Budget impact on FMCG

    Indian FMCG companies have been major beneficiaries of robust consumption demand led by favourable demographics, rising income levels and increased urbanisation. Overall sales growth of the companies has been strong despite continued high food inflation for past several months. The momentum witnessed by the rural economy has also helped to a great extent since rural India forms 40-50% of total FMCG demand. 

However, rising input costs and heightened competition has dented profitability.  Though companies resorted to price hikes, they have been either with a lag or insufficient to cover escalated costs.

While the Union Budget 2011-12 has attempted to pep up demand, it has not addressed concerns of inflation though the Finance Minister expects average inflation to come down in next financial year.

Budget proposals ::  
Proposal: Exemption limit for the general category of individual taxpayers enhanced from Rs 1,60,000 to Rs 1,80,000

Impact: Higher disposable income with consumers

Companies:  Positive for the sector

Proposal: Central excise duty maintained at 10 per cent

  Impact: Amid high inflation levels, not raising excise duty has been welcomed.

Companies: Positive for the sector especially ITC as a single digit excise hike on cigarettes was strongly expected

Proposal: As a step towards roll out of GST, Constitution Amendment Bill to be introduced in this session of Parliament.

Impact: GST on implantation will reduce distribution costs and encourage the organised sector
 

AIRTEL IS ON TOP TOWER AN ACTIVE SUBSCRIBERS LIST

    India’s largest telecom operator, Bharti Airtel, topped the active subscriber base list, with around 91.8 per cent subscribers on its network active.

According to data released by the Telecom Regulatory Authority of India (Trai), only 70.3 per cent of India’s 752 million mobile subscriber base is active, while the rest are not.

On the heels of Bharti is Idea Cellular, which has 90 per cent active subscribers on its network. The country’s second largest telecom operator, Vodafone, however, scored much less with 76 per cent active subscribers.

Mahanagar Telecom Nigam Limited is at the bottom of the list, with 27 per cent active subscribers in CDMA and 35.6 per cent in GSM. The state-owned telco’s active subscribers are lower than that of new entrants like Videocon, which has clocked 37 per cent, Etisalat with 36 per cent, Uninor with 45 per cent and Sistema Shyam with 49 per cent.

Tata Teleservices clocked 49.7 per cent in GSM and 46.5 per cent in CDMA. Bharat Sanchar Nigam Limited scored better than its PSU counterpart, with 57 per cent active subscribers on its network.

The circle-wise number of subscribers who have active connections are highest in Jammu & Kashmir with 81.8 per cent, followed by Assam with 79 per cent and Maharashtra with 77.7 per cent. Mumbai ranked the lowest with 58 per cent, indicating a lot of inactive subscribers in the city. 

Sunil Bharti Mittal, Bharti Airtel & his view on telecom sector

  Bharti Airtel Chairman and Managing Director Sunil Bharti Mittal, in an interview with Surajeet Das Gupta, speaks on a wide range of subjects on the Indian telecom industry, as well as global trends. Excerpts from an interview at the GSMA conference in Barcelona:

 What do you think is your next big area for acquisition? What about the potential in India? 
We are present in 16 out of 38 African states. So, there is a lot of potential there for growth. India will see consolidation, but it does not make sense for two small operators to merge. It also does not make sense for us to go for it, except for spectrum. However, with an open auction possible, it again makes no sense.

  But will data pick up? Do you think you would be at a disadvantage, since firms like Reliance Industries are already in the LTE space with BWA, while you are still in the 3G space?
Our 3G experience shows that the data space is flying. We have four circles in which we have BWA licences and our networks are LTE ready. So, we will launch some services in the end of this year on dongles. Also, all of us will have roaming networks on LTE with other operators and offer services from 2G to LTE. Customers will be using devices which work on various networks. We also expect more auction of 3G and 2G spectrum in the near future.

Is the stagnant revenue in Indian telecom a concern?
Yes, we are worried. We need to be concerned that in the last eight quarters, there has been no revenue growth but minutes of usage have gone up. Surely, there is need for consolidation. And the regulator is saying that we should pay more for spectrum. This will only add to the pressure.

What about regulatory policies on mergers? 
I think we should have a liberal merger and acquisition policy and the transfer of spectrum should be allowed.

Do you think the earlier trend, in which companies fought to get a telecom licence because it was at a premium, is over? 
I think the trend is present all across the world. I see it in Africa, where no one wants to buy the new operators. I see it in Indonesia, where the last two or three licences are finding it difficult to secure buyers.

What about your African Zain operations? 
We are on track, the rebranding is over. IT infrastructure, network and call centre orders have been placed. Also, as the rollout in India has slowed down, most of the companies here are happy that there is work in Africa for the rollout of the network.

In Zambia, you seem to have got into a problem with shareholders on delisting the company (Zain).
Yes, we have 97.7 per cent stake and we wanted to delist. However, some shareholders have objected. We will reapply for the permission to do so again.

Reverse impact on Indian FMCG firm. from Egypt protest ..

India's trade with Egypt stands disrupted and companies such as Dabur and Marico have suspended their operations in the strife-torn African country.

   Ten Indian firms, including Wipro, Ranbaxy, IFFCO, Dabur and Marico, have their wholly-owned subsidiaries in different parts of Egypt.

Two major FMCG companies - Dabur and Marico-- said they have shut down their plants in Egypt temporally, while Emami is keeping a close watch on the situation.