Sector outlook by industry leaders

Banking: Infrastructure funding will drive business

 

Shyam Srinivasan

Shyam Srinivasan, MD & CEO, Federal Bank

When I look at banking and business in general for CY2020, as an avid cricket buff, I can’t but draw a parallel to the T-20 format of my favourite sport.

Every epic T-20 game is often multi-speed and typically goes down to the wire, keeping us all on tenterhooks. I see 2020 living up to its billing with an active start (power play) and a mixed middle (April to September) and a hyperactive festival season (Sept to December — à la the slog overs).

Businesses are already looking at catching up on missed FY20 targets and working to have a strong JFM (January, February, March) quarter. So, bankers will be back in business and many even may trade margins for volumes, just like run-rate management in T-20.

Post-Budget and post the financial year-end will see some stock take and readjustment of business models by banks in April-June, the traditional lean period.

I expect many infrastructure investment initiatives to kick off and the demand for long-term capital to come to the fore. However, in the light of select banks having material capital challenges and facing stress in certain segments of businesses , raising new capital may present some challenges. Yet, banks will find opportunities — both direct and collateral — in these initiatives (from infrastructure investments kicking off).

‘Digital invasion’

The advent of technology has changed the narrative of modern- day sport forever. Likewise digital invasion in Banking is now no longer a ‘nice-to-do’ activity, table stakes. Authorities have taken note of this and many enabling, yet security-creating, regulations have been rolled out.

The recently launched 24x7 NEFT (National Electronic Funds Transfer) and no MDR (Merchant Discount Rate) for certain types of transactions are just some examples. All this will force banks to readjust their delivery models and cost structures. In the near term, there will be additional cost of security implementation, but over time, they will even out.

Going rural

The emergence of players from small towns, away from the ‘arc lights of urban cities’, is palpable in sport, especially T-20. No different would be the focus on rural opportunities for banking, as India rapidly urbanises (migration from rural to urban). The ecosystem that needs to cater to them in products, infrastructure and skills will be investment and business opportunities.

And as we draw closer to the festival season, I believe this action will hot up and we will see a flurry of launches and partnerships that will help banks meet new and emerging needs, thereby creating new revenue streams. New products and partnerships will come to the fore, for example, structured lending leveraging the JAM (Jan Dhan-Aadhaar-Mobile) trinity.

2020 will be a humdinger of a year, indeed.

Auto: Technology, GST reduction to shape future

Shekar Viswanathan, Vice-Chairman and Whole-time Director of Toyota Kirloskar Motor

The demand for two- and four- wheelers in India in 2020 and beyond is currently being influenced by the following factors: the NBFC and banking sectors’ ability and willingness to lend freely to consumers; the speed of ‘uberisation’; the ease of ‘metroisation’; the harshness of urban congestion; the behavioural impact on the demand of millennials and the ageing population alike; and finally the cost of BS-IV vehicles versus BS-VI vehicles, with BS-VI vehicles slated to be introduced in 2020. While a few of these factors may have a larger influence on demand in comparison to the others, it is difficult, if not impossible, to quantify the demand impact of each of these factors as the variables are too many, too complex and dynamic. The auto-makers need to recognise that these factors will be at work as they calibrate supply to meet customer needs.

EV adoption

Alternative vehicle technologies such as electric vehicles are set to make a bigger mark in 2020 and will undoubtedly benefit from the low GST rate of 5 per cent. However, the other viable technology — self- charging electric vehicles — will continue to be taxed at a rate of 43 per cent despite contributing to lowering emissions and being fuel-efficient.

In any event, product launches incorporating either of these technologies will continue. The key issue is consumer acceptance of these technologies at the price points at which they are offered by different players.

No longer a ‘sin’

Under GST, automobiles are being tagged as ‘sin’ goods and slapped with high rates of tax. But 2020 may see a turnaround in government thinking, at least for the two-wheeler sector where even a 10 percentage point reduction in GST rates will see demand surge, and consequently tax collections will go upwards and not fall.

This reduction in GST rates should be a permanent one — this alone will enable long- term planning and assimilation of the latest technologies available by the automakers.

For 2020 particularly and to ensure long-term sustainability, vehicle manufacturers will stay focussed on conserving cash and staying profitable. Stakeholders such as vehicle dealers and auto- component suppliers are typically more vulnerable in economic slowdown situations.

While dealers will need to continue investing, keeping their workforce skilled and ready to serve the park population of vehicles, auto- component makers will need to ensure that the quality standards achieved by them continues. In doing so, dealers and auto component makers will need to stay financially responsible and solvent.

GST rates

Finally, the GST collections which fund both the Centre and the State governments will only remain buoyant if, and only if, GST rates are brought down by at least 10 percentage points across the board permanently.

In this regard, it is safe to state that the GST Council has significant responsibility in shaping the future of the auto industry.

Real Estate: A buyers’ market

Sangeeta Prasad, MD & CEO, Mahindra Lifespace Developers

The year 2019 has been one of introspection for India’s real-estate industry. Transformative reforms such as RERA (Real Estate (Regulation and Development) Act), the reduction of GST and the relaxation of FDI (foreign direct investment) norms have strengthened the foundation for the sector’s revival, notwithstanding economic headwinds. Real estate and infrastructure will continue to have a far-reaching impact on the country’s overall economic performance in the new decade. Here are few key trends that are to emerge stronger in 2020.

‘Right-sized, right-priced’

Affordable housing will contribute significantly to the growth trajectory of residential real estate, supported by incentives and a favourable regulatory environment. The current substantial inventory pan- India means that real estate will continue to be a buyer’s market driven by end-users. The demand for ‘right-sized, right-priced’ homes that meet both stated and unstated user needs straddles segments and is here to stay. Customer expectations are market-specific and continually evolving.

Credible, organised companies with access to capital and a good track record of development and delivery will gain trust and market share. Project execution and delivery will remain a priority for developers with good governance practices. The consolidation theme, which has been playing out over the past few years, will continue.

Shared accommodation or ‘co-living’ is evolving at a rapid pace and will gain stronger ground across major economic centres of India, driven by a propensity among millennial students and working professionals for organised formats.

De-risking

Lastly, decision-making cycles for new/ incremental investments are getting longer, even as companies are looking at ways to de-risk via subcontracting, outsourcing and warehousing. Opportunities to convert capex into opex — short- term leases, built-to-suit and prefabricated rental factories — will continue to be favoured.

Our experience... has been that start-ups and skill development organisations prefer planned industrial ecosystems which can help them scale and go to market faster.

India has a significant opportunity to be in the contention for global MNCs’ ‘China+1’ strategy. It is an exciting time for India’s real- estate industry, as it continues to transform from being a brick-and-mortar- driven sector to a service-driven product offering. The government can provide further impetus for the sector to grow at a consistent pace by granting it infrastructure status, implementing single- window clearance and revising income-tax slabs to accelerate consumer demand.

IT: Convergence of physical and digital worlds

Sanjay Jalona, CEO and MD, L&T Infotech

The global opportunity for digital transformation is unprecedented. Even as start-ups are disrupting every industry, the leaders in those industries are responding with innovative approaches. Both new and old companies are mastering digital ways of working and achieving amazing outcomes. Their growth and transformation is tech-powered, ‘@pace and @scale’. Regardless of some macroeconomic headwinds, this is the opportunity that makes us optimistic about the next year and the decade.

Tech enablers

We believe 2020 will present opportunities for technology players to act as enablers that can help enterprises in attaining digital and automation goals, delivering innovation and agility, addressing security vulnerabilities, managing data complexities and ultimately transforming their businesses.

While there are external factors beyond our control, the need for breakaway enterprises in every industry is to master four essential plays. These are: digitising the core, being data-driven, transforming customer and employee experiences, and using efficient information technology operations as a lever of transformation. Thus, we are confident that the demand for new- age exponential and innovative technologies will gain momentum in 2020.

We also believe that the evolutionary aspect of mixing digital and physical worlds is going to be the new variable in the technology industry in 2020. While the present prominence is related to digital services, the untapped and long-term business opportunity, rather, lies in the convergence of the physical and the digital worlds.

The way ahead thus lies in creating innovative technology that intersects the physical and digital worlds and enables businesses to be relevant and future-proof.

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