by admin | May 25, 2021 | Economy, Investing, News, Opinions
By Taponeel Mukherjee,
The adage that “investing in the right industry is at least as important, if not more, than choosing the right investments” holds true in India as much as it does in any other country.
An investor needs to invest in industries that generate better returns relative to others and then needs to find specific assets within the industry that are available at attractive valuations. Regulatory conditions, demographic trends and inter-linkages between sectors are some of the drivers of growth and consequent investment attractiveness.
For instance, the recent decision on the localisation of data in India creates an investment opportunity for data centre infrastructure investors and ancillary industries. Assuming regulations are implemented and enforced credibly, tremendous infrastructure in data centres will be required to localise data.
The average monthly mobile data consumption per user in India increased by 15 times from the end of 2014 to the end of 2017 to over 4GB. The number is expected to more than triple in the next five years. Given this is mobile data consumption, if one were to add other sources of retail and industrial data consumption, one gets an idea of the vast data storage need in India.
The exponential data growth creates an opportunity for investors in sophisticated and large-scale data centres. Data centre investments will also imply opportunities in the supporting ecosystem of real estate and power supply. Real estate firms that can provide the vital data centre infrastructure become an attractive proposition as do power producers who can provide the high-power consumption needs of data centres.
The entire ecosystem benefits and creates investment opportunities for many investors. Identifying inter-linkages within industries is important for specialised investors. The impact that regulations can have in creating value across a chain of sectors is worth keeping in mind.
Changing consumption patterns and trends in income will be another significant driver of industry attractiveness. For an investor looking at sectors with long-term secular trends, watching how non-food consumption is changing with rising incomes should provide valuable insights. Discretionary consumer space is where a large part of the action should be expected given gradually rising incomes.
In the Boston Consulting Group report titled “The New Indian: The Many Facets of a Changing Consumer”, Abheek Singhi, Nimisha Jain and Kanika Sanghi point out a category that takes off for discretionary consumer products above a certain income level. This category includes industries such as entertainment, non-essential food consumption, high-end clothing and cosmetics. Capturing the upside in sectors that will benefit from rising incomes is crucial for investors looking to ride the India growth story.
Identifying attractive industries from an investment perspective is the first vital step. Industries with the correct growth dynamics help narrow down the list of outperformers across sectors. Institutional investors can approach the potential attractive investment opportunities within the identified areas through a variety of strategies, the key driver being the acquisition of the assets at attractive valuations.
Accessing opportunities through investments in the listed equity markets is one potential path if pockets of opportunities exist. Alternatively, investors with a long-term focus can create value through accessing assets through private markets, if they provide significantly lower valuation multiples due to both smaller size of businesses and current valuation multiples in the public equity markets.
Choice of the industry holds the key regardless of whether investors are focused on infrastructure businesses or consumer-facing sectors. While fundamental valuations are the absolute gospel for investing, favourable industries do provide a helpful “tailwind” for investors.
An analysis of annualised 10-year returns for S&P 500 sectors (represented by SPDR Exchange Traded Funds XLU & XLF as proxies) shows how utilities were able to deliver slightly higher annualised returns at 8.81 percent over financials (which faced significant regulatory hurdles over the last decade) at 7.34 percent.
The critical question investors must be asking of financials today is whether a less onerous regulatory regime is in the offing, thereby boosting returns over the next decade, or whether the new age fintech firms will create barriers to higher profits. The same rules apply in an Indian context. For patient investors looking at decade-long investment horizons, industry analysis can add significant value.
(Taponeel Mukherjee heads Development Tracks, an infrastructure advisory firm. Views expressed are personal. He can be contacted at taponeel.mukherjee@development-tracks.com or @Taponeel on Twitter)
—IANS
by admin | May 25, 2021 | Business, Investing, SMEs, World
Rome : Italy’s Finance Ministry is investing six million euros in European Bank for Reconstruction and Development projects to promote economic inclusion in the southern and eastern Mediterranean region, the EBRD announced on Wednesday.
The Italian contribution is centred on supporting youth employment and the development of small and medium-sized enterprises, the bank said.
Italy will help implement the EBRD programme by making available up to two million euros in technical assistance and up to four million in grants for co-investment, according to the EBRD.
Part of Italy’s financial contribution will be channelled through the EBRD Small Business Impact Fund, whose donors also include Japan, South Korea, Luxembourg, Sweden, Switzerland, Taipei China and the US.
The Small Business Impact Fund helps to finance investments, and advisory and policy dialogue activities focusing on SMEs, the EBRD said.
A grant agreement was signed at the bank’s 2018 Annual Meeting in Jordan on Wednesday in the presence of EBRD Alternate Governor for Italy, Gelsomina Vigliotti, its Vice President for Policy and Partnerships, Pierre Heilbronn, and its Managing Director for SME Finance, Claudio Viezzoli.
The EBRD is currently developing a southern and eastern Mediterranean region youth employment programme, to be piloted in Egypt this year and then rolled out in the rest of the region, the bank said.
The programme will aim to address some of the problems faced by employers and young job-seekers in the small private business sector and will promote quality, work-based learning opportunities as a route towards employment for young people, according to the EBRD.
Besies specific projects to build the capacity of local SMEs to recruit more effectively and retain skilled young people, the programme will also provide EBRD direct investment and risk-sharing support for SMEs that have the potential to offer employment to young job-seekers.
Italy is a founding member of the EBRD and is among the major contributors to the bank’s technical cooperation funds and investment co-financing funds, with 133 million euros provided since 1992.
—IANS/AKI
by admin | May 25, 2021 | Opinions
By Vatsal Srivastava,
With the crypto currency universe hitting fresh 2018 lows over the long Easter break, the question on everybodys mind is whether they buy this dip, or book their losses, or simply stay put – or “HODL”, as the crypto community likes to put it.
During great booms and busts, there is always much more noise than real signals to buy or sell. But a shrewd trader/investor always has the ability to see through the near-term noise and extreme price fluctuations and take a directional bet.
This column believes that while money will still be made in the crypto space, the days of easy money are far behind us. Everybody is a genius in a rising market, but those who can make money or even limit their downside in a falling or sideways market will build wealth over the long term.
Below are some basic steps to follow for active market participants in the crypto space. They are extremely basic but yet require a lot of discipline.
1. Treat cryptocurrencies like you would treat your stocks in an equity portfolio: Investing in a cryptocurrency can be viewed as buying equity stock of a firm from the point of view of risk management and doing your due diligence before buying. Make sure you know your thesis for buying a specific coin just like you would for a company. Read the coin’s white paper online to gather what utility value it proposes to have; do a quick Linkedln search of the founding team and senior management to assess their backgrounds and work experience, and keep a close eye on who their current and potential clients are. The white paper also gives a timeline for the next 12-18 months of the potential business roadmap for scaling up.
2. Diversify and skew your portfolio towards the top 10 coins by market capitalisation: Price is king. The price reflects fundamentals, sentiment, momentum, future outlook as well as past performance. There is a reason that out of the current total market cap of the entire coin universe of approximately $250 Billion, the top 10 coins represent almost 80 percent. And within these coins, you have diversification. Further, although the smaller coins may have a higher beta when the overall market improves, the next bull-run in the crypto space will be led by the leading coins. This is similar to what we witness in equities. Whenever things get beaten down badly, the first leg up is led up by large caps.
3. Technical analysis is elegant, but don’t use it: One sees a lot of commentary pertaining to moving averages, oversold and overbought levels, major support zones and breakout zones online. While technical analysis does provide a good picture of medium term channels or trends, I believe it should not be used as the sole indicator to buy or sell cryptos. Remember that this field of analysis is based on the assumption that markets are weak form efficient and that past price and volume data is a good enough indicator for future price action to earn positive risk-adjusted returns. For a long-term investor in the crypto currency space, this column does recommend using charting.
4. Follow leading analysts and pioneers of the crypto community: Keep updated with the latest developments in blockchain technology and ideas of various thought leaders in the crypto space on Telegram channels, Twitter handles and a host of other crypro-dedicated websites. Remember, true believers and long-term secular bulls of the space are not in the business of predicting prices but rather holding a constructive view on how they see technology affecting the current landscape.
5. Keep updated with the latest news on your coins: There are usually updated blog posts and media-related coverage on the coin’s website. Make sure you stay on top of all the newsflow of your portfolio components.
Take an informed, educated and a high-conviction view on a coin. More importantly, be prepared to change this view if the underlying fundamentals dramatically change.
Always remember: Bulls make money. Bears make money. But pigs get slaughtered.
(Vatsal Srivastava is Consulting Editor with IANS. The views expressed are personal. He can be contacted at vatsal.sriv@gmail.com)
—IANS
by admin | May 25, 2021 | Banking, Corporate, Corporate Buzz, Corporate finance, Corporate Governance, Economy, News, Politics
Y.V. Reddy
New Delhi : Former Reserve Bank of India Governor Y.V. Reddy on Saturday said the major problem of the Indian banking sector is the burden of investing 25-30 per cent of its deposits in government securities.
“The real problem for the banking sector in India is that 25-30 per cent of its deposits must be invested in government securities. Nowhere in the world is that much of burden put,” said Reddy in an interactive session at the Times Delhi Lit Fest 2017 held here.
“Second, there are other obligations as well. So you have to look at the totality of the system. But as far as few non-performing assets (NPAs) are concerned, NPA becomes a problem when the tax payer has to pay.”
Giving an insight into the problem of NPAs, Reddy explained that NPAs do not mean that the money has been robbed from the bank.
“NPAs do not mean that somebody is stealing the money. If there are NPAs in ICICI Bank, or HDFC Bank, that NPAs losses have to be borne by the shareholders,” he said.
Quoting his autobiography ‘Advice & Dissent: My Life in Public Service’, Reddy said NPAs are a bigger problem due to lack of proper provisions for collecting the lent-out money in the country’s legal system.
“NPAs is a big issue because the lender is not able to collect the money from the borrower. That is the big problem. As I have explained in my book, in India the legal system is such that the borrower repays out of moral compulsion,” Reddy asserted.
“Legally, there is no way in which the bank can collect the money, till recently. But the good thing is that the insolvency code has come. Number of fundamental things have happened (in the banking sector).”
—IANS
by admin | May 25, 2021 | Corporate, Corporate Reports, Investing
New Delhi : Global corporate giants are investing hugely in water security and management with a three-fold rise in just one year, an annual water report said on Tuesday. They committed to $23.4 billion of investment in water projects in 2017 alone.
In India too, companies are spending heavily to mitigate the risk of water supply with Tata Steel $38 million, ITC along with MNCs like Diageo, L’Oreal and Symrise AG also reporting spends in millions.
The report, ‘A turning tide: Tracking corporate action on water security’, published by non-profit environmental disclosure platform CDP, analyses water data from 742 of the world’s largest companies, including Nestle, Burberry and Kellogg’s.
It finds escalating boardroom engagement in water issues. The report highlights growing accountability and performance in water management with a 40 per cent increase in disclosure since 2016 and a 193 per cent increase in the number of companies featured on the CDP water A List.
The US (13), Japan (12) and Britain (nine) are the three countries with the most companies on the water A List.
Companies committed to $23.4 billion of investment in water projects in 2017 such as desalination plants, reclaiming waste water or improved irrigation to avoid droughts across 1,000 projects in 91 countries.
The report says the energy sector continues to be the biggest laggard, with 101 out of the 138 energy companies asked to disclose failed to do so.
Exxon Mobil and Royal Dutch Shell are among those companies persistently failing to reveal water data to investors via CDP.
Seven companies including Diageo (Britain), Colgate Palmolive (US) and Nestle (Switzerland) are now putting a higher price on water internally to reflect its increasing business cost.
“From Bangladesh to Peru and the US, climate risks – and in particular water risks – have been very real in 2017,” an official statement quoting CDP’s water scoring partner and South Pole Group CEP Renat Heuberger said.
“South Pole Group believes companies need to continue to improve their understanding, management, and transparency of water risks, in order to help inform better decision making. Together with CDP, we are committed to delivering a water-secure world.”
Companies in India increasingly report that both quality and quantity issues are constraining their business, CDP India Director Damandeep Singh told IANS.
“With uncertainty in monsoon rains and declining water availability many companies have stepped up water conservation efforts in close collaborations with stakeholders in their watersheds and river basins.
“However, many more initiatives are required which include incorporating the true value of water into their core business strategy,” he said.
In total, 4,653 companies were asked to report to CDP on their water activities in 2017, with a 44 per cent response rate.
—IANS
