Monthly Report – December 2016

Monthly Report – December 2016
bruce.arun@bcg.com
sangita.das@cii.in
singhal.mani@bcg.com
sandhya.satwadi@cii.in

Summary growth trends for the month of December 2016
Overall, December saw volumes de-growing by ~ 2% for the industry (survey respondents)
North and East bore the brunt of de-monetization with volume de-growth of 3% each as
against 0% and 1% de-growth in Nov'16. South was affected the least amongst all regions
with volume de-growth of only ~ 1.6% (2% growth in Nov'16). West de-grew by ~2% (1% degrowth
in Nov'16)
Automotive sector were badly it with ~19% de-growth (5% de-growth in Nov'16); led to Auto
Components also slowing down to a mere 2% growth with muted new order inflows. Auto
component respondents found their primary to be lower than plan by as much as ~10%
B2B businesses such as Welding (~ 13%) and Material Handling Equipment (~ 11%) grew
strongly relative to other sectors such as Engineering products (~ 5%), Metals and Mining
(~4%), Auto Components (~2%) and Building Material (~2%) segments
Full effect of de-monetization will be felt over Q4FY2017 as order backlog gets cleared
1

Survey Results
2

Survey results: December 2016 performance
Summary – all respondents Regional growth – All respondents 1
YoY growth %
12
8 6%
4%
4
0
-4
Jul’16
9%
8%
Aug ’16
8%
8%
Sep ’16
5%
5%
Oct’16
Value
1% 1%
Nov’16
Volume
-2% -2%
Dec’16
North:
-2% (-3%)
20
15
10
5
0
-5
-10
-15
-20
Peer growth
comparison
Volume growth (%)
20
Value growth (%)
All industry average
20
15
10
5
0
-5
-10
-15
-20
Industry growth
comparison
Volume growth (%)
Engg
prod
BM
Auto
comp
Welding
MM
MHE
-20 -15 -10 -5 0 5 10 15 20
Value growth (%)
All industry average
West:
-2% (-2%)
South:
-1%
(-2%)
East:
-2% (-3%)
Region
xx:
xx%
Value
growth yoy
(yy%)
Volume
growth yoy
1. Not all respondents filled in regional growth numbers. Average of regional growths therefore, may not coincide with national average. The growth numbers reported are on an year-on-year basis
Note: Building materials (BM) industry refers to cement, cementitious products, paints, tiles, roofing, scaffolding. Industry average is displayed only when there are 3+ responses per industry. Other
industries where responses were received include: consumer durables, chemicals, packaging, Consulting services, Sugar, IT, theme parks, Real estate. Regional averages may not fully align with
national average because of different regional exposures of respondent industries. All averages are 'simple averages' (i.e. not weighted by size of company). MHE – Material Handling Equipment. BM
= Building Material, MM= Metals and mining, Auto comp. = Auto components
Source: CII BCG Growth Index Survey; Industry association data on automotive sales
3

Building materials grew ~1% but volume growth muted
Peer growth comparison
Regional growth – All respondents 1
Volume growth (%)
Turnover < Rs 500 Cr
25
20
15
10
5
0
-5
-10
-15
-20
-15 -10 -5 0 5 10 15 20
Value growth (%)
All industry average All industry median
• Respondents witnessed value growth of ~ 1% but volume
growth muted
North:
-3% (-3%)
West:
1% (0%)
East:
0% (0%)
• South bucks the demonetization trend and grows at ~2%
• With smaller projects put on hold, respondents are expecting
muted demand for at least next two quarters
• Rising oil prices to put pressure on input prices and reduce
profitability further
South:
1%
(1%)
Region
xx:
xx%
(yy%)
• Sentiments from survey respondents:
"Due to demonetization - manufacturing plans get affected as there
is uncertainty in market. Sales volume may get affected”
Value
growth yoy
Volume
growth yoy
- Mr. Muralidhar Madiraju, AVP, Visaka Industries Limited
1. Not all respondents filled in regional growth numbers. Average of regional growths therefore, may not coincide with national average. The growth numbers reported are on an year-on-year basis.
Building materials include cement, cementitious products, paints, tiles, roofing, scaffolding , and glass. No. of "visible" data points on the graph is less than the number of respondents due to
overlaps. Source: CII BCG Growth Index Survey
4

Material Handling Equipment witnessed growth at
11% across India with strongest growth in West
Peer growth comparison
Regional growth – All respondents 1
Volume growth (%)
20
15
Turnover < Rs 500 Cr
10
5
0
-5
-10
0 4 8 12 16 20
Value growth (%)
All industry average All industry median
• Respondents witnessed revenue growth of ~11% and
volume growth of ~12%
• North and East experiencing price inflation as against
price deflation in South – driven by product mix
• Respondents witnessed a temporary slowdown in sales
but new order inflow growth largely remains positive
• Demonetization led to order deferment majorly in Auto,
FMCG and building materials segment – other segments
largely unaffected
• Order book position continues to be strong and growing
North:
4% (1%)
West:
11% (11%)
South:
10%
(11%)
East:
9% (4%)
Region
xx:
xx%
Value
growth yoy
(yy%)
Volume
growth yoy
1. Not all respondents filled in regional growth numbers. Average of regional growths therefore, may not coincide with national average. The growth numbers reported are on an year-on-year basis.
MHE – Material handling equipments. Source: CII BCG Growth Index Survey
5

Engineering products registered healthy growth at
5%, with strongest growth in North and South
Peer growth comparison
Regional growth – All respondents 1
Volume growth (%)
20
Turnover < Rs 500 Cr
15
10
5
0
-5
-10
-15
-15 -10 -5 0 5 10 15 20
Value growth (%)
All industry average All industry median
• Respondents witnessed a strong growth in all regions
• 80% of respondents posted positive growth both in
value and volume terms
North:
8% (6%)
West:
5% (6%)
East:
5% (2%)
• North and South regions driving growth despite
demonetization
• Many of the respondents opine de-monetization effect to
be a temporary phenomenon and normalcy will be
restored by end of financial year
South:
8%
(8%)
Region
xx:
xx%
(yy%)
• Order inflows and order book continue to grow in general
• 80%+ respondents experience growth in new
order inflow
Value
growth yoy
Volume
growth yoy
1. Not all respondents filled in regional growth numbers. Average of regional growths therefore, may not coincide with national average. The growth numbers reported are on an year-on-year basis.
MHE – Material handling equipments. Source: CII BCG Growth Index Survey
6

Welders registered healthy growth at 13%, with
strongest growth in North and East
Peer growth comparison
Regional growth – All respondents 1
Volume growth (%)
20
Turnover < Rs 500 Cr
15
10
5
North:
13% (12%)
0
0 5 10 15 20
Value growth (%)
All industry average All industry median
• Respondents witnessed a strong growth of 14% primarily
driven by exports and growth in North and East regions
• None of the survey respondents experienced a
negative growth in revenue or volume
West:
8% (6%)
East:
13% (14%)
• Order book growth continues to be positive driven by
new order inflows
• Respondents expect de-monetization effect esp. cash
crunch to be temporary and are long term positive
South:
9%
(6%)
Region
xx:
xx%
(yy%)
"Less availability of cash in market.. big expectation for
big ticket Government investment esp. in Infra space"
- Mr. Gautam Banerjee, MD, Kaiyuan Welding
Value
growth yoy
Volume
growth yoy
1. Not all respondents filled in regional growth numbers. Average of regional growths therefore, may not coincide with national average. The growth numbers reported are on an year-on-year basis.
MHE – Material handling equipments. Source: CII BCG Growth Index Survey
7

Metals and Mining grew at 4% driven by South
Peer growth comparison
Regional growth – All respondents 1
Volume growth (%)
25
20
15
10
5
0
-5
-10
Turnover < Rs 500 Cr
-15
-15 -10 -5 0 5 10 15 20
Value growth (%)
All industry average All industry median
• Metal and mining respondents posted value growth of 4%
and volume growth of 1% driven by South region
• Demonetization adversely effected planned sales with
most respondents indicating 5%-10% dip in primary sales
and 0% -5% dip in secondary and tertiary sales
• Order book growth positive with a slow down in new
order inflows
• Competition from international players to put price
inflation in check for certain metals
• Respondents adopting a cautious approach and waiting
for budgetary proposals
North:
3% (3%)
West:
3% (1%)
South:
6%
(4%)
East:
1% (1%)
Value
growth yoy
Volume
growth yoy
1. Not all respondents filled in regional growth numbers. Average of regional growths therefore, may not coincide with national average. The growth numbers reported are on an year-on-year basis.
No. of "visible" data points on the graph is less than the number of respondents due to overlaps. Source: CII BCG Growth Index Survey
Region
xx:
xx%
(yy%)
8

Automotive components growth remains muted at ~ 2%
Peer growth comparison
Regional growth – All respondents 1
Volume growth (%)
25
20
15
10
5
0
-5
-10
Turnover < Rs 500 cr
-15
-15 -10 -5 0 5 10 15 20
Value growth (%)
All industry average All industry median
• Demonetization adversely effected the auto sales but
new models driving demand
o Hero, Bajaj and TVS registered 34%, 11% and 8% drop
o Maruti, Hyundai and Mahindra registered 4% - 8% drop
o Tata, Toyota, Renault and Nissan grew 10%-35%
• Survey respondents indicate fall in tertiary & primary
sales but expect a stronger growth in future
• Respondents on "wait and watch" mode for GST and
budgetary proposals
• Order book position remains mixed with growth in basic
components such as molds vs de-growth in more
complicated finished components like wiring sets
North:
2% (1%)
West:
1% (0%)
South:
4%
(3%)
East:
0% (0%)
Value
growth yoy
Volume
growth yoy
1. Not all respondents filled in regional growth numbers. Average of regional growths therefore, may not coincide with national average. The growth numbers reported are on an year-on-year basis.
No. of "visible" data points on the graph is less than the number of respondents due to overlaps. Source: CII BCG Growth Index Survey
Region
xx:
xx%
(yy%)
9

De-monetization impact
10

De-monetization
Tertiary sales 2% - 13% lesser than planned numbers
Auto component and building product segments faced the brunt of de-monetization
CII BCG Growth Index Survey results
De-monetisation effect on sales compared to planned numbers for December 2016
Primary sales Secondary sales Tertiary sales
Industry
-2.2%
-1.7%
-2.7%
Auto components
-9.5%
-4.2%
-12.5%
Engineering products
0.0%
0.4%
0.6%
Metals and mining
MHE
-3.8%
-0.6%
-4.2%
-1.7%
-4.2%
-2.5%
Welding
-2.5%
-1.7%
-2.5%
Building products
-6.0%
-7.2%
-7.5%
0
-30 -20 -10 0 10 20
-30 -20 -10 0 10 20
-45 -30 -15 0 15 30
Source: CII BCG Growth Index survey
Avg
Max
Min
11

De-monetization
Order book grew by ~ 4% backed by new order inflows
Auto component and building product segments saw the biggest declines in order book position
CII BCG Growth Index Survey results
YoY growth in closing order book and new order inflow for December 2016
Industry
Auto
components
Engineering
products
Metals &
mining
Closing order book
4.4%
-1.3%
5.0%
4.2%
New order inflows
4.9%
0.6%
5.0%
0.8%
MHE
9.4%
15.6%
Welding
7.5%
5.0%
Building
products
-0.8%
-5.0%
0
-20 -10 0 10 20 30
-10 -5 0
5 10
50
Source: CII BCG Growth Index survey
Avg
Max
Min
12

De-monetization
Credit off take decelerated to 4.8% for November 2016
Average credit growth for Jan'16–Oct'16 at 8.8%
Outstanding non-food credit for November 2015 – November 2016
Rs (T)
80
10.8
YoY growth (%)
12
YoY
growth
Nov'16 (%)
60
40
8.8
8.3
9.3
9.8
9.9
8.8
8.4 8.5 8.6 9.0 9.0 9.0 9.1 9.2
9.1
8.4
8.4
8.3 8.2
7.9
26.7 27.0 27.2 27.5 27.3 26.6 26.6 26.5 26.4 26.2
9.4
26.5
9.3 9.1
6.7
26.0 25.8
4.8
9
6
10.3
-3.4
20
14.4 14.6 14.7 15.0 15.4 15.8 15.7 15.7 15.6 15.6 16.6 15.8
15.4
3
7.1
13.0 13.3 13.5 13.7 13.9 14.1 14.2 14.4 14.5 14.6 15.0 15.0 15.0
15.2
MoM growth
(%)
0
Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16
0.5 1.4 1.2 1.2 1.1 0.1 0.1 0 0 0 3.1 -1.9 -1.3
0
YoY Growth
Agriculture and allied activities
Industry
Services
Personal loans
Source: RBI, BCG analysis
13

De-monetization
New project proposals fell by ~ 50% post de-monetisation
announcement
New project proposals of Rs 125k crs
for Dec'16 quarter lowest for the year
~50% drop in new project proposals
post de-monetization announcement
Rs '000 crores
400
586
300
782
533
489
No. of proposals
800
120
100
600
80
Rs '000 crores
227 177
-47%
No. of projects
200
404
400
60
336
40
82
100
118
155
194
125
200
20
43
0
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
0
0
Oct 01 to Nov 08 2016
Nov 09 to Dec 31 2016
New proposals
Project value
No .of
days
39 53
Project value
Source: CMIE, press runs
14

De-monetization
Steel production growth decelerated to 5.6% as against
average growth of 16.7% for Aug'16 – Nov'16
Steel production and YoY growth rate for Nov'15 – Nov'16
YoY Growth
18
16
14
12 7.2
7.4
7.9
7.3
Duties on Chinese imports
8.6
8.0
8.2
7.7
7.5
17.0%
8.6
16.3%
8.5
Million tonnes
16.9%
10
8.5
7.6 8
10
8
6
6.1%
5.6%
6
4
2
3.4%
3.2%
2.4%
4
0
-2
-4
-6
-8
-6.8%
-4.4%
-2.8%
-0.5%
-0.5%
2
0
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
/
YoY growth
Production
Source: Office of Economic Adviser, press runs
15

De-monetization
Cement production fell to 12 month low of 20.5 MnT
Cement production and YoY growth rate for Nov'15 – Nov'16
YoY growth%
Million tonnes (MnT)
22
20
18
16
14
12
10
20.4
23.9
25.9
9.0%
25.5
13.5%
26.8
11.9%
24.7
24.9
26.1
10.3%
23.3
22.3
22.6
24.3
20.5
30
20
8
6
4
2
0
3.2%
4.4%
2.4%
1.4%
3.1%
5.5%
6.2%
0.5%
10
-2
-1.7%
0
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
/ YoY growth
Production
Source: Office of Economic Adviser, press runs
16

Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
De-monetization
Debit card and m-wallet usage hit an all time high
Debit card & m-wallet usage went up 67% & 39% resp. in Nov'16 as against 6 month avg. of 3.3%
Debit card posted 67% growth in
volume 1 backed by 44% growth in value
M-wallet posted 39% growth in volume
but value growth fell 2%
Rs '000 crores
Million transactions at POS
Rs '000 crores
Million transactions
40
235
250
4
138
150
30
20
10
110
15
134
129 131
113 118 118
105
13 13 15 16 16 17 18
125
16
141
22
32
200
150
100
50
3
2
1
49 49
53
49 50
2 2 2 2 2
59
59
3 3
71
75
3 3
100
3 3
100
50
0
0
0
0
No. of transactions
Value
1. Refers to PoS usage
Source: RBI
17

Industry Deep Dives
18

Building Materials
19

Building Materials
Residential sales saw 20% - 55% decline for Q4CY2016;
commercial space remains strong with falling vacancies
YoY Growth for Q4CY2016
Residential space
New
launches
Sales
Commercial space
Transaction
space 1
Vacancy
rate
Remarks
Mumbai
Delhi NCR
Kolkata
Chennai
Pune
Bengaluru
Hyderabad
-77% -50% -6% 5%
-73% -53% NA 6%
-15% 2 -20% 2 NA NA
NA -31% NA 12.5%
-64% -35% -31% 8.2%
-65% -45% NA 6%
NA -40% 31% 2 9-10%
Limited supply constrained
commercial space transactions
Overall transaction volume stable at
7.3 mn sq ft for 2016
Ongoing commercial space
development to drive future demand
for residential sales
Strong commercial space demand
due to space crunch. Vacancies
plummet from 22.5%
Lack of quality space led to fall in
commercial space transactions
Commercial space recorded 11.4 mn
sq ft transactions – a 5yr high
Commercial space recorded one of
the highest ever volumes
1. Indicates growth in amount of space transacted 2. Value is for H2CY2016 as Q4 numbers were no available
Source: Knight Frank, press runs
20

Building Materials
Paint industry facing headwinds from rising input prices
and slowdown in auto and residential real estate segment
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Crude oil 1 prices rise 41%
during 2016
Automotive sales fall 45%
Dec'16 qtr vs Sep'16 qtr
Construction activity
witnessing slowdown
$/bbl
60
50
40
30
20
41%
OPEC agrees to first
oil cuts in 8 years
WTI crude
Y Axis
3.0
2.5
2.0
1.5
0.0
1.7
0.1
0.2
1.5
1.8
0.1
0.3
1.5
2.0
0.1
0.3
1.6
CV
2.2
0.1
0.3
1.9
PV
2.1
0.1
0.3
1.8
-45%
1.5
0.0
0.2
1.2
2W
1.2
0.1
0.2
0.9
• Residential market in
downswing with new
launches down in 15%-
80% range for Q4CY2016
• New capex project
proposals fell by 50% post
de-monetization
announcement
• Cement production fell to
12 month low of 20.5 MnT
• Industry hopeful of
demand pickup post PM's
announcement of interest
subvention scheme for low
income housing and falling
interest rates
1. WTI
Source: EIA, SIAM, press runs
21

Building Materials
Infrastructure credit offtake de-grew 8% due to demonetization
chaos
Credit outstanding (Rs billion)
12,000
10,622 10,690
10,358 10,411 10,448
750 756 742 739 746
924 907 918 937 939
9,000
1,098 1,105 1,080 1,165 1,166
1,760 1,778 1,793 1,789 1,794
6,000
10,393
745
913
1,161
1,775
9,978
10,039
9,895
9,859
787 766 755 758
941 951 910 883
1,112 1,109 1,102 1,138
9,416
9,438
719 725
840 851
1,038 1,044
9,757
9,619
787 733
838 863
1,114 1,057
1,756 1,827 1,840 1,835 1,603 1,640 1,810 1,654
Growth%
Nov'16
vs Nov'15
-8
-3
-5
-4
-7
3,000
5,826 5,865 5,915 5,992 6,045 5,799
5,382 5,386 5,288 5,245 5,217 5,178 5,208 5,311
-9
0
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Growth
MoM (%)
2
1 0 2 1 -3 -4 1 -1 0 -4 0 3
-1
Construction
Other Infrastructure
Power
Telecom
Roads
Note: Includes repayments as well
Source: RBI
22

Material Handling Equipment (MHE)
23

MHE segment
Adoption of newer technologies by companies changing
the face of Indian MHE industry
In developed economies, equipments are in
advanced or Semi-advanced stage
Indian companies are embracing various newer
technologies to increase productivity & efficiency
Equipment
Category
Storage & Handling
equipments
Technology
Level
Basic
Efficiency
Low
Control
systems
• More comprehensive and advanced
interfaces such as warehouse control
system provides single point interface
with upper-level software
Trollys Basic Low
Engineering System
Advanced WMS
based
Very High
Industrial trucks Semi-advanced Medium
Lifting Equipments Semi-advanced Medium
Bulk Material
Handling
On Rail Transfer
Carts
Semi-advanced
Basic
High
Low
Conveyors Advanced High
For India, most of the equipments are low to medium
level. Availability of capital and skilled labors make
adoption of advanced equipments difficult for companies
Voicerecognition
systems
M2M
communicat
ions
Rise of
electric
drives
IOT
• Enables machine operators to
communicate with computer via headset
• Creates safer environment and increase
productivity
• An emerging technology making tracking
and maintenance of machinery easy
• Machines installed at any corner of the
world are connected to centralized system
where each one is analyzed for abnormality
• Industry is shifting towards electric drive
with an objective to increase energy
efficiency
• The incorporation of sensors and RFID tags
is increasing to facilitate faster movement
and error-free procedures
24

MHE segment
Simultaneously, companies are launching innovative
products to meet customers requirements
Products
Cleanscrape
Air Cleaner
Benefits
• A revolutionary innovation in belt cleaning technology that incorporates a
matrix of tungsten carbide scrapers and is tensioned against the belt.
• Filter dust-bearing air at the transfer pints without the ductwork, large fans
and energy costs of central “bag house” systems, returning captured
material directly back into the stream
Cranes
Gottwald
automated guided
vehicles
Truconnect®
Smarton Cranes
• Cranes with V-type girder which reduces dead weight, reduces
oscillations, and double the service life of the girder, thus providing
increased safety and reliability
• An unmanned, software-controlled container transporters which provide
an efficient link between the harbor quay and the stackyard
• It collects real usage data through a remote connection, provides a
periodic report that illustrates the actual use of the hoist, making it a great
tool for improving safety, optimising maintenance and assessing the hoist
lifecycle -
• A next generation Smart Crane which is easy to operate, with minimum
human supervision and helps in reducing downtime.
• Smarton is built with smart and unique features like Radio controllers,
computer tablets, the Remote Operating Station and the Crane
Management System, to make operations more efficient and safe
25

Engineering Products
26

Engineering Products
IIP for Nov'16 grew by 5.7% as against -1.8% drop in Oct'16
Growth primarily driven by low base for Nov'15 - Diwali month
IIP grew by 5.7% for Nov'16 – growth
driven by low base effect
%
Capital goods turned positive for first
time since Oct'15 and grew 15%
%
10
0
-10
5.7%
1.9%
2.2%
0.3% 1.3%
0.7%
-1.6% -1.3%
-0.7%
-2.5%
-1.8%
Jan’16 Mar’16 May’16 Jul’16 Sep’16 Nov’16
50
0
-50
15.0%
-9.3% -12.5%
-21.6% -15.3%
-21.6%
-25.3% -29.4%
-22.4% -26.9%
-16.1%
Jan’16 Mar’16 May’16 Jul’16 Sep’16 Nov’16
Consumer non-durables grew 2.9% -
fastest since Oct'15
Consumer durables grew at a strong
9.8% for Nov'16
%
%
20
0
-20
1.2% 0.1%
2.9%
-3.2%
-1.6% -0.5%
-4.9%
-2.0%
-2.9%
-4.9% -11.0%
Jan’16 Mar’16 May’16 Jul’16 Sep’16 Nov’16
20
10
0
13.9%
10.4%
11.8%
10.1% 9.8%
5.6%
5.9% 5.4% 5.8%
2.1%
0.6%
Jan’16 Mar’16 May’16 Jul’16 Sep’16 Nov’16
Source: Ministry of Statistics and Programme Implementation
27

Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Engineering Products
Manufacturing entered into contraction mode during
December 2016
PMI Index for Dec'16 fell to 49.6
Demonetisation weighed on
manufacturing sector
PMI Index
56
PMI
• Entered contraction phase for the first time
during 2016
54
52
54.4
52.6
52.4
52.3
52.1
51.7 51.8
51.1 51.1
50.7
50.5
• Both new orders and production saw
contraction for the first time in 2016
– Resulted in lower purchases and lower
pre-production inventory for the first time
in 13 months
• Work on existing orders impaired by cash
crunch - backlogs rose for 7th consecutive
month
0
49.6
50
• Post production inventory fell for 18th month
but at its slowest pace
• Respondents signalling unchanged
workforces though payroll numbers fell
marginally
Source: Nikkei India Manufacturing PMI
28

Welding
29

Welders
Demand drivers growth hit historic lows - future growth
dependent on uptick in infra, real estate and auto sectors
Automotive Real estate Infrastructure
• Automotive sales de-grew ~ 19% for
Dec'16 – highest in last 16 years
• With rural demand drying up, 2W
faced the brunt of de-monetization -
sales fall by 22%
• PV and CV saw sales declining by -
1% and -5% respectively
• Players cut down production to adapt
to the falling sales – production fell
by 22%
• Industry awaiting budgetary
proposals to boost consumer
demand
• De-monetisation adversely effected
the residential real estate market
• New launches and sales fell in 15% -
80% range for Q4CY2016 across
Tier 1 cities
• Commercial space remains stable
with improving vacancy levels
• PM announced interest subvention of
3% - 4% for low income housing
• SBI, HDFC and ICICI cut base rates
by 50-90 bps and other banks are
following suit
• Industry hopeful of renewed demand
on back of falling interest rates and
govt's push on housing
• $10 billion to be spent over next five
years for developing airport
infrastructure
• Infrastructure output growth
decelerated to 4.9% for Nov'16
following 6.6% growth in Oct'16
• Infrastructure credit deployment
declined to 8% for Nov'16
• Railways spent Rs 12,000 crs during
the year on new lines - going slow
on further investments due to fund
constraints and mounting loses
• Road laying not picking up with
highway construction pace at
513km/month for 7MFY2017 against
FY2016's 502km/month
• Private investment in infrastructure to
be limited - govt. spend needed for
rejuvenating infra space
Source: Infrastructureindia.gov.in, SIAM, press runs, analyst reports
30

Metals and Mining
31

Metals and Mining
Mining output rose 3.9% for Nov'16 despite demonetization
– full effect to be evident over Q1CY2017
Mining posted a strong growth of 3.9%
backed by improving coal production
YoY%
Basic metals production growth
decelerated to 4.8% YoY for Nov'16
YoY%
10
0
-10
5.0%
5.3%
1.5%
0.7%
1.7%
0.3%
0.8%
3.9%
-0.7%
-3.2%
Jan’16 Mar’16 May’16 Jul’16
-5.9%
Sep’16 Nov’16
20
0
-20
13.7%
11.1% 7.6%
4.4% 4.2% 4.8%
0.1%
1.0%
-0.3% -0.8%
-4.0%
Jan’16 Mar’16 May’16 Jul’16 Sep’16 Nov’16
Fabricated metal products grew at a
strong 5.2% despite de-monetisation
YoY%
Non-metallic mineral products de-grew
by 0.7% for Nov'16
YoY%
20
0
-20
13.5%
8.6%
5.7%
6.3%
5.2%
0.3%
1.2%
-3.1% -1.9%
-6.4%
-10.8%
Jan’16 Mar’16 May’16 Jul’16 Sep’16 Nov’16
20
0
-20
6.3% 11.1% 9.3%
3.4%
5.5%
1.0%
2.2% 2.7% 3.2%
-0.7%
-0.7%
Jan’16 Mar’16 May’16 Jul’16 Sep’16 Nov’16
Source: Nikkei India Manufacturing PMI
32

Metals and Mining
Steel sales grew by 5.2% despite demonetization
Speculative activity – anticipation of price increases - drove up steel sales in Dec'16
Steel sales grew 5.2% YoY and 17.1%
sequentially
YoY growth %
15
10
5
0
-5
5.8
Apr’16
7.4
6.8
Jun’16
6.6
7.3 7.1
Aug’16
7.1
Oct’16
million tonnes
6.2
7.2
5.4% 5.6%
5.2%
4.5%
0.9%
-4.1%
YoY Growth
1.0%
14.3%
-1.0%
Dec’16
Steel consumption (mn tonnes)
9
6
3
0
Future growth dependent on demand
revival from construction sector
• Exports grew at a strong 92% for Dec'16 but
constitute only 10% of Dec'16 sales
• Nov'16 witnessed dealers stocking up by
using de-monetised currency
• Speculation on price hike in Jan'17 prompted
large buyers to stock up in Dec'16
• Absorption of existing inventory necessary
before new demand comes in
• Construction sector, biggest demand driver for
steel, and automotive sector facing de-growth
from de-monetisation
• Slowing domestic demand may constrain
domestic price increase ability
• Rising coking coal prices (~ 2.1x increase
from $90/ton in Jul'16 to $190/ton in Dec'16)
may constrain margins
Source: Joint Plant Committee, press runs, analyst reports
33

Automobile and Auto Components
34

Automobile and Auto Components
Automotive industry de-grew by 18.6%, sharpest fall in
last 16 years, thanks to 'cash dry' economy
Passenger vehicle (PV) Commercial vehicle (CV) 2-wheelers
Volume growth (%)
80
20
0
-20
-20 0 20
All industry average
80
Value growth (%)
Volume growth (%)
60
0
-10
-20
-30
-30 -20 -10 0 60
All industry average
Value growth (%)
Volume growth (%)
150
100
50
0
(50)
(100)
(100) (50) 0 50 100 150
Value growth (%)
All industry average
• PV industry de-grew by ~1.5% due
to cash crunch owing to
demonetization
• Except Tata’s Tiago and few models
of Maruti (Breeza, S‐Cross &
Baleno) all have experienced the
downfall
• Maruti's UV segment growth (75%
YoY growth) provided some
cushioning to the free fall
• CV segment also posted negative
growth territory ; (-5.1% YoY)
• In December 2016, except for Ashok
Leyland, most OEMs reported sales
declines across segments
• While M&M posted overall positive
growth, thanks to a strong
performance by its small CVs (both
less-than-3T and above-3T vehicles)
• Freight transport demand has been
sizeably impacted due to a
slowdown in supply chains
• The overall two-wheeler segment
posted a huge decline of 22 %; the
previous record low was 19 percent
in December 2000
• Motorcycles deepened their slide in
December by 22.5%, with 50 percent
of bike sales coming from rural India,
the slowdown in that sector also
contributed to the drop
Source: CII BCG Growth Index Survey, Industry association data on automotive sales
35

Automobile and Auto Components
PV segment de-grew by 1.5% owing to demonetization
UV sales has shown significant improvement
Domestic sales break-up of total passenger vehicles sales
# vehicles (in '000s)
300
231 232
13 14
200 45 50
234
16
54
257
17
64
242
17
62
232
14
59
223
13
56
260
18
64
259
15
66
278
16
67
281
15
71
241
14
54
228
11
58
YOY Growth %
(Dec'16 vs Dec'15)
-18.8
29.9
100
173
168
164
176
163
159
154
178
178
195
195
174
159
-8.1
0
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
PV
growth
YoY (%)
10 1 2 5 11 6 3 17 17 20 4
2
-1
Vans
Utility Vehicles(UVs)
Passenger Cars
Source: SIAM, BCG Analysis
36

Automobile and Auto Components
Commercial vehicles sales dipped 5% in Dec'16, though
LCV segment provided some cushion
Domestic sales break-up of total commercial vehicles sales
# vehicles (in '000s)
80
80
YOY Growth %
(Dec'16 vs Dec'15)
60
40
66
62 62
62
57
37
57 56
54
52 53
54
26
29 29
25
46
26 25 23
24
21 21
23
17
-12.4
20
31
33
33
43
30
32
33
31
32
37
40
28
31
1.2
0
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
CV
growth
YoY (%)
11 18 20 22 17 17 6 0 2 -2 12 -12
M&HCVs
-5
LCVs
Source: SIAM, BCG Analysis
37

Automobile and Auto Components
Two wheelers sales hit the most due to demonetization,
declined by 22% - largest decline since 2000
Domestic sales break-up of total two wheeler sales
# vehicles (in '000s)
2,000
1,500
1,363
54
1,168
57
437
1,000
386
1,362
66
436
1,468
71
450
1,560
67
468
1,516
75
455
1,468
75
450
1,476
75
504
1,649
75
568
1,869
78
604
1,801
88
568
1,243
76
389
910
64
YOY Growth %
(Nov'16 vs Nov'15)
13.5
500
0
725
Dec-15
872
Jan-16
860
Feb-16
947
Mar-16
1,025
Apr-16
985
May-16
944
Jun-16
897
Jul-16
1,006
Aug-16
1,187
Sep-16
1,145
Oct-16
778
Nov-16
284
562
Dec-16
-26.4
-22.5
2W
growth
YoY (%)
-3 3 13 11 21 10 12 14 26 22 9
-6 -22
Mopeds
Scooter/Scooterettee
Motor cycles/Step- Through
Source: SIAM, BCG Analysis
38

Jul-15
Jul-15
Aug-15
Aug-15
Sep-15
Sep-15
Oct-15
Oct-15
Nov-15
Nov-15
Dec-15
Dec-15
Jan-16
Jan-16
Feb-16
Feb-16
Mar-16
Mar-16
Apr-16
Apr-16
May-16
May-16
Jun-16
Jun-16
Jul-16
Jul-16
Aug-16
Aug-16
Sep-16
Sep-16
Oct-16
Oct-16
Nov-16
Nov-16
Dec-16
Dec-16
Overall economic indicators: December 2016 review
Growth Indices
Balance of payment measures
Commercial vehicle sales
Economy statistics
Latest
month
Previous
month
India GDP growth est. (%) 5 6.4 7.1
China GDP growth est. (%) 5 6.4 6.7
Inflation – WPI (%) 1 3.4 3.2
Current account
Exports growth 1 (%) 1
(y-o-y)
Oil imports growth 1 (%) 1
(y-o-y)
Non-oil imports growth 1 (%) 1
(y-o-y)
Latest
month
5.7
14.6
(3.0)
Previous
month
4.6
3.1
(4.0)
'000
-5%
80
+18%
59
62
60
57
52
54
40
80
63
62
57
62 66
52
59
56 52 53
20 46
54
0
BSE Sensex 6 26,626 26,652 Trade deficit (US$ Bn) 1 (10.4) (8.3)
Select industry metrics
Capital account
s
Passenger vehicle sales
IIP (%) 7
(y-o-y)
5.7
-1.9
NRI deposits (US$ Bn) 2
121
124
Energy req growth 7 (%)
(y-o-y)
5.3
0.4
FII flows (US$ Mn) 6,8
(1,202)
(2,688)
'000
+17%
-5%
PV Auto vol growth 1 (%)
(y-o-y)
CV Auto vol growth 1 (%)
(y-o-y)
Cement production (Mn Tn) 6
Steel production (Mn Tn) 1
(1.5)
(5.6)
20.6
8.0
4.0
(11.0)
24.3
8.3
FDI flows (US$ Mn) 7
Forex reserves (US$ Bn) 1
Currency competitiveness 6
2,043
352
67.8
2,380
365
68.3
300
250
200
150
100
50
0
269
259
222 231 234 242
223
278281
222 232 252 232 257 232 260 241228
*Not comparable as one of the data 1. As of Dec and Nov 2. Total outstanding values as of Nov and Oct 3. For Dec and Nov. 4. As of end Sept and Aug 5. Average of recent GDP estimates for FY16-17
for China and India made by leading international financial institutions 6.As in Dec and Nov 7. As of Nov and Oct 8, Includes only equity flows. As of Nov and Oct
Note: PV and CV refer to passenger and commercial vehicles resp.
Source: RBI, Thomson One, Ministry of Finance monthly Report, Capitaline, EIS, BCG analysis, Press Search.
39

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