MD Lenovo told ET "Comparatively, emerging markets are growing 15-16%..Going by the low PC penetration level, India should grow much faster and consumer buying needs to go up"

State wise PC penetration

A recent study, also by IDC pointed out that South India in its entirety was the highest consumer in the Indian PC market. But state wise, Maharashtra emerged as the biggest consumer as it accounted for nearly 17.4% share of total PCs shipped in India.

Second highest was Delhi at 11.5% followed by 10.6% for Karnataka. "South India typically boasts a few big names in the enterprise market, who continue to be top spenders in IT products. Further, the region continues to be a stronghold for non-branded PC market in India" said Kiran Kumar, Sr. Analyst at IDC.

While growth numbers are welcome, figures show that consumer sentiment is shifting towards portable PCs. Even semi-urban India is waking up to compact devices like laptops, notebooks, tablets and other mobile devices.

The Lenovo All-in-One desktop has been popular with Indian consumers because of its low price. But it will be interesting to see how the Chinese manufacturer holds up against other market leaders in laptops, tablets and other portable devices in the future.

Post Offices to offer Railway Tickets bookings, mobile recharge & more…

Arun Prabhudesai — Fri, 18 May 2012 05:50:15 +0000

Indian Post offices are improving – They are not only becoming high-tech, but also considerably increasing the bouquet of services they offer at their outlets. According to the statement by Mr. Sachin Pilot, Communications & IT minister, postal department has entered into agreements with 8 organizations including financial institutions to sell their products through the post offices in the country.

Post Offices in India will offer following Services

Sl. No.	Name of Company / Financial Institutions	Description of product/service
1	Western Union Financial Services Inc.	International Money Transfer to India
2	MoneyGram Payment Systems Inc.	International Money Transfer to India
3	UTI Mutual Funds	Sale of UTI Mutual Funds through post offices
4	Pension Regulatory & Development Authority	Point of Presence for National Pension Scheme accounts.
5	India Post SBI tie-up	Department sells assets and liability products of SBI through identified postal outlets.
6	Ministry of Railways	Booking/cancellation of Railway Reserved Tickets under Passenger Reservation System
7	Reliance Money Infrastructure Limited.	Sale of Gold Coins.
8	Bharat Sanchar Nigam Ltd.	Sale of Recharge Coupons, Sancharnet Cards etc.

Regarding tie-ups with Western Union & Moneygram, it is not clear if it will allow only inward remittances or whether it will allow out ward remittances as well. According to me, one can only receive money, but because sending money requires lot of paperwork in India, it may not be possible to do it from Post Offices.

Another service that probably will help millions, especially in rural areas would be Booking / cancellation of Railway Tickets.

What do you think of these offerings by Indian Postal department ?

Telecom News Buzz: Bharti to Buy Qualcomm’s spectrum for Rs. 5k crore & more…

Arun Prabhudesai — Thu, 17 May 2012 07:07:51 +0000

Bharti Airtel nears purchase of Qualcomm’s Indian Mobile License

The talks about Bharti buying Qualcomm’s mobile license have been going on for some time seem to be coming to close. Qualcomm has reportedly asked Bharti Airtel to pay Rs. 5000 crore for its Indian unit. The talks are expected to close in 2 weeks time. Qualcomm, had bought the frequency licenses in cities including New Delhi and Mumbai in June 2010 spectrum auction, paying Rs. 4900 crore for the spectrum. Interestingly, Bharti Airtel’s 2G licenses will expire in 2014 and the company may have to pay much more TRAI’s new guidelines on 2g spectrum are approved. [Source]

Timesdeal-PayTM mobile recharge deal partnership garners record 70k orders

Timesdeal.com in partnership with mobile recharge company PayTM had offered a deal which allowed users to pay just Rs 50 and get a mobile recharge voucher worth Rs 100 from PayTM. This deal was a hit with users and garnered a record 70k orders. Also, this deal was available only to new users, so PayTM essentially brought 70k news users under its fold in one single day. Timesdeal.com witnessed a huge traffic surge, with more than 3,00,000 unique visitors visiting the site on the deal day. [Source]

Finance Minister defends Retrospective tax of Rs. 20k crore Tax on Vodafone

Looks like Indian Finance Minister, Mr. Pranab Mukherjee, is not going to budge on the subject of applying retrospective tax on telecom giant Vodafone. The amendment made sometime back, allows transactions involving Indian assets to be taxed in India even if deals are executed overseas. Pranab Da defended the decision in Rajya Sabha yesterday and clearly told that Vodafone will have to pay tax on its acquisition of Hutchison’s stake in the $11.2-billion Hutichison Essar deal executed in Cayman Islands. [Source]

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Global Mobile Handset Market 2012: Mobile Sales Decline, Smartphones Surge

Kaushambi — Thu, 17 May 2012 06:34:01 +0000

A study by IT research and advisory firm Gartner pointed out that global sales of mobile phones decreased 2% in Q1 2012 for the first time after a similar trend back in the Q2 2009. Leading mobile manufacturer Samsung topped mobile phone sales worldwide in the same period with a slightly higher market share than rival Nokia.

Of the total worldwide mobile sales in Q1 2012, at least 40% of the market share was captured by Samsung (20.7%) and Nokia (19.8%).

That’s good news for Samsung because it signifies a spike of 28% in mobile handsets sales in Q1 2012 (8.65 crore handsets) as compared to the first 4 months of 2011 (6.87 crore handsets). On the other hand Nokia witnessed about a 21% drop in its sales for the same time period, selling 8.31 crore handsets in Q1 2012 as compared to 10.75 crore in Q1 2011.

Worldwide Mobile Device Sales [1st Qtr 2012]

Apple has reason to smile because its market share went from 3.9% in Q1 2011 to 7.9% in Q1 2012. It sold more than 3.31 crore mobile phones in that period this year as compared to 1.68 crore last year. Obviously the baseless assumptions by many who believed that Apple would plummet without Steve Jobs’ presence have been proved wrong. And with the whole world eagerly awaiting the launch of iPhone 5, Apple’s footprint is set to grow.

In terms of total worldwide sales and market share, the leaders Samsung, Nokia and Apple were followed by ZTE, LG, Huawei Device, Research in Motion, Motorola, Sony Mobile Communication, HTC and other smaller mobile companies.

Interestingly, market share of South Korean mobile giant LG dropped 37% with sales of 2.39 crore handsets in Q1 2011 vs. 1.47 crore in Q1 2012. On the other hand, Chinese manufacturer Huawei Device saw a growth of nearly 63% in market share with sales soaring from about 70 lakh handsets in Q1 2011 to 1.08 crore in Q1 2012.

Motorola, the company which invented mobile phones had a tiny market share of 2% of total mobile phone sales worldwide. It sold about 83.6 lakh handsets in Q1 2012 as compared to 87.8 lakh in the same period in 2011.

Worldwide Smartphone Sales [1st Qtr 2012]

Contrary to overall mobile phone sales worldwide, the smartphone segment witnessed a solid surge of 44.7% as compared to Q1 2011. Sales of Android based phones saw a jump of 122% from 3.6 crore handsets in Q1 2011 to 8.1 crore in Q1 2012.

Retaining number one spot and with a 56% market share, Android phones amounted to more than half of smartphone sales worldwide.

Operating System	1Q12 Units	1Q12 Market Share (%)	1Q11 Units	1Q11 Market Share (%)
Android	81,067.40	56.1	36,350.10	36.4
iOS	33,120.50	22.9	16,883.20	16.9
Symbian	12,466.90	8.6	27,598.50	27.7
Research In Motion	9,939.30	6.9	13,004.00	13
Bada	3,842.20	2.7	1,862.20	1.9
Microsoft	2,712.50	1.9	2,582.10	2.6
Others	1,242.90	0.9	1,495.00	1.5
Total	144,391.70	100	99,775.00	100

iOS based smartphones manufactured by Apple also saw a steep rise in sales of nearly 96%. 3.3 crore handsets were sold in Q1 2012 overshadowing a figure of 1.6 crore in Q1 2011. This brings Apple to a commanding 2^nd place in overall market share (22.9%) in worldwide sales of smartphones in Q1 2012. Apple and Samsung have a solid grip over the global smartphone market with a combined market share of 49.3%.

Almost all other smartphone platforms witnessed a decline in market share and total sales for Q1 2012 as compared to Q1 2011.

Sales of Symbian based phones slumped 54% from 2.7 crore in Q1 2011 to 1.2 crore in Q1 2012. This platform also lost its previously held 2^nd place in market share to iOS. In Q1 2011, 27.7% of all smartphone sales worldwide were those based on a Symbian platform. In Q1 2012, they make up only 8.6% of global smartphone sales.

Key Mobile phone Device Trends

While the decline in overall sales is not the best of signs, it may very well indicate that users are slowly shifting from traditional handsets to smartphones. Total mobile phone sales decline 2% but smartphone sales meteorically rise 44.7%.
Samsung beats Nokia to grab top market share in total mobile phone sales in the world in Q1 2012 as compared to Q1 2011. 20.7% of all mobile phone sales are attributable to Samsung.
Figures for Apple expand as sales and market share grow 96% and 102% respectively. Apple sells 7.9% of the world’s mobile phones. A successful launch of the much awaited iPhone 5 could see Apple dominating the smartphone market.
China based manufacturer Huawei Device’s mobile handset global sales increase 54% although its current market share only 2.6% worldwide. Founded in 1987, Huawei Device has expanded its footprint to 140 countries and has R&D centres in 20 countries.

Indian Funding & PE Deals of the week [May 7th to May 13th 2012]

Arun Prabhudesai — Wed, 16 May 2012 17:13:45 +0000

Here are the Funding, PE and M&A deals happened in India for the week starting May 7^th 2012.

Funding, Private Equity and M&A Deals of the week [May 7^th to May 13^th 2012]

Funded Company / Acquired Company	Deal Type	Who Funded / Who Acquired	Funding Amount	Remarks
ProKlean technologies Pvt. Ltd.	Angel Funding	Chennai Angels	USD 500k	manufacturing expansion & reach expansion

Magzter Inc.	Series A	IndoUS Venture Partners	Undisclosed	To expand its footprint in other countries

cbazaar.com	Series A	Inventus Capital Partners & Ojas Venture Partners	USD 3.5 Million	For general Business Expansion

stylishyou.in	Acquisition	Yebhi.com	Undisclosed	Strategic deal for expansion in Jewellery

PriceGrabber.com, LowerMyBills.com and ClassesUSA.com	Acquisition	Ybrant Digital Ltd	USD 175 Million	To expand their product platform

Parampara Foods	Acquisition	General Mills USA	USD 12 Million	To increase their product portfolio

Firepro Systems Pvt. Ltd	Majority Stake*	Panasonic	Undisclosed	* 76% stake

Giftcart.com	Angel Funding	TekCorp	USD 1 Million	To strengthen development, marketing & Supply Chain

Radiant Hospitality Services Pvt Ltd	Acquisition	OCS Systems	USD 5.5 Million	N/A

BASIX Krishi Samruddhi Ltd	Private Equity	Acumen Fund	USD 2 Million	For creating Pan-India branches

Limberlink Technologies Pvt. Ltd.	Series A	Accel Partners	USD 2 million	N/A

ICRA Techno Analytics Limited	Acquisition	ICRA Techno Analytics Limited	Undisclosed	N/A

People Matters Media Private Limited	Series A	HR Fund	USD 750k	For general Business Expansion

Talentube.com	Angel Funding	consortium of investors	USD 12 Million	To built largest talent community in India

MVR Infrastructure & Tollways Pvt Ltd	Acquisition	IRB Infrastructure Developers	USD 26 Million*	* approx

Moolchand Healthcare	Private Equity	Sequoia Capital	USD 20 Million	To fund its business expansion plans

[We are sometimes unable to get the funding amounts, as they are not disclosed. However, we update this sheet when it becomes public. If you are aware of amounts, and they have not been put up in the table, please do get in touch with us.]

You can check out coverage of all the previous Weekly Funding & M&A deals round-up here.

Note: Even though we try our best to bring you all the funding / M&A deals of the week, there are always ones which go un-reported. Most of the deals which we put up here are published on multiple websites, and we do refer them to provide the accuracy of deal in question. If you know of the any that we have not covered, please let us know and we will be more than happy to add it to the list!

Airtel Money Super Account launched in partnership with Axis Bank

Kaushambi — Wed, 16 May 2012 15:35:20 +0000

Bharti Airtel has partnered with Axis Bank to use combined forces of telecom and banking to offer financial inclusion (FI) to thousands of Indians who still don’t have any access to banking. Called Airtel Money Super Account powered by Axis Bank, the mobile platform will be powered by Airtel MCommerce Services Limited, a fully owned subsidiary of Airtel. Banking products and services will be brought forth by Axis Bank. Infosys has been roped in as the technology innovation partner to lend its expertise in mobile and e-commerce to successfully deliver this initiative.

Sanjay Kapoor, the CEO of Bharti Airtel for India & South Asia said "….nearly 43% of our country’s population does not have bank accounts and continues to rely on cash for majority of transactions as well as payments". This could be either because they have no access to banking or that they choose to rely on cash out of habit and mindset. In such a scenario, the aim of FI is to offer banking products and services to the under-banked and low income population of urban and rural areas of a country.

Airtel Money Super Account powered by Axis Bank allows customers of Airtel Money to open a No Frills Savings Account through which they will be able to carry out a variety of banking transactions. Airtel Money, launched in February 2012, is basically an account on a mobile phone through which cash can be deposited. This balance can later be used to pay for various products and services such as balance recharges, Digital TV bills, movie tickets, e-shopping, etc.

No Frills Account is essentially a simple Savings Account without the requirement of any fixed minimum balance. It caters to users who don’t need to use many cheques or make frequent withdrawals/deposits. No Frills Accounts were introduced by banks in India as per RBI directives in order to further aid the FI objective and policy of the nation.

The service will be first activated in India’s top remittance corridors like Delhi, Mumbai, Bihar and East Uttar Pradesh. For the time being, users will be allowed to send remittances from Delhi and Mumbai, and receive in Bihar and UP.

Airtel Money Super Accounts promise to be a boon in many ways. Customers can make cash deposits, receive remittances, transfer and withdraw money anytime. These transactions can be done from authorized Airtel Money-Axis Bank outlets.

The hassle of handling cash will be reduced by making banking transactions more secure, convenient and efficient. Customers will be also able to earn interest on their No Frills Savings Account.

There are many other services that Bharti Airtel and Axis Bank have in the pipeline for their customers. These include transferring funds to another bank account through NEFT and access other banking services like RDs, FDs and micro-insurance products.

To open a Super Account, customers can visit the nearest Airtel Money-Axis Bank outlet and fill out an application form. Know Your Customer (KYC) identification documents will be required.

There is little doubt that this alliance is a winning combination of Airtel’s vast reach and Axis Bank’s goodwill. Airtel has about 15 lakh outlets in India while Axis bank is a strong player in the banking sector. Add to this equation, the expertise of IT giant Infosys, the Super Account has everything working in its favour.

However the big question is whether this initiative will actually trickle down and percolate to the target audience.

It would only fair to assume that folks who prefer dealing in cash for tax reasons will continue preferring cash as these transactions are likely to be logged. So the cash loving Indian may not necessarily prefer transferring cash via a medium that will leave a trail.

However the obvious upside to the initiative is the fact that it will allow banking services to percolate down to the roots of the Indian population. As Airtel and Axis Bank add more services and expand the Super Accounts footprint, the currently unbanked population could very well be queuing up to sign up.