Key takeaways from IIFL’s 14th Enterprising India Conference, February 2023

20 Feb 2023 , 10:40 AM

Dr. Jim Walker was significantly above consensus 

Dr. Jim Walker expects India’s GDP to grow at 7.3% for FY23 and higher in FY24. He said funding 2ppt below NGDP growth would be healthy for capex, compared to -5 to -10ppt in China that caused mal-investment. And that India’s manpower is a potential advantage considering large scale global green capex needed.

Mr. Vellayan Subbiah (CEO, Tube Investments)

He was very bullish on India manufacturing prospects with the best CAGR likely in Electronics and Electrical Goods manufacturing (13% each) until 2035. But ecosystem development would be a challenge.

Banks said margins will expand further

Margins of banks could over the next 1-2 quarters before cost uptick, and then revert to current levels. Banks issued lukewarm commentary about private capex (RBI data suggests only 1.6%/8.7% QoQ/YoY industrial loan growth) but Capital goods companies that visited the conference (Larsen, Cummins, Thermax, CG Power) were very sanguine about demand momentum across sectors. So were chemical companies – and not in sync with the expectations of a global slowdown.

IT demand is holding up

As companies are shifting from rapid digital transformation to cost optimization over longer duration, larger deals pipeline is looking healthy. Shamik Das Sharma, AI speaker, indicated that the abrupt change to companies’ digitalization strategies thanks to AI would increase work for Indian IT companies for the next 3-4 years.

Agri reforms

Reforms such as fertilizer subsidy harmonization or DBT have been stuck but subsidy targeting should improve post 2024 elections.

Auto

Auto OEMs’ margin levers will change from raw-material price fall in Q3 to operating leverage in Q4. Volume growth will slow after a strong FY23. Outlook for trucks (volumes, margins) and tyres (margins) is positive.

K-shaped behavior across sectors

In Real Estate, in last 5 years, share of launches in the affordable segment has halved and luxury doubled. ABFRL (Apparels) said that Pantaloons being in value segment that is more impacted by inflation, is facing pressure. Pizza category (catering to price sensitive consumers) was impacted more by price hikes than other categories. Similar behavior was seen in Consumer electricals. Cipla said that USFDA target action date (TAD) for Advair is in the 1^st week of April. Alkem / JB suggested IPM growth will be good.