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Indias Breakout Moment: Target US$ 5 trillion ENAM December 2019 Manish Chokhani (Director) Strictly Private & Confidential Salil Gupta (Analyst) 1 Summary India- the Sone ki Chidiya missed the industrial revolution and its

  1. India’s Breakout Moment: Target US$ 5 trillion ENAM December 2019 Manish Chokhani (Director) Strictly Private & Confidential Salil Gupta (Analyst) 1

  2. Summary  India- the “Sone ki Chidiya ” missed the industrial revolution and its share of global GDP went from >30% to <3%, accompanied with loss of its sovereignty.  Since the economic reforms of 1991, GDP has expanded >10x and Market Cap >30x  India is now among the world’s top 5 economies. Its agricultural and industrial base makes it a leading producer of most commodities. ENAM  It is recognized as the last major emerging market that, within the coming decade, has the opportunity to catapult to the 3 rd ranked economy in the world.  The Indian government has implemented a number of major reforms that include GST, RERA, IBC, as well as major social inclusion measures and EoDB indicators. However, the need for even deeper rooted reforms in a slowing global economy awash with liquidity is an unprecedented opportunity.  A number of reform measures to optimize land, labour, capital, enterprise, governance and technology have been articulated by numerous experts. Awaited eagerly.  Global and Indian investors continue to value entrepreneurs and businesses that can demonstrate large potential for growth in earnings, with governance 2 ENAM Holdings Pvt. Ltd.

  3. India went from >30% to <3% of Global GDP ENAM Source: IMF estimates, Visual Capitalist 3 ENAM Holdings Pvt. Ltd.

  4. Strong Growth since Liberalization in 1991 Indicators 1991 2019 GDP ($ billion) 275 2,970 Country rank by GDP 16 7 GDP per capita, $ 320 2,200 ENAM Exports ($ billion) 18 330 Imports ($ billion) 24 514 Market cap of BSE 100 ($ billion) 45 1,500 Foreign exchange reserves ($ billion) 1 425 FX reserves in weeks of imports 2 43 Gross national savings (previous year) 23% 29% Total investment (pervious year) 26% 32% Population below poverty line 45% 22% Source: Enam Holdings, Bloomberg, Axis Capital, CapitaLine 4 ENAM Holdings Pvt. Ltd.

  5. India is now seen as a growing, top 5 economy Ranked 5th by Nominal GDP (US$ tn), 2019 Ranked 9th by Market Cap (US$ tn), 2019 Canada 1.8 Switzerland 1.7 Brazil 1.9 ENAM India 2.0 Italy 2.1 Germany 2.0 UK 2.8 Canada 2.3 France 2.8 France 2.5 3.0 India 3.2 UK Germany 4.1 Hong Kong 5.3 Japan 5.2 Japan 5.7 China 14.0 China 6.8 32.5 United States United States 21.5 On course to become the 3 rd largest economy by 2030… and hopefully by Mkt Cap. Source: Bloomberg 2019 5 ENAM Holdings Pvt. Ltd.

  6. India: A complex country of countries  Large Population, Large Domestic Market, Poor GDP/Capita, but on Path to Progress ENAM Source: IIFL, CEIC, Economist, World Bank, Axis Capital 6 ENAM Holdings Pvt. Ltd.

  7. Strong Agriculture Base: 1 st or 2 nd Globally Food Grains Milk Cotton Horticulture Sugar Spices Cropland Production Production Production Production Production Exports Production (Mn tonnes) (Mn tonnes) (Mn bales) (Mn tonnes) (Mn tonnes) (in USD Bn) (Mn hectares) ENAM 281 176 33 315 36 3 180 India (#2) (#1) (#1) (#2) (#2) (#1) (#1) (#Global Rank)  Major producer of agrochemicals, tea, cashew, jute, oilseeds  Largest exporters of cereal products, cotton, bovine meat, sugar, etc.  All 15 major climates in the world; 46 of the 60 soil types in the world  Largest manufacturers of farm equipment Source: Mohandas Pai, Bloomberg, CapitaLine 7 ENAM Holdings Pvt. Ltd.

  8. Large Infrastructure Base: Top 5 Globally Electricity Coal Iron Ore Aviation Railway Roadway Production Production Passenger Network Network Production (‘000 Kms) (Bn Units) (Mn MT) (Mn tonnes) Traffic (Mn) (Mn Kms) ENAM 1260 740 220 345 115 6 India (#Global Rank) (#2) (#4) (#7) (#4) (#3) (#3)  Ranked 35th in Logistics Performance Index (LPI) 2016 (up 19 ranks)  Air passenger traffic is growing at 16.5%, to become 3rd largest by 2024  Produces 95 minerals – 4 fuel-related, 10 metallic, 23 non-metallic, 3 atomic, and 55 others Source: Mohandas Pai, Bloomberg, CapitaLine 8 ENAM Holdings Pvt. Ltd.

  9. Strong Industrial Base: Top 5 Globally Two Four Wireless Steel Cement ITes Electricity Construction Wheeler Wheeler Phone Production Production Capacity in Revenue in Production in Production in Subscribers Bn Sq. ft. TWh in Mn tonnes Mn tonnes USD Bn Mn Units Mn Units in Mn ENAM 107 502 25 4 1 181 1260 1162 India (#2) (#2) (#1) (#5) (#6) (#4) (#3) (#2) (#Global Rank) Japan 104 55 - 9.7 - - 1,020 173 USA 87 120 - 11.3 - 1,600 4,280 392 Source: Mohandas Pai, Bloomberg, CapitaLine 9 ENAM Holdings Pvt. Ltd.

  10. Young Educated Workforce 903 49,061 Number of Universities Number of Colleges General Courses (Mn) Specialised Courses (Mn) Arts 10.04 Engineering 4.25 Gross Enrolment 500 Mn ENAM Ratio in Higher Commerce 4.47 IT / CS 0.94 population Education in India Science 5.50 Management 1.23 in 5-24 age bracket is 25.8% Education 2.00 Medical 1.24 Social Science 1.55 Law 0.37 Pvt Institutions Others 1.07 Enrolment in account for 78% professional courses Total 23.60 9.10 institutions & 67% of grew at 20% CAGR enrolment Total: 32.66 MN Lots of institutions and graduates, but lack of quality… and opportunities. Source: Mohandas Pai, Bloomberg, CapitaLine 10 ENAM Holdings Pvt. Ltd.

  11. The Three India’s  India comprises a few middle income “Mexicans”, a few in service “Filipinos”, and almost entirely of “Africans” Per capita Total HH income population India 1 Mexico ~130m population ~110m ~$8,800 GDP $1,150 bn ENAM $9,300 per capital income India 2 Philippines ~105m population ~104m ~$3,000 $313 bn GDP $3,000 per capita India 3 Sub-Saharan Africa excluding South Africa ~$1,200 ~1,126m 976 m population $1,167 bn GDP $1,200 per capita Source: Kuntal Shah – “India: Wealth Creation Story”, 2019 11 ENAM Holdings Pvt. Ltd.

  12. Indian Consumption continues to disappoint CAGR % 2000-10 2010-20 Air.Con =2.5mn Air.Con = 6/18mn Air.Con = 0.5 mn 17 22 Fridge = 5.5 mn Fridge = 2 mn Fridge = 12/25mn 11 16 Dig. Pay TV =0 DPTV =24 mn DPTV = 164/116mn 48 17 11 20 Cars = 3.5/12 mn Cars =1.9mn Cars = 0.7mn 10 14 Bikes = 3.7mn Bikes =9.4mn Bikes = 20/35 mn ENAM 90 2000 Mortgage Mortgage Mortgage * 26 22 2010 US$ 9 bn US$ 88 bn US$ 240/646 bn 2020 60 HH (%) HH’s earning above ₹280K 30 will rise from ₹28mn in 2010 to ₹66mn in 2020 0 0 40K 100K 200K 400K 750K 1250K 2500K (Annual HH income in 000’ INR ₹ ) Most segments should have grown 3-7x, but due to inadequacy of key enablers, income levels have remained depressed and narrow. Source: Kuntal Shah – “India: Wealth Creation Story”, 2019 12 ENAM Holdings Pvt. Ltd.

  13. India Consumption is largely “unorganised”   10-80% of Products are Unbranded – depending on the Market size of taxed and untaxed smoking goods almost product category similar at ~$7 billion ENAM   ~35% of Paints market remains Unorganized Jewellery similarly has a large Unorganized segment Source: BofA Merrill Lynch Global Research Estimates 13 ENAM Holdings Pvt. Ltd.

  14. Reflected in Narrow Markets: 29 Companies = 51% of Market Cap Mcap Price (Rs) Performance (%) PE (x) PB (x) ROE (%) Company name (USD bn) CMP 52w H 52w L FY20e FY21e FY20e FY21e FY20e FY21e Sensex Index 41,130 (0) 19 Quartile 1 553 26 21 4.0 3.6 16 18 Reliance Industries Ltd 140 1,580 (0) 50 20 16 2.3 2.0 11 13 Tata Consultancy Services Ltd 109 2,077 (9) 17 24 22 8.1 7.4 35 35 HDFC Bank Ltd 97 1,265 (2) 25 26 21 4.1 3.5 17 18 Hindustan Unilever Ltd 63 2,086 (5) 26 62 52 34.9 24.2 84 77 Housing Development Finance Corp Ltd 56 2,310 (2) 27 36 33 4.7 4.3 15 14 ICICI Bank Ltd 47 519 (0) 55 31 18 2.9 2.6 10 15 ITC Ltd 42 247 (20) 5 20 18 4.7 4.3 24 25 Quartile 2 539 21 16 2.6 2.4 13 16 State Bank of India 43 349 (7) 43 16 10 1.3 1.2 10 13 ENAM Kotak Mahindra Bank Ltd 43 1,615 (4) 40 33 27 4.6 4.0 15 15 Infosys Ltd 42 702 (17) 14 18 16 4.7 4.4 26 28 Bajaj Finance Ltd 34 4,102 (4) 76 41 31 8.7 6.5 24 25 Bharti Airtel Ltd 31 437 (4) 69 (20) 1,782 2.6 2.7 (13) (1) Maruti Suzuki India Ltd 31 7,258 (8) 33 34 28 4.4 4.0 12 14 Axis Bank Ltd 30 751 (9) 29 29 15 2.4 2.1 10 15 Larsen & Toubro Ltd 26 1,350 (16) 12 18 15 2.7 2.3 16 16 Oil & Natural Gas Corp Ltd 23 133 (26) 15 6 5 0.7 0.7 13 13 Asian Paints Ltd 23 1,713 (7) 37 56 48 15.0 13.0 28 29 HCL Technologies Ltd 21 1,133 (5) 23 15 13 3.2 2.8 23 22 Bajaj Finserv Ltd 21 9,241 (0) 64 32 25 4.7 3.9 18 20 Nestle India Ltd 20 14,663 (3) 48 72 60 42.4 37.0 62 77 Wipro Ltd 19 240 (20) 4 14 14 2.6 2.3 17 18 Coal India Ltd 18 206 (24) 16 7 7 4.2 3.5 62 58 Indian Oil Corp Ltd 17 133 (22) 14 8 6 1.0 1.0 13 15 UltraTech Cement Ltd 17 4,292 (12) 29 31 26 3.4 3.0 12 12 HDFC Life Insurance Co Ltd 16 576 (11) 67 36 29 17.2 14.4 24 23 Avenue Supermarts Ltd 16 1,843 (8) 50 86 66 16.1 13.0 21 22 NTPC Ltd 16 116 (21) 8 10 9 1.0 1.0 11 12 Bharat Petroleum Corp Ltd 15 510 (7) 65 13 11 2.4 2.1 19 21 Sun Pharmaceutical Industries Ltd 15 457 (9) 30 24 20 2.4 2.2 10 11 Source: Axis Capital, Bloomberg, CapitaLine 14 ENAM Holdings Pvt. Ltd.

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