Recession & Opportunities For Keralites NRK

Recession
From a Keralite & NRK perspective
What is Recession? Feasibility Studies | Business Plans | Project Reports | Market Research | Based in Calicut How did it happen? How will it affect India, Kerala and Gulf? what every keralite should know Tel: 0091 495 4022224 TM How will it affect us? Mobile: 0091 9846 751234 Mobile: 0091 9995 900800 What are the opportunities?
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This presentation is prepared with the objective of informing the common man on what recession is and how to make best use of it. Best care has been taken by the author in compiling the information and presenting it. The opinions represented here are observations of the author, and anyone who uses this information has to do his own due diligence and investigation, and cannot place any blame or fault on the author or his firm for any consequence from using the data in this presentation. Hope you have a good reading. You are welcome to forward this information to any of your friends Any comments or suggestions, please email: | Business Plans | Project Reports | Market Research info@capellaventures.in
Feasibility Studies
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| Based in Calicut
Tel: 0091 495 4022224 Mobile: 0091 9846 751234 Mobile: 0091 9995 900800 Email: info@capellaventures.in Web: www.capellaventures.in
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Global Recession
Source: http://en.wikipedia.org/wiki/File:Recession_2008.png
Feasibility Studies | Business Plans | Project Reports | Market Research | Based in Calicut
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What is Recession?
In simple terms, an economy is said to be in recession, when The GDP of a country begins to fall for 2 or more quarters This fall in GDP continues for many more months, slowing down the economy with it GDP is the total cost of all goods and services produced in the country in a year.
What Causes Recession? Recession is a normal business cycle An economy naturally expands for 6-10 years and then go in for a recession for about 6 months to 2 years. It is correction process, when consumers/investors realize they are buying at rates beyond its true value This loss of confidence, makes buyers/investors to sell off their assets or abstain from buying new This act of not buying or selling off, is followed by everybody, and the prices of goods, commodities, land and stocks fall rapidly This causes Recession. The time for investors or buyers to feel that the economy has reached its bottom, and can now invest or buy, is when the boom (recovery) starts. The period from the start of negative sentiments to positive sentiments is the period of Recession. Historically it has ranged from 6 months to average 2 years
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History of Global Economic Crisis

1982-83 US Recessiondue to over production
1990s US Recessioncollapse of junk bonds
1930-1939 The Great Depression 1997-1999 Asian Financial Crisis 2001 US RecessionDot Com bubble burst
2008 US RecessionMortgages crash
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History of Economic Crisis in India

1972-1974 steep rise in global oil prices, when inflation reached 20% in India
2008 US RecessionMortgages crash
1997-99 Asian Financial Crisis, it slowed down India growth from 7% in 1994 to 4.5% in 1997
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What was the reason for this Recession?

What caused Recession in USA? Due to heavy competition in Home Loans, banks in USA began to give loans to people with poor credit worthiness (that is without considering if they can repay the loan) or unstable income. These banks came into trouble, when these people where unable to pay back the loan. The banks became at loss and some of them might close down, taking with them the savings of many depositors. Now, when the loan was easy to get for anyone, people started to invest in real estate. The construction industry boomed. When the people failed to pay back the loans, the banks, real estate and the construction industry collapsed. This along with rising oil prices created problems. And this trend began to affect other sectors of the economy as well. Since most countries around the world, like India and GCC countries have economic connections with US, the slow down there will affect them as well
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Impact of Recession in India- Negative Aspects

According to the Assocham Business Barometer survey of 250 CEOs, About 80% projected GDP growth for 2008-09 at 7.1 per cent from the earlier 7.6 per cent, with strong waves of negative economic sentiment. Over 80% of CEOs said manufacturing sector, which has witnessed a negative growth of 1.2 per cent in October, would take double hit from the rapid slackening of domestic demand and heavy shrinkage in new export orders. Services sector which recorded an average growth rate of 10.7 per cent in last three years is expected to deteriorate to below 9 per cent growth rate mark According to FICCI (Federation of Indian Chamber of Commerce & Industries), A state of uncertainty is gripping over many services sectors, including financial services, software, outsourcing, civil aviation and real estate, due to the global financial crisis, credit crunch and higher interest rates during the recent months, according to a survey by the Federation of Indian Chambers of Commerce and Industry. According to McKinsey, The country will run out of capital to support economic expansion. Sectors like textiles, metals and mining, automotive, cement, real estate, media, IT need working capital to fund projects underway. The economy is under stress with growing bank non-performing loans and job losses in sectors like textiles. The firm said operating margins in almost all sector have reduced and will fall further over the next two years. Increased cost of debt will erode the profitability more and interest coverage Pressure on the real sector likely over next two years will have negative consequences for the broader economy According to McKinsey projection, even in steady state, infrastructure financing would face a deficit of $150 billion and it can increase sharply in current scenario. Along with a deficit in the infrastructure sector, fall in corporate savings and foreign inflows can also result in a potential shortfall of $200 billion of the total savings and investment
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Impact of Recession in India- Positive Aspects

Strong Banking system: The Indian financial system has the potential to survive due to the stringent regulatory framework, and other factors like, Limited exposure to US-mortgage backed securities. The central bank's regulations ensured that the Indian financial system has a leverage of 13:1 (while the US investment banks' leverage is 30:1) The dominant role that government-owned banks play in the Indian banking sector. These banks hold financial assets worth 77.2 per cent. All banks, irrespective of ownership, need to invest over 32 per cent of their deposits with RBI or invest in sovereign bonds. Reserve requirements set by RBI are among the highest in the world. This ensures that RBI and the banking system have enough muscle to support the economy when there is a slowdown or liquidity crisis. And also that banks have limited credit risk and the balance sheets have significant liquidity Export Exposure: Indian exports to the US is just over 3% of GDP. India has a healthy trade surplus with the United States. Confidence Factor: According to a study, around 42 per cent of people feel that 2009 will be better than 2008. India has been ranked as the seventh most optimistic nation along with Russia, according to study by global market information group TNS and Gallup International. Citi retained its forecast for India's economic growth in fiscal 2009 and 2010 on "positive coordinated measures" by the central bank and the finance ministry. Lowering Inflation: The crude prices started easing and hovered near $38 a barrel at the year end, while global commodity prices took a more than 50 per cent dip, providing relief to both government and consumers. Steel prices have almost halved from the peak of $1,200 per tonne earlier this year.
Sectors that did well from April November 2008 According to survey by FICCI, a few services that have seen a high growth of 10% to 20% in April-November 2008 are (Figures in bracket refer to growth in year-ago period ): Railway revenue earning passenger traffic 12.2 per cent (14 per cent), Revenue earning railway freight traffic 15.7 per cent (14 per cent), Housing finance 12 per cent (12 per cent), Entertainment & media industry 10 per cent (16 per cent), IT/software/software services 15 per cent (33 per cent) and Organized retail trade 15 per cent (30 per cent).
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Impact of Recession in Kerala-1

The Kerala Tourism has been affected by the global financial crisis
Drop of 35% in foreigners arrivals (compared to last year) leading to large cancellations of hotel rooms, resorts and house boats The backwater tourism is expected to head into worst crisis in 15 years. According to House Boat Owners Association, the business is down by 50 per cent and cancellations come to around 75 per cent The backwaters (in Alapuzha alone) used to earn a business of Rs 35 lakhs per day (through some 400 house boats), now only has a sale of Rs 10 lakhs or so daily. If the crisis continues, about 2000 people will lose their jobs
Solution to crisis
According to State Finance Minister, TM Thomas Issac the best way to resist the downturn was to attract more investments in the infrastructure sector, with active participation of small and medium private investors,
Remittances from abroad

If the financial crisis continues, Kerala with its economy centered around remittances from abroad, stands to gain from the depreciating rupee
Industries based on US and European markets most hit

Textiles and garments, tourism and fisheries, which relied mainly on the US and EU, are the worst affected
Decline in State Revenues

Excise duty alone has registered a decline of around 15 per cent and if the situation continues, the State will be severely hit
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Impact of Recession in Kerala -2

Impact of recession in Gulf
The gulf countries are getting affected due to the recession and falling oil prices. This means that salaries/job opportunities may shrink and that alone will cause huge impact on the Kerala economy. No new projects are being undertaken in the Gulf countries due to the economic meltdown. This could result in thousands of Keralites employed in those countries to be compelled to return during 2009-2010
Solution to crisis
According to State Finance Minister, TM Thomas Issac the best way to resist the downturn was to attract more investments in the infrastructure sector, with active participation of small and medium private investors,
Employment
About 1.5 lakh employees engaged in Keralas traditional industries will lose job as a result of the crisis,
Exports
Export of coir, marine products, cashew, spices and other items had recorded a decline of 15 to 30 per cent Steep fall in price of rubber in the wake of global recession with its grim fallout on automobile sector is bound to hit Kerala's economy badly as state accounts for 92 per cent of India's natural rubber production.
Growth Rate
States growth rate was likely to come down to 6 from the present 8.1 per cent.
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Impact of Recession in Gulf

The recession due to flight of capital has started affecting the Gulf region, and is expected to affect the job market seriously The Indian expatriates who contribute to the bulk of work force in Gulf countries is expected to have a hard time. Hundreds of employees have already lost their jobs in construction, real estate and financial sector. About 80% of the construction workers in GCC are Indians, and with the construction sector hit the hardest, their future is in the dark Dubai had been the hotspot of development for the past many years, and it stood as the largest market for speculative buying of some of the worlds most prestigious projects. Needless to say, with the recession, Dubai is hit the hardest among other GCC cities Banks in the region are reviewing credit policies and loans have become harder Banks have setup higher salary ceiling to approve personal loans and easy credit on credit card is no longer easy. This is quite opposite to the situation in past where credit cards were easily given to anyone In way of remittance, Kerala alone was expected to receive Rs. 42,000 crores this fiscal year, but the situations do not look that promising anymore The Gulf economy is expected to have tougher times ahead Some GCC countries are planning to increase the minimum salary required for expatriates to bring in their families
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Impact of Recession in India on Sectors
Ad Industry
Aviation
B-Schools
BPO
Business Consulting
Event Mgt
Exports
HR & Recruitment
Infrastructure Related
IT / ITES
Jewellery Exports
Leather
Legal Consulting
Real Estate
Retail
Transport
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Opportunities in Recession
Red***
The industries in Red are going to have problems in getting revenues and capital during this recession. These business, if it can survive liquidity problems, will continue to do good, as it did before the recession, after 1 or 2 years. If a businessman is interested in getting into this business, by setting up his own firm, then he should start it by planning his time and finances properly. If the setup period (construction etc) takes 1-2 years, then it is ideal to start now. As he can commence operation when recession is over. Constructing now, also gets him construction expenses at lower cost
Yellow***
The industries in Yellow are going to have a mixed opportunity. Various situations will dictate how they fare in their market.
Green***
The industries in Green are those who are going to do well, in this recession. These business will not typically need fund, unless they are planning for expansions or increasing their marketing to exploit the opportunity. If the setup period is less, say can be done in few months, then it is worthy of entering these industry. But not recommended. As by the time, the new business builds up a reputation, the boom caused by general recession to this business will be over, and the financials may not be that promising, after the recession. But some industries or firms, will continue to perform well, so it depends on case to case basis.
Scenario
Tips for Promoters
If a businessman is interested in getting into this business, by setting up his own firm, then he should start it by planning his time and finances properly. If the setup period (construction etc) takes 1-2 years, then it is ideal to start now. But has to study how this business will perform, after the recession is over.
If an investor is planning to invest in this business from scratch, then above tip is relevant for him. But if he wants to be part of an established player in this industry, then also this is a Tips for good time. Most of these firms will need Investors extra cash to meet their working expenses and debts. By investing in, to keep them Feasibility Studies | Business Plans survive the recession, helps you enter these companies without paying much premium or goodwill.
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If an investor is planning to invest in this If an investor is planning to invest in this business from scratch, then above tip is business from scratch, then above tip is relevant for him. relevant for him. This could be a good time for those who But if he wants to be part of an established wish to invest into established businesses player in this industry, then this is a bad as well. Most of these firms will be having time. As the firm will request premiums and credit and liquidity crunch, which can be to good wills. the benefit of the investor. By investing in, | to Project Reports Market Research | Based in Calicut keep them survive the | recession, helps you enter these companies without paying much premium or goodwill. Tel: 0091 495 4022224 *** these are just general tips, and each firm in each industry in each sector has Mobile: 0091 9846 751234 to reviewed in detail before making an investment. Contrary to general advise Mobile: 0091 9995 900800 given above, some firms in red (as mentioned above), can be really green, Email: info@capellaventures.in based on their unique situation, and vice versa Web: www.capellaventures.in
Most investors wish to invest in a business when it is doing very well. Because they are convinced of its performance. But successful businesses DO NOT need capital from others, or they will charge a very high premium for the Goodwill. So most investors end up not investing anywhere, and miss golden opportunities. The real smart investor invests in good companies, when they are having temporary problems (like seasonal recession or off seasons). For this is a time, when the investor can get a share in that company without paying high or any goodwill. Once that recession is over, these businesses get back in form! For the riskier investor, who targets higher profits, he can invest in startups so that he can sell his shares to outsiders at a very high premium, after 2-3 years. Investors who really make money, are those who wait and give time for their invests to grow.
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About the Author

Ameen Ahsan
MA Finance & Investment (UK), BBM
MD & CEO
Capella is headed by Mr. Ameen Ahsan, as the Managing Director. Mr. Ameen Ahsan is a Corporate Strategy Advisor who has done his masters in Finance & Investment from Exeter University, UK. During his study at Exeter University, he was the Chairman of the fund that won the International Portfolio Management Award in 2001, an award by INVESCO and BFS Securities in association with the School of Business & Economics (Exeter University). On the professional front, Ameen Ahsan had worked as Strategy Advisor for a leading Dubai based company, and as Consultant at a German strategy advisory company (MESA, now OC&C UAE). Ameen has exposure in sectors as Service (Business Consulting, Publication) Industrial (Confectionery, Publishing Press), Trading (FMCG, Office Stationery), Tourism and Privatization of Govt Companies. Ameen is consulted by business houses on various corporate strategy related issues. His articles on business strategies have been published in leading English and Malayalam publications. Ameen has international exposure and has travelled to United Kingdom, France, Germany, Belgium, Malaysia, Oman and UAE.
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About Capella
Capella Ventures is the venture consulting and management division of Capella Projects Consulting Private Limited (founded in 2008) Capella Ventures is into the business of providing consulting, advisory and research services to new ventures and initiatives in association with promoters who have the relevant technical expertise. Our contribution in each project is by providing consulting, project management and investor relationship services. We provide total turnkey solutions to companies to grow (by organic or inorganic means).
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Reference
http://recession.org/library/ http://amitkottisa-itrecession.blogspot.com/ http://news.bbc.co.uk/2/hi/south_asia/ http://www.thehindu.com/ http://www.thehindubusinessline.com/ http://placementfirst.com http://www.keralatips.org/ http://en.wikipedia.org/ http://www.rediff.com/money/ http://www.blogcatalog.com/ http://www.financialexpress.com/ http://timesofindia.indiatimes.com/ http://www.ayurvednews.com/ http://www.indopia.in/India-usa-uk-news/latest-news/ http://keralaonline.com/news/ http://finance.indiainfo.com/2008/ http://business.outlookindia.com/ http://goldnews.bullionvault.com/ http://www.hinduonnet.com/2008/ http://sify.com/finance/ http://www.commodityonline.com/news/ http://www.mathrubhumi.org/ http://economictimes.indiatimes.com/
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Recession & Opportunities For Keralites NRK

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Recession & Opportunities For Keralites NRK

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Drepturi de autor:

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Recession

From a Keralite & NRK perspective

Email: info@capellaventures.in Web: www.capellaventures.in

History of Global Economic Crisis

1990s US Recessioncollapse of junk bonds

2008 US RecessionMortgages crash

History of Economic Crisis in India

2008 US RecessionMortgages crash

What was the reason for this Recession?

Impact of Recession in India- Negative Aspects

Impact of Recession in India- Positive Aspects

Impact of Recession in Kerala-1

Remittances from abroad

Industries based on US and European markets most hit

Decline in State Revenues

Impact of Recession in Kerala -2

Impact of Recession in Gulf

Impact of Recession in India on Sectors

Tips for Promoters

About the Author

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