- Jaipur Branch of CIRC of ICAI, Jaipur

Report
CA Meet - Jaipur
December 13, 2014
Global economic environment
Performance
review
Key
regulatory
developments
2
Global economy: growth remains uneven
• GDP growth at 3.9% in Q3-CY2014 1 (CY2013: 2.2%)
• Update on QE
• End to monthly bond purchases by the Fed
• Fed will continue to reinvest proceeds
• Low interest rates for “considerable period” indicated
US
• Growth remains muted with large economies facing
Eurozone challenges
• Deflation concerns persist; ECB reduced interest
rates in Jun & Sep 2014
China
1.
3
• Moderation in GDP growth to 7.3% y-o-y in Q3CY2014 (>9.0% levels in 2011 & 2012)
Based on seasonally adjusted annualized quarterly
GDP growth
Global monetary policy
• Fed ends quantitative easing
• However, interest rates likely to remain low for
considerable period
US
US
• Interest rates continue to remain at very low levels
Eurozone • Long term refinancing operations to continue till
June 2016
Japan
• Persistent deflationary conditions; QE increased
from ¥60 trillion - ¥70 trillion to about ¥80 trillion
each year
Accommodative global monetary policy likely to continue
4
Key global developments to monitor
Trends in global growth; developments in Euro area
Timing of rate increases by the US Federal Reserve
Growth trends in China
Geopolitical developments
5
India: long term growth potential
Performance
review
Key
regulatory
developments
6
India: strong long term growth fundamentals
Favourable
demographics
Healthy savings &
investment rates
Key drivers of
growth
Rising per capita
income
Rural India-high
growth potential
High potential for infrastructure development to support
economic growth in the long term
7
Favourable demographic profile
A young population with median
age of 25 years
1,432
1,053 1,053
840
840
1,501
1,432
1,501
Rising share of working age population
• Addition of around 12 million to the
workforce every year for next five years
• Working age population to exceed 50%
of total population in 2025
Dependency ratios to remain low
till 2040
8
Healthy savings & investment rate
Savings rate
~37%
~25%
FY2003
FY2008
Investment rate
~30%
FY2013
~38%
~25%
FY2003
FY2008
~35%
FY2013
Investments driven primarily by domestic savings
9
Strong domestic demand
Per Capita GDP (USD)
1,432
1,053
840
1,501
1,509
7
749
2005
10
Source: IMF
2013
Rising per capita GDP
accelerating domestic demand
Revival in consumption growth…
PCE
% Y oY
10.0%
Long term average
9. 4%
9. 3%
8. 7%
8. 7% 8. 5%
9.0%
8.0%
7. 4%
7. 2%
7.0%
5. 7%
6.0%
5.0%
4. 8%
5. 0%
5. 2%
H1-2015
FY2014
FY2013
FY2012
FY2011
FY2010
FY2009
FY2008
FY2007
FY2006
FY2005
4.0%
Private consumption expenditure (PCE) growth was
below long-term average of 7.2% YoY; moderate pickup
seen in H1-2015
11
Source: MOSPI
...likely to drive passenger vehicle sales
• Historically, passenger vehicle (PV) sales are seen to track
PCE growth, albeit with a lag
• Domestic car sales grew by 9.5% in November 2014 driven
by lower fuel prices and continued relief in excise duty
12
Source: CEIC
Trends for rural India
(% )
Agriculture
Share in rural NDP
Industry
Services
100
41.7
37.3
28.6
80
20.0
60
23.9
27.5
40
51.4
20
38.8
30.7
0
FY2000
* ICICI Bank estimates
FY2005
FY2010*
• Over 700 mn people spread across 600,000 villages
• Share of industry and services in rural economic
growth now higher
13
Rural demand to be a growth lever
Monthly per capita expenditure
INR
CAGR growth (%)
Rural
Urban
Rural
Urban
2011 - 12
1,430
2,630
16.5
15.1
2009 - 10
1,053
1,985
13.5
13.5
2004 - 05
559
1,052
2.8
4.2
1999 - 00
486
855
9.2
10.7
1993 - 94
286
464
Estimates of the consumer expenditure survey conducted by
NSSO for 2011-12 show that growth in monthly per capita
expenditure in rural India has exceeded that in urban India
for the first time since economic reforms began in early
1990s
14
Source: MOSPI
India: recent developments
Performance
review
Key
regulatory
developments
15
India: structural concerns being addressed
• High level of fiscal deficit and domestic
Earlier
current account deficit
concerns
• Persistent high levels of inflation
• Market volatility; sharp movement in
exchange rate
• Reduction in fiscal deficit from 5.7% in
FY2012 to 4.6% in FY2014
• Current account deficit has narrowed
Recent
significantly from 4.8% in FY2013 to 2.1% in
developments
Q2-2015
• CPI inflation has moderated from an
average of 9.5% in FY2014 to 5.5% in Oct
2014
• Improvement in capital flows
16
Continued optimism due to strong election mandate
S&P raised outlook for India from ‘negative’ to
‘stable
Several agencies have revised India’s growth
forecasts upwards in the range of 5.5%-6.0% for
FY2015
17
Measures by the Government
Recent
actions
Other
reforms
being
considered
18
• Complete deregulation of diesel prices
• Ordinance relating to coal block deallocation
• Approval of new domestic gas pricing
policy
• Gas pricing to be reviewed every six months
beginning April 1, 2015
• Launch of ‘Make in India’ campaign
• Land acquisition reforms
• Labour reforms
• Introduction of goods and services tax
(GST)
• Liberalisation of insurance sector
India: economic outlook
GDP growth in the range of 5.5%-6.0% for FY2015
March-2016 CPI inflation at 6.0%-6.5%
Anticipation of rate cut by RBI in early 2015
19
In summary
Improvement in growth outlook for the Indian
economy
Retail sector expected to benefit from improved
macro economic outlook and policy initiatives
20
India: Growth gathering momentum
GDP grow th
(% YoY)
8.0
6.0
4.0
2.0

Jun-14
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
FY2015: 5.5-5.7% target; further acceleration expected over the
next few years
Source: MOSPI, ICICI Bank Research
21
Sep-12
Jun-12
Mar-12
Dec-11
Sep-11
Jun-11
0.0
RBI has maintained a pause on rates
(% )
10.0
Repo (Policy) rate
Cash Reserve Ratio
9.0
8.0
7.0
6.0
5.0
4.0

Aug-14
May-14
Feb-14
Nov-13
RBI has maintained pause on policy rates since January-2014
Source: RBI, ICICI Bank Research
22
Aug-13
May-13
Feb-13
Nov-12
Aug-12
3.0
Real estate sector
23
Real estate & construction account for ~12% of GDP
Share in GDP
Real etstate services and ow nership of dw ellings
(% )
Construction*
9.0
6.0
3.0
* includes residential and non-residential construction
Source: MOSPI, ICICI Bank Research
24
FY2013
FY2012
FY2011
FY2010
FY2009
FY2008
FY2007
FY2006
FY2005
0.0
Residential and non-residential construction have high
interlinkages with other sectors
Output multiplier*
3.0
2.4
21-sector average (1.83)
1.8
1.2
0.6
Banking and
Insurance
Trade
Real Estate
Services
Agriculture
Hotel and
Restaurants
Transport* * *
Construction* *
0.0
•“output multiplier” refers to change in total output in economy in response to rise in 1 unit of exogenous demand for a sector’s output
** construction includes residential, non-residential and other construction
*** excluding railways


Construction sector has strong inter-sectoral linkages leading to a
high employment generation potential.
For instance, the employment multiplier for residential
construction sector is ~3
Source: NCAER, ICICI Bank Research
25
Growth in house prices has come off
RBI House Price Index
GDP grow th (RHS)
(% YoY)
(% YoY)
30
8.0
25
7.0
20
6.0
15
5.0
10

Q4 FY14
Q3 FY14
Q2 FY14
Q1 FY14
Q4 FY13
Q3 FY13
The growth in house prices has slowed down to catch up with
the erstwhile fall in GDP growth trajectory
Source: RBI, ICICI Bank Research
26
Q2 FY13
Q1 FY13
Q4 FY12
3.0
Q3 FY12
0
Q2 FY12
4.0
Q1 FY12
5
Overall affordability has remained static
Property Value
(INR lac)
60
Affordability
Annual income* (RHS)
(INR lac)
12
0
2014
0
2013
2
2012
10
2011
4
2010
20
2009
6
2008
30
2007
8
2006
40
2005
10
2004
50
(* Income of an average property buyer)
Affordability calculated as the ratio of property value to annual income

Affordability of property by households has remained largely
static over the last few years
Source: HDFC, ICICI Bank Research
27
Flow of funds into the real-estate sector
28
Share of physical savings in total savings has risen
Proportion of total household savings
Financial saving
Physical saving
(% )
80
70
60
50
40
30


2012-13
2009-10
2006-07
2003-04
2000-01
1997-98
1994-95
1991-92
While overall household savings have declined since FY2011,
the share of physical savings (which includes real-estate) has
increased
Financial savings (as % of GDP) remained static at ~7.0% even
in FY2014
Source: MOSPI, ICICI Bank Research
29
1988-89
1985-86
1982-83
1979-80
1976-77
1973-74
1970-71
20
Property a predominant investment avenue for households
Others
Equities
Consumption
Mutual funds
Post office
Insurance
and pension
Bank deposit
Investment of urban households by asset
Gold and arts
Real Estate
(% of total
investment)
35
30
25
20
15
10
5
0
* The study was conducted in 2011

According to an RBI-NCAER survey*, investment in property has
taken priority over gold, deposits and equities for an average
urban household
Source: NCAER, ICICI Bank Research
30
Credit-penetration in the sector remains very low
M ortgage debt-GDP ratio
(% )
100
80
60
40
20


UK
USA
Hong
Kong
India’s mortgage-debt to GDP ratio at 9% is one of the lowest in
the world, suggesting scope for further penetration
Access to formal credit in India remains limited
Source: National Housing Bank (NHB), ICICI Bank
Research
31
Singapore
Malaysia
South
Korea
China
Thailand
India
Indonesia
0
FDI inflows into the sector have declined recently
Total FDI
Sectoral distribution of FDI equity inflows*
Share of construction development in FDI (RHS)
(USD bn)
40
(% )
10
9
8
7
6
5
4
3
2
1
0
35
30
25
20
15
10
5
0
2010-11

2011-12
2012-13
2013-14 Q1 FY2015
9.2%
Construction
development^
Telecommunications
5.4%
5.0%
Automobile industry
* FY2014
Share of construction development in FDI equity inflows has
been declining
^defined as townships, housing and built-up infrastructure
Source: DIPP, MOSPI, ICICI Bank Research
32
Services (financial &
non-financial)
6.2%
Policy initiatives to support the sector in this context
In the FY2015 Union Budget, the Government announced a
number of initiatives to support the sector
• INR 70.6 bn allotted for 100 smart cities
• INR 80 bn allocated for rural housing schemes
• Relaxations made in FDI in realty
• Tax incentives given on home loans
• Necessary incentives and a conducive tax regime for REITs
• Banks permitted to issue bonds in order to finance longterm credit to infrastructure and affordable housing segments
33
Real Estate in Jaipur
34
Executive Summary
35
•
Jaipur is expected to become a mega city by 2025 with a population
of 10 million people covering an area of about 800 sq km.
•
Jaipur residential real estate market is driven by a 60:40 mix of
investors and end users respectively.
•
Maximum supply and absorption in the Jaipur market falls in the
price bracket of INR 3,000 – 3,500/sqft.
•
Most preferred configuration in terms new launches and absorption
for the residential units has been the 3-BHK segment.
Infrastructure Growth
l
Metro Rail Network
•
One of the biggest growth stimulators for Jaipur reality market
• Once operational, rates of residential property on and near the metro route
are expected to flare up
lBus
Rapid Transit Service (BRTS)
•
•
l
Proposed to cater to city's growing traffic needs
"North-South Corridor" from Sikar Road to Tonk Road, and an "EastWest
Corridor" from Ajmer Road to Delhi Road
Ring Road
•
The proposed Ring Road project will be an arterial road connecting the
major areas of Jaipur together
• The Expressway will have investment zones for commercial as well as
residential development on both the sides
Delhi Mumbai Industrial Corridor (DMIC)
•
A band of 150 km on both
sides of the DFC has been
chosen to be developed
DMIC
•
Nearly 39% of DFC
passing
through
Rajasthan;
plenty
of
opportunities for industrial
establishment
•
About 60% of the State's
area
(locations
like
Jaipur, Alwar, Kota and
Bhilwara) fall within the
project influence area of
DMIC.
Infrastructure Growth Contd..
l
Dedicated Freight Corridor (DFC) running through Jaipur
•
•
l
Rail corridor connecting Jawaharlal Nehru Port near Mumbai to Dadri
near Delhi
Will allow high-speed connectivity for high axle load wagons (25 tonnes)
of double stacked container trains
Other Infrastructural Developments to boost demand of housing
•
Knowledge cities: The Knowledge City North- near Chaup village.
Knowledge City South, will come up near the satellite town of Phagi
• Science-Tech City: Near Achrol on the Jaipur-Delhi highway . The
location is opportune for investments in the higher education sector
• Several healthcare projects : like Reliance Medicity and Bombay
Hospital will promote medical tourism and employment
Sales Trends QoQ
16,000
new launches
new launch absorption
total absorption
unsold inventories
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Q4-2012
Q1-2013
Q2-2013
Q3-2013
Q4-2013
Q1-2014
Q2-2014
Source: PropEquity, ICICI Property Services Group.
Inventory Levels static at 12k – 14k
39
Q3-2014*
Top Micro Markets in Jaipur (based on sales)
3000
Total Absorption (Unit)
Total Availability (Unit)
2500
2000
1500
1000
500
*Source: PropEquity, ICICI Property Services Group
Note: Residential data for 2014 (from Jan-2014 to August-2014)
40
MWC
Road
Sikar
Road
Kalwar
Road
Patrakar
Colony
Ajmer
Road
Durga
pura
Sanganer
Vaishali
Nagar
Tonk
Road
Jagatpura
0
Micro markets in Jaipur
The investors are willing to invest in the areas developing along the ‘spokes’
around the center of Jaipur. Following are the top 10 micro markets in Jaipur.
l
l
Ajmer Road
•
Attracting investors from Delhi NCR and witnessing the development of
integrated townships
• The occupancy rates are currently around 30%
l
Patrakar Colony
•
Close to Mansarovar colony & Mansarovar Metro station
• Situated around 8 kms from the airport
• The ticket size lies in the range of 20-80 lacs
l
Tonk Road
•
Builders are betting big on this area due to its proximity to Pratap Nagar
• The second most active micro-market in terms of absorption with 312
units being absorbed in the first 7 months of 2014
l
Micro markets in Jaipur
l
Mahindra World City
•
Joint venture by Mahindra & Mahindra with RIICO, the Mahindra City,
spreads across 3,000-acres
• Divided into two zones- one zone being the IT zone and the other zone
being dedicated to Export industries like Gem stones, handicrafts etc.
• Located on NH-8 and well connected to the Kandla Port in Gujarat
• Jaipur master plan has planned to develop the social and residential
infrastructure such as housing facilities, healthcare facilities, educational
institutions, etc. for a holistic living environment
l
The Jagatpura micro-market
•
25 residential projects coming up in this area
•
Located around 6 kms from Malviya Nagar
•
The ticket size of in this area lies in the range of 30-40 Lacs
Micro markets in Jaipur Continued
l
Vaishali Nagar
•
Offers a healthy mix of residential, retail and commercial development
• Low-rise floors as well as bigger projects by renowned local developers
• Residential units in this region are priced in the range of INR 3,000 6,000/sq ft
lSikar
•
Road
An industrial belt that witnesses some residential projects by local
developers. It is located along the Delhi Bypass connecting the heart of
Jaipur to the Vishwakarma Industrial Area
• Close to Vidyadhar Nagar and its good connectivity through the Bus
Rapid Transit Service (BRTS) system.
• This micro-market has the average ticket size (2 BHK) falling in the range
of 30 – 35 Lacs.
Micro markets in Jaipur Continued
l
Kalwar Road
•
The proposed Jaipur- Jodhpur mega highway project is expected to bring
more traction and focus to this area
• The residential projects are priced in the range of INR 2500 - 3300 / sq ft
l
Durgapura
•
Is densely populated residential area ,having one of the best proximity and
connectivity to the major commercial/retail hubs of Jaipur
• Lies along the Tonk Road with the airport only a kilometer away and
Durgapur Railway Station lying within the area
l
Sanganer
•
•
Jaipur is served by an International Airport, which is situated in its
satellite town of Sanganer, at a distance of 10 km from city center and
offers sporadic service to major Domestic and International locations.
The economic development is fuelled by proximity to airport
Key conclusions
India’s growth trajectory is on an upturn
Real estate sector a critical driver of the growth story
Interest rates could be supportive if inflation eases
Stability in Rupee to support India’s recovery
45
ICICI Bank Overview
Overview
#1
N/W
• Largest private sector bank in India
• Largest branch network among private sector
banks supplemented with large ATM network
• Over 25 million customer accounts
• Strong capital base with CAR of 17.41% with
Tier 1 ratio of 12.75% at September 30, 2014
• Among Top 60 banks in the world by market
cap
• Global presence in 18 countries
Retail Distribution
Distribution
Serviced through…
A strong Retail base..
Total Customers
> 25 mn
Branches
3,815
NRI customers
> 1 mn
ATMs
11,739
HNI customers
> 0.40 mn
Salary Customers
> 11 mn
Employees
Mobile
Banking
> 65,000
2.5 mn
5.2 mn
Internet Banking
• Retail deposit account for 70% of total domestic deposit
•
CASA ratio at 43.7% at September 30, 2014
•
1.75 mn New customer accounts opened at September 30, 2014
•
Larger Pre-qualified customer base, across all lending
products.
Key initiatives during recent years
Technology
Leveraging social
networking
platforms
Tab banking
Supporting
Mobile banking: next
generation apps
customer service
across domains
& cost efficiency
Redesigned &
customized website
24x7 touch banking:
facilitating day-today transactions
Comprehensive
solutions: online
tendering, electronic
toll collection
Leveraging mobility, digitisation and
innovations in payments technology
Tab
Banking
TAB Banking
• 25000 Tabs across India led to 25000 additional touch points
• Seamless integration with auto loans will ensur faster
turnaround time and conversion.
• Field Investigation and Valuation in Auto Loans through TAB
• About 35-40% of the savings accounts opened every month
are sourced using tab banking
Tab Banking for hassle free account
opening
Thank you
50
Things that matter in investing…
Valuation
Cycle
Sentiments
Triggers

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