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Ashwani Singla, Managing Director & Chief Executive asingla@ps-b.com M: +98 1107 5843 Shefali Khanna, Director, Marketing skhanna@ps-b.com M: +971 111 8615 Penn Schoen Berland, South Asia 603, Unitech CyberPark, Sector 39, Gurgaon Haryana, India www.psbresearch.in
Methodology
An online survey conducted between August 8 - 30, 2012 in Mumbai PSBs proprietary C3 (C-Cube) framework was used for drawing insights
Strategic Investors
(PE Funds / IBankers)
35 42 24
Financial Investors
(MF / Portfolio Managers)
Endorsers
(Brokerage Houses / CRAs)
N = 101
Years of work experience Years of work experience 8-10 8-10 yrs yrs 10-15 yrs yrs 10-15
*Disclaimer: The information contained within is the property of Penn Schoen Berland & Associates. No part of this document may be copied or reproduced without the written consent of Penn Schoen Berland & Associates. Failure to do so may invite legal action as appropriate.
Private Equity
their environment.
Portfolio Management
of their rivals because they succeed in adapting themselves best to Even in the marketplace, its not the strongest who win, but ones most responsive and adaptable to change. Today, for business leaders and Contact us: Penn Schoen Berland, South Asia 603, Unitech CyberPark Sector 39, Gurgaon Haryana, India Managing Director & Chief Executive,
Penn Schoen Berland, South Asia www.psbresearch.in
CXOs, it is a constant struggle to adapt to a fast-changing business environment. Its not just about making the right choices for themselves but for all their stakeholders employees, business partners, clients, customers, policy makers, shareholders and investors.
Ashwani Singla,
Mutual Fund
I Bank
Even as the economy slows down, investors and endorsers feel that Indias economy will remain resilient, irrespective of the policy issues. Four-fifth of the Bizfluentials who participated in our survey said that they believe the Indian economy is on the right track. 74% of strategic investors believe that Indian economy is in the right direction, 83% of financial investors and 79% of endorsers also feel positively
Endorser
Thanks to our partners: Ashwani Singla, Managing Director & Chief Executive
90%
53%
91%
75%
79%
80%
asingla@ps-b.com
The key questions that businesses need to understand for financial competitiveness are
Strategic Investor
I Bank
I Bank
Investors and endorsers feel positive about the direction of Indian economy.
Private Equity Mutual Fund
Private Equity
who said, In the struggle for survival, the fittest win out at the expense
Shefali Khanna,
1. How do financial investors choose the right business Financial skhanna@ps-b.com to invest in? Investor 2. How can one understand these choices?
about the direction of the economy. Strategic Financial Endorser Investor Investor 91% of portfolio managers, 79% of brokerage houses and 75% of Bizfluentials working for mutual funds saw the Indian economy moving in the right direction despite all the clutter, making financial investors and endorsers a much more optimistic group than strategic investors. Among the key concerns raised by strategic and financial investors and endorsers, were scams, poor governance and tardy policy implementation.
Endorser
2 Will the market look Markets to move up in up in the near future? 12-36 months
According to our study, the market outlook remains positive in the 12-36 month horizon. Aligned to this, is the investors preferred investment horizon of 1-5 years, even as scams and poor governance continue to be top of mind concerns. 51% of the participants believed that the stock market would witness a ~5% growth over a 1236 months window, while only 2% said that the markets would see a 15% jump over 12 months. One-fifth of the Bizfluentials surveyed feel that this might happen, but over the next 36 months. Despite the optimism about the economy, it was clear that when it came to stock picks, most would study both past track record and closely view the future potential of a company before investing. 7 out of 10 participants said that they believed in balance between past and the future before taking a call. However, 20% were willing to pay a premium on the perceived future of a company and 13% said they still rely entirely on past track record as perceived in the public.
24 months
Growth
Up to +5% +5% to +10% +10% to +15% More than +15% -5% -5% to -10% 10% to -15% More than -15%
No.
09 46 26 11 04 03 00 01
12 months
Growth
Up to +5% +5% to +10% +10% to +15% More than +15% -5% -5% to -10% 10% to -15% More than -15%
36 months
Growth
Up to +5% +5% to +10% +10% to +15% More than +15% -5% -5% to -10% 10% to -15% More than -15%
No. 51 15 15 02 11 04 02 00
No.
03 21 49 20 01 02 02 02
Previous Decade
Next Decade
1 2 3 Real Estate Infrastructure Energy & Resources Oil & Gas / Power / Electricity Banking, Financial Services and Insurance
3 Which are the Sectors that will drive the Market? Pharmaceuticals all set Contact us: Penn Schoen Berland, South Asia to emerge as the next 603, Unitech CyberPark big influencer Sector 39, Gurgaon
Haryana, India www.psbresearch.in
Pharamaceuticals made the largest leap up the ranks as the next big influencer set to make a huge impact on the market. While Bizfluentials ranked it 11th most important sector in the last decade, this year Pharma is among the Top 5 sectors that will play a major role in the next ten years. Infrastructure, Real Estate, BFSI, and Energy shaped the last decade and will continue to be the key sectors for growth over the next. High Tech, ICTS, Capital Goods will remain among the Top 10 influential sectors.
Infrastructure Real Estate Banking, Financial Services and Insurance Energy & Resources Oil & Gas / Power / Electricity Telecommunication Infrastructure Technology & IT services Steel/Metals/Alloys Telecommunication Services Auto
5 6 7 8 9 10 11 12 13 14 15 16 17
Competitiveness drivers Telecommunication financial markets of the Infrastructure Technology & IT services 2012
Pharma/Biotech Steel/Metals/Alloys Telecommunication Services Auto Infrastructure Related Capital Goods/Engineering Consumer Processed Goods Travel & Hospitality Education Media & Entertainment Aviation
Financial Investors Real Estate Infrastructure Pharma & Biotechnology Energy & Resources BFSI
1
Endosers Energy & Resources Infrastructure Real Estate Pharma & Biotechnology Technology & IT
Capital Goods/Engineering Pharma/Biotech Consumer Processed Goods Media & Entertainment Travel & Hospitality Infrastructure Related Education Aviation
Estate
BFSI
Shefali Khanna, 3 Infrastructure Director, Marketing skhanna@ps-b.com 4 Energy & M: +971 111 8615 Resources
2 3 4
Authenticity
Distinctiveness
Character
Communication
Capability
Employee Citizenship Business Practices & Ethics Corporate Responsibility Transparency & Governance
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Market Performance
(Capability)
Contact us: Penn Schoen Berland, South Asia 603, Unitech CyberPark Sector 39, Gurgaon Haryana, India www.psbresearch.in
Corporate Image
Managing Director The fundamental Capability of the company in terms of its management team, business practices, & Chief Executive and financial stability asingla@ps-b.com 5843 M: +98 1107The fundamental Character of a company in terms of its corporate vision for the future, transparency on business associates, employees and governance The fundamental Communication of its clear vision for the future and how successfully the company communicates its character and capability to its stakeholders Shefali Khanna, Director, Marketing Often, in looking at the minutiae, the bigger picture consisting macro-economic factors and company skhanna@ps-b.com M: +971image in the minds of stakeholders can be overlooked. Several factors impact value, but Bizfluentials feel 111 8615 that its the external factors that exert most influence on company equity.
Financial competitiveness is about focussing on the right fundamentals and getting the fundamentals right
Financial Performance
(Capability )
11
Efficient use of resources and macroeconomic factors top the list for leaders in the financial world, but they must also be careful about what drives investors. Our survey showed a clear distinction within preferences of different kinds of investors within the Top 5 drivers.
Is a trend setter
Global Competitiveness
Market 1
Leading Market Share
Market performance
Create competitiveness toCustomer gain Track record of base a winning edge. resolving customer
issues quickly and efciently Loyal
Shows a clear vision of the future of the company and the industry
Invest in building safe & healthy work environment Lower than industry average attrition rates
Build a
ucts
Among the various drivers that affect Market Performance, strategic investors focus on global
Introduces new business investors value a capable management team higher products & services than endorsers, who look at the future potential of the ahead of others
Edge
Character corporate governance standards Financial investors, with their lesser interest Makes full disclosures, The ability to manage Generally in the especially when things Protect in business risks and interestof minority build athe clean news for right drivers, prefer to rely on capable go wrong reasons management teams, positive news coverage and shareholders image is rewarded by financial indicators, such as debt-equity ratio, cash the market. So, focus on reserves and earnings per share. Being closer to Fair & progressive Claims always employer governance and engage bymarket movements, financial investors also rely on backed proof Disassociate shareholder market indicators like share price/volume volatility interest from management with stakeholders to and share group. Invests in Local build the right image. Communities
Endorsers look for the managements ability to hold
Important
views that are not just determined by Focus on governanceexpectations customers and tranperanc and shareholders their revolving for the future and expect full disclosures from the Focus on governance and long and short term goals, is tranperancy rewarded around a balance of disassociated shareholder company, even during difficult times. Strategic by the market transparency and Strategic investors are looking for a clear vision investors also care about the larger role played by visible at is interest from that of management. important public the company, be it in establishing high governance standards or corporate social responsibility.
platforms
Company leadership
ge
brand/ Focus on Leadingportfolio governance and tranperancy is s in Leading brand/ s in by rewarded portfoliothe market Is a trend setter Is a trend setter Global Competitiveness Global
Generally Ability to Managenot Risks & Build a Clea controversial is Rewarded by the Market
Competitiveness
Ability to balance Ability toboth short term balance both short term term and long and long term goals
Generally not Fierce but fair controversial Fierce but fair competitor
the of Shows a clear visionfuture of the company Invest in building safe & healthy the future of the and the industry safe & healthy company work environment and the industry work environment
Invest in building
competitor
Leading
Track Build a record of Track record of resolving customer Establishes high strong resolving customer issues issues quickly and quickly and Character corporate governance standards efciently
Makes full disclosures, especially when things go wrong
Customer base
Customer base
Generally in the Makes full disclosures, Generally in thebacked by proof especially when things news for right Protect the right especially when things news for Protect the go wrong Strengthen reasons interestof minority go wrong reasons interestof minority
go wrong
Build a strong Establishes high Establishescorporate governance high strong Character Makes full disclosures, standards Character corporate governance when things standards especially
Makes full disclosures,
Build a
Lower than in
efciently
Introduces new new Introduces products & services products & services ahead of others others ahead of
Edge
Edge
Communication shareholders
shareholders
business business
Edge
Critical
Disassociate shareholder interest from management
Critical
Fair progressive Fair & progressive & company and the industry Claims always Claims always employer employer Generally in the backed by proof backed by proof Disassociate shareho Disassociate shareholder news for right reasons 14 interest from management from manage interest
Invests in Local Invests in Local Communities Communities
Generally not controversial
Critical
Critical
Important
Important
Important
growth
Company leadership Company leadership is visible at important public is visible at important public platforms Penn, schoen & berland associates, llc.
platforms
Global Market Scenario Crude oil import bill Political Stability Fiscal Deficit Foreign Exchange Reserves Extent of Shares pledged Group (A, B, T/T, Z) High FIIs ownership
anage sk Better
External risks
Index of Industrial
Production Leverage external Interest Rates opportunities and mitigate Inflation external risks to stay ahead. Agricultural Production
and interest rates while endorsers look at the larger picture, ranking inflation and fiscal deficit as preferred macroeconomic parameters.
Most Critical
Financial performance
Strategic investors focus on segmentation of the company stock, whether it is a large-cap, mid-cap or small-cap. They also worry about the number of shares pledged by the management to feel confident of the company. The financial investors
Edge
Macroeconomic factors remain top of mind issues for all players environment being most important to strategic investors. Financial investors are focussed on GDP Indirect Taxation
Foreign with GDP Investment
Strategic investors look at financial stability and revenue growth, while financial investors opt to look
High Importance
on the other hand are more focussed on pricing and volatility of the stock. Endorsers meanwhile have ranked volatility, volumes and number of shares pledged as the key factors that impact their
Importance
Leverage External Opportunities & Contact us: Demonstrate Ability to Protect Investor Wealth Penn Schoen Berland, South Asia Mitigate External Risks to Stay Ahead 603, Unitech CyberPark
Sector 39, Gurgaon Haryana, India www.psbresearch.in
Direct Taxation
deeper into the finances of the company, looking for debt/equity ratio, EPS and future earning potential of the company for valuation. Endorsers also value EPS and future potential.
Free float
Demonstrate Ability to Prote Maintain Healthy Financials to Command Va decision making for stock picking.
Competitiveness drivers of the financial markets 2012
Average Trading Volumes
Good to have
Good to know
import bill
Political Stability
High FIIs o
Future Earnings
Free float
15
Extent of shares pledged Consistent revenue and profit growth above inflation rate Categorisation (large cap/ mid cap)
Future Earnings
Importance Group
(A,B, T/T, Z)
Indirect Taxation
High Importance
Edge
Account Balance
Free Float
Free float
Ave
Good to have
Free Float
Importance
Good to have
Direct Taxation
High Fll Ownership
Conclusions
1 Focus on the right fundamentals and get them right Corporate Image is a key differentiator Winning hearts and minds of stakeholders is a science. Invest in it.
Competitiveness drivers corporations operating in the Indian Sub-continent, South East Asia & The of the financial markets Middle East. The South Asia is led by Ashwani Singla, formerly the CEO of Genesis Burson-Marsteller (GBM) & Board Member, Burson-Marsteller 2012 (B-M), Asia Pacific.
PSB is a part of Y&R Brands and WPP (NASDAQ:WPPGY), More information is available on www.psbresearch.in
Thanks to our partners: Ashwani Singla, Managing Director & Chief Executive asingla@ps-b.com M: +98 1107 5843
2 3
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We have also generated sectoral & investor specific insights. Should you want to know more, please contact Shefali Khanna, Director, Marketing,
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