Vol 8. Issue 2. 1 - 31 MAY 2021 | For Private Circulation Only pg 4. From MAKE-IN-INDIA to MAKE-FOR-THE-WORLD pg 60, 62, 78, 90. Interviews: Mr Krishan Sachdev, Mr Nipun Singhal, Mr Saurabh Gupta, Mr Maulesh Chhaya pg 95. Indian Economy: Trend Indicators pg 97. PhillipCapital Coverage Universe Ground View - Previous Issues GROUND VIEW Vol 8. Issue 2. 1 - 31 MAY 2021 MANAGING DIRECTOR & CEO IT SERVICES Vineet Bhatnagar Vibhor Singhal Karan Uppal EDITORIAL BOARD Manish Agarwalla INFRASTRUCTURE Kinshuk Bharti Tiwari Vibhor Singhal Deepika Bhandari DESIGN & ILLUSTRATION Chaitanya Modak LOGISTICS, www.inhousedesign.co.in TRANSPORTATION Vikram Suryavanshi EDITOR Roshan Sony MEDIA, CONSUMER DISCRETIONARY HEAD- INSTITUTIONAL Ankit Kedia st st EQUITIES Rahul Jain 1 Mar 2021 Vol 8. Issue 1 1 Nov 2020 Vol 7. Issue 4 Kinshuk Bharti Tiwari METALS RESEARCH Vikash Singh AUTOMOBILES Saksham Kaushal MIDCAPS Amar Kant Gaur Deepak Agarwal Vineet Shanker AGRI INPUTS Keshav Bharadia Deepak Chitroda REAL-ESTATE BANKING, NBFCs Vaibhav Agarwal Manish Agarwalla Sujal Kumar STRATEGY Pradeep Agrawal Anjali Verma Manoj Rawat CONSUMER Vishal Gutka TECHNICALS Binay Shukla Subodh Gupta CEMENT PRODUCTION MANAGER Vaibhav Agarwal Ganesh Deorukhkar 1st Sep 2020 Vol 7. Issue 3 1st Jul 2020 Vol 7. Issue 2 ECONOMICS EQUITY SALES & EVENTS Anjali Verma Rosie Ferns Navneeth Vijayan SALES & DISTRIBUTION ENGINEERING, Archan Vyas CAPITAL GOODS Ashka Gulati Jonas Bhutta Jignesh Kanani Sandesh Shetty Sneha Baxi Amarinder Sabharwal HEALTHCARE, SPECIALTY CHEMICALS CORPORATE Surya Patra COMMUNICATIONS Hrishikesh Patole Zarine Damania Rishita Raja Mrunal Pawar FOR EDITORIAL QUERIES PhillipCapital (India) Private Limited. No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400 013 [email protected] 1st Feb 2020 Vol 7. Issue 1 1st Oct 2019 Vol 6. Issue 6 2 GROUND VIEW 1 - 31 MAY 2021 1 - 31 MAY 2021 GROUND VIEW 3 Letter from the MD CONTENTS I want to express my sincere gratitude to all the frontline COVID-19 warriors who continue to manage and fight the crisis, especially in this second wave. I am also proud to see how our country has successfully rolled out its vaccination strategy and hope that most of our people are vaccinated by the end of June, bringing an end to this dreaded second wave. Although the vaccination drive is in full swing, the threat is very real, so we need to take ample care of ourselves and our fellow human beings. There is no doubt that fighting and overcoming the pandemic is going to take collective effort. 4. COVER STORY The pandemic has caused an economic fallout across sectors. From MAKE-IN-INDIA to However, the consumer electronics industry has shown its resilience MAKE-FOR-THE-WORLD and has performed better than anticipated. As people were working By Deepak Agarwal, Vineet Shanker & from home, demand for products that offer convenience and provide a better life (such as washing machines, dryers, air conditioners, TVs, Keshav Bharadia and other home appliances) increased significantly. Traditionally, the INTERVIEWS Indian electronics industry, especially consumer electronics, has been largely dependent on imports. However, our government’s strong 60. INTERVIEW emphasis is on becoming self-reliant ‘Atmanirbhar’ and promoting Mr Krishan Sachdev, domestic manufacturing (by bringing in schemes like Production Chairman, Carrier Midea India Linked Incentives (PLI) and imposing import restrictions) – which has started leading to reduction in imports. 62. INTERVIEW The pandemic has exposed the frailties of the supply chain and the importance of de-risking it at a global scale; the world is keen to adopt Mr Nipun Singhal, a China +1 strategy in preparation of more challenging times. This, our MD and CEO, midcaps team believes, can lead to an unprecedented opportunity Amstrad (OVOT Pvt. Ltd for the Indian consumer electronics industry, especially for Electronic Manufacturing Services (EMS). Deepak Agarwal, Vineet Shanker, and 78. INTERVIEW Keshav Bharadia, our midcaps team members, dug deep into the electronics manufacturing industry from the perspective of its current Mr Saurabh Gupta, very-low global market share, and how India is likely to be a major CFO, Dixon Technologies electronics manufacturing hub in the future. In addition to this, the team interviewed Mr Krishan Sachdev, Chairman, 90. INTERVIEW Carrier Midea India, Mr Saurabh Gupta, CFO, Dixon Technologies, Mr Mr Maulesh Chhaya, Nipun Singhal, MD & CEO, Amstrad (OVOT Pvt. Ltd) and some other Industry Expert, Mentor industry leaders and experts – to understand how well electronics manufacturing is positioned to capture domestic demand and increase value addition, and to gauge the global exports opportunity. 95. Indian Economy: Trend Indicators 97. PhillipCapital Coverage Universe Cheers and Best Wishes, Vineet Bhatnagar Valuation Summary 2 GROUND VIEW 1 - 31 MAY 2021 1 - 31 MAY 2021 GROUND VIEW 3 COVERCOVER STORY BY DEEPAK AGARWAL, VINEET SHANKER, KESHAV BHARADIA From MAKE-IN-INDIA to MAKE-FOR-THE-WORLD Manufacturing is the next big theme India will see an increase in domestic value-addition across product segments (currently quite below the global average). With the setting up of a components ecosystem, and scaling up of large-scale electronics manufacturing capabilities in the country, this industry should see tremendous growth. 4 GROUND VIEW 1 - 31 MAY 2021 1 - 31 MAY 2021 GROUND VIEW 5 The Indian electronics industry is in a sweet spot because of the government’s initiatives such as Make-in-India, Aatmanirbhar Bharat, and the de-risking of the global supply chain coupled with an increased adoption of the China+1 strategy worldwide. India has essentially been a net importer of electronics goods and components in the past, due to drawbacks and challenges in local manufacturing. However, this is changing rapidly and experts believe that various government incentives such as PLI, EMC 2.0, SPECS, NPE, along with reformed labour laws, will prove conducive to manufacturing in India for the world. As a result, There is likely to be huge capex over the next 3-5 years in the electronics industry. India has already seen an influx of investments coming in to scale up manufacturing, from both domestic and international companies. The global supply chain disruption arising out of China last year has increased awareness amongst companies worldwide about the consequences of doing most of their manufacturing in China. This has led to companies relocating to other countries. India has the lowest penetration rates across consumer durables, a large domestic market, supportive government policies, lower tax rates and the lowest wages, making it a lucrative destination for many global giants and domestic companies. India will see an increase in domestic value-addition across product segments (currently quite below the global average). With the setting up of a components ecosystem, and scaling up of large-scale electronics manufacturing capabilities in the country, this industry should see tremendous growth. pg. 6 INDIA’S ELECTRONICS INDUSTRY Eyeing a bigger share of the global supply chain _______________________________________ pg. 17 GOVERNMENT’S INCENTIVES FOR INDIA INC Government is the catalyst that is driving growth _______________________________________ pg. 31 CHINA + 1 STRATEGY De-risking the global supply chain _______________________________________ pg. 46 PRODUCTS Lower penetration and a large domestic market = huge growth _______________________________________ pg. 91 OUTLOOK Make in India! But how soon will India make for the world? _______________________________________ 4 GROUND VIEW 1 - 31 MAY 2021 1 - 31 MAY 2021 GROUND VIEW 5 INDIA’S ELECTRONICS INDUSTRY Eyeing a bigger share of the global supply chain Contract manufacturers will support growth Electronics: The fastest growing India’s electronics market size industry in the world • India’s electronics hardware production has increased from Rs 1.9tn in FY15 to touch an estimated Rs 5.46tn in Experts believe that the electronics industry will surpass the FY20. This includes production of consumer electronics, US$ 7.3tn mark by 2025. In fact, the Indian market is likely to electronics components, computers, strategic and be second only to China’s, followed by Vietnam, Thailand, industrial electronics (Source: MEITY Annual Report and Indonesia. India’s electronics industry has undergone FY20). drastic changes in the last 20 years, mostly in products, the • The Indian consumer electronics and consumer durables retail environment, and in terms of an evolving administrative market is likely to become the fifth-largest globally by landscape. Of late, innovation and technology changes have 2025. been rising, because of a shift in consumer behaviour and • Despite disruption due to covid, smartphone shipments changing business requirements. saw a decline of only 1.7% in CY20. The production worth These five factors will push the industry’s growth to the next of mobile phones in India reached US$ 30bn in FY20 level: from US$ 3bn in FY15, which should only increase from 1. Low penetration of products; much lower than the global here. India is focussing on manufacturing and becoming a average. global manufacturing hub. 2. Positive GDP growth outlook. • Under EMS, there is ESDM (Electronics System and 3. Huge push from the government to become self-reliant Design Manufacturing), which has two sub sections – (reduce import dependency) and to increase exports by electronics systems and electronics