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Policy&Politics

Best proxy to play the CNG theme in India

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India is the world’s third largest energy consumption country after the U.S. and China and according to BP Energy Outlook, India’s share in global energy consumption is expected to increase from 6% in 2018 to 12% in 2050. Underlying this trend will be a convergence in the contribution of natural gas in the energy mix for China and India, such that by 2050 gas could account for 15- 25% of energy across every major global economy. India is primarily reliant on imports for its oil and gas requirements to the extent of 80% and 50% respectively Indias natural gas consumption is targeted to rise more than three-folds over the next decade, from about 170 million standard cubic metres per day (mmscmd) to 600 mmscmd, based on economic and environmental considerations.

This target is also aligned with the governments vision for gas consumption by 2030. The country has committed investments of $ 60 billion to expand gas infrastructure that includes LNG import terminals, laying of pipelines and expanding city gas distribution networks across the country. Gas fuels production in heavy industries such as fertilizers, power, refineries and petrochemicals apart from its growing consumption for domestic purposes and automobiles. Industrial production currently reliant on coal and naphtha is transitioning to gas-fuelled plants and domestic gas production is also expected to rise commensurately.

Fertilizers and city gas distribution (CGD) are seen to be the primary drivers of future consumption trends in the country Following the successful 9th and 10th rounds of city gas distribution (CGD) auctions conducted by the Petroleum and Natural Gas Regulatory Board (PNGRB) in 2018, there is a committed and timebound expansion of infrastructure to be executed over the next five years. Over the last five years, CNG infrastructure has already been expanding with the number of operating CNG stations in the country increasing to 3,000 as on 31st March 2021.

While there has been a steady increase in the number of CNG-fuelled vehicles operating on Indian roads on an overall basis, availability of CNG on a more widespread basis is currently confined only to a few states – namely, Maharashtra, Gujarat, Delhi NCR and now Uttar Pradesh. Contribution from gas usage is likely to expand as pipeline connectivity in the 136 new GAs, allocated under 9th and 10th CGD bidding, has now already completed nearly three years. By the year 2030, Indias network of CNG stations is set to exceed 11,000, a growth of five times in a tenyear period with extensive nationwide coverage. Given the favourable economic proposition for CNG vehicles, compared to those powered by petrol or diesel, demand for this clean fuel option should expand considerably as auto manufacturers increase production and expand the number of models fitted with factory-fitted CNG kits.

The market share of CNG-fuelled cars sold in the Indian market increased from 4% in 2019-20 to 6% in 2020-21. Going forward, prices of CNG-powered vehicles may further rationalize with increasing scale of production and demand could increase with the availability of a larger range of models from many leading auto makers.

In such a scenario which are the companies which are likely to derive maximum benefit & grow significantly considering the fact that commodity prices like Aluminium and Steel have now started correcting sharply? ne such company which is a dominant leader in the entire CNG & Industrial Cylinder market value chain is Everest Kanto Limited (EKC) which is in to manufacturing of high pressure seamless cylinders for industrial gases, CNG applications, large diameter high pressure seamless vessels, large seamless cylinders, jumbo cylinders & jumbo skids for the storage & bulk transportation of CNG, Nitrogen, Helium, Argon, etc which find applications in domestic and international markets like autos, aerospace, chemical processing, construction, food production, nuclear, power etc EKC is the largest player among the domestic space with a market share of over 50% and is amongst the top 10 players in the global space in the manufacturing of high-pressure gas cylinders, which is used in the storage of Compressed Natural Gas (CNG) and industrial gases EKC has a extensive range of products which cover various segments like CNG, Industrial Cylinders, Medical Cylinders, Hydrogen Cylinders, Fire Extinguisher Body Cylinders, Jumbo Cylinders, Breathing Air Cylinders and Type 4 Composite Cylinders Further, EKCL has diversified customer mix consisting of OEM (Original Equipment Manufacturers) such as Bajaj Auto Limited, Tata Motors Limited, Ashok Leyland, VE Commercial Vehicles Limited (Eicher Motors), CEV Engineering Pvt Ltd (Hyundai), etc.

The customers also include some of the large industrial gas manufacturers like PraxAir, fire fighting product companies such as Tyco, Siemens, Minimax etc and city gas distribution companies like Adani Gas, Mahanagar Gas, Indraprashta Gas etc. Further, the company has manufacturing facilities in Dubai and USA apart from India. EKCL exports to countries in Middle East, Africa, Europe, South America and CIS countries We expect industrial cylinders to show strong growth over the next few years, backed by strong growth in the Indian manufacturing sector, which is expected to show double-digit growth rates. Government initiatives in projecting India as a medical tourism hub and higher investments in health care would also drive demand for industrial cylinders used to store oxygen Compressed natural gas (CNG) is believed to be the cleanest burning fossil fuel, compared to petrol, diesel and even liquefied petroleum gas.

We expect demand for CNG cylinders to show robust growth not only due to environmental issues and cost-effectiveness but also to the increase in natural gas availability throughout the world. We expect many cities in India to be covered by CNG refuelling stations due to increase in the availability of gas, which in turn would lead to increase in demand for CNG cylinders Also the CNG/Industrial Gas Cylinder Industry has very high entry barriers and requires several certifications before new players can start operations.

Hence effectively competition is limited giving EKC reasonable pricing power In our opinion EKC is the best proxy to play the CNG theme which is likely to show strong growth over the next 3-5 years ahead as EKC enjoys scale & a well established infrastructure to benefit from this change All this has got reflected in FY22 numbers with revenues at Rs 1699 crs & a PAT of Rs 265 crs vs Rs 90 crs last year with a net EPS of Rs 24 as compared to Rs 8 in FY21 From a valuation perspective the EKC stock has also corrected by almost 37% from its peak in April 2022 & currently trades at Rs 173 levels at a PE multiple of 6xFY23E & 4xFY24E. 

(The author is the Head-Research at Profitmart Securities and a seasoned financial planner and equity researcher.)

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Policy&Politics

Kejriwal unveils ‘Guarantee’ for LS Polls: AAP’s pledge for change

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On “Kejriwal ki Guarantee”, he said 24X7 power supply, good education and health facilities, and arranging two crore jobs for youths every year are part of it.

Delhi Chief Minister and AAP national convener Arvind Kejriwal declared “Kejriwal ki Guarantee” on Sunday, outlining 10 urgent initiatives to be pursued swiftly, including the liberation of Indian territory from Chinese control, should the INDIA bloc come to power at the Centre. This opposition alliance, comprising parties like AAP, Congress, Trinamool Congress, and Dravida Munnetra Kazhagam, was established to challenge the BJP-led National Democratic Alliance in the Lok Sabha elections.

A day after his release from jail on interim bail, Kejriwal on Saturday said the INDIA bloc will form the next government and his AAP will be part of it. Addressing a press conference on Sunday, the AAP leader said people will have to choose between “Modi ki Guarantee” and “Kejriwal ki guarantee”. The latter is a “brand”, Kejriwal said.

On the announcement of his guarantees, Kejriwal said, “I have not discussed with my INDIA bloc partners about this. I will press upon my INDIA bloc partners to fulfill these guarantees.”

Kejriwal said while the AAP has fulfilled its “guarantees” of free power, good schools, and Mohalla Clinics in Delhi, “(Prime Minister Narendra) Modi has not fulfilled his guarantees”.

On “Kejriwal ki Guarantee”, he said 24X7 power supply, good education and health facilities, and arranging two crore jobs for youths every year are part of it.

“We worked on management to ensure 24×7 power supply in Punjab and Delhi. We can do it in the entire country. The government schools in the country are in a bad shape. We will arrange good quality education across the country. We know how to do it,” he said.

Kejriwal also promised to end the Agniveer scheme and ensure that farmers get MSP for their crops as per the Swaminathan Commission’s report. “Rashtra Sarvopari is our guarantee. China has occupied our land and we will free it from their occupation,” he said. Kejriwal also promised to provide full statehood to Delhi.

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Economy

Macro & financial stability, boost to infra, extended PLI likely key areas in Modi 3.0

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If one were to go by the Central Government’s poll manifesto which has stayed aligned to the pre-poll interim Budget, a strong adherence to the path of macro and financial stability as priorities, marked by low inflation, strong external balances, high growth, and fiscal prudence, appears to be the likely scenario if it comes back to power. A DBS Group research by Radhika Rao, senior economist, DBS Group Research and Taimur Baig, MD and Chief Economist, DBS Group Research indicates that the government will continue with the infrastructure push, policies to expand the manufacturing sector, and establish the country’s position as a voice of the Global South.

On the first, the focus will be on improving physical and digital infrastructure, marked by new metro networks, new railway tracks, new-age trains, improved connectivity, new bullet trains, roads, and energy infrastructure. Concurrently, besides expanding the 5G network, improving rural broadband connectivity, exploring 6G technology and the digitization of land records, amongst others, were highlighted in the to-do lists, as per Rao and Baig.

Secondly, Make-in-India and PLI schemes are likely to be expanded, with an emphasis on employment creation, simplification of regulatory processes, appropriate infra for manufacturing hubs, and R&D. A mix of traditional and new-age sectors will likely be prioritized, including a globally competitive food-processing industry, and core sectors (steel, cement, metals, engineering etc), besides a push towards indigenous defense manufacturing, pharma, new age & chip manufacturing, auto and electric vehicles, amongst others.

Existing social welfare programs are likely to be enhanced with better outreach, including, a middle-class focus through the provision of high-value jobs, quality healthcare and infra to improve ease of living, amongst others. Also on the radar is affordable housing program expansion with a focus on slum redevelopment, sustainable cities, etc. The PM Garib Kalyan Anna Yojana is to be a priority, which will continue to provide free foodgrain ration to about 800 mn residents. On healthcare, Rao and Baig see continuity to provide quality free health treatment to up to 500,000 poor families under Ayushman Bharat.

The economists are also of the view that the PM Ujjwala Yojana, which has already benefited 100 mn with cooking gas connections, will be expanded. Subsidies for solar panels on roofs of 10 mn households up to 300 units/month under the PM Surya Ghar Muft Bijli Yojana, unorganized workers, farmers and continuation of financial assistance to farmers under PM Kisan, farm self-sufficiency, etc.), start-ups and micro-credit enterprises, will be the other focus areas to boost the economy from a bottom-up approach.

Rao and Baig foresee limited fiscal implications from these announcements as part of these were included in the interim budget and the manifesto did not outline any new big-bang reforms or fresh social welfare spending programs. “We maintain our FY25 fiscal deficit assumption at -5.1% of GDP with the existing borrowing program,” says the economists.

A broad-based push towards more contentious structural reforms (land, labor, farming, etc.) did not receive a mention in the manifesto, which may still be prioritized if the party returns for a third term. In our view, the incoming government is neither limited by nor will be restricted by the poll promises. To that extent, the scope of reforms can be wider than what has been laid out in the respective manifestos.

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Policy&Politics

Govt extends date for submission of R&D proposals

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The Government has extended the deadline for submission of proposals related to R&D scheme under the National Green Hydrogen Mission. The R&D scheme seeks to make the production, storage, transportation and utilisation of green hydrogen more affordable. It also aims to improve the efficiency, safety and reliability of the relevant processes and technologies involved in the green hydrogen value chain. Subsequent to the issue of the guidelines, the Ministry of New & Renewable Energy issued a call for proposals on 16 March, 2024.

While the Call for Proposals is receiving encouraging response, some stakeholders have requested more time for submission of R&D proposals. In view of such requests and to allow sufficient time to the institutions for submitting good-quality proposals, the Ministry has extended the deadline for submission of proposals to 27th April, 2024.

The scheme also aims to foster partnerships among industry, academia and government in order to establish an innovation ecosystem for green hydrogen technologies. The scheme will also help the scaling up and commercialisation of green hydrogen technologies by providing the necessary policy and regulatory support.

The R&D scheme will be implemented with a total budgetary outlay of Rs 400 crore till the financial year 2025-26. The support under the R&D programme includes all components of the green hydrogen value chain, namely, production, storage, compression, transportation, and utilisation.

The R&D projects supported under the mission will be goal-oriented, time bound, and suitable to be scaled up. In addition to industrial and institutional research, innovative MSMEs and start-ups working on indigenous technology development will also be encouraged under the Scheme.

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Policy&Politics

India, Brazil, South Africa to press for labour & social issues, sustainability

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The Indian delegation also comprises Rupesh Kumar Thakur, Joint Secretary, and Rakesh Gaur, Deputy Director from the Ministry of Labour & Employment.

India, on Thursday, joined the G20’s two-day 2nd Employment Working Group (EWG) meeting under the Brazilian Presidency which is all set to address labour, employment and social issues for strong, sustainable, balanced and job-rich growth for all. India is co-chairing the 2nd EWG meeting, along with Brazil and South Africa, and is represented by Sumita Dawra, Secretary, Labour & Employment.

The Indian delegation also comprises Rupesh Kumar Thakur, Joint Secretary, and Rakesh Gaur, Deputy Director from the Ministry of Labour & Employment. India has pointed out that the priority areas of the 2nd EWG at Brasilia align with the priority areas and outcomes of previous G20 presidencies including Indian presidency, and commended the continuity in the multi-year agenda to create lasting positive change in the world of work. This not only sustains but also elevates the work initiated by the EWG during the Indian Presidency.

The focus areas for the 2nd EWG meeting are — creating quality employment and promoting decent labour, addressing a just transition amidst digital and energy transformations, leveraging technologies to enhance the quality of life for al and the emphasis on gender equity and promoting diversity in the world of employment for inclusivity, driving innovation and growth. On the first day of the meeting, deliberations were held on the over-arching theme of promotion of gender equality and promoting diversity in the workplace.

The Indian delegation emphasized the need for creating inclusive environments by ensuring equal representation and empowerment for all, irrespective of race, gender, ethnicity, or socio-economic background. To increase female labour force participation, India has enacted occupational safety health and working conditions code, 2020 which entitles women to be employed in all establishments for all types of work with their consent at night time. This provision has already been implemented in underground mines.

In 2017, the Government amended the Maternity Benefit Act of 1961, which increased the ‘maternity leave with pay protection’ from 12 weeks to 26 weeks for all women working in establishments employing 10 or more workers. This is expected to reduce the motherhood pay gap among the working mothers. To aid migrant workers, India’s innovative policy ‘One Nation, One Ration Card’ allows migrants to access their entitled food grains from anywhere in the Public Distribution System network in the country.

A landmark step in fostering inclusion in the workforce is the e-Shram portal, launched to create a national database of unorganized workers, especially migrant and construction workers. This initiative, providing the e-Shram card, enables access to benefits under various social security schemes.

The portal allows an unorganized worker to register himself or herself on the portal on self-declaration basis, under 400 occupations in 30 broad occupation sectors. More than 290 million unorganized workers have been registered on this portal so far.

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Policy&Politics

India to spend USD 3.7 billion to fence Myanmar border

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India plans to spend nearly $3.7 billion to fence its 1,610-km (1,000-mile) porous border with Myanmar within about a decade, said a source with direct knowledge of the matter, to prevent smuggling and other illegal activities. New Delhi said earlier this year it would fence the border and end a decades-old visa-free movement policy with coup-hit Myanmar for border citizens for reasons of national security and to maintain the demographic structure of its northeastern region.

A government committee earlier this month approved the cost for the fencing, which needs to be approved by Prime Minister Narendra Modi’s cabinet, said the source who declined to be named as they were not authorised to talk to the media. The prime minister’s office and the ministries of home, finance, foreign affairs and information and broadcasting did not immediately respond to an email seeking comment.

Myanmar has so far not commented on India’s fencing plans. Since a military coup in Myanmar in 2021, thousands of civilians and hundreds of troops have fled from there to Indian states where people on both sides share ethnic and familial ties. This has worried New Delhi because of risk of communal tensions spreading to India. Some members of the Indian government have also blamed the porous border for abetting the tense situation in the restive north-eastern Indian state of Manipur, abutting Myanmar.

For nearly a year, Manipur has been engulfed by a civil war-like situation between two ethnic groups, one of which shares lineage with Myanmar’s Chin tribe. The committee of senior Indian officials also agreed to build parallel roads along the fence and 1,700 km (1,050 miles) of feeder roads connecting military bases to the border, the source said.

The fence and the adjoining road will cost nearly 125 million rupees per km, more than double that of the 55 million per km cost for the border fence with Bangladesh built in 2020, the source said, because of the difficult hilly terrain and the use of technology to prevent intrusion and corrosion.

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Policy&Politics

ONLY 2-3% RECOVERED FROM $2-3 TN ANNUAL ILLEGAL TRADE THROUGH BANKING: INTERPOL

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However, Stock highlighted the enormity of the challenge, noting that between 40% and 70% of criminal profits are reinvested, perpetuating the cycle of illicit financial activity.

In a press briefing held on Wednesday, Interpol Secretary General Jurgen Stock unveiled alarming statistics regarding the extent of undetected money laundering and illegal trade transactions plaguing the global banking network. Stock revealed that over 96% of the money transacted through this network remains undetected, with only 2-3% of the estimated USD 2-3 trillion from illegal trade being tracked and returned to victims.

Interpol, working in conjunction with law enforcement agencies and private financial sectors across its 196 member countries, is committed to combating the rising tide of fraud perpetrated by illicit traders. These criminal activities encompass a wide spectrum, including drug trafficking, human trafficking, arms dealing, and the illicit movement of financial assets.

Stock emphasized the urgent need to establish mechanisms for monitoring transactions within the global banking network. Currently, efforts are underway to engage banking associations worldwide in setting up such a framework. However, Stock highlighted the enormity of the challenge, noting that between 40% and 70% of criminal profits are reinvested, perpetuating the cycle of illicit financial activity. The lack of real-time information sharing poses a significant obstacle to law enforcement agencies in their efforts to combat money laundering and illegal trade.

Stock underscored the role of Artificial Intelligence (AI) in exacerbating this problem, citing its use in voice cloning and other fraudulent activities. Criminal organizations are leveraging AI technologies to expand their operations and evade detection on a global scale. Stock emphasized the importance of enhanced cooperation between law enforcement agencies and private sector banking groups. Realtime information sharing is crucial in the fight against illegal wealth accumulation.

Drawing inspiration from initiatives such as the “Singapore Anti-Scam Centre,” Stock called for the adoption of similar models in other countries to strengthen the collective response to financial crimes. In conclusion, Stock’s revelations underscore the pressing need for concerted action to combat global financial crimes. Enhanced cooperation between public and private sectors, coupled with innovative strategies for monitoring and combating illicit transactions, is essential to safeguarding the integrity of the global financial system.

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