S. Viraraghavan, Director, Sales and Marketing, Cargill India shares nitty gritties in an exclusive interview to B&E

B&E: How does Cargill India feel government policy should be modified with regard to FDI in food processing and retailing and will it adversely affect the unorganized and small players?

SV: Creating a favourable fiscal environment to induce venture capital and mutual funds to invest in different components of supply chain, tax holidays, excise relief, fiscal incentives for cold-chain setups and a regulatory mechanism are important for driving growth. It is a misnomer that organized retail will have a negative impact on unorganized sector. They can co-exist and grow and a lot of inefficiencies will get addressed.

B&E: Processed food currently forms a very small percentage of India’s exports. How can this scenario be improved in terms of duty rates and standards?

SV: We have to improve the acceptance of process food in the society and address the myth that all processed food is unhealthy. Govt. of India is taking some positive initiatives to address fiscal incentives to the sector which is a positive development. Export of food items to developed markets needs adherence to stringent food norms and hence, requires high capital investment in machinery and process automation. Concessional duties for importing machinery will also encourage big ticket investments in the sector. The Food Safety and Standards Act is a positive step and we need alignment to global food safety standards such as CODEX to make our products acceptable in the global market.

B&E: How does Cargill India see the future for the sector in a 3-5 year timeline and what is the biggest opportunity areas within the sector?

SV: With the economy growing at an accelerated pace, there’s been a significant change in food habits. More processed and functional food will become part of the Indian diet and hence the sector will see robust growth. As a major global Food Ingredients Supplier we see a big opportunities in the sector. We have successful and popular brands like Nature Fresh and Gemini and have substantial market access. Going forward, this creates a favorable situation for us to look at the food market.

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Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri 
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Morgan Stanley cuts FY'12 India growth to 7.7 per cent

The next three to six months may not be very good for the Indian equities market, but it makes a very good investment proposition with a 12-18 months view, and India would continue to be on a high-growth path posting 7.7 per cent in 2011-12, said Morgan Stanley analysts. "There is a 19 per cent upside for the BSE Sensex considering our target of 22,100 points. And the market provides a great environment for the stock pickers, as the macro influence on stock prices has already peaked," said Ridham Desai, MD and head of Indian equity research team of Morgan Stanley.

"Valuations are looking attractive, especially on an absolute basis, and for the broader market, the market is pricing in slower near-term growth," he added. Morgan Stanley has shifted its focus from global commodities to domestic consumer-driven sectors. "We remain overweight on industrials and are cognizant of the downside to capital expansion," Desai added. Industrials include engineering, capital goods and infrastructure sectors.

Other favourites include energy, telecom and utilities, while sectors that are underweight are consumer staples, healthcare, financials and materials (commodities). Technology is in the neutral. "Risk-return analysis is in favour of small- and mid-cap stocks, compared to frontline stocks," Desai said. Global risks apart, the market performance would depend on the policy initiatives of the government in the coming quarters. Desai listed expected policy decisions as fuel price hikes, fertiliser prices, FDI in retail and coal mining policy.
"Higher interest rates are likely to put pressure on corporate profitability, but are unlikely to affect them much," said Desai, reasoning that the current debt levels of Indian companies was much lower compared to its own past. On the global front, the impact of withdrawal of quantitative easing (QE-II) in the US on commodity prices was identified as a major surprise in store. Consequent to the US launching the QE-II in September 2010, commodity prices shot up as the US dollar slid.

Responding to a query on the attractiveness of the Indian market for foreign institutional investors (FIIs), Desai said, "Foreign investors are cautious at present and are waiting to invest. But typically foreign inflows follow performance and not the other way round."

Chetan Ahya, MD and Asia Pacific economist at Morgan Stanley, said the government spending will nosedive this fiscal to seven to eight per cent of GDP from 18-19 per cent of CAGR (compounded annual growth rate) in the last five years.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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