Qualitative Analysis Of Demand Points A Healthy Growth Rate For The 8 Sectors In India

A Thought paper that tries to identify safer growth opportunities for global investors in Turbulent Market. By-Amit Bhushan Date 16th Mat 2009.

Qualitative Analysis of Demand Dynamics Points Healthy Growth Rate for below 8 Sectors in India Financial upheaval in Global Markets has upset many countries & industries. Demand has been particularly low for Capital Goods, Household Durables, Reality, Automobiles, and Toys etc. Geogarphically, the US, most of Western Europe, Japan, Korea etc, are in recession with serious implications in demand from Middle East (due to fall in Oil prices). Much of developing world including BRICS witnessing abatement in demand as consumers want stability of economy and financial reassurance. Food products, Pharma & consumer goods (nondurables) are among the few sectors that have not been much affected, although even in these industries the profit margins are down. Investors, the world over are busy making assessments about the shape of emerging demandsupply dynamics and how & which corporate offers or has opportunities to capitalize on emerging opportunities. Quite a few are on lookout to identify “Safe” markets and sectors to invest into. Luckily, India is one country which has only been moderately affected (or relatively much less affected) by the Global turmoil. This is because of its limited integration with the Global Markets with Exports being less than 1112% of GDP, Relatively Restricted Entry for Foreign Investors (Read low dependency on FDI), and Limited integration with Global Financial Markets (other than some portfolio investments which have

been liberalized). Since the contribution of Exports & International investments towards the economic growth was much less than in many other Asian countries, the effect on these has not caused much damage. Though, it may be noted the Export sector is surely looking down with Job losses in that field, however much of the economy has largely escaped the burnt, more so because Import dependent Export of Diamonds, Jewelry, Petrochemicals etc. if removed, effective exports (based largely on local supplies) shall come down to just about 7-8% of GDP. However on the Services Exports front, IT exports segment which was one amongst the major drivers of Services exports shall probably escape with only a little moderation in its rate of growth, again because India is amongst the most competitive supply source & has a low market penetration of only about 3% of the global outsource services market (in spite of all the hype surrounding it). On the capital markets front, no doubt with Portfolio Investors exiting developing markets in hordes has brought down key Indian indices like NIFTY & SENSEX to about half the level from their peaks in January 2008. This was more due to enhanced perception of Risk associated with the developing countries, increased currency volatility, redemptions pressure from portfolio investors back home and not so clear policy directions from regulatory institutions like

By: Amit Bhushan Contact: [email protected] Author works with a major International Bank in India. Views expressed are personal

A Thought paper that tries to identify safer growth opportunities for global investors in Turbulent Market. By-Amit Bhushan Date 16th Mat 2009. RBI, SEBI etc. especially towards the interests of portfolio investors (tinkering with disclosure standards, restriction on purposes for which inward flows were permissible) around that period. Higher than expected drop in GDP growth rate from 9% to 55.5%, no doubt takes some sheen off India’s acclaim of being a safe place to invest. A fall of nearly 4 percentage points in rate of growth for a large and highly diverse market like India needs to be understood in a better manner. The same is attributed to being a result a mix of various factors such as Monetary tightening by authorities which continued till July-August 08 (leading to higher domestic interest for credit for Reality & Automobile segment (and resultant fall in demand); falling demand in exports of Garment, Gems & Jewelry with some significant Job losses and therefore loss of confidence among consumers. This was also accompanied by huge shortage of liquidity in credit markets (especially in foreign currency credit markets led by foreign banks & institutions which was a result of global liquidity problem and a general loss of confidence in credit selection or credit risk measurement), which affected project investments by corporates in India. Both domestic & foreign investors (in India) started reassessing demand in the emerging scenario, adopting a wait and watch approach leading to a slowdown in Capital Goods segment. This was coupled with slowdown in other highly visible sectors such as IT Exports, Tourism (both domestic and inbound) and to some extent in Durables

segment (as a loss of confidence among consumers). All this coupled with an already depressed capital market & a lack of clear political direction due to pending General Elections led to businesses preferring postponement of largescale investments in an economy afflicted with corruption and nepotism. While the government, though in election mode, did announce stimulus packages to lift market sentiment however, an overarching Indian Bureaucracy ensures that the same shall take a few years to reach the ground i.e. if they manage to trickle at all. Presently, apart from Reality, Gems & Jewelry, Garments and some Auto component manufacturers & exporters, most well managed companies in other sectors are expected to close the year with limited growth or very moderate decrease in turnover with modest decline is profits unless there are credit defaults pertaining to debtors or Exchange Fluctuation related losses (partly on account of carry trade & similar speculative deals). With present Liquidity in markets and fall in interest rates, consumers are coming back to action albeit in a more calibrated manner and the same measured behavior is reflected in Bank’s lending which has relatively more stringent credit scrutiny measures then in past. However, sales of automobile & durables have started looking up. The same is the case for “affordable homes”. Corporate investments still await further stabilization in political situation & clarity of policies. Businesses want a government that shall be able to attract foreign investments,

By: Amit Bhushan Contact: [email protected] Author works with a major International Bank in India. Views expressed are personal

A Thought paper that tries to identify safer growth opportunities for global investors in Turbulent Market. By-Amit Bhushan Date 16th Mat 2009. manage Balance of Payments and a clear Fiscal and monetary policy direction as well as one which ensures a workable security environment. This shall ensure a stable outlook for banks (both domestic & foreign) to loosen the purse strings and start lending towards bankable projects (of which quite a few with some groundwork done happen to be in India) in the prevailing environments. The prevailing low market capitalization might offer opportunities for Mergers & Acquisition to corporate abroad or for PE in buyout business (for those who can still afford to do it in the present situation). With some large projects like a large refinery, a large Gas field & a mini car project going live this year contributing some 2.5-3% of the GDP and natural growth of economy in current environment pegged at another 3-3.5% (due to modest growth in Agriculture & services with stagnation in Industrial growth expected for the year), the government estimates of growth around 6% may be realistic in the prevailing scenario (although a bad monsoons could be one spoilsports). However, sustainability of this growth rate requires continued investments in new projects for which it is critical that Financial Institutions both domestic & foreign continue to pour credit in the capital starved economy. Therefore, stability of macroeconomic environment, security & clear policy directions from the country’s government (and polity) are critical factors for the success of the economy. While quite a few Global corporates & even SMEs are watching the Indian scene unfolding with lots of interest

especially after its breaking the shackles of nuclear apartheid, however they need reassurance that their investments do not hit roadblocks of policy hurdles & corruption, an agreeable climate to ensure reach out to customers & repatriation of profits. India’s potential as a low cost production base as an alternative to China or other small Asian countries (& therefore an opportunity to derisk sourcing) are other added attractions. Though India’s higher cost of infrastructure (or nonavailability) & energy prices, tough labour laws, chaotic politicoeconomic environment, high interest rates, and complex tax environment have been impediments to its emergence as a dependable supply source of choice among investors. Its low wage English speaking educated workforce with high level of technical skills & innovativeness has done the trick for services exports though. While exports demand continues to remain depressed with exports showing degrowth of up to 30% (resultant effective impact has been a negative 2% on overall GDP numbers), the domestic demand is expected to act as a driver of growth. The consumption led domestic demand is expect to remain somewhat weaker due to stricter credit selection policies of banks, however innovation in market by producers reaching out to customers at lower price points and hence expansion of markets can ensure that growth momentum continues (just in same way as Tata’s Nano is expected to expand overall automobile market in India). The telecom sector, healthcare

By: Amit Bhushan Contact: [email protected] Author works with a major International Bank in India. Views expressed are personal

A Thought paper that tries to identify safer growth opportunities for global investors in Turbulent Market. By-Amit Bhushan Date 16th Mat 2009. sector are already experiencing a sort of boom even in the present situation as a result of their capability to open mass market among India’s poor and Reality, Domestic travel & tourism sectors can be expected to seriously initiate exploring the opportunity soon. Now, the investment led demand which is more a function of opportunity, security, macroeconomic stability, labour laws, taxation, government policies and infrastructure among other things and therefore a function of reforms in these segments. Therefore quality of governance shall continue to be an important function affecting the investment led demand. Investors shall continue to watch India for evolving opportunities be it for Greenfield projects or M&A or other ways of market entry. Though India offers consumer led demand & hence growth opportunity in various sectors, there is a lot of pent up demand in certain select sectors. This offers opportunity that can be harnessed with targeted offering of suitably designed and innovatively packages products for achieving a high growth & decent return. The same are discussed below. 1) Energy: India’s energy demands have proved to be tremendously resilient with almost no signs of ebbing of growth in demand even with high price volatility in the energy segment. The demand is met through Coal, Crude Oil & Gas and Electricity from Renewal & Non-Renewable Energy sources. In all the three segments huge opportunity exists

for investors of all classes, whether they are large or small. Like in Crude Oil & Gas, India has opened exploration, storage as well as refining segment for foreign players. Its gas distribution and storage infrastructure as well as handling capacity at ports also requires investments as a result of growing/pent up demand. In coal, it requires investments in harnessing coal bed methane, Coal gasification as well coal washeries. Its own coal mines are not producing enough coal of good varieties due to lack of investment & technology as well as corruption and political interference in the sector. Its Electricity generation as well as distribution infrastructure is also throwing tremendous opportunities (though marked with high risks due to political considerations and corruption). Now with the end of Nuclear Apartheid, opportunity for generation of Nuclear Energy shall only get added to overall demand scenario. India also offers huge potential for Renewable energy with host of opportunity in Hydropower segment in large as well as mini hydel plant segments. The potential for Wind Power as well as solar power segment is also huge due to India’s climatic conditions. However, the sector is afflicted with a high degree of political interference, corruption, bureaucratic inertia & complex socio-political-security factors/concerns. Reforms are needed at the national as well as provincial government levels to streamline policy while managing expectations of a diverse set of customers with potentially conflicting expectations. Unlike a telecom/communications sector

By: Amit Bhushan Contact: [email protected] Author works with a major International Bank in India. Views expressed are personal

A Thought paper that tries to identify safer growth opportunities for global investors in Turbulent Market. By-Amit Bhushan Date 16th Mat 2009. where Raw material is spectrum, Bandwidth or air waves with negligible costs, this sector has rising cost of raw materials and added to it a grossly inefficient distribution infrastructure. A well thought out coherent supply chain that satisfy all concerns and is cost effective to meet demand of a large majority has eluded all players so far. Various plans to open up the sectors have only been met with limited success. Lots of foreign players/project consultancy companies have already established presence in India with Investors seriously weighing upcoming opportunities. This sector shall remain one of the most sought after segments among Global investors, equipment suppliers as well as operating companies, however a lot of work needs to be done to unshackle the same. 2) Healthcare/Pharma: Finally, India’s medical professionals along with their technology counterparts have started to listen to its millions of teaming poor populace. Lately, a lot of experimentation to address the medical needs of India’s poor population is being reported. A good thing is that most of these experimentations are initiatives of its private sector corporates and individuals rather than a government driven initiative. And look at the result. India has already emerged as one of the cheapest healthcare destinations in the world and among the cheapest source of Drugs (generic). As a result, its English speaking professionals are among the most sought after people even in this recession. The developed countries have not been able to resist

temptation to ‘import’ doctors & nurses from India or even tried using a cheaper option of sending patients to India for cost effective treatment. Such efforts are likely to expand market manifold and allow India to emerge as the new healthcare destination in coming 510 years. This is so as Healthcare industry is still needs to expand further and also look at avenues that bring down cost further. While technological and application innovations shall continued to deliver their stuff; the distribution aspect still needs to be fixed for services to reach its poor. The capacity to absorb foreign patients along with its own poor population also needs to be developed. The players need to understand this growth driver with potentially insatiable demand and therefore work towards developing systems that help reaching poorer populations with capacity to handle “volumes” in a cost effective manner rather than focusing of “upper class or foreign customers” alone. Also, epidemics such as SARS, Swine Flu, Mad Cow etc. have raised awareness among its populace of diseases among cattles, poultry etc. These shall raise demand in veterinary services and medicine exponentially. Experiments like telemedicine, robotic surgery (through remote) and other low but effective treatment methodologies are making headlines and raising awareness levels and making the services available at prices which are affordable to customers. With West also joining in to control costs, it is expected that industry in India shall only emerge much stronger and grow manifold.

By: Amit Bhushan Contact: [email protected] Author works with a major International Bank in India. Views expressed are personal

A Thought paper that tries to identify safer growth opportunities for global investors in Turbulent Market. By-Amit Bhushan Date 16th Mat 2009. 3) Biotechnology: Biotechnology industry serves as a research arm to Agritech, and Pharma industry which increases potential for strategic alliances. Tremendous potential exists in agri-business in Indian economy for transgenic seeds, bio-fertilizers, recombinant vaccines and drugs etc. Global trends show that all large pharmaceutical players are putting their money in healthcare for long term benefits. It is expected that nearly half the drugs in the next decade would be biotech products. India offers excellent opportunity to start business with low capital bases, highly qualified scientific & English speaking manpower, excellent bio-diversity, suitable patent laws and strong base of indigenous capabilities has been created. India’s experience with genetically modified Cotton has generally been good which may allow regulators with some other crops promising to improve falling farm yields. India has generally been favourable to bio-fertilizers & recombinant vaccines. With its past seeped in Ayurveda and Unani medicine systems, it offers a host of ideas and opportunity to researchers for development of drugs and food products to solve today’s problems. India has potential to become a cost effective research destination with huge market potential for players in this sector. 4) “Affordable Housing”: While many shall argue that affordable housing is one sector that shall always have demand in all the countries most of the times (even in recession). After all, ain’t this good way to generate cash by moving in “affordable home” by

selling a costly property? So why waste time discussing ages old formula. Also, don’t know anyone who runs a business to develop homes that are unaffordable. If it were to succeed as a good investor value proposition somebody shall have already lapped it by now since housing is an age old industry.. In spite of all these thoughts, I have still decided to discuss the topic as this has a special case in India. First, India has requirement for almost 20 – 45 million homes to house its poor. If the size of the opportunity has not impressed you, there’s much more. The changing Indian political system is definitely turning to focus on inward with key issues being of making hygienic living conditions available to common man at affordable price (Electricity, Roads & Water supply have emerged as the mantra for political success). The “affordable housing” segment has or can play a key role as it not only makes the hygienic living standards, an “Indian Dream”, into reality, but it also helps mobilize peoples’ savings and future income potential to meet their present aspirations or ‘pent up demand’ in the market along with significant job creation in market. There is an increasing recognition of this factor among the political and ruling classes, however not much action is seen among businesses to work towards unshackling this market. Fulfilling requirement of “affordable homes” shall primarily require large scale “Land Reforms”. Land dealing in India, like most of Asia, is amongst the most complex and corruption prone segment with lots of emotions and sensibilities of people attached to it (for whom it is their

By: Amit Bhushan Contact: [email protected] Author works with a major International Bank in India. Views expressed are personal

A Thought paper that tries to identify safer growth opportunities for global investors in Turbulent Market. By-Amit Bhushan Date 16th Mat 2009. only significant asset) and therefore a playing field for all sort of political players. Complex laws for ownership and transfer of assets coupled with non-availability of clearly authenticated Land records and a legal system that moves at snails pace (it may take up to 25 years to settle legal disputes), are all formidable deterrents for all but the most diehard investors. If these were not enough, India’s bureaucracy in the form of locality development authority, municipal government & state and central government intervention in forms of various approval requirements make this sector an absolute nightmare. How does the Reality player then survive? Isn’t that some of most prosperous people in India are Reality tycoons. The existing Reality players have converted the Red Tape of the governance into an opportunity. They have used the opportunity of non-availability or lack of adequate supply of land for development to inflate prices of Land. Their model is to essentially buy and hold land (whatever little is available), inflate the prices artificially through hideous mechanism (by exacerbating this shortage or combined actions in groups therefore they are often dubbed as ‘land mafia’) and then push the property at much higher prices. The economy which grew at 6-9% for past 15 years provided for the success of this gambit. The incoming flow of Foreign investors, rising incomes of the middle classes coupled with an ever larger number of Non-Residents willing to own ‘a piece of resurgent India’ provided for chunks of ‘captive’ market. However, this model is being challenged in the falling

market where Non-residents have become much more circumspect with Job losses in their country of residence and falling values of their investments in India. The MNCs are busy redrawing their expansion plans and rising salaries of middle class in India isn’t likely to grow at the same pace as in past at least for the near future. While this has lead to moderation in property prices, however the players are yet to develop a new model for growth. “Affordable Housing” which looks to optimize unit cost development and hence price of a housing property with innovation in design, construction techniques and materials with developers focusing to reduce time to bring a property to market (instead of increasing the same and using time to inflate prices) and harnessing economies of scale to make their profits rather than hideously inflating land/property prices. This also raises question that would developers not trying to bring construction cost down to enhance their own profits. The answer is a clear “no” because the focus of the market was on NRI and Upper Middle segment customers which are less focused on costs but desires high quality finish and hassle free transaction. Much of the developers in urban areas have been focused on this segment where demand has ebbed & thus prices are moderating, however the developers are holding out in hope that demand shall revive which seems unlikely to happen any time soon. While the NRI shall wait for a clearer picture to emerge in both the country of residence as well as in India, the Middle classes shall like a revival of the High Income growth cycle that was witnessed in

By: Amit Bhushan Contact: [email protected] Author works with a major International Bank in India. Views expressed are personal

A Thought paper that tries to identify safer growth opportunities for global investors in Turbulent Market. By-Amit Bhushan Date 16th Mat 2009. the past 10 years. Both these factors have a low probability as Global Financial markets with its focus of reducing cost including pay packets of employees shall remain in their current state for sometime. So, it may be wise for investors to focus in areas such as “affordable homes” which offers plethora of opportunities provided a suitable model is worked upon. An early entry and development of brand value in this segment has potential to create long term wealth in a market with potentially insatiable demand, however the path is sprinkled with all sorts of challenges. 5) Training & Education: This is a classic case of a sector which has been a mess due to over regulation & resultant undersupply. This has also seen some innovative corporate action with reasonable degree of success. To begin the story here, I would like to point out that the Indian state makes it incumbent upon its government to offer basic education to all its children below fourteen years of age. Responsibility of education is shared jointly between the state & central government. Since the government has very limited capability and resources, there exists a robust private sector whose presence has largely been welcome to the richer sections of society. The poorer classes have not been able to afford the services of these private schools and therefore scoff at the sector. The government sector suffers from the apathy, neglect, corruption & unprofessional conduct of the large government bureaucracy and is in state of morass. Government has regulations pertaining constitution

of the private sector, regarding syllabi of what should be taught, regulates infrastructure requirements, has rights to inspect teaching, advises the kind of pay to be given to teaching staff and also conducts examination of students at certain level (X & XII). It’s a classic case where one failing party decides to play regulator and fail all others involved in the process. Naturally, the private sector remains harassed with the overarching government intervention. The same was the state of higher education as well till a few years ago, until the need for large number of trained people by a single industry brought about a mindset change in the segment. Basically, it was India’s famed Information Technology industry which needed a vast army of trained code writers as well people who can run and work through the solutions offered by the industry. This required a large army of people which India’s state run higher education system was in no way equipped to provide. It didn’t have the resources or the willingness to invest in these resources either. It was then that some of the entrepreneurs rose up to the challenge. This led to start of “Vocational Training” institute in computers which facilitated people into jobs that they otherwise would not have been capable to deliver. The models were successful in avoiding the ‘Red Tape’ of Indian bureaucracy. The ruling classes sensing the mood of the people decided not to mess up with the model. Subsequently, this model started offering more complex variety of education and also started receiving accolades from the industry for their training. The

By: Amit Bhushan Contact: [email protected] Author works with a major International Bank in India. Views expressed are personal

A Thought paper that tries to identify safer growth opportunities for global investors in Turbulent Market. By-Amit Bhushan Date 16th Mat 2009. government sensing the need to wake up started to liberalize its own education system via All India council of Technical Education route which started giving recognition to private institutes for various technical courses and later also decided on allowing private universities. While standards for ownership and constitution of these players are still tightly regulated, efforts are on to allow foreign investments in this segment. Also, lower level education system still cries for reforms. Given the size of the market and ability to become a low cost destination for education offers significant opportunity for investors. 6) Railways: The railway system in India works as an extended arm of the government barring some government owned undertaking. This is so because the subsequent governments have consistent in their view of railways as a facilitator of national integration rather as pure transportation services for people. This makes any significant effort to reform the Indian Railways having a parliamentary sanction with all the attached consequences. Luckily, there have been some significant efforts to cut cost turn around the carrier as a result of which it is now in a position to generate a small cash surplus. There has also been some effort to privatize load carrying segment and allow private sector to operate on some routes. This has been done with a view to win back freight from the costlier road transportation segment to which railways have been loosing traffic on accounts of its own inefficiency. This is important to Railways as it uses revenue from

freight segment to subsidize ticket cost for the poor class which can only pay the subsidized fare for travel. Quite a few players smell opportunity in the freight segment however are skeptical of the continuation of this policy as well as the size of the opportunity. The governments needs to clarify about the opportunity and possibly make reforms more transparent by privatizing the Railway warehouse, loading & unloading segment fully to private sector. This shall make available vital revenues to invest in Railroads, bridges and culverts that are needed to handle enhanced traffic flow. Apart from coporate wagon carriage segment, the Railways also plan to make use of its land holding to generate revenues. The ability of the sector to deliver value to consumer however remains unquestioned however need to translate it into a real investment opportunity needs government support. However players are watching because the revenue proposition to transport India’s growing need of commodities and manufactured goods remains strong, acquiring this infrastructure gives a lot of competitive advantage for future, relative less competition & hence good margins. The railways have been a cheap & competitive source for movement of goods for ages now, so the player are evaluating upcoming opportunity with interest. The risk factors are that nobody is talking for corporatization of Railways yet, so having to continuously deal with a government bureaucracy might affect profits on account of corruption, lethargy etc.

By: Amit Bhushan Contact: [email protected] Author works with a major International Bank in India. Views expressed are personal

A Thought paper that tries to identify safer growth opportunities for global investors in Turbulent Market. By-Amit Bhushan Date 16th Mat 2009. 7) Communications: The Mobile Telephony, Internet & Maas communications media through Television & Radio is booming as a result of reforms in the segment. The low price penetration to reach all classes strategy adopted as a result of policy measures of the government has brought about a tremendous change and created huge demand in the segment. The companies is this sector have been able to service customers as some of the lowest price point in the world thus transforming India’s huge population of poor people into prospective customers and are reaping the benefit of the same in form of a boom even when the global markets are not in the best of shape. Government’s encouragement to E-Governance and making information disclosure of net by governments is getting encouraging public response and as a result an ever increasing demand. The sectors are creating tremendous opportunity for associated equipment suppliers and service providers as well. Altogether, communications is one showcase sector where successful reforms have transformed a moribund sector into a flourishing business opportunity savored by both domestic as well as foreign investors. 8) Food Processing: India has diverse agro-climatic conditions with the largest arable land area in the world to produce a wide rage of food stuff. It is among the top three produces of wheat, rice, maize, lentils, barley, jute, coconut, cotton, tea, coffee, sugarcane, tobacco, spices, cashew nuts, edible oils seeds, fruits & vegetables among other things. It

also has the largest livestock population in the world and is among the largest producers of honey, milk, poultry and meat & fisheries products. Presently, a small percentage of farm produces processed into value added products. The efficiency of supply chain & distribution with multiple layers of traders, poor storage & packaging facilities are also a drain on the economy & consumers. India also has locational advantage to export to Middle East & Central Asia. Rapid urbanization, increased literacy, changing life-style, more women in work force and rising per capita income have all caused rapid growth and changes in the demand pattern, leading to several new opportunities in food and beverages sector. Already, Food Processing Industry is expected to grow at the rate of 10-15%. An average Indian spends about 50% of household expenditure on food items. However this sector again is politically sensitive with government time and again intervening in with policies like Minimum support price for cereals & sugar, minimum export price, quantitative restrictions of exports & imports, tinkering with input prices of goods such as fertilizers & distribution with laws and restrictions on movement of cereals etc. Though quite a few players are already operating in the processed food space, there is scope for many more. However, the players shall have to take into account the Indian taste buds, price points at which a large market of economic order becomes available and distribution efficiency to reach the market. Opportunity can also be explored in supplying technology, equipment etc. to

By: Amit Bhushan Contact: [email protected] Author works with a major International Bank in India. Views expressed are personal

A Thought paper that tries to identify safer growth opportunities for global investors in Turbulent Market. By-Amit Bhushan Date 16th Mat 2009. existing domestic players successfully operating in the market to enhance their efficiency in production & distribution and hence optimize their costs further. While the sector has been open for investment, global players have shown only limited interest in the highly price sensitive market. The investors need to be cautiously assessing weakness in the existing supply chain that can profitably address or saliency of the new products in the Indian market. Alternatively, they can also evaluate India as a cost effective sourcing destination for their global customers. The dining out and ready –to –eat segments has been growing at double digit rates along with health foods like Packaged Juices and fun foods albeit over small bases. While the same may be good news for investors, however risks posed by high degree of price sensitivity of the market offers little scope for experimentation. Therefore investors have to cautiously assess their competitive strength in producing value add to the food processing supply chain in a profitable manner.

By: Amit Bhushan Contact: [email protected] Author works with a major International Bank in India. Views expressed are personal