See 5-6% cut in Nifty EPS this yr; growth a concern: Kotak

There is a need for more follow-on action on reforms from the central government, is the word coming in from Sanjeev Prasad of Kotak Institutional Equities. As far as the macroeconomic situation is concerned, India is in a very safe spot, he says. The only missing piece, according to him, is growth.

“Consumption at the moment is weak, private sector investments are nearly dead and net exports is suffering as a consequence of whatever is happening globally,” he told CNBC-TV18. Based on this, he is taking the 7.5-8 percent GDP growth figures with a pinch of salt.

Also, Prasad says interest in emerging markets is low and India too will get impacted because of FII redemption pressures. However, he believes external sectors such as IT and pharma are doing well at the moment. It may also be a good idea to play themes linked to macroeconomic development, he adds.

Going ahead, he expects Nifty EPS to be cut by another 5-6 percent for this year.

Sonia: Do you see much more upside to the market now after the 50 bps rate cut or do you think global weakness will come back to haunt us?

A: It is hard to say in the short-term but I would think 50 bps cut is definitely a positive surprise. We need to see more follow-up action in terms of some headline reform being put in place by the central government and some of the state governments are also doing right things, so we may see some news over there. We are heading into Q2 earnings numbers. So let’s see what comes out over there. Hopefully the pace of earnings downgrades will start stabilising over this quarter or so, so that should again help and let’s see where the global sentiment stabilises because as of now people are still very negative on growth issues everywhere in the world and as far as emerging markets are concerned, there is very little interest as far as emerging markets in general. So any rally based on 50 bps cut – you will have to look at a lot of other sobering issues which are there.

Latha: Something more in terms of the other takeaways from the monetary policy. The forecast for inflation for FY17 is benign, the Reserve Bank of India (RBI) at the moment sees at 4.8 percent but they have upgraded growth for FY17 to 8 percent though FY16 growth has been downgraded, any comment overall, any key takeaways for the health of the economies in the macros for the coming year?

A: The macroeconomic position of India is very good. I think for the last several years I have never seen the macroeconomic position in such good shape, in the sense you have current account/ balance of payments (BoP) which is very much under control. The Q1 current account deficit is at 1.2 percent and that should be the number for the full year also, so that is very manageable. Inflation and interest rates are coming off, so that is a positive and the fiscal situation is also looking reasonably good.

The missing piece as far as macroeconomic situation is concerned is growth and I suspect growth will continue to a challenge for the next three-four quarters. If you look at the basic gross domestic product (GDP) construct, as of now we have three of the four items which are just not moving, consumption is weak, private sector investment is dead practically and you have net exports which are suffering because of the way global economy is slowing down. So the only real driver left is government spending, in a way the government is trying its best. I see the capital expenditure numbers for the government for first four months is up 39 percent but within the fiscal construct the government can only do that much. So put all this things together, it doesn’t look like growth is coming back in a big hurry. I still have a lot of issues with GDP numbers. This doesn’t look like an economy which is growing at 7 percent plus when you see some of the real data etc, it doesn’t look like we have an economy which is growing at 7 percent plus, so I would take 7.5-8 percent growth number with a large pinch of salt.

Latha: I am asking you in terms of growth downgrade that it came and the number is a bit fuzzy. How does it translate for you in terms of earnings? Where are the companies in which you see earnings growth coming?

A: If you look at BSE 30 or Nifty-Fifty index, a lot of earnings hasn’t got much to do with India, about 50-60 percent is not directly linked to India GDP but having said that at this point of time even the companies which benefit globally, even they are not looking that good particularly the entire commodity basket. So the sectors which are still doing okay seem to be the external sectors like IT and pharmaceutical space, other than that anything linked to domestic GDP, industrials etc, they will take some time to recover. However, some of the other sectors which are not that dependent on the GDP such as power sector, utilities kind of names, there the growth numbers still look intact. So if I put all the numbers together then for March ’16 we are looking at about 13 percent odd growth for the Nifty-Fifty. My sense is you will still see the downgrades in autos and industrials maybe little bit in the energy names also given where food prices are. So ultimately we should end up somewhere about 10-11 percent net profit growth for the Nifty-Fifty index for the current year.

However, for next year we have about 18 percent growth which means we have already build in some recovery, economic activity and GDP for next year. So let’s wait and see how the recovery process starts and how strong that is. So my sense is its 18 percent maybe on the higher side, it could probably come down to 18 percent or so. So net-net there are some earnings downgrades which I have yet to watch to the numbers and that is the real challenge over here, in the sense stock market corrects but how much more the earnings numbers will correct, is a real issue over here.

Sonia: How have you read into the flow situation because luckily for us the domestic money is solid and that continues to protect our downside but foreign institutional investors (FIIs) have been selling relentlessly and even after the big trigger yesterday there was a sell figure of Rs 1,100 crore by FIIs. Do you expect this redemption from FIIs to continue?

A: Looks like as of now nobody is interested in emerging markets. If you look at the kind of returns emerging markets have delivered over the last six months-one-three-five years, they have given about 20 percent negative return which is disastrous. Emerging market index is down about 30 percent on five year basis in dollar terms whereas the developed market index is about 30 percent. So you cannot have emerging markets performing so poorly and expect money to come in. So as of now whichever emerging market investor we talk to is feeling pressure as far as redemption is concerned or not seeing any inflows coming in which effectively means whether India does well on its own count in terms of relatively better macroeconomic positions, some reforms moving ahead, GDP is still growing relatively stronger compared to many emerging markets.

We will be clubbed with other emerging markets and given the fact that interest levels in emerging markets are low at this point in time and India will also suffer the consequences of any redemption that you see in emerging market funds. I think this process will continue for some time and this could continue till the time global investors either start feeling more comfortable about any turnaround in the macroeconomic position of some of the more distressed emerging markets and that’s still sometime away, in the sense emerging markets running very high twin deficit, high current account and high fiscal deficit or some of them are running very high current account deficit. Till the time you have high commodity prices and high global liquidity, all the wounds would probably get covered but that’s no longer the case.

The other thing which would happen is the market gets crushed so much that people start doing some amount of bottom fishing but that’s an issue of how much earnings numbers have been cut and whether that is sufficient or not. So as of now emerging markets will continue to see outflows which means we have to rely on domestic money and I hope that continues because that is the only thing which is holding up this market otherwise it would have been lot more in line with some of the other emerging markets.

More bad news for Tata Motors as S&P outlook cut to stable

Tata Motors  shares have more than halved from a peak of Rs 605 seen in February this year, on concerns of slowing Jaguar Land Rover (JLR) sales in China. Also, weighing on sentiment are the hefty discounts on JLR being offered in the US, which will soon start reflecting in Tata Motors’ earnings.

Despite the steep fall in stock price, investors are not ready to bite yet.

Adding to the bad news for the company, rating agency Standard & Poor’s (S&P) has cut its outlook for Tata Motors to ‘stable’ from positive.

“The demand slowdown in China and continuing capital expenditure at Jaguar Land Rover Automotive (JLR) will result in negative free operating cash flows and weaker financial ratios for Tata Motors in fiscal 2016 than we previously expected,” says S&P.

The rating agency however has retained its ‘BB’ long-term ratings on Tata Motors and the company’s US-dollar denominated senior unsecured notes, saying new model launches and a recovery in demand will support Tata Motors’ financials in fiscal 2017 and onward.

Sanjeev Prasad of Kotak Institutional Equities says the movement in the stock is mainly a reflection of its business in China and he would want more clarity on its business there before taking a call. He in fact sees more earnings downgrades for the company.

Last week, brokerage house Deutsche Bank downgraded its rating on the stock on ‘hold’ and cut price target by 21 percent to Rs 375.

Brokerage house Credit Suisse, however, has retained its ‘outperform’ rating on the stock, citing an impending volume recovery, even as it sees some near term pain for the company.

From the Credit Suisse report:

“JLR is still not able to sell proper volumes of Discovery Sport and XE in the US and China because of the unavailability of Ingenium petrol engines. Their availability starts only in November. Hence, healthy year-on-year growth in volumes will start only from November, with the F-Pace launch in the March quarter. JLR should be able to further build on it.”

And there could some fall out of the Volkswagen emission scandal as well, cautions the brokerage.

“…..there is a high probability that compliance costs for the entire industry goes up and JLR being a niche manufacturer can clearly get impacted.”

Expect some lousy numbers for the September quarter

“……September quarter margins are likely to be the worst in the past four years as a combination of lower volumes, poor mix and higher costs in anticipation of the new launches hit the P&L.”

Mkt to be attractive at 7500; see 75 bps cut in FY16: UBS

Unless Reserve Bank (RBI) Governor Raghuram Rajan surprises the market with bigger cut than what the street is expecting, it will be difficult to move to a positive zone, says Gautam Chhaochharia of UBS. He strongly feels Nifty will be attractive at 7500 levels.

Chhaochharia expects a 75 bps cut in repo rate in FY16 and is on the same page with the street which is expecting a 25 bps cut today.

Speaking to CNBC-TV18, Chhaochharia said the global situation is quite precarious and India cannot not be affected by it. “Meltdown in China will drive further selling in India,” he says. However, he expects a cyclical recovery to play out next year with falling interest rates acting as the big catalyst. UBS expects FY16 earnings at 8 percent, FY17 at 16 percent. He pegs year-end target for Nifty at 8200.

He is underweight on two wheelers and neutral on others, barring Maruti and house maintains  overweight stance on Pharma and banks . He is particular;y optimistic on public sector banks on the back of measures taken by the government.

Below is the transcript of Gautam Chhaochharia’s interview with Reema Tendulkar and Sonia Shenoy on CNBC-TV18. Sonia: Whichever way the ball rolls today, do you get the sense that market is still headed downwards?

A: Looks like because from a short-term perspective, obviously the global cues are not positive and when the regional markets and global markets are falling, like we have seen, for India to close positively will be a tough one unless obviously the Governor surprises with a bigger rate cut than what market is looking at.

Reema: How worried are you about what is happening in the global markets especially in the commodity space, so many commodities like copper are at a 6-year low, what is the global piece telling you?

A: This reflects the concerns on growth globally and while fundamentally it is not something to get overly worried about specifically from India perspective but it does hurt the sentiment globally, both in terms of growth as well as in terms of market participant’s sentiment because a lot of investors would be exposed to a lot of these stocks in these sectors.

Sonia: For now the Nifty has held on to that 7,500 level that we hit in the month of August. Do you get a sense that that level could be taken out easily because the incremental cues have only gotten worse?

A: Short-term anything can happen, it is difficult to say that. However, yes around those levels, the market again gets back into an attractive risk reward zone and if you are seeing in the context of 8,200 Nifty target for December, yes that zone would be definitely attractive.

Reema: What would your expectations be from the Reserve Bank of India (RBI) policy today as well as going ahead and how much does it matter to the market given the global concerns?

A: Officially we still remain 75 bps today and total 75 bps from today till end of FY16 and another 50 bps in FY17 so we are still aggressive and bullish on the rate cut trajectory. That will definitely give confidence to global investors in terms of the macro framework, which India has because inflation etc has been a big concern for global investors. So if the RBI continues on its rate cut trajectory, it does provide confidence to global investors.

Sonia: I was going through your note where you mentioned that in the auto space, Mahindra and Mahindra  (M&M) and Tata Motors  are attractively valued but rural headwinds and China worries remain. Now not just China, now there are worries in Europe as well with what is happening with the Volkswagen scam, that could balloon into a bigger issue for the auto sector, do you think auto stocks would move to the backburner for a while and become underperformers not just the original equipment manufacturers (OEMs) but the ancillaries as well?

A: There is still underweight two-wheelers and neutral four-wheelers and Maruti is only one which is a top pick for us. it is very difficult to call as to how the regulatory thing moves? Will it become a big ballooning issue for Indian OEMs or auto parts? I think it is still early days. Our work suggests that unless it becomes a bigger global issue, in its current form, it may not matter much but obviously in a near-term sentiment does take precedence and that is why you are seeing this stock getting hurt.

Reema: You are buoyant about Maruti doing very well and it is one of your preferred stocks, it is up 35 percent this year on a year-to-date (YTD) basis but apart from Maruti, couple of your other preferred stocks something like Oil and Natural Gas Corporation  (ONGC) or Coal India  , ITC  , they have all declined close to about 20-30 percent since the beginning of the year, what would you recommend investors to do in these stocks?

A: I won’t get into individual stocks beyond just the headline part and we keep adding and deleting these names at different point of time depending on the valuations but the overall sector stance still remains overweight pharmaceuticals, overweight banks, neutral staples and underweight two-wheelers and IT services.

Sonia: When you are overweight in financials and banks, would you still continue to stick to the private sector banks or now is there some sort of a valuation argument being built up for public sector undertaking (PSU) banks as well?

A: We like both.

RBI surprises, cuts repo rate by 50 bps; keeps CRR at 4%

The Reserve Bank of India (RBI) lowered the benchmark repo rate by 50 basis points to 6.75 percent, while keeping CRR and SLR unchanged at 4 percent and 21.5 percent, respectively. This marks the fourth repo rate cut by the RBI since January 2015. However, it has lowered its FY16 GDP growth target to 7.4 percent from 7.6 percent. It also said the focus should now shift to bringing inflation down to 5 percent by FY17-end.

The repo rate was last at 6.75 percent in March 2011.

The focus of monetary action in the near term will now shift towards removing impediments in rate cut transmission by banks, the RBI said. It also intends to work with the government to ensure that banks pass on the bulk of the cumulative 125 basis points cut since January this year.

“A further monetary policy accommodation will be conditioned by the abating of recent inflationary pressures, the full monsoon outturn, possible Federal Reserve actions and greater transmission of its front-loaded past actions,” the RBI press release said.

Governor Raghuram Rajan said the RBI intends to be as accomodative as possible given its inflation targets and with this 50 basis points rate cut, he has front-loaded action.

However, the RBI cautioned that since the third bi-monthly statement of August 2015, global growth has moderated, especially in emerging market economies (EMEs), global trade has deteriorated further and downside risks to growth have increased.

As far as India is concerned, a tentative economic recovery is underway, but is still far from robust, the RBI statement stated.

However, there are a lot of questions on the impact of poor monsoon on inflation. The RBI said looking forward, inflation is likely to go up from September for a few months as favourable base effects reverse. The RBI expects the outlook for food inflation to improve if the increase in sown area translates into higher production. “Moderate increases in minimum support prices should keep cereal inflation muted, while subdued international food price inflation should continue to put downward pressure on the prices of sugar and edible oil, and food inflation more generally,” RBI said.

Rajan also expects pro-active supply-side management by the government. “It is important that pro-active supply-side management by the government be in place to head off any food price pressures should they materialise, especially in respect of onion and pulses.

” RBI said it expects CPI inflation to average around 5.5 percent in October-December and 5.8 percent in January-March 2016 and finally moderate to 4.8 percent in January-March 2017.

The RBI has also said that foreign investment cap in government bonds will be relaxed in phases to 5 percent by March 2018. A hike in foreign investment limit in bonds will be announced every March and September. The foreign investment limits in debt will be fixed in rupee terms. In aggregate terms, this is expected to open up room for additional investment of Rs 1,20,000 crore in the limit for central government securities by March 2018 over and above the existing limit of Rs 1,53,500 crore for all government securities (G-sec).

Also, the RBI said Indian corporates can now issue rupee denominated bonds with a minimum maturity of five years at overseas locations within the ceiling of foreign investment permitted in corporate debt (USD 51 billion at present).

Mkt has factored 25 bps rate cut; avoid metals: UTI MF

Swati Kulkarni, Executive Vice President and Fund Manager, UTI Mutual Fund says the market has already factored in a 25 basis points (bps), so the Nifty may not react far too much to it.

Speaking to CNBC-TV18, Kulkarni says the central bank has a good case for cutting rates owing to strong inflation data.

Meanwhile, she recommends investors to bet on cement, auto, auto ancillaries. However, she suggests a strong avoid call on metals, despite their decent valuations.

Anuj: Tomorrow is the Reserve Bank of India (RBI) monetary policy, how big you think that is going to be a trigger for the market and Do you think there is a risk of the markets selling off again like we saw with last rate cut or do you think this time it would be different?

A: It is highly probable that 25 basis point rate cut is likely to happen. Of course nobody can predict what RBI finally does to the 100 percent perfection but market is factoring in about 25 basis point rate cut at this point of time.

Ekta: According to you will the banks pass on additional lending rate cuts, the big ones such as State Bank of India (SBI) and if so by how much? Where do you expect may be lending rates to be by the year end?

A: The stalwart, bankers have already commented on this and we have some anecdotal evidence of HDFC Bank taking a rate cut and also SBI has also followed so, from that perspective the transmission has started to happen. There is definitely a room for a rate cut given the Fed in action in this last policy and also given the inflation numbers which recently were announced at 3.66 percent. So, I think there is a fair amount of ground to expect a rate cut at this point of time.

Anuj: Once this policy is out of the wave what do you think is the next trigger for this market? We have been in a bit of a near-term bearish trend or if you want to call may be a bull market correction but the market has really tested patients of the bulls over the last many months. Do you think we will stick in this range and do you think we have made a bit of high at around 9,000 and would it be tough for the market to go to 9,000 or do you think in next 6 to 12 months the market may go to all time highs?

A: The trigger for that kind of movement from the market is earnings recovery. While we know that the economy is in up cycle and as far as the cyclical recovery is concerned. We don’t know the pace and we don’t know exactly how the investment side of the economy is going to pick-up.

As you know unless the investment side of economy shows some traction it is very difficult to assume that the consumption side of the economy is going to support all along. So from that perspective I think earnings recovery is going to get triggered and that we know is going to be the second half. We have to be patient to look at how the contracting activity, the mining that is expected to pick-up and also the announcement on the roads and railways that actually streamlines the economic mobilisation and that is something which is expected in the second half and also we have a favourable base as far as the FY15 muted earnings was concerned. So, I clearly think that probably earnings recovery is what the market will look for and that is what will drive the market further.

Ekta: What is your sense in a couple of these pharmaceutical stocks? Has the cream come back in terms of valuations only in the selective pharmaceutical stocks say something like a Dr Reddys Laboratories versus a Sun Pharmaceutical Industries and hence going forward we are not going to see a generic sort of valuation parameter for pharma stocks? It might be more stories specific?

A: I can’t comment on stock specific, but definitely pharma is a sector where some companies do tend to gain depending on their abbreviated new drug application (ANDA) pipeline and the approvals. They tend to make extraordinary profits during when they have exclusive rights. So, from that perspective there would be a much of a stock specific moves that we will have to get into the nitty-gritty.

However, generally I would like to mention that given the expectation that the dollar is likely to remain firm and these companies do have exposure to US markets and hence this sector as a whole especially the companies which have US generics as a large portion of their revenues, these are likely to remain under investment radars. That is what is going to drive and of course there will be case specific outperformance within that sector.

Anuj: Going forward which are the sectors you are most bullish on after the kind of correction that we have seen?

A: Strategic portfolio construct remains the same. Basically we would like to have more allocations towards the cyclical stocks. So, from that perspective I continue to stay overweight on stocks like cement, automobile, auto ancillaries and industrial manufacturing construction. On the banking side we will be bridging our underweight positions so more or less that remains the same.

At this point of time we are still avoiding sectors like metal, though the valuations are very attractive there. So, may be at five to six time enterprise value (EV)/ earnings before interest, tax, depreciation and amortization (EBITDA). However, given the slowdown that is talked about in China; China export is a big threat for the sector as far as the pricing power is concerned. Given the global slowdown I don’t think China demand can be replaced by any other nations quickly. So from that perspective I expect the pain to continue in that sector and hence I would rather avoid that sector and also will avoid realty at this point of time.

 

RBI may cut repo to 4 year low; caution against inflation

The Reserve Bank of India (RBI) is expected to cut its key repo rate to a four-year low on Tuesday to help support the domestic economy at a time when consumer inflation is at a record low, but may express caution about easing further as price risks still loom.

A agency poll last week showed 45 of 51 economists expect the RBI to cut the repo rate by 25 basis points to 7.00 percent, its lowest since May 2011. The RBI has already eased the policy rate by 75 bps so far this year.

But another rate cut may depend on how food prices impact consumer inflation starting in September, given India could be facing its driest year since 2009 as monsoon rains have fallen below their long-term average.

A favourable base effect seen in the previous two months is also expected to wane.

The RBI is also likely to err on the side of caution as US interest rates are expected to rise by the end of this year for the first time since 2006, potentially putting pressure on emerging market currencies, including the rupee.

RBI Governor Raghuram Rajan is expected to express that cautiousness as he looks to manage expectations, and counterbalance the calls for aggressive easing from government officials and corporate executives.

“I expect the RBI to cut the repo rate and sound a cautionary tone on the deficient monsoon’s impact on food prices and the Fed,” Soumya Kanti Ghosh, chief economic adviser at State Bank of India  , said.

Expectations for a rate cut surged the release of data showing consumer inflation at a record low of 3.66 percent in August. Inflation looks set to undershoot the government’s projection of 6 percent inflation by January 2016.

The economy expanded at a slower-than-expected annualised rate of 7 percent in the April-June quarter. That is faster than China, but well below the government’s target of 8 to 8.5 percent for the year ending in March.

The stuttering recovery in the growth rate lies behind the calls for the central bank to lower interest rates, but the RBI is worried about the potential for inflation to flare up again.

Rajan this month pointed out that without a favourable base effect, August inflation would have been around “mid five percent.”

Looking ahead, analysts expect Rajan to set a new target to bring consumer inflation down to 5 percent by January 2017, as part of his longer-term objective to keep inflation at around 4 percent.

Indian growth story looks attractive: Entrepreneurs

The Indian story is garnering more and more interest globally, said Indian entrepreneur s in the Unites States.

“We are seeing a lot of interest in participating in the India story, both from what opportunities are being catered within the local market and the emerging category of entrepreneur s from India who are creating global companies,” said Dinesh Katiyar, Partner, Accel.

In an interview with CNBC-TV18, the group of entrepreneur s said that Prime Minister’s Digital India has potential for investment from large companies and at the same time, it is a great opportunity for smaller companies to grow.

Tarun Agarwal, Co-Founder at ThinkApps said start-up opportunities in the country are tremendous. Big venture capital funds are looking at India with great interest today, he added.

Agreeing to the sentiment, Srinivasan Seshadri, Founder, Zettata said companies in India are young and willing to experiment, which makes investment easier.

Increasing size of global market and growing customer base in India are the other catalyst driving the growth story.

Q: The big concern that investors like yourself have been raising in the valley is that they would rather invest in the valley given the fact that India is still tough when it comes when it comes to regulatory norms, while it is easy to attract inflows, it is difficult to exit. Would you agree to that?

Katiyar: We are obviously seeing a big improvement in that situation. So, we are clearly seeing a lot of energy at the grass-roots level where a lot more entrepreneur s willing to go after all kinds of problems whether they are domestic opportunities or global ones.

We are seeing a lot of interest in participating in the India story, both from what opportunities are being catered within the local market and the emerging category of entrepreneur s from India who are creating global companies.

We are obviously hopeful that the regulatory environments sort of hurdles that make it a bit harder for companies get to the right exit points will get eliminated over time. We are clearly seeing that optimism being shared with our investors as well.

Q: So, you would say that gradually the exit hurdles are becoming easier. Are you increasing your investment in India?

Katiyar: Absolutely, if you look at the size of our funds that we are investing in India, we have been growing for every subsequent fund has been larger. If we look at our peer groups, the amount of money that is now being put into the venture capital asset group in India has been growing a lot.

Again, all of that is tied up to this thesis that we will see exit opportunities. We are beginning to see domestic mergers and acquisitions (M&A) picking up. Clearly, right now, it is being driven by companies like Flipkart, Ola and several others, but that starts creating some liquidity within the system. It keeps promoting Angel investments; it keeps getting more entrepreneur s into the fold.

Q: You have started a company which essentially does search but even better. So, how do you create differentiated products and let me understand, you have of course set your base in Silicon Valley, where does the India market stand for you? As a start-up , do you believe that it is easier to invest, to begin in Silicon Valley than in India?

Seshadri: I think the Indian market is an important market for us. Primarily, because the companies are much younger and they are much more willing to experiment and so for a high technology company like us, it is a fertile proving ground. And that is how it has panned out so far. Clearly, the size of the market is something that is growing day-by-day, so that is why we are sort of speaking to the global market right now.

Q: In supply chain management, there are several hurdles with respect to clearance that you would face in India. You have a presence in Bangalore as well. But you are based out of Silicon Valley. Is it easier to work out of the Silicon Valley than in India? Would you say that Prime Minister Modi’s efforts to create a Silicon Valley within India are more difficult and it could be just a dream?

Ayyangar: The US is a great place to start companies and have a worldwide perspective. However, India is huge market for us in terms of consumers demanding brand goods and as well as Indian merchants wanting to sell abroad. Indians think cross-border from day-one.

So, we are happy to serve them and make delivery very simple. All the hassles you talked about, we flatten it and we are a virtual delivery company that works with partners to make it as simple as an application programming interface (API).

Q: Let me ask you about the kind of hurdles that you have faced. Securities and Exchange Board of India (SEBI) has kind of tried to clear up the kind of norms with respect to startup listing but do you believe that encouraging investment, convincing investors of your entrepreneur ship skills, your business plan is tougher in India and do you feel that investors don’t take as much risk?

Garg: Firstly, I think convincing investors into the India story and growth story has become significantly different in 2014 and 2015 thanks to Narendra Modi’s effort as well to promote the country in several parts of the world.

For us, we started this year and we have been able to raise funds and we continue to see momentum that people have a lot stronger belief in what is possible in India, what Indian entrepreneur s can do in India and what Indian entrepreneur s can basically build global companies out of India. So, we truly believe in that and that is how we started and we are now starting to look at growing in Silicon Valley.

Q: This is what National Association of Software and Services Companies (NASSCOM) was saying that even the startup s that do build in India they prefer working out of Silicon Valley. Is that the case in your case?

Garg: Yes or no I would say. So, we have lot of our technology and operations based out of India. We also have customers in India using our products, but when you are looking at customers targeted in Silicon Valley you have to build a post here. So, for a reason if you need to be closer to your customer, you need to build it.

Q: A lot is required with respect to Digital India and Prime Minister is trying to encourage startup s in Silicon Valley. From a ThinkApps point of view, do you believe that there are ways in which startup s here in the Silicon Valley can aid the government in their efforts to encourage Digital India?

Agarwal: India happens to be unique position where Mobile is leapfrogging previous technologies especially Desktop-First kind of world. For India, China becomes an interesting model in terms of what kind of services can become digitalised.

To that extent while used cases might come in from various parts of the world but in terms of scaling things at a level where hundreds of millions of people using these services, make companies here have their experience in serving global audiences.

We have seen Google expressing quite a bit of enthusiasm. Sundar Pichai yesterday talked about supporting Modi’s vision. So there is definitely potential for larger companies to support that vision as well as smaller companies to take advantage of that opportunity.

Q: Do you believe that it is easier to invest in Silicon Valley than in India or to startup in Silicon Valley than in India?

Agarwal: I think Silicon Valley has a longer history in terms of startup environment ecosystem investment history but today for entrepreneur s it is a continuous chase opportunity. Right now opportunity in India is huge. Investors are also convinced about that and investors are optimistic people. So his is a huge

opportunity for them. So, at this moment all big venture capital funds are looking at India and many of them are actively investing as well.

Governance reform top priority: Modi tells Fortune 500 CEOs

Prime Minister Narendra Modi has said governance reform is his number one priority, during a meeting with a group of top American CEOs with a collective net worth of USD 4.5 trillion. “Reform in governance is my No 1 priority. We are for simplified procedures, speedy decision making, transparency and accountability,” Modi told over 40 CEOs of Fortune 500 companies over a dinner as he presented a page-long fact sheet of the steps taken by his government in the last one year.

Among the CEOs of Fortune 500 companies attending event were Lockheed Martin Chairman and CEO Marillyn Hewson, Ford President and CEO Mark Fields, IBM Chairman Ginni Rometty, Pepsi Co Chief Indra Nooyi, and Dow Chemical Chairman Andrew Liveris. Some of the CEOs attending the dinner described it as  “report card,” adding that this reflected the great transparency of the Modi Government. “Please continue to do more what you are doing. May be slightly faster,” External Affairs Minister spokesperson Vikas Swarup said.

Briefing reporters after the day long meetings, Indian Ambassador to the US Arun K Singh said the comments made by some of the CEOs was that a lot of progress has been made in the last one year, but it has been inaccurately assessed and reported. During the meeting, the Prime Minister said the foreign direct investment (FDI) all over the world has fallen but in India it has increased by 40 percent.

“This reflects confidence in the Indian economy,” Modi said. During the meeting, Swarup said the Prime Minister listened from each one of the CEOs present in the room on what their plans are for India and what are the problems they are facing and how that can be resolved. “By and large the mood was very upbeat.

There is general consensus that the Prime Minister is effecting change in India. The only thing all the CEOs said is that please make that change faster,” the Indian diplomat said.

India’s Capital Goods Policy on the anvil

The first-ever policy for India’s capital goods sector will be placed before the Cabinet for approval by November-end, a government official said today. “We will take it (the policy for the capital goods sector) to the Cabinet by November-end,” Secretary in the Heavy Industries Ministry, Rajan Katoch said at a press conference here.

The Ministry had set up a task force to make a road map for the country’s capital goods sector and sought suggestions on a draft paper to frame a policy on the industry.

The draft paper prepared by the Department of Heavy Industry pointed out that imports continue to address 35 to 40 per cent of domestic demand with the proportion being significantly higher in “critical components” segment for each sub sector. Moreover, it said, Indian share in global exports in the capital goods sector is still low — between 0.1 and 0.6 per cent — across various sub sectors. In contrast, share of global exports for China is between 7.7 and 16.3 per cent depending on the sub sector.

The capital goods sector contributes significantly to exports with over Rs 52,000 crore in 2013-14 which has grown at approximately 20 per cent per annum over the last decade. The imports were to the extent of Rs 1,14,500 crore, which is 37 per cent of the total demand of capital goods. Besides, Katoch said, individual Cabinet notes on closure of four CPSEs, including three units of HMT and Tungabhadra Steel Products, have been circulated while discussions are on with Defence Ministry on Hindustan Cables.

“Four of the Cabinet notes have been circulated including HMT and Tungabhadra Steel. They are under consideration. We are getting the views of various ministries.

“On Hindustan Cables Ltd, there was some discussion with Defence Ministry where they were expressing some interest in one or two of the units. So awaiting a final response, we will move ahead (with process of closure) in case they (Defence Ministry) are not interested,” Katoch said. The Cabinet had earlier given in-principle approval for shutting down five CPSEs including HMT Bearings, HMT Watches, HMT Chinar Watches, Tungabhadra Steel Products and Hindustan Cables. However, the closure modalities including a VRS package for the employees, need to be formalised after seeking approval on individual proposals by the Cabinet. Katoch was here for a press conference related to WIN India 2015, a leading industrial and engineering trade fair, scheduled from December 9-11. WIN India is being organised by Hannover Milano Fairs India Pvt Ltd, the Indian subsidiary company of the global joint venture of Deutsche Messe (Germany), and Fiera Milano Group (Italy).

Ficci is the industry partner for the event.

Kribhco to set up fertiliser plant; to invest Rs 1,000 cr

Fertiliser cooperative KRIBHCO said it will set up a phosphoric and potassic fertiliser plant at Krishnapatnam in Andhra Pradesh with an investment of Rs 1,000 crore.

This will be the first P&K fertiliser plant of Krishak Bharati Cooperative Ltd (KRIBHCO), which produces urea only.

“The plant is being set up in Andhra Pradesh as the state government has offered power at Rs 1 per unit for next 10 years, VAT exemption for next seven years and a host of other incentives, giving benefit to KRIBCO of about Rs 500 crore,” KRIBHCO Chairman Chandra Pal Singh said.

The land has already been allotted by state government for the fertiliser plant. The annual capacity of the plant will be about 6 lakh tonnes tonnes and it will take 4-5 years for the project to become operational.

There are also plans to increase the capacity of this plant in the second phase and take the total annual capacity to 1.2 million tonnes per annum, Singh added.

At present, Kribhco has one urea plant in Hazira in Gujarat having an annual capacity of 2.2 million tonnes. Besides, the cooperative has one plant in Shajhanpur in Uttar Pradesh in partnership with the Shyam group having a capacity of 1 million tonnes. KRIBHCO also declared a dividend of 15 per cent for member cooperative shareholders.