India - Right Time Right Place

INDIA

THE RIGHT PLACE THE RIGHT TIME

Roadmap.. • Changing Ch i Face F off India I di – Political Factors – Economic E i Factors F t – Demographics and Life Style – Savings and Investment

• Changing Face of Financial Services – – – –

Banking Broking and Distribution Mutual Funds Insurance

[email protected]

India’s VISION for Growth.. • 15 Years (Reforms) • 6G Governments t • 5 Prime Ministers • ONE DIRECTION • 8% GDP Growth Rate………

[email protected]

Our Achievement.. Year

GDP FII Growth Inflow

FDI

Per Capita

Inflation

1990 990

4.9% 9%

USD S 1 Million

S 97 9 USD S 390 USD Million

9%

2007

9.4%

USD 15 Billion

USD 16 USD 797 Billion

3.4%

(8.9% for Q2 2007-8)

[email protected]

GDP and Per Capita Income

[email protected]

•

One of the Fastest Growing Free Market Democracy. y

•

Consumption Expenditure f forming i 78% off GDP

•

Economic Reforms well on Course.

Growing Service Sector 900 Contribution of Services increased from 48 percent to 55 percent

800

U S D B illio n

700

453

600 398

500 400 300 200 100

191

237

103

125

105

105

204

231

135

145

0 1999-00 2002-03 2005-06 Agriculture Industry Services

•

Key Service Sector Drivers – – – – –

Software and ITES Entertainment Education Travel and Tourism Financial Services

[email protected]

2006-07

Infrastructure Development ‰

US$ 494 billion of investment is proposed for the Eleventh Plan Period (2007-12)

Govt Opened Gates for Private Players to operate in Infra Development ‰ Already Telecom, Construction and Power together has attracted FDI of US$6.8 billion till Aug 2007 ‰ Funds raised through Infra Schemes by MF are likely to exceed US$5.7 billion in 2007 against US$0.6 US$0 6 billion in 2006. 2006 ‰

[email protected]

[email protected]

GUJARAT G j t : Th Gujarat The NEXT E Economic i HUB KNOW YOUR STATE WELL

[email protected]

Facts.. •

41 Ports that handle most of the cargo in the country

•

Dahej – India’s only chemical handling port.

•

j : India’s Largest g hydro y project p j Sardar Sarovar Project

•

Jamnagar : The Largest Industrial Estate in World. World’s Largest grassroots refinery.

•

Kandla : Asia’s first and India's largest multiproduct special economic zone.

•

Gujarat accounts for 40% of India's India s pharmaceutical production.

•

Gujarat’s Gems and Jewellary industry processes 80% of diamond in the country.

•

Gujarat is the first state in the country to develop port facilities, estate and roads in conjunction with the private sector. [email protected]

•

State’s State s GDP is growing at 12.4% 12 4%

•

India’s most industrial state. Accounts for 20% of India's manufacturing output

•

Ranks 3rd in terms of number of factories

•

India’s first LNG terminal has been commissioned at Dahej P t and Port d a gas pipeline i li grid id is i under d construction t ti

•

Gujarat is home of Asia’s Leading Business School

•

Sardar Sarovar Project will provide assured irrigation to 1.8million hectares with water for domestic and industrial use in about 8215 villages and 135 townships

•

Single Window Clearance (iNDEXTb) on an average clears investment approvals in 30 days.

[email protected]

• With 5% of India’s population population, Gujarat has 16% of Industrial Production. • Gujarat Tops in Economic Freedom Index • Ahmedabad has the lowest labor cost among all major cities of India • Only State in Country to allow exit option to investors. investors • One of the largest gas production region of the country • With 33 SEZ, Gujarat has one of the highest number of SEZ in India [email protected]

Roadmap.. • Changing Ch i Face F off India I di – Political Factors – Economic Factors

– Demographics and Life Style – Savings and Investment

• Changing Face of Financial Services – – – –

Banking Broking and Distribution Mutual Funds Insurance

[email protected]

Working Age Population

[email protected]

[email protected]

Growing Need of Manpower • Over O 3 million illi scientific i ifi and d technical manpower. • Over 0.6 million S&T post graduates • Over 0.7 million graduate engineers • Over 3500 doctorates in science every year

[email protected]

Estimates.. • S Software ft M Market k t : $60billi $60billion by b 2010 : needs more than 2.2 million people • IT Enabled Service recruiting 400 people everyday. y y • India’s Factories needs 73 million workers by 2015 (50% more than today’s today s strength) • 3200 additional pilots required today. • Telecom and Retail segment will create 2 million jjobs in next two years. y [email protected]

Shifting Pattern on Campus •

Job is not the economic necessity. necessity They are looking for exposure, building network and learning.

•

Degree Fixation loosens up. Shift on vocational courses and skill building. – Presentation Skills – Communication Skills – Negotiation and Leadership Skills

•

Subject : Not as important.

•

Campus : Old Body, New Heart. – Mobiles – Dressing D i Etiquettes Eti tt

[email protected]

Life Style Changes Life Style / Attitude

Early 1990s

2007

Conveyance

Bike

Car

Eating Out

Fortnightly, Chinese, Mughlai

Tri Weekly, Thai, Italian, Lebanese

Aspiration

Job Driven

Life / Dream Driven

Shopping

Discount Stores

Brand

Apartment p

Rented

Own

Health Conscious

No

Yes

Marriage

Later, Mostly Arranged

Romances

Social Responsibility

Less Responsible

Aware

Work Habits

Nine to Five

Carrying work at home on laptop

Loyalty

To Employers

To self

[email protected]

Standard Of Living - Indians

Source : Mckinsey

[email protected]

Roadmap.. • Changing Ch i Face F off India I di – Political Factors – Economic Factors – Demographics and Life Style

– Savings and Investment • Changing Face of Financial Services – – – –

Banking Broking and Distribution Mutual Funds Insurance

[email protected]

Gross Domestic Savings

Source : World Bank Report 2006

[email protected]

Distribution of Household Savings Provident and Pension Funds, Insurance Funds:

10 00% 10.00%

C Currency 8 80% 8.80%

Life Insurance, Postal & State 14.20%

Government -

Bank Deposits

small savings

47.40%

14.70%

Shares and Debentures, 4.90%

[email protected]

Source: RBI Aug 2006

Capital Market.. India is among the major destinations across the globe for inflow of US Dollar

Sensex – The Bombay Stock Exchange index has risen 20 times from 1990s to reach 20,000 mark in November 2007. 11/12/2007 Crossed 20,000 mark k

25000

20000

09 July 2007 Crossed 15,000 mark

15000

07 February 2006 Crossed 10,000 mark 30 December 1999 Crossed 5,000 mark

10000

Emergence of industry and confidence of local investors along with th FII the FIIs h has lled d tto upsurge of the Sensex

5000

0 1Jul97

1Feb98

[email protected]

1Sep98

1Apr99

1Nov99

FIIs have infused large investments into the Indian stock market

1Jun00

1Jan01

11Aug- Mar01 02

111Oct- May- Dec02 03 03

1Jul04

Encouraging industry performance

1Feb05

1Sep05

1Apr06

1Nov06

1Jun07

1Jan08

Increased local investors’ confidence

Roadmap.. • Changing Face of India – – – –

Political Factors Economic Factors Demographics and Life Style Savings g and Investment

• Changing Face of Financial Services – – – –

Banking Broking and Distribution Mutual Funds Insurance

[email protected]

Factors for Financial Service Boom

[email protected]

Indian Financial Sector • Banking sector enters new areas like Wealth Management, Private Banking, Credit Cards, Investment Advisory Services etc • War Game : Acquire and Retain Customers • Financial Products like Mutual Funds, Funds Insurance, Insurance PMS competing with Traditional Banking Products. oducts • Low Non Performing Assets and prudential accounting g standards • 2nd Phase of Reforms – On way to acquire global size. [email protected]

Roadmap.. • Changing Face of India – – – –

Political Factors Economic Factors Demographics and Life Style Savings g and Investment

• Changing Face of Financial Services – Banking – Broking and Distribution – Mutual utua Funds u ds – Insurance

[email protected]

Banking • 84 Commercial Banks – Accounts for 81% of Financial Sector. Over 3000 Co-op p Banks a/c 11%, 133 RRBs having 3% share – Operating with 68,681 Branches – Largest g Network in the World. • Total Size : Rs 36,105 Billion • India will be the third largest banking hub in the world by 2040. 2040 [email protected]

• T Total t l Domestic D ti Credit C dit in i India I di crossing i $400 Billion compared to china’s $2.8 Trillion • Debt to Income Ratio in India is 5% compared to 27% in south east Asia and 50% in developed market. • Retail Banking – A New Buzzword. – No of Millioners crossed 1 Lac Mark – Avg Salary Raise is 13 – 14%

[email protected]

Untapped Potential

Banking Services

India

Thailand Malaysia Taiwan Korea

Consumer Loans

8.0%

12.0%

26.0%

36.0%

58.0%

gg Mortgages

4.0%

9.0%

13.0%

17.0%

37.0%

Credit Cards

0.4%

2.8%

9.8%

82.4%

121.9%

Other Retail Loans

4 0% 4.0%

8 0% 8.0%

16 0% 16.0%

17 0% 17.0%

41 0% 41.0%

[email protected]

Road Beyond 2009 (Banking) • Foreign Banks allowed to set up fully owned subsidiaries. • Foreign banks to be treated on par with Indian banks after 2009. 2009 • Competition to intensify

[email protected]

Roadmap.. • Changing Face of India – – – –

Political Factors Economic Factors Demographics and Life Style Savings g and Investment

• Changing Face of Financial Services – Banking

– Broking and Distribution – Mutual utua Funds u ds – Insurance

[email protected]

[email protected]

Why to Invest in E it Market?? Equity M k t??

Just Imagine.. • How much can you make in 26 years by just investing Rs.10,000 initially in any of financial instruments ?

Let us look at the real example…

[email protected]

If you have subscribed in 100 shares of ________ company with a face value of Rs. 100 in 1980…

•

In 1981 company declared 1:1 bonus = you have 200 shares

•

In 1985 company declared 1:1 bonus = you have 400 shares

•

In 1986 company split the share to Rs. 10 = you have 4,000 shares

•

In 1987 company declared 1:1 bonus = you have 8,000 shares

•

In 1989 company p y declared 1:1 bonus = y you have 16,000 shares

•

In 1992 company declared 1:1 bonus = you have 32,000 shares

•

In 1995 company declared 1:1 bonus = you have 64,000 shares

•

I 1997 company d In declared l d1 1:2 2b bonus = you h have 1,92,000 1 92 000 shares h

•

In 1999 company split the share to Rs. 2 = you have 9,60,000 shares

•

In 2004 company declared 1:2 bonus = you have 28,80,000 shares

•

In 2005 company declared 1:1 bonus = you have 57,60,000 shares

[email protected]

At the end of 2005… • Y You h have 57,60,000 57 60 000 shares h off the th company Any yg guess about the company p y? (Hint : Its an Indian company)

[email protected]

The result of ‘Power of Compounding’

Y Your presentt valuation l ti is i about b t

Rs 300 Cr Rs.300 Cr.+ + (CAGR 60%) & The company is ‘WIPRO’ WIPRO

[email protected]

Other such examples…

CIPLA Investment of Rs. 10,000 , in 1979 will fetch Rs. 95 cr.+

INFOSYS Investment of Rs. 10,000 in 1992 will fetch Rs. 1.5 cr.+

RANBAXY Investment of Rs. 1000 in 1980 will fetch Rs. 1.9 cr.+

[email protected]

Whyy do equities q g give higher g returns ?

Because,, equities q represent p p portion of business (profit) which is growing

[email protected]

What returns to expect from equities in the long g run ?

Equity returns = Earnings growth + dividends

[email protected]

Why this happens………..

‰

When short term is good, market is over optimistic - assets get overvalued January - March 2000

‰

When short term is bad, market is over pessimistic - assets become cheap Presently

[email protected]

Moreover, in the last 20 years, we’ve seen …. ‰Two

wars ‰At least three major financial scandals ‰Assassination of 2 prime ministers ‰At least 3 recessionary periods ‰10 different governments and ‰An unfair share of natural disasters, Yet GDP has grown by 15.6% p.a. and the Sensex by 19% p.a. [email protected]

‰ Equities

are unique assets that investors feel more comfortable buying at higher prices and selling at lower prices

[email protected]

[email protected]

Primary Market •

Domestic Equity Raised Rs 630 Bn in last three years, which is twice the amount raised during proceeding decade (Rs 364 bn).

[email protected]

Primary Market • Ninth Largest IPO Market in the world. world • Global Market Share : 3% • India stands 2nd position with respect to IPO proceeds – registering 166% growth YTD. • Expected IPO Offering 2008 : US $18.65 bn.

[email protected]

Secondary Market NSE ranks 3rd in the world in terms of the number of trades in the equity cash market - Traded volume during g FY06 exceeded $350 bn with average g dailyy volume of $1.4 bn NSE ranks no.1 globally in terms of number of contracts traded in equity stock futures and ranked 3rd for equity index futures

[email protected]

Volatility to remain high Annualised Volatality of BSE SENSEX

2003-04

2005-06

2006-07

2009-10(E)

10.2

9.5

9.3

UK K FTSE 100

0

16.3

Sing gapore STI

5

17

USA DJ U

10

17.6

5 0 Ind ia BSE Se ensex

15

20.1

Japan NKY

16.4

27.3

S S.Korea KOSPI K

20

19

30 25 20 15 10

China C SH HCOMP

in %

25

29

R Russia CRTX

28

30

Annualised d Volatility (in n %)

35

Annualised Volatility of International Indices (200506)

Source: SEBI annual report, Cygnus estimates

Factors influencing 2003-04 • Lower Base • Small Free Float • Political Instability • RBI policy [email protected]

2007-08 & beyond • Integration with World Economy • Economy Growing very fast • GDP growth slumps in Developed World

Roadmap.. • Changing Face of India – – – –

Political Factors Economic Factors Demographics and Life Style Savings g and Investment

• Changing Face of Financial Services – Banking – Broking and Distribution

– Mutual Funds – Insurance

[email protected]

MF – Asset Under Management

[email protected]

Growth Path..

[email protected]

Classification of Funds The Risk Return Trade off Equity Funds

Returns

Debt Funds

Growth Funds A Aggressive, i Value, V l Growth G h

Sectoral Funds

Debt Gilt & Bond Funds Balanced Funds

Liquid fund

Low [email protected]

Medium Risk

High

Why time the market ? Leave it to the Fund Managers Date

BSE Sensex

HDFC Equity

6-Aug-97

4523.07

7.75

10.65

13.45

Franklin India Bluechip 14.54

22-Feb-00

5883.33

29.32

22.30

29.02

30.50

26-Feb-02

3712.74

22.07

22.09

16.16

25-Jul-03

3726.51

31.33

32.34

26 S 03 26-Sep-03

4887 05 4887.05

42 95 42.95

24-Dec-03

5641.92

10-Jun-04

4832.68

Franklin India Prima Fund 11.26

Reliance Growth

Reliance Vision

13.73

13.57

42.12

47.23

29.88

23.86

27.15

24.12

19.23

22.77

28.69

42.49

42.44

36.68

39 87 39.87

32 86 32.86

39 72 39.72

57 71 57.71

58 27 58.27

52 20 52.20

50.22

44.82

38.73

48.98

77.96

76.66

65.38

45.95

43.21

35.91

46.66

69.52

69.54

55.35

HDFC Prudence

HDFC Top 200

I iis the It h time i that h iis IMPORTANT not the h TIMING One Common Theme Bull or Bear Look at Diversified Equity Funds [email protected]

Roadmap.. • Changing Face of India – – – –

Political Factors Economic Factors Demographics and Life Style Savings g and Investment

• Changing Face of Financial Services – Banking – Broking and Distribution – Mutual Funds

– Insurance

[email protected]

[email protected]

[email protected]

Wallet Share.. • Life insurance share in household financial savings improved to 14.6% in 2006-07 from 11.2% in 1999-2000 Financial Assets (Gross)

1999-2000

2006-07

Currency

8.8

8.6

Deposits

36.3

55.7

Share and debenture

7.7

6.3

Claims on Government

12.3

5.2

Life Insurance Funds

11.2

14.6

Postal & State Insurance

0.9

0.4

Provident & Pension Funds

22.8

9.2

Source : RBI

[email protected]

As Economic Driver Financial Savings

Growth of economy results into increase in savings

Capital Formation

Insurance

Higher Income – Greater Savings

Direct Employment

Employment Generation – Financial prosperity

Investment in Govt Govt. Securities, Infrastructure Projects, j , Capital Markets

Indirect Employment

Economic Development p [email protected]

Better infrastructure B i f results into growth of economy

Infrastructure Development 60

Life Insurance.. Financial Assets (Gross)

FY 00

FY 07

1

16

NB Premium (Rs. Cr)

8,299

75,400

NB Policies (No. Cr)

1.69

3.82

Total Premium (Rs. Cr)

26,250

153,000

Penetration as % of GDP

1.2%

4.1%

Insurance Premium per capita (Rs.)

280

1,510

5

9,485

No. of Players

Capital deployed (Rs. Cr)

[email protected] Source: IRDA, Swiss Re

Penetration and Density Life insurance penetration & per capita (2006) ( ) 1 4 .0 %

13.1% 1 2 .0 %

5000

5140 8 3% 8.3%

4000

1 0 .0 %

7.9%

8 .0 %

2829

3000

4.1%

4.0%

2000

1790

1480

3 2% 3.2% 189

0 UK

Japan

US

Kore a

M alay sia

Only a third of the target population of 400 mn is insured [email protected] Source: IRDA, Swiss Re

4 .0 %

1.3%

1000

6 .0 %

73 Brazil

1.7% 2 .0 %

34

33

China

India

0 .0 %

Insura ance pe ne tra ation

Insurance pe r capita a (U SD )

6000

Strong Customer Focus.. Traditional Products

Market Linked Plans

Life Insurance

Life + Health

Group Superannuation

Individual & Group Pensions

Standard Benefits

Cafeteria Approach

[email protected]

“India India is not a poor country but perceived as such, due to inefficient use of its resources”

Observation of World Bank President

“One of the fastest growing economies in the world world, India is an excellent country for any company to be in in.””

Kensaku Konishi President and Chief Executive Officer Canon India

“India is the fastest growing and highest revenue generating market of the 13 economies revenue-generating in the Asia-Pacific region.” Randall Stephenson CEO AT&T

Feel Proud as an INDIAN

The Right Time g Place The Right

Thank YOU.