Franchise Business in India

India is called a developing country, as we don't have another classification as a rapidly developing country. Let me today put some light on India in the franchise business.(Hey hey if you don't know what franchise business is and what exactly you should do to own a fanchisee then you should first read : What is a franchise business??.) The Franchise business isn't new in India and it's early days date back to 1990's. Today India has many franchise businesses of foriegn brands like KFC, McDonald's, Holiday Inn, Gold's Gym, Marks and Spencers and they have reached not only first tier but also many second tier cities in India and they are running successfully.

After 1990 the franchise business has boomed by leaps and bounds and there are many success stories to tell. Franchise business industry in India records a growth of 30%-35% per year from the past 5 years. And yes why not, because the core thing for any business to be succesful is the customers. And India has lot of it- and the world knows this, as a result many multi national companies are happy to offer franchise to Indian businessmans. One of the latest offering I know is of "beard papa's" from Japan. They are an international quality brand when it comes to cream puff's and they are inviting Master Franchisees.

The 4 sectors which have show the most rapid growth in franchise business in India are telecom sector, food sector, retail sector and education sector. These are all poised to grow with rate above 40% per annum atleast for the next 5-6 years. Food and retail sector have seen tremendous growth because the spending power of indian middle class is increasing. Read a splendid article about India's retail sector - India's retail sector is Boooooming...??.

Apart from these 4 sectors, the brewerage industry,health,beauty, and tourism are next to sparkle. India has favourable conditions for any fresh business to florish, also the competition is not as intense as in US and there are a lot of customers-hope you know that India is second largest in population- you don't need to be the king of your sector, you can be not even in top 10 but still you business may grow by leaps and bounds and you will have good profit margin. Couple this with the low rate of francise failure in India and significant return of investment and you will realise India's potential in franchise businesses.

Airbus views demand for 24 thousand aircrafts!

Aircraft manufacturer Airbus foresees a demand of 24,300 new passenger and freighter aircrafts which are valued at about $2.8 trillion. This visualization is for the period till 2026. The Annual Global Market forecast of Airbus says that it will create an average annual delivery of around 1,215 aircrafts, which is certainly a big number. Although this will give a boost to manufacturing sector of airplanes but there are two grave problems to this growth. First is the fuel cost. As the world knows, the fuel prices have risen sharply in past 2 years which was not even foreseen by the economy analysts. This sudden rise in fuel prices (A nice article about this: The Price Of Oil: affecting factors and it's future...) is another game of the gap between supply and demand. By, 2026 the fuel burnt per 100 passengers per Kilometer is expected to be 3 litres!

The next problem is of the air traffic. Even today the Air traffic controllers are having a tough time to resolve the traffic problems. In world's most developed cities like NewYork, Los Angeles, Hong Kong and even our own amchi Mumbai the condition is very close to saturated. The condition in 2026 will be horrible if no solutions are put in place. One of the solution to increase efficiency is to discontinue the old planes which consume more fuel and deploy new planes. But again the degree of practicality is associated with it. In India, the aviation sector has seen a downfall in last 6-10 months and there is a very tough competition. Even the customers will be increasing in future, the scenario will be same. Invest wisely in Aviation sector.

Reliance Power IPO - how should a retail investor approach it?

Reliance Power IPO is causing daily news and todays is its last day of offering. The price band is 405-450. This is 4th day - the last day and untill tommorrow the issue was over subscribed about 38 times - I dont know exact figures but it will be around it. Now should you apply to this one or not?
I think its not a good company to remain invested in. Relaince Power have no mega projects going on - all it has are promises. Other power companies in India like Tata Power, NTPC look more strong than Reliance Power, just for comparison NTPC will have a capacity double to that of Reliance Power in 2016 - even we consider all the promises of Reliance Power to be true. I feel we should make just listing gains in this IPO as i think above 800 the Reliance Power share is over priced.

Can world’s cheapest car – Tata’s 1lakh car- co-exist with prestigious brands like Jaguar and Land Rover?

A particular motor vehicle company is seen to concentrate mainly on one range of products, be it Toyota, Nissan or BMW, they are known for a particular category of cars. As the world now knows TATA MOTORS is out to create the world’s cheapest car! It will cost INR 1 lakh. That is equal to around US$2700 only!

But, Tata Sons Chairman Ratan Tata has said it is possible for the world's cheapest car to co-exist with prestigious brands like Jaguar and Land Rover despite an image disparity. He says if the brands like Nissan and BMW have the mini versions of cars why can’t TATA MOTORS, and he is pretty confident about this. Toyota has “Lexus” and Nissan has “Infini” and BMW has its “mini”. So, the market competitors are now trying to prove their skills in other range of their products and why not?? It’s getting them more business; they are giving low price cars to the people, which is good for a common man to fulfill his dream of having a car; and the makers are world renowned market leaders so the quality can be assured.


The world is waiting to catch a glimpse of the much touted Tata’s 1 lakh car, which would be unveiled at the Auto Expo in New Delhi on January 10. The car market is said to experience the decade’s greatest metamorphosis after the actual on-road launch of this highly spoken Tata’s 1 lakh car.

What are p-notes? - restiction on which caused SENSEX to fall 1744points on 17th Aug,2007 and Market closed for an hour!

The 30-share index, SENSEX; which reached a life-time high this week, crashed 1744 points, after the SEBI put up its suggestion late on Tuesday evening. The market was closed for an hour. The p-Notes are said be behind the hugh surge in foreign inflows, which caused the latest market rally. "The steps taken by SEBI are in the right direction," the Finance Minister P.Chidambaram said. The Securities and Exchange Board of India (SEBI) on Tuesday proposed to tighten the rules for purchase of shares and bonds in Indian companies through the participatory note (p-Note) route. The move is aimed at arresting the surge in foreign inflows through p-notes.

So, what are these p-notes? Why such a havoc about them? What makes them so special? P-Notes are financial instruments used by investors or hedge funds that are not registered with the Securities and Exchange Board of India to invest in Indian securities. Indian-based brokerages buy India-based securities and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors. Participatory notes are like contract notes. These are issued by FIIs to entities that want to invest in the Indian stock market but do not want to register themselves with the SEBI. SEBI was not very happy about participatory notes because they have no way to know who owns the underlying securities, it feared that hedge funds acting through participatory notes will cause economic volatility in India's exchanges.

I feel that this step taken by the SEBI is good step towards improving clarity of FII investments. Many are saying this should have been done a lot before, say 6-7 years back. But at that time p-notes were not that much a highly weighted investment instrument by the FII. As a report says "the notional value of PNs has zoomed from 20% of FII/sub-account assets in March 2004 to 51.6% in August 2007, in other words from Rs 31,875 crore to Rs 3,53,484 crore!". While FIIs were net investors to the tune of $8.5 billion during the last calendar year, expectations are that they would invest close to $12 billion this year. This would take the market's exposure to P-Notes to over $5 billion, if the same ratio were maintained for the next three months.

What exactly were the restrictions put by SEBI on p-Notes - check out in next post.

India's Retail Sector is Booooming...?

Retail in India has gained a surprising importance in past year as we see many corporate gaints investing in billions into this sector. India has topped the AT Kearney’s annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. The Indian retail market -- one of India's fastest growing industries -- is expected to grow from US$ 350 billion to US$ 427 billion by 2010. According to Euromonitor International, the Indian Retail market will grow in value terms by a total of 39.6 per cent between 2006 and 2011, averaging growth of almost 7 per cent a year.

The food Retail and Mobile Retail is growing at a high pace. Reliance Retail, a subsidiary of Mumbai-based petroleum gaint Reliance Industries, has opened around 100 fruit and vegetable stores under "Reliance Fresh" brand in less than a year, already invested around Rs:2500 crore (US$ 0.637 billion!) and plans to invest about Rs:90,000 crore ($22.99 billion!) in setting up retails stores in various formats- hyper markets-supermarkets, speciality stores, discount stores...etc. Also Bharti Wal-Mart is setting up itself to enter into this sector soon. So look out for more billion dollar investments in these sector in comming year 2008.

Reading all this how's you feeling? Mind blowing reports with huge numbers about India's Retail sector, feeling great? Read next.....

Very few people think of the other part. The government decision on January 24 allows up to 51 percent foreign direct investment (FDI) in “single brand” retail stores. Nike, Nokia or Levi can establish stores, but multi-brand retailers such as Wal-Mart and Carrefour are excluded, for now. Commerce and Industry Minister Kamal Nath told the leaders of the world’s richest corporations that India was seeking to increase its FDI to $US10 billion by 2006-2007, up from the $6.5 billion invested in 2005.Retail activities such as door-to-door selling, street carts and market stalls, act as a last resort for the unemployed, given the lack of jobs in manufacturing and agriculture. Many in the retail trade are living below the poverty line. A report published in December 2004 by the Centre for Policy Alternatives (CPAS) entitled “FDI in India’s Retail Sector: More Bad than Good” stated that retailing is “probably the primary form of disguised unemployment/underemployment in the country”.The report continued: “Given the already over-crowded agricultural sector, and the stagnating manufacturing sector, and the hard nature and relatively low wages of jobs in both, many million Indians are virtually forced into the services sector. Here, given the lack of opportunities, it is almost a natural decision for an individual to set up a small shop or store, depending on his or her means or capital. And thus a retailer is born, seemingly out of circumstance rather than choice.” The report is spelndid, you can view it here :- http://72.14.253.104/search?q=cache:eZn1OLJE7PcJ:indiafdiwatch.org/fileadmin/India_site/10-FDI-Retail-more-bad.pdf+retail+sector+in+india&hl=en&ct=clnk&cd=13&gl=in

Although the Indian government hails foreign investment as an economic boon, the growth has largely benefitted the wealthy to the detriment of large sections of workers, small business and farmers. The opening up of the Indian economy and deregulation has resulted in substantial public sector job cuts, the destruction of industries, land seizures and cuts to food and fuel subsidies. There are approximately 40 million people and 11 million outlets in India’s retail sector. Many of these are marginal businesses—small shops and stalls, street vendors and hawkers—which will be destroyed by competition from large retail outlets and chains. Many people, who have no alternate source of income or work, will be left completely destitute.

(I have written this article with lot of research. I want to know your comments over this.Thank you.)

Are small caps better then large caps or mid caps in bearish markets ?

When you look at the statistics of recent downfalls in sensex, you will notice that small cap index BSE Small Cap is the one which has been least badly hit, than compared to BSE SENSEX, BSE MIDCAP or BSE 100. I have always considered small cap investment as risky investment but these satistics made me think the other way. I would have been pleased to post the exact numbers here but im not getting past values right now. I will be back with them very soon. Till then just to keep you thinking, here is a comparison, in the past 3 months, BSE Small Cap have grown by +6.7% , BSE MIDCAP have grown by +2.8% and BSE SENSEX fell by -1.1% !