It is no fault of India or its companies. But they have to pay for the global financial tsunami created by the US credit crisis that hit its shores, just because India was somewhere on the shores across the sea. Banks in India also recoiled, and refused even to disburse the loans sanctioned already.
This is not something of the kind what we have seen in the recent decades, when every five years there used to be a scam affecting the sentiment.
Or it is not because of oversupply that had been the main reason for companies suffering during economic downturn.
Just take the case of pharma major Wockhardt. To repay an external commercial borrowing ( ECB) of just about $ 90 million ( over Rs 430 crore), it is being made to run from pillar to post. As Sunil Shah, CEO, Evergreen Capital Advisors, puts it, “ Losers are yet to be counted. New bodies ( of losers) are emerging day after day. Even Madoff's ( who swindled $ 50 billion through a ponzi scheme) trail is set to lengthen the list.” But how does it impact demand for various goods and services? “ Unreasonably high expenditure on films, travel and eating out will come down. Some sanity will come to such spending as the slowdown sets in,” says Aneesh Tripathi of Grant Thornton, leading management and accounting consultants.
Thus, people would seek to find cheaper options for fulfilling these desires when the going gets tough in 2009. Let us see what are the sectors experts have identified as the top 10 businesses or enterprises that would turn out to be maximum wealth in 2009:
ENTERTAINMENT
People, in fact, will need more entertainment during slowdown or depression. But the budgets on this item will come down drastically, sustaining only budget entertainment industry. That means multiplexes may not do as well. “ Retail food, amusement parks, films and entertainment will do well. Indian consumer has sizeable savings to enable them to enjoy the fruits of their labour,” says Harsha Raghavan, principal- investment area, Goldman Sachs ( India) Securities.
RETAIL
High- end retail may not do well, though valueconscious buying will remain steady. Thus, retailers offering bargain deals will do better than others. “ Discount stores like Big Bazar and Subhiksha will do better,” says S. Jindal, CEO of Continental Capital Advisors.
HOSPITALITY & AIRLINES
People cannot do away with tourism and hospitality. “ Budget hotels, low- cost airlines and midsize restaurants will continue to do well as people will try to limit their costs on such things,” says Tripathi.
Thus, tourism may look down.
“ Indian consumer is the smartest. Once he sees that there is no commensurate benefit in travelling in business class, he will simply shift to economy class,” says Raghavan.
FMCG
Soaps and toiletries and food items fall under essentials category. One can only shift from one brand to the other. Raghavan says, “ All general consumption driven sectors, including medicines, will do less worse in slowdown, while export led industries will suffer the most.” Food and groceries cannot be cut too. “ It is unlikely that people will cut on their food consumption,” says Jindal.
KPO/ LPO
Knowledge Process Outsourcing ( KPO) and Legal Process Outsourcing ( LPO) are niche specializations that give a lot of cost advantages to companies using their services. Tripathi of Grant Thornton, says, " These IT subsectors will grow because of the cost advantage they offer." When companies are weighed down by cost pressures, they cannot give up outsourcing.
“ Technology companies, that too mid- cap ones among them, will thrive,” says Shah.
UTILITIES
Slowdown shall not hurt power consumption, household gas or telecom, unlike petroleum fuels consumption, which have already taken a beating. “ It is safe to assume that people are not going to stop lighting their homes. So utility administration, maintenance and other related businesses should remain intact,” says Jindal.
EDUCATION
Rain or shine education sector will be steady. An evergreen industry as one cannot afford to take cudgels with the future of one's children. There were reports recently that many executives were planning to go on sabbatical to find ways and means of handling slowdown or recession and to acquire extra skill sets when they are not in jobs.
HEALTHCARE
Tough it is not good to see this industry prosper unhindered, nobody can help it when worries overwhelm one.
Worries complicate matters and lead to psychological and physical problems.
“ More People will get sick due to depression — sometimes even more so when they don’t have the insurance or money to take preventative measures or eat healthy food,” says Jindal.
INFRASTRUCTURE
Companies with large contracts from governments may do well as the latter would try to increase expenditure on infrastructure.
This sector has been identified as the only sector by investing in which the government wants to sustain high growth levels. The Centre plans to pump in about $ 700 billion ( Over Rs 3,300 crore) in the sector — including roads, railways, ports and airports — by 2012.
DEFENCE
Whether there is a war or not, the country has to be ever prepared for any eventuality from neighbours like Pakistan and Bangladesh. Privatisation of production of some defence requirements has raised interest and participation of private players.
“ This sector may benefit as there will be more public spending,” says Jindal.
LAST WORD
Traditional sectors like auto, real estate, textile, tourism and general engineering sectors would suffer in 2009. Exports will also suffer because of lack of buying interest abroad. There is one industry that sinks in well with people, whether it is a celebration or a sorrow — the beverages industry. “ As the worries intensify, people will gulp down more drinks to forget,” Jindal adds.
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