doing business in india - us-india business council

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New Delhi, 22nd October 2007

Doing Business In India

Opportunities And Challenges

US India Business Council

Presentation to Business and Trade delegation from Minnesota

by

Manish Mathur

Principal, A.T. Kearney



2A.T. Kearney

Agenda

n Overview of the India opportunity

n Characteristics of the Indian business environment

n Key challenges

n Summary



3A.T. Kearney

India is the second fastest growing economy in the world and thefourth largest in PPP terms

Italy

2002 2004 2006 2008 2010 2012 2014

United States

Japan

UK

France

India

Russia

Germany

15

5

0

China

Canada 8.8%

11%

2.8%

4,069

12,939

10,518

3,942

2,605

US China Japan India Germany

India’s economy would be larger than two of thecurrent G8 countries in 2014 – Canada and Russia

Nominal GDP Projection (US$ Trillion) GDP Adjusted For PPP (2006, US$ Billion)

India is already the fourth “largest” economy in“Purchasing power parity”

Source: Goldman Sachs BRICs report, World Market Research Centre; A.T. Kearney analysis

Overview of the India opportunity

GDP Projection And Adjusted For PPP



4A.T. Kearney

As many as 500 million people will enter the middle class in next 15years

101m588m

391m

94m

17m

CAGR

628m

478m

123mUpper-Middle$10,000+ PPP(1)

Middle$5,000-10,000 PPP

Emerging$2,500-5,000 PPP

PoorUnder $2,500 PPP

14%

12%

3%

-11%

Note: (1) PPP denotes Purchasing Power Parity; (2) Population data US~ 300 mn, UK~60 mn and Germany~82 millionSources: U.N. Population Studies; A.T. Kearney analysis

2005 2020

Indian Population By Income Class, 2005-2020 (Millions)

The size of this new middle class is much more than the totalpopulation of countries like US, UK and Germany combined(2)




5A.T. Kearney

531 555 522 490

370461 573 612

139

404985 8171 87

65 65

174246

102

36332820

'00 '10 '00 '10 '00 '10 '00 '10

(MN People)

The opportunity is enhanced by young ‘working-age’ demographicsand a highly skilled manpower base

Population Trends And Projections (BRIC) Availability Of Graduates

§ India has large and widespread educational infrastructure – Over 380 universities (11,200 colleges)

– 1,500 research institutions and around 9,000 PhDs

– Over 200,000 engineering graduates

– Over 250,000 post graduates and 2,000,000 graduates

§ India’s working population (25-54 yrs) growth rate is 2.5%compared to 0.7% in China

§ Brazil and Russia have a smaller population base

§ Russia will experience a decline in population in the future

Brazil Russia India China

>55 years25-54 years0-24 years

CAGR = 1.2% CAGR = -0.5%

CAGR = 1.6%

CAGR = 0.7%

CAGR 2.5%

CAGR0.7%

9

258

1989

PhD’s

PostGraduates

Graduates

Source: ICICI-OneSource, Malaysia Ministry of Education — Department of Statistics: China Population Statistical yearbook; Statistical Abstract ofIndia; Bureau of Labor and Statistical Standards, Philippines; AICTE; Asiaweek; IMD World Competit iveness yearbook, StatistischesBundesamt 2001; A.T. Kearney analysis

Population Trends And College Graduates For India




6A.T. Kearney

The Indian government remains committed to market reforms

Reforms introduced post 2000

• Market-determinedunified exchange ratesystem

• Import licensing was

virtually abolished• Peak protective customs

duty rates were broughtdown

• Automatic FDI approval(upto 50%) in severalindustries

• The Foreign InvestmentPromotion Board wasconstituted

• Policy to promoteparticipation by FIIs in thesecondary market forIndian stocks

External SectorReforms

• Almost all industriallicensing wasabolished

• Restrictions under theMonopolies andRestrictive TradePractices Act werereduced

• Private entryrequirements for bothdomestic and foreignplayers eased

• Sectors reservedexclusively for the

public sector, wereopened up for privateparticipation

Industrial PolicyReforms

• Abolition of priceregulation of IPOs

• Setting up of theSecurities and

Exchange Board ofIndia (SEBI) and theNational StockExchange (NSE)

• Capital marketopened for FIIs

• Interest rates werederegulated

• Stringent capitaladequacy norms

Financial SectorReforms

• Agricultural reforms

— Ease of inter-state movement of foodgrains

— Reform of the Public Distribution

System• Fiscal reforms

— Rationalization of tax structure

— Introduction of VAT

• FDI policy reforms

— Opening up of sectors to FDI

— Raising equity cap for FDIparticipation in many sectors

Second Generation Reforms

Liberalization Reforms introduced in 1991

Source: A.T. Kearney analysis

Overview Of The Key Reforms Introduced Since 1991

The commitment to reforms has continued despite changesin the political regime over the years




7A.T. Kearney

15 years of reform have meant that investment norms are liberal today

Investmentnorms

Repatriation ofprofits

Other fiscalincentives (SEZs)

§ India permits FDI in almost all sectors§ except atomic energy, defense, railways, coal and lignite, mining of iron, manganese,

chrome, gypsum, gold, diamonds, copper and zinc.§Automatic approvals are granted by the Reserve Bank of India in sectors where

up to 100%, 74%, 51%, 40% or 26% foreign equity is allowed as a rule

§ India permits FDI in almost all sectors§ except atomic energy, defense, railways, coal and lignite, mining of iron, manganese,

chrome, gypsum, gold, diamonds, copper and zinc.§Automatic approvals are granted by the Reserve Bank of India in sectors where

up to 100%, 74%, 51%, 40% or 26% foreign equity is allowed as a rule

§ Dividends, capital gains, royalties and fees can be repatriated easily with thepermission of the Reserve Bank of India

§ In case of an exit decision, the overseas promoter can repatriate his share afterdischarging tax and other obligations

§ Dividends, capital gains, royalties and fees can be repatriated easily with thepermission of the Reserve Bank of India

§ In case of an exit decision, the overseas promoter can repatriate his share afterdischarging tax and other obligations

§ SEZ's are duty free enclaves where up to 100% FDI in manufacturing sector isallowed through automatic route barring a few sectors

§ Other benefits of SEZ's include exemption from customs duty on import ofcapital goods, raw materials, consumables & spares and exemption fromincome tax

§ SEZ's are duty free enclaves where up to 100% FDI in manufacturing sector isallowed through automatic route barring a few sectors§ Other benefits of SEZ's include exemption from customs duty on import of

capital goods, raw materials, consumables & spares and exemption fromincome tax

Overview Of The Key Investment Norms




8A.T. Kearney

Most attractive investment destinations for global investors

India’s performance in A.T. Kearney’s FDI Confidence Index hasconsistently improved since 2002


China

United States

Mexico

Poland

GermanyIndia

United Kingdom

Russia

Brazil

Spain

France

ItalyCzech Republic

Canada

Japan

September 2003

1

2

3

4

56

7

8

9

10

11

1213

14

15

China

United States

India

United Kingdom

GermanyFrance

Australia

Hong Kong

Italy

Japan

Russia

PolandSpain

Czech Republic

Malaysia

September 2004

1

2

3

4

56

7

8

9

10

11

1213

14

15

December 2005

China

India

United States

United Kingdom

PolandRussia

Brazil

Australia

Germany

Hong Kong

Hungary

Czech RepublicTurkey

France

Japan

1

2

3

4

56

7

8

9

10

11

1213

14

15

India’s score = 1.04 India’s score = 1.95India’s score = 1.4

September 2002

China

United States

United Kingdom

Germany

FranceItaly

Spain

Canada

Mexico

Australia

Poland

JapanBrazil

Czech Republic

India

1

2

3

4

56

7

8

9

10

11

1213

14

15

India’s score = 1.05




9A.T. Kearney

India is ranked as the most attractive in A.T. Kearney’s Offshore locationattractiveness and Global retail development Indices


C o u n t r y

R i s k ( E c o n o m i c A n

d P o l i t i c a l )

0 = H i g h R i s k ,

1 0 0 = L o w

R i s k

Market Potential

0 = Low Potential, 100 = High Potential

30

40

50

60

70

80

30 40 50

On the radar screenTo ConsiderLower priority

Size of the bubble indicates retailsales of food, drink and tobacco inUS$ billions, excluding taxes in 2005

India

Russia

Ukraine

Macedonia

China

Latvia

Croatia

Turkey

Bulgaria

Vietnam

Bosnia &Herzegovina

Brazil

PakistanIndonesia

Philippines

Morocco

SaudiArabia

Romania

Slovenia

SlovakiaSouth KoreaHungary

Malaysia

Lithuania

Taiwan

Chile

Thailand

Egypt

TunisiaMexico

A.T. Kearney’s Offshore Location Attractiveness Index

§ India outperformed its peers on the basis ofhigh availability of skilled manpower and itslow cost structure

3.72 3.32 3.092.64

1.47

1.31

0.931.77

2.02

2.63

2.09

1.36 0.73 0.92 1.36

Financial ScoreEnvironment Score

People Score

MalaysiaChinaIndia Czech Rep. Singapore

5.595.71

7.12

5.58 5.46

A.T. Kearney’s Global Retail Development Index

§ The large size and fragmented nature of the Indian retailmarket makes it attractive for large foreign players

Overview Of India’s Rank On Key Indices




10A.T. Kearney

The investment and consumption trends are encouraging

Increased domesticconsumer spending

Globalopportunities forIndian corporates

Increasedforeign

investment0.7

4.3

15

28

0

5

10

15

20

25

30

2000 2005 2006 2007 (Till

May)

§ FDI of US$15.7B in 2006-7 compared toUS$3.6 B in 2004-05

§ From Jan to Oct 2007, FIIs had pumped in ahefty US$ 16.3 billion in equities

Foreign investment

2.633.75

5.55

15.72

0

5

10

15

20

25

30

2003-04 2004-05 2005-06 2006-07

§ GDP projected to reach over US$ 1.5 trillion by2015

§ Services are ~ 55% of Indian GDP§ 64% of Indian GDP is consumption (Vs.

China’s 42%)§ Exports-GDP ratio for India is only ~10%

compared to ratio of ~30% for China

Increased consumer spending

§ Global deals by Indian corporates worthUS$28 B in first five months of2007compared to US$4.3 B in year 2004

§ Major deals in recent years include Tata’sacquisition of Corus for US$ 12 billion andof Tetley for US$ 2.5 billion; Hindalco-Novelis deal of US$ 6 billion

Outbound M&A Deals

FDI Investment (US$ Billion)Outbound M&A deals (US$ Billion)

Source: Government of India websites; A.T. Kearney analysis




11A.T. Kearney

Table Of Contents

n Overview of the Indian opportunity


n Key challenges

n Summary

Table Of Contents



12A.T. Kearney

The Indian political and judicial system are fundamental to the longterm sustainable growth of India

Judiciary

Legislature

Executive

§ There is a single hierarchy ofcourts, with the Supreme Court

of India at the top. Indian courtsprovide adequate safeguardsfor the enforcement of propertyand contractual rights

§ English is the main courtlanguage for the Supreme court

§ India is a common law countrywith a written constitution

which guarantees individualand property rights.

§ Democratically electedlegislature has the power toenact new laws and amendexisting ones

§ Successive governments havebeen upholding constitutional law

since independence andelections are regular andpeaceful

§ There is minimal intervention ofthe Executive with the Judiciaryand it is quite regular for centralor state governments to getreprimands from the legal courtson specific issues

Characteristics of the Indian business environment

Source: National Informatics Centre, India; Supreme Court website; A.T. Kearney analysis



13A.T. Kearney

Being a secular democracy comes naturally to India; changeovers aresmooth and economic policy consistent

Note: (1) There were 3 governments in the interim between 1996 and 1998(2) BJP: Bharatiya Janata Party


1991 - 1996 1998-2004 (1)

P.V. Narasimha RaoPrime Minister

Dr. ManmohanSingh

Finance Minister

P ChidambaramCommerce

Minister

AB VajpayeePrime Minister

Dr. JaswantSingh

Finance Minister

Arun JaitleyCommerce

Minister

Dr. Manmohan SinghPrime Minister

P ChidambaramFinance Minister

Kamal NathCommerce

Minister

Regime: Congress

• Initiated economic liberalizationprogram

• Comprehensive set of reformscovering the external sector, industrialpolicy & the financial reforms

Regime: BJP(2) led coalition

• Continued economic reforms

• Strengthened India’s status as agrowing economic world power

• Privatization of key PSUs, initiated theprocess of VAT

• Encouraged investments in IT, Telecom& BPO sectors

Regime: Congress-led coalition

• Impetus to economic reforms throughgreater focus on agriculture &infrastructure

• Continued liberalization of theeconomy by opening up new sectorsfor FDI

• Targeting a projected real GDP growthrate of 7– 8% per year

2004-present




14A.T. Kearney

India portrays a landscape of diverse consumer base

Sheer scale of diversity makes India a seat for a major worldcivilization than a mere nation-state

RuralUrban

Rich

Poor

North

South

Liberal

Conservative

§Language and cultural diversity:

– There are 28 States and 22 nationallanguages. Other than these 22 languages,there are hundreds of dialects that add to themultilingual nature of the country

§Young India Vs Conservative India – While the young liberal India may be clamoring

for change and reform, there is a large sectionwhich is still fears any further reform in policy

§Highly educated Vs Illiterate: – On one side, there are established institutes of

higher learning, and on the other 28% of thepopulation is still illiterate

§Rich Vs Poor: – While the benefits of economic development

are percolating downwards, 26.1% of theentire population is still below poverty line

Dimensions of Diversity





15A.T. Kearney

Culturally, the themes which bind the country are uniquely Indian

Bollywood Cricket Value consciousness

More than 900 movies (characterizedas melodramatic musicals) madeevery year

India is truly a cricket crazy nationwith top cricketers seen as rolemodels

Indian consumer is fascinated withvalue and companies have enteredinto low unit packs (sometimes singleconsumption) to reach the masses

It is important to understand the popular symbols of the country and whatthey denote to be able to succeed in the Indian market





16A.T. Kearney

Table Of Contents



n Key challenges

n Summary

Table Of Contents



17A.T. Kearney

Indian markets pose a host of significant challenges

§ The Indian consumer market is aconglomeration of significantlydiverse markets and cannot be seenas one market environment

Heterogeneity of the market

• Given that there are entrenchedlocal players in all the segments, itis important for a new entrant toclearly decide the mode of entry

Entrenched Local Players

§Poor infrastructure and complexityof logistics coupled with nebulouspolicy environment in many sectorscan form roadblocks

Infrastructure constraints

• India is still significantly behind in“Ease of Doing Business”parameters and familiarity with theIndian context holds significantimportance

Complexity in “Doing Business”

Key Challenges

Overview Of Key Challenges In India



18A.T. Kearney

The heterogeneity of the Indian market means that players need to beclear on the segments they need to target

§Low price points – In order to expand the addressable

market, players are constantlyintroducing low unit packs of verylow price points of INR 1,2 and 5.

– Due to better value equation andhigher packaging cost, most ofthese products are very low marginones but help build trials andexpand market

§Large packs for consumption – While there are low unit packs,

there is demand for largeconsumption packs as well. Arielsells skus from INR 2 to INR 145

§Range of price index – The value index varies significantly.

Ariel Front-O-Mat is three times thevalue of Tide for the same weight inthe same format

Story Of Many Indias

Tide 20 gms: 1.5

Tide 75 gms bar: 5

Tide 200 gms: 11

Tide 500 gms: 26

Tide 1 kg: 51

Ariel 500 g: 50

Ariel 1 kg: 99

Ariel Front-O-Mat 1 kg: 145

P r i c e s i n I N R

Key Challenges

Key Milestones In Evolution of India As A Multicultural SocietyConsumer Goods example




19A.T. Kearney

Players need to choose their mode of entry carefully

RepresentativeOffice

(Up to 6 months)

Alliance(6 to 18 months)

Majority-ownedJoint Venture

(12 to 24 months)

Wholly OwnedManufacturing

(18 to 36 months)

Low High Investment, Complexity and Business Risk

Low

High

P o t e n t i a l B e n e f i t

Key Success Factors

§ Basic understanding of doing business in India§ Strong and reliable partner

§ Good relationship with partner

§ Senior management attention

§ Strong and balanced team

§ Established link to and support from

headquarters

§ Deep understanding of doing business in India

§ Significant attention from senior management

§ Strong on-site management team

Key Challenges


The mode of entry will also be different for different sectorsdepending on the reforms stage and strength of local competition



20A.T. Kearney

There are significant constraints on infrastructure which increase thelogistics costs and inefficiencies for operations

Seaports Airports Roadways

The 12 major Indian ports, handle90 percent of the all-India portthroughput

§ Average ship turnaround time(ASTA) at Indian ports is ~7 daysASTA at Singapore port is six toeight hours

§ Container moves per hour rangesfrom (7-15) for Indian portscompared to range of (35-40) forSingapore and Hong Kong

There are significant issues ofcongestion in key international anddomestic airports

§ At many airports, passengeramenities need to be upgraded

§ There are also deficiencies inrespect of ground handling facilities,night landing systems, cargohandling, etc., at some airports

§ Reasons are limited terminalcapacity, bunching of flights, delayin passenger clearances, etc

India’s road network extends3.319mn km, of which 1.517mn km(45%) is paved

§ Average truck speeds=> 30-40kmper hour (km/h), in comparison todeveloped country standards of 60-70 km/hr

§ India also has a poor road safetyrecord, with an average of 75,000

deaths on the road every year

Source: National Informatics Centre, India; A.T. Kearney analysis

Key Challenges

Overview Of Transport Infrastructure Related Constraints



21A.T. Kearney

India is still significantly behind on “Ease of Doing Business”parameters

§ Measures credit information sharing and the legalrights of borrowers and lenders46236Getting Credit

§ Better investor protection.43233ProtectingInvestors

§ costs and procedures involved in importing and

exporting a standardized shipment of goods314279

Trading Across

Borders§ The ease or difficulty of enforcing commercial

contracts2177177EnforcingContracts

Dealing withLicenses

Starting aBusiness

Doing Business

Ease of...

134

111

120

Doing

Business 2008 rank

133

93

..

Doing

Business 2007 rank

§ 20 procedures over 224 days are needed to build awarehouse, including obtaining necessary licensesand permits etc

§ An entrepreneur needs 13 permissions over aduration of 33 days on an average

§ US ranks 3rd and China ranks 83rd in the world

Comments

2

2

2

India advantage

Key Challenges

1 Low 5 High

Overview Of India’s Rank On Ease Of Doing Business Parameters (2008)

Entrenched local players have become more adept atmanaging the environment

Source: The Doing Business project-2008, World Bank; A.T. Kearney analysis



22A.T. Kearney

Table Of Contents



n Key challenges

n Summary

Table Of Contents



23A.T. Kearney

Indian markets provide a significant opportunity for companies who canovercome the challenges

n A vibrant economy – expected togrow at a rapid clip

n Favorable demographics

n Growing consumer market

n Highly skilled manpower

n Economic and policy reforms

n Increased foreign investment

n Challenges with infrastructure

n Regulatory / bureaucratic barriers

n Large and diverse consumer market

n Complex distribution structures

n Pricing challenges

n Evolving markets

Opportunities Challenges

Summary



Thank You

Manish Mathur

[email protected]

mailto:[email protected]

mailto:[email protected]



25A.T. Kearney

Table Of Contents

n The India opportunity story

n Understanding the spirit and essence of India

n Key challenges

n Summary

n Appendix: Overview of key industry sectors

Table Of Contents



26A.T. Kearney

Overview of key industry sectors

n Agro-industry and food processing

n

Textilen Leather

n Oil and Gas

n Automotive

n Tyres

n Banking

n Insurance

n ICT

n Pharmaceuticals and Healthcare

n Machinery and Equipment

n Infrastructure

n

Aerospace and defensen Tourism

n Retail

n Petrochemical

n Cement

Appendix



27A.T. Kearney

Rising consumption and evolving tastes are driving growth of foodprocessing sector

47 5471

33

68

30

2004 2005 2010

Primary processed food Value added food

India Processed Food Market Forecast(€ billions)

Level of processing in food processing Industry in India - 2005(Processed food as % of total food)

2%

21%

6%

11%

37%

F r u i t s &

V e g e t a b l e s

D a i r y

P r o d u c t s

M e a t

P o u l t r y

M a r i n e

F i s h e r i e s

• Market growth expectation of 10% per year up to 2010

• Today only 2% of India’s agriculture production isprocessed

• Rapid urbanization, and rising per capita income, haveled to rapid growth of food processing industry

• Diverse climate and land in India results in large rawmaterial base suitable for food processing industries

• Primary food processing is highly fragmented with asmall organized sector and unorganized sector that

includes hundreds of thousands of processing units• Indian food and beverage companies are exporting toregional overseas markets with similar tastes

• EU countries such as Netherlands, Germany, Italy andFrance account for 30 per cent of FDI in this sector

• Fiscal incentives by several governments have led tohigh investments in those regions

Key trends

• Indian Players: Amul, Britannia Industries, Dabur, GodrejBeverages Foods, Haldiram, Gits Food Products, MTR,Parle Agro

• Foreign Players: PepsiCo Inc, Cadbury's, Heinz , HLL ,ITC , Nestle

Key Players

78

139

15%

7%

1 0 %

Notes: (1) Packed fruits and vegetables, packed milk, unbranded edible oil, milled rice, flour, tea, coffee, sugar, pulses, species and salt(2) Processed fruits and vegetables, juices, jams, pickles, squashes, concentrate, processed dairy products etc

Source: Ministry of Food Processing, India, A.T. Kearney analysis

1 2

87

Appendix



28A.T. Kearney

Clusters in food processing sector are emerging in areas offering taxand other fiscal incentives

Chennai

Mumbai

Kolkata

Siliguri

Baddi

Jammu

Silvassa

Jaipur

Nandur

Mandideep

Chittur

Nashik

MysoreHosur

Ghatkeshar

Coimbatore

Rudrapur

Gurgaon Noida

New Delhi

Nagpur

Chirala

Bangalore

Moga

Samalkha

Nanjangud

Pantnagar

SankrailMithapur

Channo

Nabha

Sonipat

Rajahmundry

Pune

Food Processing Industry

• Areas of Uttaranchal, Punjab andHimachal produce large varieties offruits and vegetables

• Fiscal incentives in the region areleading to strong growth in industry

• Silvassa is a key industrial areain this cluster

• Major players like ITC, Britanniaand MTR have presence in thisregion

Appendix



29A.T. Kearney

• Absence of quality cold storage facilities andtransportation leads to high wastage in sector

• Existing laws hamper growth of contract farming

• Multiple ministries and laws govern the food processingindustry increasing complexity for the industry players

• Agricultural Produce and Marketing Act leads to most of

the food products getting traded through regulatedmechanism rather than open market

• Essential commodity act restricts free inter-statemovement of certain food products

• Multiple tax rates and levies across states and locationscreate procedural complexity

• High cost of packaging affect the margins of the industry

• Execution of existing law for prevention of foodadulteration is time consuming

Challenges

• Setup large low cost production bases in India fordomestic and export markets by using low cost workforce

• Enter ready meal and health food segments as they seeburgeoning demand

• Customize Italian concepts to suit Indian flavors assuccessfully done by McDonalds and Pizza Hut

Opportunities


Opportunities and challenges of Food Processing sector

Appendix



30A.T. Kearney



n Textile

n Leather

n Oil and Gas

n Automotive

n Tyres

n Banking

n Insurance

n ICT



n Infrastructure

n

Aerospace and defensen Tourism

n Retail

n Petrochemical

n Cement

Appendix



31A.T. Kearney

The textile sector is amongst the largest industries of the Indianeconomy

• Indian Players: Raymond, Bombay Dyeing, Arvind Mills,Vardhman Group, Aditya Birla Nuvo, Welspun, Century

Textiles, Alok Industries, Indo Rama Synthetics, CenturyEnka, SRF

• Global Players: Belgian UCO (JV with Raymond), VF (JVwith Arvind Mills)

Key Players

1996 2000 2006

27%

36%41%

CottonCloth

Blended1

Cloth

Man made fiberbased cloth

Cloth Production(Bn sq. mt.)

31.5

38.6

45.0CAGR: 4%

Textile and clothing products industry size(€ Bn)

1927

14

23

2006 2010

Domestic Market Exports

11%

33

49

14%

9%

CAGR

Notes: (1) Cloth woven with more than one fibersSource: Compendium of Textile Statistics

13% 15% 13%

60% 49% 46%

• Indian textile and clothing industry expected to grow at arate of 11% by 2010, driven mainly by exports

• Production recently driven by growth of man made fibersbased cloth

• Problem of market access for international players due tohigh trade barriers and regulatory burden

• Indian textile clusters and Italian company Carrera

Holdings have signed a formal agreement to form atextile cluster consortium under which Carrera willprovide technology, marketing assistance and financialassistance to various textile parks in India

Key trends

Appendix



32A.T. Kearney

The textile industry in India has clusters in various parts of the countryeach specializing in different fibers

Chennai

MaduraiCoimbatore

Bangalore

Surat

AhmedabadIndore

Nagpur

Calcutta

Kanpur

Delhi

Srinagar

Ludhiana

• Tamil Nadu is a majormanufacturer of cotton textilescontributing to 22% of India’s

cotton yarn and textile exports• Karnataka is major producer of

cotton and silk and is a apparelsourcing base for many globalfirms

• Gujarat mainly manufacturescotton based fabrics apart fromsome synthetic fibers

• Maharashtra is a manufacturer ofcotton textiles in India

• Punjab is a major export base forwoolen and cotton textiles

• Uttar Pradesh produces cottonand woolen textile

Appendix



33A.T. Kearney

Opportunities and challenges of Textile sector

• Market access in India is difficult due toregulatory/custom duty issues

• Industry not self reliant, around 75% of investment ischanneled through government aides in promoting theindustry

• Inefficiencies in customs procedures/bureaucracy

• Products less sophisticated with a focus on low tomedium priced goods

• Highly labor intensive manufacturing with many small andmedium size firms

• Lack of technological upgradation and economies ofscale

Challenges

• Leverage Italian capabilities and quality in machinery andequipment, fashion and design to transfer know how andcapacity to Indian industry

• Invest in setting up vertically integrated large scale units / retail chains (single brand)

• Enter into marketing joint ventures with Indian companiesor brand licensing to Indian players

• Partner with Indian vendors to import from India, bynominating large Indian companies having credibility interms of capacities and quality

• Export of lifestyle brands of garments and accessories toIndia

Opportunities


Appendix



34A.T. Kearney



n Textile

n Leather

n Oil and Gas

n Automotive

n Tyres

n Banking

n Insurance

n ICT



n Infrastructure

n Aerospace and defense

n Tourism

n Retail

n Petrochemical

n Cement

Appendix



35A.T. Kearney

The leather manufacturing industry in India is valued at over € 3 billionand is the third largest in the world

1.41.7 1.8

2003 2004 2005

India Leather market value 2005(€ bn)

• Largest livestock population in the world

• In 2005, total production of leather industry was over € 3bn out of which exports accounted for € 1.8 bn (Leatherindustry 8th in the export trade of the country) growing ata CAGR of 13% (2003-05)

• Around 1600 tanneries in India concentrated in threestates Tamil Nadu (52%), West Bengal (23%) and U.P.

(12%)• Major leather products are footwear (776 ml pairs peryear), skins (170 ml units), leather shoe uppers (112 mlpairs), leather garments, leather goods such as handbags, belts, wallets, gloves, sports goods, harness andsaddles etc.

• Footwear production consumes about 60% of the totalleather production

Key trends

• Indian Players: Superhouse Leathers, MirzaInternational, Liberty Shoes, Bhartiya International,Lakhani India, Forward Group

• Italian Players: Conceria Virginia Italy (JV with ForwardGroup)

• Global Players: Bata, Fossil (stake in Crew B.O.SProducts)

Key Players

1.2

1.8

Total value ofproduction: 3 bn €

India Leather Export trend 2003-2005(€ bn)

Cagr:13 %

National consumption

Export

Source: IBEF, Exim Bank

Appendix



36A.T. Kearney

There are three primary leather goods manufacturing clusters in India

New Delhi Noida

Jallandhar

Haryana

Kanpur

Agra

Bangalore

Hyderabad

Chennai

Ambur

Ranipet

VaniyambadiTiruchchirappalli

Dindigul

• West Bengal is one of thecountry's top state for export offinished leather goods

• Bata which is the largest

manufacturer and marketer offootwear products in India islocated in Kolkata

• The Government of West Bengalhas setup a state-of-the-artintegrated Leather Complex on theeastern fringe of Kolkata

Kolkata

• Majority of the tanneries in Indiaare located in Tamil Nadu

• Govt. of Tamil Nadu offers aspecial capital subsidy to furtherencourage the leather industry

• TALCO-a state govt. organizationis setting common effluenttreatment plants in leather industryclusters

• Uttar Pradesh is an importantcenter for tanneries as it has alarge population of livestock

• Kanpur is a prominent centre forleather processing and specializesin processing hides into heavyleather

Appendix



37A.T. Kearney

• Limited production with respect to raw material: withabout 15% of the world livestock population, Indiaaccounted for only 8% of the leather production in 2002

• Fragmented sector: Indian leather industry consists of42,000 small-scale industry (SSI) units, which account for75% of the total production

• Environmental challenges as leather industry istraditionally considered polluting especially tanning andfinishing

• Many developed countries are implementing non-TariffBarriers to restrict leather exports from developingcountries like India

Challenges

• Focus on manufacture and export of value addedproducts as opposed to raw material

• Export machinery to India or to have technologyagreements with Indian firms, as technology used by mostplayers is outdated

• Economies of scale in setting up large scale units

• High growth of the local footwear market

Opportunities


Opportunities and challenges of Textile sector

Appendix



38A.T. Kearney



n Textile

n Leather

n Oil and Gas

n Automotive

n Tyres

n Banking

n Insurance

n ICT



n Infrastructure


n Tourism

n Retail

n Petrochemical

n Cement

Appendix



39A.T. Kearney

Strong growth is expected in oil and gas consumption spurred bystrong economic growth

135172

368

101138

325

2007 2012 2025

Oil Consumption Oil Imports

• Oil: 36% of India’s primary energy consumption

• Expected growth of overall demand to 172 MMT in2011-12 and 368 MMT in 2024-25

• Natural Gas: India is a relatively new entrant into thenatural gas market but is expected to rival both Chinaand Japan in having the largest natural gas demandin Asia

• Natural gas volume in the country will partly bedriven as a substitute to petroleum products sinceit is cheaper and cleaner

• Reforms in the power sector will also encouragenatural gas to be used as a cleaner substitute to coalin the long term

Key trends

• Indian players: Oil and Natural Gas Corporation,Reliance Industries, Indian Oil Corporation, GAIL,Essar, Indraprastha Gas, Oil India Ltd, HPCL, BPCL

• Italian players: Saipem SpA

• Other global players: British Petroleum, CairnEnergy, Exxon Mobil, Gaz de France, Shell, Total,OAO Gazprom, British Gas

Key Players

Current and Forecasted Oil Demand in India(in MMT)

Current and Forecasted Gas Demand in Indiain MMTOE)

4358

120

1626

40

2007 2012 2025

Gas Consumption Gas Imports

CAGR 6%

CAGR 7%

Oil Consumption

Oil Imports

CAGR 6%

CAGR 5%

Gas Consumption

Gas Imports

Notes: (1) TOE:Tonnes of Oil EquivalentSource: Infraline, Crisinfac

Appendix



40A.T. Kearney

This industry is centered around crude oil sources or transportationhubs such as ports

Oil & Gas Industry

Vishakhapatnamor Vizag

Haldia

Digboi

Numaligarh

Bongaigaon

Guwahati

Barauni

Narimanam

Chennai

Mumbai

Koyali

Jamnagar

Panipat

Mathura

Manali

Mangalore

Tatipaka

Cochin

• Cauvery and KG basin have some

of the largest gas fields in India• Oil refining capacities in Cochin,

Chennai, Mangalore and Vizag

• Oil refining capacities in Digboiand Guwhati,

• Assam is one of the largest oilproducing states in the country

• Significant oil refining capacitiesexist in Panipat and Mathura

• Mumbai High is the key source ofoil production in India

• Jamnagar has the biggest oil

refinery in India

Appendix



41A.T. Kearney

The oil and gas sector has recently been deregulated and is stillevolving

• Government of India approved the New Exploration Licensing Policy (NELP) under whichnational oil companies are required to compete on an equal footing with Indian and foreigncompanies to secure oil and gas petroleum exploration licenses

• Under the NELP upto 100% foreign participation is allowed and a fast track approval

mechanism is in place through single window Empowered Committee of Secretaries• MoPNG has conceived a more coordinated approach to acquisition of overseas oil and

gas assets through :• joint foray (compared to the current fragmented approach)• bilateral engagements with other countries to benefit from each others strengths in

areas of technology transfers, R&D, safety and training• multilateral engagements such as the Asian Round Tables, International Energy Forum

etc

Trade/Investment Policies & Regulations


Appendix



42A.T. Kearney

Opportunities and challenges of the Oil and Gas market

• Natural decline in ageing oil and gas producing fields

• Limited infrastructure available for gas transmission anddistribution

• Distortion in public tenders, subject to custom dutyapplication

• Absence of statutory framework in the upstream industry

• Lack of clarity in Open Access Policy

• Incidence of cross subsidy due to social obligations

• Long lead times for recent discoveries by pvt / JVcompanies

Challenges


• Leverage on India’s key advantages as an export refininghub like cost competitiveness and location

• Alliances and partnerships to diversify the energy supplybase and improve long term supply security

• Exploring of new resources of hydrocarbons such asCBM and Gas Hydrates

• Cooperate in technology assistance programs to improvequantity and quality of power generation

Opportunities

Appendix



43A.T. Kearney



n Textile

n Leather

n Oil and Gas

n Automotive

n Tyres

n Banking

n Insurance

n ICT



n Infrastructure


n Tourism

n Retail

n Petrochemical

n Cement

Appendix



44A.T. Kearney

3.157

6.794469

1.347

2002 2005

The automotive industry is growing at a rapid pace spurred by bothdomestic demand as well as increased exports

• Indian Automotive industry growth of 19% since2002• Auto component exports growing at a rate of 30%

in the last three year• Increased demand for vehicles created by growing

economy and rising per capita income• Increased vehicle ownership due to increased and

affordable vehicle financing• Favorable demographic profile with 35% of the

population between 15-35 years• Entry of several players and launch of multiple

models at various price points• Changing consumer behavior – shorter ownership

lifecycles

Key trends

• Indian players: – Passenger Vehicles: Tata Motors, Mahindra &

Mahindra – Commercial Vehicles: Tata Motors, Ashok

Leyland, Eicher Motors – Two wheelers: Hero Honda, TVS, Bajaj Auto

• Italian players: Fiat, Piaggio• Other global players: Suzuki, GM, Ford, Honda,

Toyota, Hyundai, Daimler Chrysler, Audi, BMW,Renault-Nissan

Key Players

8,4

14,1

2002 2005

CA G R : 1

9 %

India Automobile market value 2002-2005(€, Billion)

C A G R

: 2 2 %

India Auto Components market value 2002-2005(€, Million)

3.626

8.141CAGR

Exports

Domestic

30%

21%

Source: ACMA, Global Insight, CrisInfac, AT Kearney Analysis

Appendix



45A.T. Kearney

2002 2004 2006

Europe is currently the largest and fastest growing export market forIndian auto components suppliers

Export of Autocomponents from India(€ Million)

Americas

Asia

Africa

Others

C a g r : 3 0 %

10%

16%

26%

Europe36%

12%

Total1.347

781

469

Small stampingsExteriors

Interior trims, Instrumentpanels, HVAC

Interiors

Ignition systems, startermotors and parts

Electrical

Brake linings, brake partsChassis

Fuel injection systems,

Pistons, transmissioncomponents, Cylinderblocks, engine blocks

Power

Train

SegmentsExamples of

Components Importedfrom India

Source: CRISINFAC, A.T. Kearney Analysis

30% 28%

31%

30%

19%

18% 11%

11%

11%

10%

Appendix



46A.T. Kearney

There are three regional automotive clusters in India

Halol

Gurgaon Surajpur

Lucknow

CalcuttaIndore(2)

Bidadi

Maraimalai Nagar

Noida

Pune

Chennai

Kurla

AurangabadMumbai

NagpurNasikIgatpuri

Kanhe

Irrungattukottai

• Gurgaon is the only manufacturinglocation of Maruti Suzuki, the IndianPV leader; and its ancillaries

• Gurgaon is also the hub for the leadingtwo wheeler manufacturer: HeroHonda and its component business

• Chennai is the export hub andcomponent sourcing hub for Ford andHyundai and the transmissionssourcing hub for Toyota

• Chennai is also the manufacturinghub for the TVS Group (two wheelersand components)

• Pune is the main manufacturinglocation for Tata Motors (largestIndian OEM) and its autocomponentdivision ; GM is setting up its secondfacility in Pune

• Also Bharat Forge, the world’ssecond largest forging company is

located in Pune

Hub: Pune

Hub: Chennai

Hub: Gurgaon

Source: ISI emerging market, Indiainfoline

Appendix



47A.T. Kearney

• Infrastructures and access points for car imports stilllimited

• Quality products difficult to be provide on a consistentbasis from Indian companies• Many Indian suppliers do not have the capability to

supply large scale orders required by global companies

• Focus on product development still non-existent in manycompanies

• Localization is essential for international players to enterthe Indian market

Challenges

• The Indian automotive industry has reached a critical sizeand is expected to show a healthy growth rate driving thedevelopment of the auto components industry

• India is emerging as a global small car manufacturing hubdriving the maturity of supplier capabilities across theentire value chain (product design to delivery)

– OEMs such as Maruti-Suzuki and Hyundai haveidentified India as small car export bases and areworking with Indian suppliers to develop theircapabilities

• The need for greater localization to achieve costleadership has also driven growth and development ofthe auto ancillary supplier base in India

• India is emerging as a global base for offshoring ofengineering design services for the automotive industry

Opportunities


Opportunities and challenge of the Automotive sector

Appendix



48A.T. Kearney



n Textile

n Leather

n Oil and Gas

n Automotive

n Tyres

n Banking

n Insurance

n ICT



n Infrastructure


n Tourism

n Retail

n Petrochemical

n Cement

Appendix



50A.T. Kearney

Six large domestic players dominate the market and their plants arelocated mostly in Maharashtra and Tamil Nadu

Pondicherry

Pune

Kankroli

Banmore

Vikrant

Mumbai

Cochin

Nasik

Kalamassery

Limda

Tiruvottiyur

Arakonam

Ponda

• Tyre manufacturerslocated close to theautomotive hubaround Pune • Tyre manufacturers located close

to the automotive hub aroundChennai

• Tyre manufacturerslocated close to theautomotive industry inKarnataka

• Kerala produces over 90% ofIndia's natural rubber and hasmany intermediate rubber unitsmaking it ideal for tyremanufacturing

Appendix



51A.T. Kearney

• Narrow product range, large operating overheads andhigh break-even levels

• High costs due to regulation on ISI mark (additionalmarking that requires additional investment for foreignproducers)

• Continuous increase in prices of raw materials suchas natural rubber, which accounts for nearly one thirdof total raw material costs

• Cheaper imports of tyres especially from China

• High capital requirements to set up tyre manufacturingplants

Challenges

• Set up facilities for manufacturing tyres for domesticsales as well as exports (notwithstanding the wellentrenched competition in the domestic market)

• Leverage on technology, as Indian tyre makers aretechnologically behind global competitors• While the PV segment has transitioned over near

completely to radial tyres, the penetration levels forradials is only at 5% for CV’s; Indian tyre companiesare however rapidly ramping up capacities in this frontto not only serve the expanding OE market, butpotentially an even larger aftermarket demand goingforward

• Newer technologies like run-flat tyres have notpenetrated the Indian market yet

• Sale of equipment / machinery to Indian tyre companies

• Other technology transfers

Opportunities


Opportunities and challenge of the Tyres sector

Appendix



53A.T. Kearney

Banking sector is characterized by high credit demand due to risingconsumption

Per Capita Deposit and Credit per branch

India Commercial Banks market value(€ billions)

Source: RBI, Crisinfac

(€)

• High GDP growth rate leading to high credit demandacross sectors

• Consumer credit in India witnessing a strongexpansion for credit led by the housing and the retailsectors

• Corporate credit offtake, agriculture and SME sectorsare the other major growth avenues for the bankingsector

• Banks liquidating their holdings of Government securitiesto meet high credit demand

• Stronger banking regulations have led to improvement inasset quality with declining NPAs

• Ratio of per capita deposit and credit per branch amongthe lowest in the world and expected to grow withincreasing GDP

Key trend

• State owned players: SBI, PNB, UTI Bank ltd., CanaraBank, Union bank of India, Bank of Baroda, AllahabadBank

• Private players: HDFC Bank, ICICI Bank

• Foreign Banks: HSBC Ltd., ABN-AMRO Bank N.V.,American Express, BNP Paribas, Citibank, StandardChartered bank

Key Players

299266

310363

125 146194

258

0

100

200

300

400

2003 2004 2005 2006

Deposits Advance

€ millions

CAGR7%

CAGR27%

165

207

275

2.6

1.8

1.3

0

50100

150200

250300

2001 2003 2005

0

0.51

1.52

2.53

Per Capita deposit Credit per branch

Appendix



54A.T. Kearney

Financial market reforms are paving way for global players to enter thesector

• License norms for foreign banks are different from that for Indian banks which makes ittougher for foreign banks to expand network in India

• There is a limit of 10% on voting rights for foreign investors which will be removed in year2009 under RBI plan

• Foreign banks operating in India required to migrate to Basel II1 with effect from March 31,2008

• Foreign banks are currently taxed ay 41,82% versus 35,7% for local banks• Foreign banks in India will have to lend 32% of their net banking credit to the priority sector

in the country

• FDI:

• Foreign bank can enter India through one of the 3 channels: branches, subsidiary orrepresentative office

• There is limit of 74% on FDI investments in private banks (of which Foreign InstitutionalInvestors cannot hold more than 49%) and a limit of 20% on investments in public banks

• Foreign banks can also operate through wholly owned subsidiary (WOS)

• Reserve banks plans to give national treatment to WOS after 2009 under which branchexpansion will be easier

Main Trade/Investment Policies & Regulations

Notes: (1) Guidelines for determining the minimum solvency requirements for banks with a new system for weighting the risks run by banksSource: A.T. Kearney analysis

Appendix



55A.T. Kearney

Opportunities and challenges for Banking sector

• With a strong outlook for credit and implementation ofBasel II norms, Indian Banks would require additionalcapital to support their growth plans

• Policy hurdles for foreign banks planning to invest in India

• Increased competition in the sector as foreign and privateplayers look to expand across businesses

• Weak recovery mechanisms and legal procedures

increase the cost of doing business in India• Small sizes of most Indian banks with weak balance

sheets hampering their growth in global financial market

Challenges

• Invest in existing Indian banks as they seek largeamount of capital to sustain credit demand by Indianeconomy

• Use NBFC route to start operations in India and launchfull scale banking operations after obtaining bankinglicense from RBI

• Partner with Indian banks to launch products whereItalian banks can bring in operational expertise andIndian banks can provide distribution network

Opportunities


Appendix

A di



56A.T. Kearney



n Textile

n Leather

n Oil and Gas

n Automotive

n Tyres

n Banking

n Insurance

n ICT



n Infrastructure


n Tourism

n Retail

n Petrochemical

n Cement

Appendix

A di



57A.T. Kearney

2.4 2.7 3.1

9.4 11.214.0

0

5

10

15

20

2003 2004 2005

Non Life Insurance premium Life Insurance premium

Growing disposable income and awareness is driving growth inInsurance sector, especially in Life segment

Insurance Penetration(Year 2004, Premiums as a % of GDP)

India Insurance market value(€ billions)

Source: IRDA (Insurance Regulatory and Development Authority), Fitch

• High growing sector (cagr 20% in last two years)especially in life segment

• Insurance penetration similar to China but unbalancedtowards life premium

• 14 insurers companies, among which 1 governmentinsurer in life and 4 in non-life dominate the market

• Most private insurance companies are joint venturesbetween Indian & foreign partners

• Banking channels are the preferred distribution modes

for private insurance companies accounting for 20-25%of sales

• Unit linked insurance plans are popular in life insurancesegment

• Foreign players like Generali, Fortis, Paternoster, SwissRe are planning to enter Indian market

Key trends

• Life Insurance: LIC, ICICI Prudential, HDFC StandardLife, Birla Sun Life, SBI Life, Bajaj Allianz, Kotak OldMutual

• Non-life Insurance: National Insurance Company Ltd.,New India Assurance Company Ltd., Oriental InsuranceCompany Ltd., United India Insurance Company Ltd.,ICICI Lombard, Bajaj Allianz and Iffko-Tokio

• Reinsurance: General Insurance Corporation

Key Players

2.75.1

2.5 2.2

4.9

4.1

1.10.7

India China Italy USA

Non Life Insurance Penetration Life Insurance Penetration

CA G R: 2 0 %

22%

14%

3.2 3.3

7.6

9.4

11.813.9

17.1

Appendix

A di



58A.T. Kearney

Insurance penetration is likely to increase with regulatory changes

• FDI: allowed under automatic route only up to 26% which is expected to be increased to49% in year 2007

• IRDA plans to keep a FII limit of 26% over and above the FDI limit of 49%

• Every insurer is required to write certain percentage of its policies in the rural sectorwhich varies from 5% to 15%

• IRDA plans to remove tariff regulations for non-life insurance premium from Year 2007which will allow companies to set rates

• Banks cannot hold more than 49% stake in an insurance company

• Separate licenses are required to enter into life and non-life segment

• Any entity can get insurance license in only one category

• Pension fund regulation still missing

• The minimum paid-up capital requirement presently stands at € 16.9 mn for both life andnon-life business and € 33.8 mn for the reinsurance business



Appendix

Appendix



59A.T. Kearney

• Weak distribution network in small towns and villages is akey barrier in growth of insurance in these areas

• Lack of trained manpower is hampering growth ofinsurance sector

• Tariffs in non-life insurance results in losses in segmentslike motor insurance leading to lower growth

Challenges

• India’s large rural and small town population largely underpenetrated but offering a huge market for all players

• Segments like health, life and disability plans have a largegrowing market in the Indian middle class

• Italian insurers can bring in product knowledge and better

risk management practices to Indian market

Opportunities


Opportunities and challenges for Insurance sector

Appendix

Appendix



60A.T. Kearney



n Textile

n Leather

n Oil and Gas

n Automotive

n Tyres

n Banking

n Insurance

n ICT



n Infrastructure


n Tourism

n Retail

n Petrochemical

n Cement

Appendix

Appendix



61A.T. Kearney

The Indian IT and BPO industry has witnessed strong growth acrosssegments

Indian BPO Industry Market Size

(Euro Bn)

3.54.8

2.4

0.7

0.5

0.2

2004 2005 2006

Exports Domestic

7.410

13

2.7 3.2 4

2004 2005 2006

Exports Domestic

• Americas and Europe remain the key markets forexports accounting for over 90 per cent of IT-ITESexports

• India share of global offshore market in BPO industryexpected to stabilize at ~50-55%

– Companies to diversify presence across multiplelocations

– Other attractive destinations like Philippines,Malaysia, Czech Republic expected to startcompeting for offshore pie

• Cost advantages combined with emerging successstories expected to be primary drivers in near future

• Cross selling between IT services and BPO withinsame engagement boundaries expected to increase

Key Trends

CAGR = 46%

CAGR = 29%

1.6

10.7

15.5

Source: Nasscom, A.T. Kearney analysis and research

• Indian Players: Infosys, TCS, Wipro, Satyam, Cognizant,HCL Technologies

• International Players: IBM, Accenture, Microsoft,CSC,SAP, HP, American express, Convergys, Genpact

Key Players

Indian IT Industry Market Size(Euro Bn)

10.1

13.1

16.9

Appendix

Appendix



62A.T. Kearney

India continues to be the preferred destination for offshore services

3.72 3.32 3.09 2.641.47

3.59 3.17

1.00

2.99 2.88

1.31

0.93 1.77 2.02

2.63

0.92 1.41

2.48

1.68 1.57

2.09

1.360.73 0.92

1.36 0.94 0.861.94

0.7 0.88

I n d i a

C h i n a

M a l a y s i a

C

z e c h

R e p .

S i n g a p o r e

P h i l i p

p i n e s

B r a z i l

C a n a d a

C h i l e

P

o l a n d

A.T. Kearney’s Offshore Location Attractiveness Index — 2004

5.33

7.12

5.71 5.59 5.58 5.46 5.45 5.44 5.42 5.37

People ScoreEnvironment ScoreFinancial Score

India outperformed its peers on the basis of high availability of skilledmanpower and its low cost structure


Appendix

Appendix



63A.T. Kearney

Government has provided various fiscal and non fiscal incentives tothe sector

• Duty-free imports of capital goods permitted for BPO companies

• Total income tax exemption on export of IT enabled outsourcing services

• Fiscal incentives for IT companies provided by Exim policy1 of India

• Many state governments have announced incentives and procedural waivers for the IT-

ITES sector focusing on issues like infrastructure and electronic governance• State governments have announced IT policies to create a manpower pool for IT and

ITES industry

• Information technology act 2001 enacted to provide legal recognition to all transactions bymeans of electronic data exchange

Trade/Investment Policies & Regulations

Notes: (1) Policy for exports and importsSource: A.T. Kearney analysis

Appendix

Appendix



64A.T. Kearney

Opportunities and challenge in the IT/ITES industry

• Lack of infrastructure and data protection laws couldhamper growth of IT/ITES sector in India

• Availability of trained manpower for growing needs ofindustry could be a potential bottleneck

• China and other countries in the ITES sector areincreasingly challenge India’s dominance in the sector

• Rising labor costs are reducing India’s competitiveadvantage in the sector

Challenges


• Leverage the Indian advantage for business processoutsourcing of services

• Use India as a outsourcing hub for content development,R&D services and software products

• Indian companies can use Italy as a hub to serve Italyand other European countries

• Indian companies can use Indian experience to helpdevelopment of IT clusters in Italy

Opportunities

Appendix

Appendix



65A.T. Kearney



n Textile

n Leather

n Oil and Gas

n Automotive

n Tyres

n Banking

n Insurance

n ICT



n Infrastructure


n Tourism

n Retail

n Petrochemical

n Cement

Appendix

Appendix



66A.T. Kearney

Indian pharmaceutical market is growing quickly, driven by export anddomestic market growth

4.93.0

4.9

1.6 2.1 3.5

3.6

5.9

2003 2005 2008E 2010E

Exports Domestic Market

Note: (1) Domestic market value is for western finished medicines only. India also imports drugs to meet its requirementsSource: IDMA, Espicom, IMS, Crisinfac, Secondary Research, A.T. Kearney analysis

India Pharmaceutical market trend 2003-2010(1)

(€ Billion)

• Indian players: Cipla, Ranbaxy, Nicholas

Piramal, Sun Pharma, Dr. Reddy Laboratories,• Other global players: Glaxo SmithKline, Zydus

Cadila, Pfizer, Aventis, Abbott India, Wockhardt

Key PlayersCAGR

17%

10% 4.6

8.4

10.7

4930

21 14 11 9 8 7 6 6 4 419

6

U S A

J

a p a n

G e r m

a n y

F r

a n c e

I t a l y

U K

C

h i n a

C a

n a d a

S

p a i n

S

o u t h

K

o r e a

M e x i c o

B

r a z i l

I n d i a

N e t h e r l

a n d s

A u s

t r a l i a

Total Pharmaceutical Market(€ Billion, Year 2003)

Low drug expenditure per capita driven by• Low pricing levels• Vast majority of drug spending concentrated with

middle class

187251535611441882889240331345368388614 P e r C a p i t a

S p e n d

( € )

233

cagr: 11 %

5,7

cagr: 1 3,5 %

• World’s 13th largest pharma market in valueterms and 4°in volume terms

• High growing market, currently still dominate bydomestic consumption but with exports expectedto reach 46% of production in 2010

• Exports growing due to the low manufacturingcosts and time to market advantages inresearch

• Domestic market growth driven by risingincome levels, expenditure on healthcare andintroduction of new patent regime

• Several 3rd party service providers, includinglocal & international players, are setting upbases in India

Key Trends

Appendix

Appendix



67A.T. Kearney

The are four major forces driving the Indian Pharmaceutical industry

• High GDP growth leading to higherdisposable income

• Increasing private expenditure onhealthcare

• Growing consuming class creating a

larger target market Increasing ruralincomes are opening up new markets

Changing Demographic Profile

Drivers ofIndian

PharmaIndustry

• Complicated multi-level distributionsystem makes it hard for new players

• Alliance based strategy of smallercompanies for attaining wider reachcreate barriers to entry

Emerging Distribution System

• Recognition of product patents which isencouraging global players to enter themarket

• More favorable intellectual propertylaws are promoting India as a R&D hub

for the industry

Changing Regulatory Regime

• Rapid growth (8-10%)• Shift towards lifestyle diseases

• Increase penetration of healthinsurance

• Increasing role of private providers

Changing Healthcare Market

Appendix

Appendix



68A.T. Kearney

The pharmaceutical industry is largely concentrated in west India

Baddi Barotiwala

Kandla

Kadi

Hlrapur

Vadodara

Maloda

Halol

IndoreValsad

Ankleshwar

Kalol

Dholka

Vatva

Bhimpore

Vapi

Piparia

Athal

ThaneMumbai

Ratlam

Patalganga

Bhandara

Nashik

Aurangabad

Waluj

Vikhroli

Chikalthana

KurkumbhSolapur

Pashamylaram

Kazipally

Hyderabad

JeedimetlaVernaMargao

Bangalore

MysorePoonoon

Chennai

Vishakhapatnam

Pharmaceutical Industry• Bangalore is the key

hub for biotechnologyindustry

• Favorable government policiesand access to ports for exportshas helped in making westernIndia the major cluster ofpharmaceutical industry

pp

Appendix



69A.T. Kearney

• Intellectual Property Laws regarding patents in India stillnot stringent; many global companies are hesitant tointroduce products in this market

• Prices of key drugs still regulated by Drugs Price ControlOrder

Challenges

• India as a suitable alternative for R&D activities onaccount of cost advantage (30-50%), time to marketadvantage (cycle time reduction of 30-40%) and strongpeople skill availability

• Abilities of national companies in-licensing and out-licensing for drugs at different stage of development (pre-

clinical, clinical and manufacturing phase)

• Availabilities of new Biotech products which may belaunched in the regulated markets

• 30-40% manufacturing cost advantage in API1 againstwestern markets and also boasts of largest number of USFDA approved sites outside US

Opportunities

Opportunities and challenges for Pharmaceutical sector

Notes: (1) Active Pharmaceutical IngredientsSource: A.T. Kearney analysis

pp

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Appendix



71A.T. Kearney

Infrastructure development is driving demand for machinery &equipment in India

Indian Machinery & Equipment Industry Size

(1)

(€ bn)

Notes: (1) Capital goods as per CMIE classificationSource: CII

4.83.9

3.44.6

2003 2004


• Strong designing and engineering capabilities along withlow labor cost has made India one of the preferredoffshoring destinations

• Machine tools was one of the high growth segment inimports while machinery and instruments showed highgrowth rate in exports

• Machinery & equipment (Non electrical machinery)sector is concentrated, with the Top 5-7 companies

accounting for more than 70-80% of the market in mostindustries

• Electrical machinery sector as well is highly concentratedwith 3-6 players dominating industry

• Leading players in electrical machinery sector havecollaborations with foreign companies for technology

• Key industry bodies are Indian Machine ToolsManufacturer Association and Federation of EngineeringIndustries of India

• Indian companies are leveraging cost advantage in

production to increase exports

Key trends

• Indian Players: BHEL, L&T, Crompton Greaves,Cummins India, Elgi Equipments, HMT, Kirloskar OilEngines

• Foreign Players: Siemens, ABB, Thermax

Key Players

CAGR

CAGR 3%

8.2 8.5

35%

-20%

pp

Appendix



72A.T. Kearney

Machinery & Equipment Manufacturers

Areas of western India and few northern states are major hubs ofmachinery and equipment production

Faridabad

Goa

Jamshedpur

Bangalore

Hyderabad

Pune

Hardwar

Kirloskarvadi

Bhopal

Jhansi

Jagdishpur

Varanasi

Coimbatore

Daman and Diu

Nashik

Mumbai

Vadodara

Ranipet

New Delhi

Ahmednagar

Kondhapuri

Dewas

Hazira

Mysore

Jamshedpur

Chennai

Gurgaon

Rudrapur

Tiruchchirappalli

Goindwal

Sitara

Pinjore

Ernakulam

Ajmer

Mandideep

Malanpur

Shirval

Kalwa

• Most of the big players like ABB,

L&T etc in machinery & equipmenthave plants in states ofMaharashtra & Gujarat

• The industrial cluster in northernregion is centered around Delhi andfew locations in Punjab & UP

Appendix



73A.T. Kearney

• Increase in raw material prices has resulted in low profitmargins for the heavy engineering industry

• Increased competition

• Indian capital goods manufacturers face costdisadvantages due to high cost of finance, power andpoor infrastructure

• Duty structure in India is distorted with lower duty onmachinery & equipment imports and high excise dutieswhich leads to disadvantage for local manufacturers

• Access to technology is a challenge for Indian companiesas technology absorption requires large amount of capital

Challenges

• Outsource engineering components from Indianmanufacturers to leverage cost advantage of Indianmanufacturers

• Invest in setting production facilities in India to takeadvantage of low production cost

• Export of machinery & equipment to India as demand of

capital goods surges with growing infrastructure needs ofthe country

• Bring in a lot of technical expertise to Indian electricalmachinery market as India is compliant with the Europeanstandards for electrical engineering

Opportunities


Opportunities and challenges for Machinery and Equipment sector

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75A.T. Kearney

Infrastructure sector provides a strong opportunity for private players

• India lacks infrastructure to support its growing economy

• Ease of regulations and increasing private sectorparticipation has led to strong growth in infrastructuresector over the past few years

• Of the Euro 152 Bn plan for investment in infrastructurefrom 2006 to 2010, 39% is expected from privateinvestment

• Multilateral agencies such as the World Bank and the

Asian Development Bank (ADB) are funding variousinfrastructure projects on a large scale in India

• The Government is tapping alternative sources of fundsfor infrastructure development like fuel cess for roaddevelopment

Key trends

• Indian Players: RIL, ADAE, Mahindra & Mahindra, IOCand ONGC, NTPC, L&T , Gammon India Ltd , HCC

• Global Players: Nokia, P&O, PSA, Maersk, GammonIndia, CWC and the Dubai Port Authority

Key Players

Proposed Infrastructure Investment (2006-2010)(Euro Bn)

248

4

1523

4

2

86

5 7 5 2

38

14

44

52

14

Power Roads Railways Ports Others

Govt.

Debt

Private

Accruals

Euro 152 Bn

Cumulative Govt. Spend on Infrastructurevs. Industrial GDP

0

3

6

9

12

15

0 130 260 390 520 650Industrial GDP

C u m

u l a t i v e G o v e r n m e n t

S p e

n d o n I n f r a s t r u c t u r e

China

India

19951995

2003

2003

50%

(Euro Bn)

(Euro Bn)

Appendix



76A.T. Kearney

Government has made policy initiatives to attract private investment ininfrastructure sector

Source: Ministry of Commerce, India

• Government is offering several projects in the infrastructure sector on a Build Operate and Transfer basisthat provide net equity returns of 18 to 25% to construction companies

• Electricity Act 2003: promotes competition, privatization, project financing and incentivizes profit making

• National Maritime Policy: 228 projects open for public private partnerships

• National Highways Development Project financed through BOT route: permission to private parties to

invest in NH Development project, levy, collect and retain fees and also regulate traffic on BOT routes

• SEZ scheme under which developers of SEZs and SEZ units are provided various fiscal and non fiscalincentives


Appendix



77A.T. Kearney

• The massive investment programme for infrastructurehas to be funded at a time when government is trying toreduce its fiscal deficit

• Private investment in sectors like power was curtailed bythe lack of financial sustainability of projects due tosubsidy

• Government has limited focus on maintenance or roadinfrastructure

• Bulk of the infrastructure is still controlled by governmentleading to limited private participation

Challenges

• Investments in power generation and transmission as thepower demand increases with the growing economy

• Invest under Build Operate and Transfer basis in thenational highways segment as they carry more than 40per cent of the traffic

• Deregulation in the ports sector and multiple options forprivate participation provides opportunity for Italianplayers with strong expertise in the sector

• Growing demand for real estate makes it an attractiveprospect for Italian investors

• Italian companies can provide expertise in modernground-handling facilities and cargo-handling facilities toIndian airports

• Investments in SEZ as government is providing variousincentives to developers

Opportunities


Opportunities and challenges for Infrastructure

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79A.T. Kearney

Modernization of armed forces is leading to rising defense expenditurein India

3.54

5.65 5.80

2004 2005 2006E

911 12

2.82.9

2.6

0

4

8

12

16

2003 2004 2005

2.4

2.6

2.8

3

Defense expenditure per capitaDefense expenditure as % of GDP

(€)

India Defense Expenditure

India Defense Allocation for Purchase of Weapons(€ billions)

Source: BMI Research

• Indian armed forces are in midst of rapid modernizationwhich has led to increase in defense expenditure

• India looking to procure equipment from new supplierslike South Africa apart from its traditional suppliers inRussia, USA and Israel

• Focus on indigenization of defense equipment and lowreturns on local R&D has resulted in India looking fortechnology transfer, licensed production and jointdevelopment of equipment instead of off the shelfpurchase

• In Aero India 2005 air show, deals worth over €0.91bnwere signed between Indian and foreign aerospace firms

• Global players looking to collaborate with Indian firms inareas like software for defense purpose

Key trends

• Indian players: HAL, Mazagon Dock LTD, Ordnance

Factories, Bharat Electronics Ltd, Bharat Dynamics Ltd• Foreign companies: Honeywell International

• Private Indian players: Tata, L&T, Mahindra & Mahindra,Kirloskar Brothers, Ashok Leyland, Jindal, MaxAerospace & Aviation, and Ramoss India

Key Players

CA G R: 2 8 %

CAGR18%

Appendix



80A.T. Kearney

• Key aeronautical establishments ofHAL is located in Bangalore

• The defense electronics companyBEL has units in Bangalore andChennai

Aerospace and Defense industry is located across the country withmajor clusters in western and southern India

Aerospace and Defense Industry

Ambarnath

Ichapur

Kolkata

Bhandara

Bhadravati

Bhusaval

Bangalore

Nashik

Hyderabad

Chennai

Lucknow

Kanpur

KoraputPune

Aruvankadu

Jabalpur

Machilipatnam

Ghaziabad

Kotdwara

Kanchanbagh

Bhanpur

Gurgaon

Nagpur

• There are several Indian ordnancefactories in Maharashtra

• Leading defense shipyard Mazagondock ltd is located in Mumbai

• Missile manufacturing unitsof BDL are located in AndhraPradesh

• There is manufacturing locationof Hindustan aeronautical ltd.(HAL ) apart from several Indianordnance factories



Appendix



82A.T. Kearney

• Procurements in the sector heavily influenced by politicalclimate and strategic relationship between governments

• Strong international competition due to incumbent playersfrom Russia, Israel and USA

• Indirect offset not allowed

Challenges

• Direct equipment sales to armed forces as India planslarge expenditure on purchase of defense equipment inits effort towards modernization of armed forces

• Joint development of technology and equipment inpartnership with Indian private and public players

• Italian companies can potentially use India to outsource

components for their global manufacturing operations

• Outsource engineering and design to India as it offershigh quality and cost effective design capability

Opportunities


Opportunities and challenges for Aerospace and Defense sector

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84A.T. Kearney

Rising spending on recreation is leading to boom in tourism sector

510630 700

850

1997 2003 2004 2005

CA G R 3 %

Source: Indian Tourism Statistics 2004 ; International Passenger Survey in India 1996-97 and 2003; Euromonitor report on Indian Tourism 2005 ;Interviews; A.T. Kearney analysis

• Increased spending on non-essential items and easyavailability of credit for consumer purchase has led tohigh tourism expenditure

• Rapid growth of low cost carriers and Infrastructure up-gradation of airports have led to increase in air travel

• Indian travel industry highly fragmented with the small orlocal players constituting for 83% of the market whereastour operators account for only 16%

• Travel agencies dominated by mid-sized players, whichtypically offer tours of big tour operators

• Disintermediation in lower value services and highvolumes are expected to drive consolidation in the sectorwhich will result in closure of several small sized travelcompanies

• Several online players have entered the market over thelast year and many more expected to enter in the next 1year

Key trends

• Large Tour Operators: SOTC, Cox & Kings, TCI• Regional Players: Kesri tours, Rajarani travels• Direct Suppliers: Jet Airways, Indian, Air Deccan, Spice

Jet, Kingfisher• Hotels : Indian Hotels, EIH, Hotel Leela, Asian Hotels,

Taj GVK• Online Players: Makemytrip, Travelguru

Key Players

Leisure Traveler Volume(All figures in ‘000s)

3.9

4.2

4.5

2003 2004 2005

Leisure and Recreation Expenditure in India(€ billions)

CAGR: 7%

CA G R 1 8

%



Appendix



86A.T. Kearney

• Lack of infrastructure facilities like airports, quality roads,sanitation, water quality in the country hamperingdevelopment of many tourist destinations

• Lack of direct flies between Italy and India

• Health and personal safety concerns due to water quality

and hygiene among international tourists

• High Governments charges on road, passenger, toll,luxury and sales taxes on the proceeds of traveloperators

• Competition from the online players create pressure onoffline players to build scale and consolidate

• Scarcity of budget hotels and affordable rooms

• Difficulty in obtaining VISA

Challenges

• Investment in assets to develop own holiday destination/ hotels as they see increasing demand and limited supply

• Tour operators looking to enter India should customizeofferings to match the tastes and preferences of Indiantravelers

• Invest in existing tour operators and provide technologyand expertise to build large scale of operations

• Create offerings to make India as one of the preferredtourist destination for Italian tourists

Opportunities


Opportunities and challenges for Tourism sector

Appendix



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88A.T. Kearney

Increasing income levels and changing consumption patterns have ledto rapid growth of organized retail sector

181

278 300343

393

2002 2004 2005 2007E 2009E

CAGR: 18 %

8575

32 22 206

USA Brazil South

Africa

Vietnam China India

India Total Retail Market Size1

(€ Bn)

Organized Retail Penetration(Organized retail as % of total retail, 2006l)

• Market value of 300 Bn € in 2005 growing by 7% in thenext four years

• Market largely fragmented and dominated by smallunorganized players• organized retail only 6% of total retail, but expected to

grow by 10% per year up 2010

• Continuous growth of population of urban areas, aspercentage of total population (currently 29%)

• Textile, food & grocery account for around 60% of

organized retail market• Global players who have developed or customized

products for Indian market have been successful inIndia. Coca Cola & Unilever (HLL) launched smallerSKUs to drive penetration in the mass market,Mcdonalds’ customized menu to Indian tastes

Key trends

• Food and Grocery: Food Bazaar, Food World,Subhiksha, Big Bazaar, Spencer’s

• Food and Beverage: Barista, Café Coffee Day, McDonald's, Pizza Hut, Haldirams

• Department Stores: Shoppers Stop, Lifestyle, Westside,Pharmacy: Health and Glow, CRS, 98.4

• Books, Music & Gifts: Landmark, Crossword,MusicWorld, Planet M

Key Players

Notes: (1) Estimated sales to the end consumer across all categoriesSource: Economist Intelligence Unit (EIU), Euromonitor, A.T. Kearney analysis

CAGR: 7 %

Appendix



89A.T. Kearney

Participation of international players is currently restricted by FDIpolicies

• FDI: foreign investments not allowed in multi-brand retailing

• FDI upto 51% is allowed for single band retailing

• Retail does not belong to the “granted industry status” which hinders creation of retail specific laws

• Many retail products are purchased from small scale industries (SSIs) as 506 items are reserved for

manufacturing by SSIs

• Urban Land Ceiling Act and Rent Control Acts have resulted in very high property prices

• VAT policy has been implemented in all states, except Tamil Nadu



Appendix



90A.T. Kearney

• Lack of basic infrastructure creates difficulty in sustainingretail operations across the large geographical spread ofcountry

• FDI limitation

• Current regulations lead to some hindrances in thegrowth of real estate development

• The tax structure in India is still complex and evolving,creating challenges for retailers

• The supply base for the retail sector is fragmented due togovernment policies and legacy issues

• Lack of trained manpower is a bottleneck for growth inthe retail sector

• Limited knowledge about the consumer behavior of hugepopulation in towns and rural areas

Challenges

• Enter into a joint venture or agree on a fee basedmechanism with Indian retailers and provide in-storemanagement expertise to Indian retailers

• Manage supply chain for Indian retailers bringing ininternational experience and technology to increaseefficiency and reduce costs

• Invest in setting up a operations through formats that are

currently allowed under Indian law

Opportunities


Opportunities and challenges for Retail sector

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92A.T. Kearney

The petrochemical industry is forecasted to grow at a CAGR of 10%over the coming years

5.4 6.37.6

2005 2007 2009

CAG R: ~ 9 %

Butadiene, 2%

Benzene, 9% Toluene, 3%

100% = 5.4 mtpa

India Domestic Basic Petrochemicals(1)

market production(Mtpa)

Basic Petrochemical Market in 2005100%=5.4 mtpa

Notes: (1) Includes Ethylene, Propylene, Butadiene, Benzene and Toluene(2) Annual growth in volume till 2011

Source: CrisInfac, Interviews, A.T. Kearney analysis

Ethylene50%Propy-

lene36%

• The current basic petrochemical demand is driven byethylene and propylene (~86% of total demand)

• Propylene and butadiene are expected to witness CAGRof ~ 16% and 17.5% respectively over next 5 years

• The market for propylene will grow on account ofdownstream capacity expansion by Reliance industries(RIL) at Jamnagar and new capacity set up by Indian Oil(IOCL) at Panipat

• Butadiene demand is expected to grow rapidly owing toa 100 mtpa SBR plant being set up by RIL and another40 mtpa plant by Bhansali Engineering

• The end plastic user industries like automotive, homeappliances and packaging are also expected to witnessrapid growth, in turn driving demand for petrochemicalindustry

Key trends

• Indian Players: Reliance India Ltd, IndianPetrochemicals Ltd, Gas Authority of India Ltd, Indian OilCorporation Ltd, Haldia Petrochemicals Ltd, KochiRefineries, Mangalore Refinery

Key Players

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93A.T. Kearney

Petrochemical plants are located in proximity to raw material sources

Vishakhapatnam

Haldia

Digboi

Numaligarh

Bongaigaon

Guwahati

Barauni

Narimanam

ChennaiKuthethoor

Patalganga

Rabale

Mumbai

Nagothane

Hazira

Dahej

KoyaliVadodara

Jamnagar

Panipat Mathura

Petrochemical Industry

• Large petrochemical plants inHazira, Jamnagar, Patalgangaetc. make the western India as thekey region for petrochemicalindustry

• Petrochemical units inAssam situated close to oilsources

Appendix



94A.T. Kearney

• Cyclicality of Industry’s profitability

• Significant capacity is being built in the Middle East whichhas a cost advantage due to the cheaper cost of naturalgas

Challenges• Tight demand - supply situation in the Indian

petrochemical market

• Large and growing domestic market for petrochemicals

• Cost advantages for exports

Opportunities


Opportunities and challenges for Petrochemicals sector

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96A.T. Kearney

The industry is witnessing strong growth driven by a boom inconstruction and real estate

Source: IBEF, Crisinfac

• Market value of 6 Mn euros in 2005

• Second largest producer of cement in the world afterChina

• Per capita consumption of 102 kg still low if compared tothe world average of 260 kg

• Cement demand expected to grow steadily the next fiveyears driven by growth in the construction market(commercial as well as real estate)

• Exports grew by 20% in 2005 due to higher demand from

markets such as the Middle East, Sri Lanka and Nepal• The industry is in a stage of consolidation and internationalplayers are entering the market

Key Trends

• Indian players: Grasim, ACC, Gujarat Ambuja, IndiaCements, Ultratech Cement, Century Textiles, JaiprakashIndustries, Birla Corporation

• Italian players: Italcementi• Other global players: Holcim, Lafarge, Heidelberg, Cemex

Key Players

114.0121.0

3.4

4.1

2004 2005


Cement Production in India(Million Tonnes)

Cement industry turnover in India(€ Million)

5.93

6.34

2004 2005

C A G R

: 7 %

117.4

125.1

+6%

+21%

Higherdemand

from MiddleEast

CA G R: 7 %

C t l t i il l t d li t i th

Appendix



97A.T. Kearney

Cement plants are primarily located near limestone reserves in thecountry

Ultratech Cement

Grasim Cement

Gujarat Ambuja Cement

ACC

Durgapur

Jharsugdha

Hirmi

Chandrapur

Tadipatri

Arakonam

Ratnagiri

Jafrabad

Magdatta

Raipur

MalkhedHotgi

Reddipalayam

Sikka

ShambhupuraJawad Road

Bhatinda

Ropar

Darlaghat

Pali

Kodinar

Bhatapara

Sankrail

Gagal

Lakheri

kymore

Tikaria

Purulia

SindriChaibasa

Bargarh

Jamul

Chanda

WadiMacherla

Madukkarai

• Capacities in Jawad and otherplaces due to availability oflimestone

• Chandrapur is the key cementproduction hub in the area

• The western market is served byplants in Jafrabad and Magdatta

• Sindri, Chaibasa andother plants in WestBengal and Jharkhandmajor plants eastern India

• Plants in Darlaghat andBhatinda are key sourcesfor the northern market

O t iti d h ll f C t t

Appendix



• Highly fragmented market and regional in natureconsisting of over 54 players and more than 129manufacturing plants

• Risk of excess of supply due to large capacity additionsexpected to become operational in the coming years

• Transportation costs which account for 20% of overallcosts are expected to increase

• High energy cost, one of the most important componentof cement productive cycle

Challenges

• Huge and growing demand for cement due toinfrastructure spending (particularly on roads, ports andairports), a spurt in housing construction and expansionin corporate production facilities

• Efficiency of Indian cement companies due to low costtechnology and extensive restructuring

• Sector fragmentation favor purchasing of equity stakes byinternational firms: e.g. Italcementi has acquired a stakein the K.K. Birla promoted Zuari Industries' cement plantin Andhra Pradesh

Opportunities

Opportunities and challenges for Cement sector

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