As it expects the volume turnaround momentum to continue in India, The Coca-Cola Company wants the country to be “the no. 3 market” in the future from the present sixth slot.
Describing India as “a great country and a great place to do business”, Coca-Cola president and chief executive James Quincey on Thursday said the recent blip in sales are behind them and that he is looking to build the fundamentals stronger to make India’s business much bigger.
“Over the last few decades, we’ve been investing in India, creating lots of jobs and lots of business and it has become the sixth largest market in the Coke system.
“The most immediate challenge for KK (T Krishnakumar, president of Coca-Cola India & Southwest Asia) is to become no. 5 in the foreseeable future, but in the end, my vision for India is it will be one of the top three markets in the world for Coca-Cola,” Quincey told a select group of reporters.
Quincey, who was elevated as the CEO of the Atlanta- based cola major in May, also said India is a great country with many opportunities and a great future and Coke wants to build a good business here and without quantifying the amount, committed to investment more than USD 5 billion by 2020 as announced earlier.
“India is going to return to vibrant growth…India can be a very successful place to build the business. The ideal is let’s get from six to five on the way to being no 3 is the mandate,” he said.
He parried a question on how much of the said investment have already been made, saying, “We continue with our investment plan through 2020. We’ll keep making more investments. We want to be consistently investing.”
Admitting that sales had fallen in the last quarter of 2016 and in the first quarter of 2017, he said things have started to turn around.
“No business can grow in a perfect straight line. We’ve had a rough few months at the end of last year and at the beginning of this year but things are starting to turn around and come back. We are still very positive,” he said.
Though he promised to reduce the sugar content in their products — an issue that has been gaining currency across the world on health grounds — Quincey did not offer a timeline to do so, but said, faster growth in India will also come from non-carbonated (non-sparkling) drinks, as elsewhere.
When asked about when will the company have a 50:50 product and revenue share globally, he parried a direct answer but said it took almost 15 year to reach 70 per cent from 90 per cent so, and it could be 2025 or 2030.
He was, however, quick to add that sparkling drinks will continue to grow here and will remain the focus in the immediate future.
Quincey also said the company is open to inorganic growth opportunities as in the past, Coke had bought out the local brand – ThumsUp which still continues to be the volume driver here.
The company will be investing more in the non-sparkling segment to expand the portfolio.
“If you went back 10-15 years, the business was still 90 per cent sparkling globally which now is under 70 per cent. We see an opportunity to not just continue but accelerate the broadening of the portfolio yet during that time sparkling continued to grow.
But he was quick to add, “Over the next five years the revenue we get from sparkling in India will grow and yet the total revenue will grow faster than sparkling. Over time we’ll get more and more of the other categories contributing to the revenue.
RBI to remain watchful on growth, financial stability: Das
Mumbai: The Reserve Bank of India (RBI) will remain vigilant and strive to revive growth in Asia’s third-largest economy, as well as pushing to maintain macroeconomic, financial and price stability, its governor said in a speech.
India lost momentum in the final quarter of 2018, reducing its annual rate of economic growth to 6.6 percent, the slowest pace in five quarters and much less than expected.
But RBI Governor Shaktikanta Das said the country’s real gross domestic product (GDP) growth was expected to reach 7.2 per cent in the fiscal year to March 2020, which he described as the strongest among the world’s large economies.
India’s annual retail inflation rate rose in March to 2.86 per cent, from 2.57 per cent in the previous month, but remained below the central bank’s target for an eighth straight month, increasing the chances for a key interest rate cut in June.
“Inflation has remained below target, averaging 3.6 per cent for the period under the inflation targeting framework so far,” Das said in the speech, uploaded on the RBI website early on Saturday. He said he was referring to the period from October 2016 to February 2019.
The RBI has lowered its retail inflation forecast to 3.8 percent by January-March 2020, but warned it could be higher if food and fuel prices climb abruptly, or if fiscal deficits overshot targets.
India’s current account deficit is expected to be around 2.5 per cent of GDP in 2018-19 and the gross fiscal deficit has kept to budgetary targets, he added.
Das underscored the risks facing emerging market economies such as a India as global growth and trade weaken.
“There is considerable uncertainty as to whether this weakness is temporary or the beginning of a recession in advanced economies,” Das said, adding that central banks around the world were not tightening monetary policy, with some even promoting easier lending conditions.
The RBI cut its policy interest rate by 25 basis points earlier this month, in a widely expected move to boost the economy at a time Prime Minister Narendra Modi is seeking a second term in a national election.
Emerging market economies also remain exposed to financial market volatility, Das said, and financial conditions could heighten existing stress on the balance sheets of lending institutions in some countries.
At 0.1%, India’s industrial growth falls to 20-month low in February
New Delhi: A contraction in manufacturing output, especially in the sensitive capital and consumer goods segment, pulled down industrial growth to a 20-month low of just 0.1 per cent in February.
The bottom crawling growth rate follows a 1.43 per cent growth in the previous month of January. The index of industrial production (IIP) has witnessed low growth since November, 2018, and is expected to remain muted owing to weak exports, rural distress, credit constraints and uncertainty over the election outcome, according to economists.
In the April-February period of the current financial year, industrial output grew at 4 per cent, as against 4.3 per cent in the same period of the previous financial year.
The manufacturing segment, which constitutes the bulk of the index of industrial production (IIP) at 77.6 per cent, contracted by 0.3 per cent in February against an equally small rise of 0.93 per cent in January. Before, this, the December 2018 manufacturing number of 2.95 per cent. The numbers show continued volatility in the IIP, despite change in the index last year.
Most of all, the capital goods segment, which connotes investments, saw output growth turning to negative with an 8.8 per cent contraction, as compared to a 3.42 per cent contraction in the previous month.
Driven by machinery and heavy transport, capital goods production had been on a solid upward swing till October.
“The capital goods sector, which had shown an average growth of 8.9 per cent during April-October period in FY19 and raised hopes of an incipient investment recovery in the economy is once again appearing to be losing steam. With the exception of December 2018, capital goods are recording negative growth in each month since November,” Devendra Kumar Pant, Chief Economist at India Ratings and Research, said.
In January, the growth rate for consumer durables also fell to 1.2 per cent, from the 2.3 per cent growth in January. “A 1.2 per cent consumer goods production is also reflective of inventories that have built up in Q3, when capacity utilisation also improved. But, with demand tapering off, production has slowed down,” Madan Sabnavis, chief economist at CARE Ratings, said.
On the other hand, consumer non-durables commanded a growth rate of 4.3 per cent in February, up from 3.3 per cent in January. All other user-based segments either showed a negative growth or low-single digit growth.
Overall IIP growth for the entire year would be about 4.5 per cent, which is half per cent lower than what we had projected earlier, Sabnavis added.Of 23 sub-sectors within manufacturing, 13 recorded a year-on-year contraction, compared to 11 in January. Slowdown in major sectors such as metals and refined petroleum brought down overall growth. On the other hand, apart from furniture and food manufacturing, which saw healthy growth in the financial year, computer hardware production managed to see a healthy growth.
This is after the government pushed manufacturing in the sector on a sustained basis over the past nine months, through a series of benefits and the phased manufacturing programme aimed to reduce imports of electronics goods.
The two other sectors in the IIP — electricity and mining — also saw muted growth in February, data released on Friday showed.
Electricity generation rose 1.2 per cent in the latest month, slightly more than the 0.93 per cent rise in January. On the other hand, mining output grew by 2 per cent in February, against a 3.92 per cent rise in January.
TCS net profit up 17.7% to Rs 8,126 crore in Q4, crosses $20-bn revenue
Mumbai: Tata Consultancy Services (TCS) on Friday reported robust numbers both for the fourth quarter of 2018-19 and the full financial year, with the country’s largest IT services company crossing the $20-billion revenue mark for the first time. Growth in net profit as well as revenue exceeded Street expectations, though margin contracted a bit in the fourth quarter.
For the quarter ended March 31, TCS reported Rs 8,126 crore in net profit, a jump of 17.7 per cent over the corresponding quarter last year. Revenue, at Rs 38,010 crore, saw an increase of 18.5 per cent on a year-on-year (y-o-y) basis. When compared with the trailing quarter, net profit was almost flat, while revenue grew 1.8 per cent.
A survey by Bloomberg based on consensus analysts’ estimates had pegged TCS’ revenue and net profit at Rs 37,829.1 crore and Rs 7,970.7 crore, respectively. “This is a year when TCS has fired from all cylinders, and we are exiting the year on a much stronger note than how we entered it,” CEO and MD Rajesh Gopinathan said during a post-earnings interaction with media. “This is the strongest revenue growth that we have had in the last 15 quarters. Our order book is bigger than (what it was in) the previous three quarters. The deal pipeline is also robust,” Gopinathan added.
For FY19, TCS reported Rs 31,472 crore in net profit, an increase of 21.9 per cent over the previous fiscal year, while revenue at Rs 1.46 trillion was 19 per cent higher than FY18’s.
For the first time, TCS crossed $20 billion in its dollar revenue, posting $20.91 billion in top line in FY19, a growth of 9.6 per cent over the previous year, while it widened the revenue gap with the closest Indian competitor, Infosys, by $9.1 billion. In constant currency terms, it maintained double-digit revenue growth and grew 11.4 per cent.
Operating profit margins for Q4 as well as the full year, however, were marginally lower than the expectations and came below the guided range of 26-29 per cent. In the quarter under review, margins at 25.1 per cent saw a 50 basis point decline over the previous quarter, while margins for the full year stood at 25.6 per cent, up 79 bps.
The firm added six clients, each contributing revenues in excess of $100 million during FY19, while the employee headcount addition stood robust. The year ended with 4,24,285 employees, almost 30,000 higher than last year. Attrition at 11.3 per cent was one of the lowest in industry.
TCS continued to witness strong growth in its digital business, which accounted for 31 per cent of the overall revenue. Banking, financial services & insurance, which lagged other verticals, rebounded to double-digit growth with an increase of 11.6 per cent in the March quarter, although for the full year, it was 7.7 per cent.
chart In terms of geographies, North America business grew 9.9 per cent y-o-y (constant currency terms) in Q4, while for the full year, growth was 8.3 per cent. The UK, where TCS has the highest exposure compared with other Indian peers, saw maximum growth with revenues from the country rising 21.3 per cent y-o-y for the quarter and 22 per cent for the full year.
“Deals have come from many different markets and verticals. These give us the confidence that we’ll continue the momentum. Last year, we had very large segments that were dragging with growth of less than 2-3 per cent. We now have a benefit of a few large deals, so almost all segments are growing on a par with the company average,” Gopinathan said.
“TCS has delivered a decent set of numbers for Q4FY19, which beat estimates on the revenue and net profit fronts. Reported EBIT margins missed our estimates, though adjusted for Rs 220 crore contribution to electoral trust in Q4, margin was higher than estimates,” said Sanjeev Hota, AVP Research at Sharekhan.
The company reported deal TCV (total contract value) of $6.2 billion compared to $5.9 billion in the last quarter.
TCS said that like the previous year, it would start rolling out salary hikes in the range of 2-6 per cent based on geographies the employees are located, and some other metrics. In Q4 of last year, the company had doled out 120 per cent variable payouts, which will be 100 per cent this year.