PM's Panel is bullish on Indian economy but with caution
The Prime Minister’s Economic Advisory Council, headed by former Reserve Bank governor C Rangarajan has observed and also recommended following measures.
- Riding an investment boom, the Indian economy will grow 9% in the current fiscal on top of last year’s 9.4% growth and price rise will be contained at 4%.
- The economy’s managers will have to make some tough choices like curbing the inflow of external debt, allowing the rupee to appreciate further and removing “administrative and procedural impediments” to acquisitions abroad. It sees the external environment as still being benign and expects sustained investment to keep growth booming. The need to curb capital inflows comes from the mismatch between the current account deficit, which is seen at $17.4 billion, and surpluses on the capital account (nearly $58 billion). The excess inflow of foreign capital can make the rupee far too strong; managing this would mean jacking up money supply which could harden inflation and eventually interest rates. A sensible policy response is to allow all these three things to happen in moderate doses and to discourage external borrowing for rupee expenditure.
- The council is not in favour of disrupting foreign equity investments. “Equity investment by its very nature is high risk and policy continuity is an essential element to initiate and maintain such flows. They cannot be turned on and off at will. However, on the debt side, there are some areas that can do with some scrutiny,” it said.
- The panel suggested three instruments to face the strong capital flow: allowing the rupee to appreciate, sterilising capital inflows in excess of what can be absorbed into reserves without pushing money supply growth above 17.5%; and instituting a policy of encouraging capital outflow and discouraging external borrowing for rupee expenditure.
- The report pegged farm growth at 2.5%; industrial output at 10.6%; and services at 10.4%. Mr Rangarajan cautioned that unless the farm and power sectors grow, the current rate of economic growth cannot be sustained. “Food security is an extremely important issue. Agriculture should be priority, as 60% people are dependent on it.”
- The Council expects that there will be no unemployment by 2010, if not earlier. Whether people are satisfied with their remuneration or not is a different matter, panel's chairman C Rangarajan qualified promptly. "The unadjusted employment elasticity for the latest period (1999-2000 to 2004-05) is 0.48. Even after adjusting sectoral elasticities to lower figures, it is seen that with a GDP growth rate of 8%, by 2010 the workforce will become equal to the labour force. A stronger growth rate, which is quite possible, will take economy to this point even in a shorter period. Economic growth has been a major driving force in achieving higher level of employment," EAC's Economic Outlook 2007-08 said.
Related Articles:-
- PM's panel seeks inflow curbs - The Economic Times - 17-07-2007
- Jobs for everyone by 2010: Economic panel - The Times of India - 18-07-2007
- GDP growth to be 9 pc; inflation 4 pc: PM's economic panel - The Hindu - 16-07-2007
- India can achieve 10% growth in 2008-09 - The Economic Times - 17-07-2007
- PM panel pegs GDP growth at 9%, inflation at 4% - 16-07-2007 - Business Standard - 18-07-2007
- PM's panel sees economy growing at 9% - Moneycontrol India - 16-07-2007
- Official optimism - Business Standard - 19-07-2007
- EAC projects 9 p.c. GDP growth - The Hindu - 17-07-2007
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Five companies that would be worth $1 billion each
Published in Businessworld
YATISH RAJAWAT & MANOJ VOHRA
Going public is the inflection point for most entrepreneurs and companies. While there are notable exceptions, the public listing of an enterprise is what allows it to get the capital, goodwill, managerial talent and prudential oversight necessary to become great. As importantly, public listings are what allow society at large to share in the success of the company. This fulfils its social obligation of fostering greater public participation in the economy, and ensures that commerce is encompassing and not extractive.
After wading through data on hundreds of private firms, here are five that we would love to see go public. Listing these firms, we believe, would give them a market capitalisation of $1 billion (Rs 4,100 crore) each, plus the leverage to achieve their vertiginous growth targets.
Sankalpan Infrastructure
Within a decade of its inception, Sankalpan has emerged as one of India's fastest growing integrated realty and infrastructure service providers. The company provides end-to-end services to real estate companies — ranging from acquiring land for clients, to dealing with arcane regulations, creating project plans, architecting, construction, interior design, and finally delivering the finished building to the customer.
So far, Mumbai-based Sankalpan has executed more than 600 projects worth $200 million (Rs 820 crore). This year, it has already booked projects worth Rs 90 crore — remarkable growth for a company whose revenues in 2004-05 were Rs 4.5 crore.
If listed, Sankalpan could command a market capitalisation of about Rs 1,000 crore. Given its long-term plans, this figure could quadruple and the company scrip could become a real estate bell weather. Founder Ninad Randive is building up anticipation for the move. “We may go public sometime in 2009-10,” he says.
Bharat Hotels
When founder Lalit Suri passed away last year, the management of this hotel group fell to his wife, Jyotsna. Given her untested abilities, a public listing and the introduction of professional management seems much needed. The Dubai Investment Group recently paid $40 million (Rs 164 crore) for a 5 per cent stake in Bharat Hotels. But the company will need more capital, as it plans to add 3,800 rooms at a cost of Rs 1,000 crore. Bharat has also announced its first international foray — the construction of The Grand Fort Dubai — in partnership with the Dubai-based Nakheel Group. Based on a comparison with its listed peers, we believe Bharat Hotels’ current market capitalisation would be about Rs 2,000 crore, a figure that could well double as the company’s plans fall into place.
Vijai Electricals
Vijai was founded 30 years ago by D.J. Ramesh and is one of India’s largest power equipment companies. Given India’s massive energy needs, Vijai is investing $70 million (Rs 287 crore) in expanding its product range.
To fund this expansion, the company has raised $25 million (Rs 102.5 crore) from UK-based private equity firm 3i Capital. But the capital-intensive nature of Vijai's core business and the high multiples commanded by power companies make listing an attractive option.
Given the valuations enjoyed by peers such as Bharat Bijlee, EMCO and Indo Tec., Vijai could command a market capitalisation of Rs 2,500 to Rs 3,000 crore if it listed today. Continuing growth in the power sector means that over the next few years, Vijai’s domestic market growth will probably be even faster than it has been in the past, and its valuation could touch Rs 5,000 crore by 2010.
Mahanagar Gas
Mahanagar Gas is the largest gas distribution company in India, with more than 300,000 households and 850 commercial units as its clients. It is investing Rs 1,200 crore over the next five years to expand its pipeline and needs a massive cash infusion.
Sister company Gujarat Gas has been favourably valued by investors and we believe Mahanagar Gas would be shown the same favour. With revenues of Rs 513.5 crore, the company could command a market capitalisation of Rs 1,500 crore. Since Mahanagar Gas is also expanding into neighbouring cities, such as Pune, its customer base and revenues are expected to double. This, along with the spiralling demand for delivery of piped gas in India, will ensure strong growth prospects for Mahanagar Gas, whose market capitalisation could touch Rs 4,000 crore by 2012.
VVF
Being named after two billionaires could help Rustom Godrej Pallonji Joshi become one himself. VVF, the oleochemicals and personal care products company his father started in 1939, is one of the largest FMCG contract manufacturers in India. VVF has plants in Dubai, Canada and the US. VVF also owns personal care brands, such as Doy, Doy Care Aloe Vera, Shiff and Jo, and will spend Rs 200 crore to build up its own FMCG business. If all goes as planned, the company’s revenues could cross Rs 1,000 crore by 2008.
Listing would be a good way for VVF to fund its growth plans. If the company gets itself listed today, its market capitalisation would be in the region of Rs 2,000 crore to Rs 2,700 crore, a figure that could double over the next five years.
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