INDIA S ECONOMIC GROWTH & AVIATION SECTOR OPPORTUNITIES

Transcription

1 INDIA S ECONOMIC GROWTH & AVIATION SECTOR OPPORTUNITIES Atul Joshi Oct 12, 2018 Oyster Capital

2 Agenda India : Economic Growth Strong Base With Headwinds Aviation Sector: Growth & Opportunities

3 Fiscal Deficit..on consolidation path Fiscal Deficit - India Center State Center improves on fiscal deficit but states widen to some Deficit leads to constraint on ability to spend A boost for PPP may be expected

4 Debt to GDP...stabilising at high levels Debt to GDP India avg Debt to GDP - Others Ind Can UK Fra US Jap Source: Fitch

5 Long Dated Borrowing & Lower Maturities A cushion Average maturity of Govt. Debt (Years) Fra Ger US Aus Can India Debt maturities to GDP % UK France Germany US Canada India

6 CAD deteriorates but supported by FDI inflow 6 India CAD CAD+Net FDI E

7 Reserves A strong cushion Reserves (months of Import Cover) India 7.6 Indonesia 7.1 Italy 2.6 Australia 2.0 France 2.7 USA Germany UK

8 GDP Growth below potential above peers Real GDP growth (%), 2017 Real GDP Growth per head (%, 5-year avg.) (2.0) (4.0) India Indonesia Mexico Thailand Brazil Russia China

9 Favourable Population Dynamics Developed Countries India Developed Countries India Upto Upto Source: India Ratings and Research 63.3% of India s Population Below 34 Years of age against China s 48.7% and advanced economy s 41.9% in 2015

10 Growth of Middle Class in India Doubled in just 5 years Another 65% growth in next 5 years 20% 11% 33% Growth of Middle Class in India Source: NCAER < 2Lakh 2 to 4.9 Lakh 5 to 9.9 Lakh 10 Lakh>

11 Net Financial Savings of Household Sector % of Gross National Disposable Income Source: RBI Annual Report 2018

12 Agenda India : Economic Growth Strong Base With Headwinds Aviation Sector Growth & Opportunities

13 Passenger Traffic Growth Demone tisation GST GFC Source: DGCA

14 Passenger Traffic Growth Rapidity of Growth 5 Months of traffic takes over yearly traffic Apr-Aug Domestic International Total Source: DGCA

15 Cargo Traffic Domestic In 000 metric tonnes CAGR of 6.6%

16 Cargo Traffic International In 000 metric tonnes CAGR of 5.4%

17 Aircraft Movement Nos. in mn % % Domestic International

18 Number of Aircrafts No. of Aircrafts Air Asia 18 Air India 136 Air India Express 23 Alliance Air 17 GO Air 37 Indigo 172 Jet Airways 113 Jet lite 7 Spice Jet 58 Vistara 21

19 Market Share of Airlines Domestic Departures GO AIR 9% AIR ASIA 4% VISTARA 4% OTHERS 0% AIR INDIA 12% ALLIANCE AIR 1% SPICEJET 13% INDIGO 40% JET AIRWAYS 17% Private Airlines command 88% of the market share for domestic departures

20 Market Share of Airports Domestic Departures Private Airports though just 6 in number, have a lion s share in traffic AAI operated Domestic airports are nibbling market share from private sector

21 Growth Opportunities Growth % Cargo Growth Domestic International 9% 15% 2018 over 2017 Passenger Growth Domestic International 19% 11% Market Share % Private Airports Market Share Domestic International 51% 67% March 31, 2018 Private Airlines Market Share Domestic Segment 88% March 31, 2018

22 Growth Opportunities Airport Density is measured as number of people per airport US Airport Density = 60,000 people China Airport Density = 3.20 mn people India Airport Density = 4.60 mn people India airport density very high Develop much large number of airports Upgrade existing airports Number of flights per capita US > 2 Australia > 2 China 0.3 Brazil 0.3 India 0.04 Source: APAO Presentation

23 Growth Opportunities MRO Opportunity MRO is the second highest cost contributor after fuel MRO opportunity in India is estimated at USD 30 bn Presently there are nearly 11 MROs at different stages of approval FDI permitted 100% auto route Smaller Aircraft & Helicopter Opportunity Poor air connectivity for most of its hill stations Poor air connectivity on last mile basis to most frequented tourist/religious places e.g. Dwarka Surge pricing strategy by railways a boon for air passengers Prudent pricing by air operators a must Carrying capacity still a long way to go Road network build up slowing down due to financial and operational issues

24 Challenges Last mile connectivity with airport and convenience to travel Revenue share lop sided risks not balanced out No single window for clearances Reserved activities on Cost Recovery basis Concession agreements need adherence CAG and RTI application to private operators remains a threat

25 Suggestions & Conclusion Suggestions: Ministry of Civil Aviation & Tourism work together Work on last mile connectivity through alternate routes such as dedicated trains and bus routes on BRTS from airport to city centers Ministry of Finance, state governments and RBI to work towards clearing path for securitising cash flows of operators Conclusion Despite challenges, the sector offers undeniable lucrative opportunity across a wide spectrum of services covering ground, passenger, cargo, MRO and allied services

26 Adi Shankaracharya says.

27 Thank You

28 Net External Debt (NXD) A strength UK FRA AUS US SPA ITA BRA SA IND 2014 NXD (% of GDP) NXD (% of Exports) (BBB median 5) (BBB median 16.4) Source: Fitch

29 External Debt Servicing & ST Debt A Cushion Ext Debt Ser (% of Exports) Ext Int Ser (% of Exports) ST Ext Debt (% of GXD) 90 (BBB median 13.3) (BBB median 5.0) (BBB median 24.9) IND AUS CAN GER US FRA UK CHN JAP Source: Fitch 28

30 Theory 3 Consumption story developing strongly (%, CAGR) 18 Rural Urban FY78 CY83 FY88 FY94 FY00 FY05 FY06 FY07 FY08 FY10 FY12 Source: NSSO, India Ratings and Research 29

31 Rural Consumption in Favour of Discretionary Spending FY12 FY00 Consumer Durables 6% 3% Medical 7% Others 18% Food 49% Medical 6% Education 2% 2% Consumer Durables 3% 3% Others 14% Food 59% Education 2% 3% Clothing & 8% Footwear 8% Clothing 8% & Footwear 8% Fuel & Light 8% Fuel & Light 9% 9% Source: NSSO, India Ratings and Research Source: NSSO, India Ratings and Research 30

32 Theory 4: India One Story Though Not Uniform 0.84 Chandigarh: Delhi: State s Contribution to GDP (FY14) 3.74 Less than 2% Puducherry: More than 2% but less than 5% More than 5% but less than 8% More than 8% Source: India Ratings and Research 31

33 But Some Laggard States are Catching up 4.17 Chandigarh: -1.28% Delhi: 5.21% Puducherry: 6.44% Per Capita GSDP Growth (FY09-FY14) Less than 3% More than 3% but less than 5% More than 5% but less than 7% More than 7% Source: India Ratings and Research 32

34 Fundamental Weaknesses - High Committed Expenditure INR trn 12 Interest Payments Committed Expenditure Revenue Receipts FY10 FY11 FY12 FY13 FY14 FY15 FY16e Source: India Ratings and Research

35 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Domestic Demand to Drive GDP Growth New Investment Announced has Increased (USD bn) New Investment Announced (INR Trn) (LHS) Growth (RHS) (%,yoy) 3, ,490 2,990 2,490 2,617 3,077 3,444 2,483 2, ,990 1, ,313 1, , Source: CMIE and Ind-Ra

36 Theory 4 Banking Sector Foundation Strong; Weakness Cyclical Macro Prudential Indicator (MPI) - Macro risks such as asset price bubble Least Risk MPI 1; India Moderate Risk 2 ; Singapore, Switzerland Highest Risk - 3 ; China, HK Bank system CAR at 11.9% SLR / CRR at 27% Bank Assets / GDP India 70%; Brazil 139%, China 213%, Germany 183%, UK 341%, US 111% Loan to Deposit India 77%, Brazil 106%, China 92%, Germany 85%, UK 102%, US 95% Dollarized ratio at 3.5% against BBB median of 17.3% Very low vulnerability to global credit meltdown

37 States Aggregate Capex Higher Than Centre (USD bn) Year Centre States Combined States as % of total FY11 24, , , FY12 24, , , FY13 25, , , FY14 28, , , FY15 (RE) 29, , , Source: Central government budget, RBI and Ind-Ra

38 CAD deteriorates but supported by FDI inflow India CAD CAD+Net FDI E CAD CAD+Net FDI AUS CAN US UK Indonesia Mexico Source: Fitch