Composite Leading Indicators (CLIs) for India points to growth gaining momentum. India's CLI inched up to 99.2 in June from 98.9 in May. CLIs are designed to anticipate turning points in economic activity relative to trend.

The total value of India's listed companies is expected to cross the US$ 1.5 trillion mark within the next 12 months

as India enters the top 10 club of countries by market capitalisation.

According to the Organisation for Economic Cooperation and Development (OECD), India is poised for better growth.

In the second quarter of 2014 the Indian economy advanced 5.7%, up from 4.6 percent expansion in the first three months of the year. It is the highest growth rate in 3 years since the fourth quarter of 2011.

The highest growth rates in the second quarter were reported in the sectors of electricity, gas & water supply (10.2 %); financing, insurance, real estate and business services (10.4 %) and community, social and personal services (9.1 %).

Manufacturing advanced 3.5 % compared with a contraction of 1.2 % a year ago. Mining sector grew 2.1 % compared with a 3.9 % fall a year earlier. The expansion of farm output growth slowed to 3.8 % in the quarter, from 4.0 % a year ago. Trade, hotels, transport and communication rose by 2.8 %.

Construction sector expanded 4.8 %. The key indicators of construction sector, namely, production of cement and consumption of finished steel registered growth rate of 9.5 % and 0.7 %.

Current Economic Scenario

2

INDIAN ECONOMY EXPANDS 5.7% IN Q2 OF THE FINANCIAL YEAR(India GDP growth graph)

2012 2012 2013 2013 2014 20144

4.5

5

5.5

6

6.5

7

4

4.5

5

5.5

6

6.5

7

SOURCE: WWW.TRADINGECONOMICS.COM | MINISTRY OF STATISTICS AND PROGRAMME IMPLEMENTATION (MOSPI)

6.5

6

5.1

4.5 4.64.4

4.8

4.4

4.8 4.7 4.6

5.7

SOURCE: WWW.TRADINGECONOMICS.COM | MINISTRY OF STATISTICS AND PROGRAMME IMPLEMENTATION (MOSPI) INDIA

Oct/13 Jan/14 Apr/14 Jul/147

8

9

10

11

12

7

8

9

10

11

12

9.8410.17

11.16

9.87

8.79 8.03 8.31 8.598.28

7.317.96 7.8

India Consumer Inflation Edges Down in August

(India Inflation Rate)

3

Historically, the wholesale price index (WPI) has been the main measure of inflation in India. However, in 2013, the governor of The Reserve Bank of India Raghuram Rajan had announced that the consumer price index is a better measure of inflation.

Indian consumer prices rose by an annual 7.8 percent in August of 2014, slowing slightly from 7.96 percent in July.

HSBC India Services PMI™ (with Composite PMI data)

HSBC India composite output PMI50 = no change on previous month, S. Adj.

Increasing rate of growth

Increasing rate of contraction

60

55

50

45

40

Source: Markit, HSBC.

40

65

Private sector activity expands for fourth consecutive month

Summary

The latest PMI data highlighted a fourth successive monthly rise in private sector activity in India as the HSBC Composite Output Index stood at 51.6 in August, down from 53.0 in July. While the latest figure indicated a slowdown in output growth across the private sector, it remained consistent with a moderate expansion in activity. Output growth weakened from July at both services and manufacturing companies, although manufacturing production increased at the second-quickest pace since February 2013.

Adjusted for seasonal influences, the headline HSBC India Services Business Activity Index posted 50.6 in August, down from 52.2 in July. The latest reading highlighted a fourth consecutive monthly expansion in service sector output, and was consistent with a modest rate of growth. Anecdotal evidence linked both upward and downward movements in activity to changes in order book volumes. Sector data indicated that growth of activity was broad-based, as only Hotels & Restaurants companies reported a reduction. The fastest increase was at Post & Telecommunications firms.

Indian services firms registered a fourth successive monthly rise in new orders in August, although the pace of expansion slowed from July. Panel members attributed improvements in new business to stronger demand. Incoming new work rose solidly across the private sector as a whole, with the sharper expansion recorded in the manufacturing industry.

Workforce numbers in the Indian service sector were unchanged in August, as the vast majority of survey participants signalled no change in employment. Overall, staffing levels in the private sector remained broadly stable, as has been the case for the past five months.

Backlogs of work held by Indian services companies continued to grow in August, extending the current sequence of accumulation to six months. However, the rate of increase was modest overall. While growth of outstanding business accelerated at manufacturers, backlogs across the private sector expanded at the slowest pace in the current period of accumulation.

Input prices faced by Indian service sector firms increased in August, although the rate of cost inflation eased to the weakest since July 2013. Survey respondents suggested that higher input costs centred around rising oil prices. Private sector companies across the economy as a whole noted a slowdown in cost pressures from the previous month.

Similarly, the rate of charge inflation recorded at services companies in August was muted in the context of historical data. Slower charge inflation was recorded throughout the private sector, as output prices increased at the weakest pace since May 2013.

Expectations regarding future activity at service providers remained positive in August, although the index dropped to its lowest level in 11 months. Surveyed firms justified their optimism by referring to anticipated rises in future demand and the planned introduction of marketing initiatives.

Comment

Commenting on the India Services PMI™ survey, Frederic Neumann, Co-Head of Asian Economic Research at HSBC said:

“Growth in service sector activity slowed in August. Moreover, the improvement in new business flows and business optimism moderated. Services activity is once again turning down following a swift post-election uptick, suggesting that an improvement in reform momentum is needed to lift sentiment in the sector. On the positive side, weaker activity has softened inflation indicators within the survey."

Key points

• Output grows across the private sector, as manufacturing production increases solidly

• New orders rise for fourth successive month

• Inflationary pressures ease across private sector

Historical Overview

2006 2007 2008 2009 2010 2011 2012 2013 2014

4

10

15

20 -400

-600

-800

-1000

-1200

Conversely, workforce numbers declined for a second successive month in August, albeit at a fractional rate as the vast majority of survey respondents left employment unchanged.

Meanwhile, higher prices paid for raw materials meant that input costs rose strongly in August. That said, the rate of cost inflation slowed from July. Factory gate prices also increased during the month, although the pace of charge inflation at Indian manufacturers was slight overall. Price rises were broad-based by sector, with the sharpest increase recorded in the consumer goods category.

Comment

Commenting on the India Manufacturing PMI™ survey, Frederic Neumann, Co-Head of Asian Economic Research at HSBC said:

"Manufacturing activity moderated following a spurt in the previous month. Output and new orders slowed slightly in August, but remained robust relative to their 12-month history. The mood remains positive too, with firms accumulating inventory in response to stronger demand. However, price pressures remained elevated, despite the slight deceleration seen in input prices. This is likely to keep the central bank guarded against inflation risks, particularly from the pick-up in demand."

Key points

• Further expansions in output and new orders

• Robust growth in new business from abroad

• Inflationary pressures ease from July

HSBC India Manufacturing PMI™

Summary

The latest PMI data highlighted a tenth consecutive monthly improvement in operating conditions in August, as solid output growth was supported by strong expansions in total new orders and business from abroad. Purchasing activity continued to rise, although a second consecutive decline in employment was recorded. Meanwhile, input cost pressures eased slightly following the acceleration seen in July.

The seasonally adjusted HSBC India Purchasing Managers’ IndexTM (PMITM) – a figure designed to give an accurate overview of business conditions in the manufacturing sector – dipped slightly from July’s 17- month high of 53.0 to 52.4 in August. Nonetheless, the reading was consistent with a solid improvement in operating conditions. Among the monitored sub-sectors, the best performing was consumer goods, while business conditions deteriorated in the capital goods category.

Output at Indian manufacturing companies rose for a tenth straight month in August, and at the second-sharpest rate since February 2013. Anecdotal evidence linked expansions in production to improved order book volumes. Output was reduced in the investment goods sub-sector, in contrast to growth recorded elsewhere.

August data also signalled that new orders increased for a tenth month in succession. The rate of growth slowed from July’s 17-month peak but remained solid. New work intakes rose in each of the monitored sub-sectors apart from investment goods.

Similarly, new export orders rose in August, extending the current sequence of growth to 11 months. Surveyed firms pointed to strengthening demand from key export clients as the main reason behind expansions in foreign business.

As a result of continued growth in demand, Indian manufacturers picked up their purchasing activity for a tenth month running in August. By sub-sector, the steepest rise in buying activity was recorded by consumer goods companies, whereas producers of capital goods reported a reduction.

Subsequently, input stocks and post-production inventories held by Indian manufacturers grew in August. Panellists indicated that stocks were increased in order to respond to expansions in new orders. Stocks of purchases and finished goods increased in two of the three surveyed categories, with the exception being investment goods.

HSBC India Manufacturing PMI

50 = no change on previous month, S. Adj.

Increasing rate of growth

Increasing rate of contraction

60

55

50

45

40

Source: Markit, HSBC.

65

Historical Overview

2006 2007 2008 2009 2010 2011 2012 2013 20142005

Growth of manufacturing output slows in August, but remains solid

5

48.2

lowest and five being the highest), the average rating was 3.6.

The survey shows that demand and sales are likely to remain robust in the current quarter. Nearly two-third respondents expect demand for their products and services to go up in the July-to-September period.

Analysts say that by increasing the income tax exemption limit for individual taxpayers, the budget has tried to leave more money into the hands of end consumers.

The survey also shows 58 per cent respondents expect the budget to spur fresh investment over the next quarter. The survey also asked respondents that whether Finance Minister’s target of achieving seven to eight per cent economic growth in the next three years is achievable. A thumping majority- 87 per cent-have responded in the affirmative.

Market research agency C fore quizzed 500 CEOs and chief financial officers across 12 cities for the survey.

Source: Business Today-C fore Business Confidence Survey

The latest Business Today-C fore Business Confidence Survey shows an unprecedented jump in corporate sentiment. The survey found that, on a scale of 100, confidence level reached an 11-quarter high of 56.8.

Almost all parameters that constitute the survey, which was conducted shortly after the newly elected government presented its first Budget, show that businesses are more upbeat today than they were in the past three years.

The survey shows that 68 per cent respondents expect the overall economic situation to improve in the July-to-September quarter. Similarly, 62 per cent expect the overall business situation to get better in the current quarter.

Corporate leaders also expect availability of finance and production levels to improve. For instance, 56 per cent respondents foresee better availability of finance in the quarter through September. Cost of external finance, however, remains an issue with only 46 per cent respondents expecting it to come down.

Most CEOs in the survey rated the first budget of the new government highly. On a scale of 1 to 5 (one being the

Business Confidence Survey

48.7Apr - June

2013

48.6Oct - Dec

2013

48.2July - Sep

2013

51.4Jan - Mar

2014

56.8Apr - Jun

2014IN FULLBLOOM

Hope rises from the depths of the previous year, flowers across

industries and sectors.

BCI BY SECTORAll sectors have seen a major rebound

BCI BY SECTORBusinesses across the board are more hopeful than before

Big*businesses

Oct-Dec 2013 Jan-Mar 2014 Apr-June 2014

47.550.9

57.5

4851.2

58.9

50.552.7

55.8

48.351.6

54.6

Mediumbusinesses

Smallbusinesses

Microbusinesses

Heavy Engineering

47.6Oct-Dec 2013

50.7Jan-Mar 2014

55.7Apr-June 2014

Light Industry

48.1Oct-Dec 2013

51.3Jan-Mar 2014

57.9Apr-June 2014

Services

50.3Oct-Dec 2013

52.4Jan-Mar 2014

56.5Apr-June 2014

<

>

6

Small business: Turnover �5-100 crore Micro businesses: Turnover < �5 crore

*Big business: Turnover > �500 crore Medium businesses: Turnover �100-500 crore

7

2 68

31 53

ROSY OUTLOOKA majority of respondents feels the July-to-September quarter will be better than April-June

1. Economic Prospects Facing BusinessesNearly three-fifths expect prospects to improve

2. Overall Economic SituationMost expect situation to improve or stay unchanged

3. Working Capital RequirementMore than half expect it to increase as economic activity revives

4. Availability of FinanceSimilarly, more than half expect improvement here too

Substantially worse

Substantially better

Substantially better

Substantially better

Substantially better

Substantially worse

Moderately worse

Same/no change Moderately better

Moderately better

Moderately better

Moderately better

Moderatelyworse

Moderatelyworse

Moderatelyworse

Substantiallyworse

Substantiallyworse

Same/no change

Same/no change

Same/no change

1

1

27

4

4

6 637 50

5235

927 59

Figures indicate percentage of respondents

5. Cost of External FinanceNearly half expect it to reduce

Substantially worse

Substantially worse

Substantially worse

Moderately worse

Moderately worse

Moderately worse

Same/no change

Same/no change

Moderately better

Moderately better

Moderately better

Substantially better

Substantially better

Substantially better

6. Order Book/DemandNearly two-thirds are bullish

Subs

tan

tial

ly

wor

se

Mod

erat

ely

wor

se

Sam

e/n

o ch

ange

Mod

erat

ely

bett

er

Subs

tan

tial

ly

bett

er

7. Supply PickupA majority expects improvement

8. Production Capacity Utilisation

Three in five are optimistic

Figures indicate percentage of respondents

44

1 4 30 54 11 2

5

55

29

9

2

3

8

5235

8

6

840

2

Same/no change

` ` ``

LITTLE CHANGE SO FARThe April-June period was only slightly better than the previous three months, say most respondents

1. Overall Economic Conditions

2. Finance Availability

4. Hiring Situation 5. Profit Margins

3. Demand Conditions

More than half feel the situation has stayed much the same

Substantially worse

Moderately worse

Same/no change

Moderately better

Substantially better

5

52

7

34

Only a little over a third feel the situation improved

Subs

tan

tial

ly

wor

se

Mod

erat

ely

wor

se

Sam

e/n

o ch

ange

Mod

erat

ely

bett

er

Subs

tan

tial

ly

bett

er

56

30

72

3

4

28

59

6

5

Just two-fifths saw some improvementSubstantially worse

Moderately worse

Same/no change

Moderately better

Substantially better

2

5

6

51

36

Nearly three-fifths saw no change About a quarter feel margins improved

Substantially worse

Moderately worse

Same/no change

Moderately better

Substantially better

Figures indicate percentage of respondents

Substantially worse

Moderately worse

Same/no change

Moderately better

Substantially better

1

11

62

23

3

940

2

Substantially worse

Substantially worse

Substantially worse

Substantially better

Substantially better

Substantially better

Moderately better

Moderately better

Moderately better

Same/no change

Same/no change

Same/no change

Moderately worse

Moderately worse

Moderately worse

Substantially worse

Substantially better

Moderately better

Same/no change

Moderately worse

A majority expects no change

2

More than half forecast a rise in imports

11. Hiring PickupFew are worried

9. Export Pickup 10. Import Pickup

12. Stock price Pickup 13.Investment

15.Budget Rating

14.GDP GrowthA majority feels the budget will spur fresh investment over the next quarter

A vast majority feels it is possible to achieve the target of 7-8 percent GDP growth in the next three years

The first budget of the Modi governa-ment gets an above average rating on a scale of 1 to 5. (One is lowest, 5 highest)

More than three-fourths are bullish

3.6Figures indicate percentage of respondents

Average Rating

12

4

3 5

4 1 2

4 5

3 7

5 8

2 01 5

61

1 35 8YES

Can’t Say1 8

2 4No

8 7YES

N O

61

839

58

46

10

11

Category Report - Logistics

DOMESTIC RUBBER TRANSPORTATION FOR TYRE INDUSTRY

* Period considered for Analysis: Jul 2013 – Mar 2014.* Average Freight rates are taken for 70+ sourcing points at Kerala to various Tyre manufacturing plants.

Geographical distribution of Tyre manufacturing plants in India

33%

44%

17%

3%

Note: Top 10 Tyre manufacturing Companies are considered for above analysis

Central India East India North India South India West India

3%

Source State

Kerala

Kerala

Kerala

Destination Zone

North India

East India

West India

16 MT Vehicle

1.91 1.87

1.94

2.07

1.96

2.09

21 MT Vehicle

* Freight Rate (Rs./MT/KM)

RUBBER GRADE, PACKAGING & TRANSPORTATION – Rubber Ribbed Smoked Sheets (RSS) 4 and 5 is generally the most prevalent rubber grade and is used for the manufacturing of automotive tyres.

In India, RSS grades are packed as 50 kg bales in LDP cover and as 110kg crates as per the requirements of the tyre manufacturers. Adequate care needs to be taken during the transportation of rubber so as to protect it from wet, dirty sands and other foreign particles.

Typically, 16MT truck & 20MT trucks are used for transportation of rubber by road. The majority of the transportation activities happen along the railway line and road across national highways i.e. NH17 and NH47 pass all across the state from South to North.

The rubber industry in India is basically divided into two sectors - tyre and non-tyre sector. Going by the share of rubber consumption, automotive tyre sector is the single largest sector accounting for about 50% of the consumption.

RUBBER CULTIVATION & TYRE MANUFACTURING PLANTS –Kerala accounts for 90% of India's total rubber production. The other producers are Karnataka and non-traditional states for e.g. Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura, which accounts for the other 10%.

In Kerala, there are more than 70 locations from where the rubber is lifted for transportation so as to cater to the needs of several automotive manufacturers dispersed all over India for tyre manufacturing. Out of these 70 locations South Kerala, Central Kerala & North Kerala accounts for 50%, 30% and 20% respectively.

PREVAILING FREIGHT RATES –

Monsoon Season: The rubber production fluctuates during monsoon season (Jun – Aug) & due to less demand in other industries, availability of vehicle increases. Therefore, there is no change in freight rate (considered as base freight rate) & even in some cases, the rates goes down compared to previous months.

Post Monsoon season: After the monsoon season (Sep - Dec), rubber production increases and there is a huge demand in

12

DEMAND SUPPLY DYNAMICS –

ANNUAL FREIGHT TRENDS –

domestic market for material supplies. As per the market demand freight rate goes high up to 4-5% from the base freight rate.

Festive occasions: The freight rate increases around 5-7% during local festivals. (Onam - Aug to Sep & Vishu - Mar to Apr).

Year end: Most of the local markets release their stock after rubber price increase during Jan to Mar. Due to this reason, freight rate goes up to 10-12% from the base freight rate.

100

102

105

107

Assuming ‘x’ as base freight = 100

x

Jul-Aug Sep-Oct Nov-Dec Jan-Feb Mar-Apr May-Jun

x+2% x+5% x+7% x+10% x+8%

110

108

SUITABLE CONTRACTING STRATEGY –

Due to several fluctuations in rubber transportation rates all-round the year, the best contracting strategy as per current industry trend is to go for rate revision every 2-3 months or finalizing a long term annual rate contract with price variation clause to account for seasonal fluctuations. Aforementioned

strategy will help tyre manufacturing giants in risk mitigation pertaining to the transporter back out and risk purchases. Furthermore, finalizing the contract between Jun – Jul will result in best rates as compared to other months and are more profitable for the tyre manufacturing companies.

Demand of vehicle depends on the following seasonal factors, which controls the total freight cycle –

a.

b.

c.

d.

Category-wise savings and Transaction Value

13

Category Management Service Snapshot

Category-wise savings and Transaction Value

Instrumentation 11.89 28.37%

Electrical Instrument 49.8 15.17%

Colliary Contract 1299.8 13.20%

Material Handling Equipment 87.42 11.73%

Process Consumable 5.4 11.48%

Construction & Material Handling Equipment 4540.41 9.57%

Fabrication Items / Assembly 1300.25 9.17%

Repair And Maintenance Services 387.67 7.79%

Mechanical Equipment 738.44 7.47%

Ferrous Casting 37.43 7.10%

Transaction Value in Rs. Lac

Savings Percentage

Categories Transaction Value in Rs. Lac

Savings Percentage

Categories

PR to PO activity July'14 Aug'14

No of PR processed 1803 1778

PR Value (Rs. Lakhs) 8005.04 7217.88

Avg Negotiated Savings 8% 11.31%

Avg CycleTime (Days) 29.57 28.26

14

FINAL DERIVED PRICE

A PSU steel major used to conduct offline negotiations for copper cathode for seven of its units across the country. The annual procurement value of the buy was about Rs 100 crore and there were only three existing suppliers for the item namely Hindustan Copper Limited, Sesa Sterlite and Hindalco. One of the plants mandated buyjunction to devise an online strategy for procurement of 2,636 tons of copper cathode.

Client objectives

• Obtaining the most competitive market rates;

• Reduction in cycle time from RFQ issuance to finalization of contract;

• Encourage more competition through appropriate bidding strategy.

Challenges

• To break the cartelisation among leading suppliers;

• Gaining mindspace of existing suppliers who were used to offline processes, convincing them to come forth and compete online;

• To encourage fair competition between the suppliers;

• To overcome the time constraint and enabling quick finalisation of contract by client.

The strategy

The team began by analysing the cost drivers to understand market movements and devised a feasible negotiation strategy through e-platform. Finally, a reverse auction was conducted on premium discount rate basis on the start bid price.

Deployment of right resources, review and monitoring processes and increased engagement with suppliers to ensure cycle time reduction were part of the strategy.

Outcome

For the first time, an event of this background and size was brought on the online platform, and resulted in a 2% reduction from the sealed bid price. The cartel was successfully broken by ensuring a transparent and fair bidding process. The total value of transactions during the event was Rs 100 crore.

Buyjunction Case Study

Buyjunction Aids Procurement Of Copper Cathode For A PSU Steel Major

mjunction is the largest ecommerce company in India.It is a 50:50 venture promoted by the Steel Authority of India Limited (SAIL) and TATA Steel.

corporate officemjunction Services Limited Godrej Waterside Tower – I, 3rd Floor, Plot No. 5, Block – DP Sector – V, Salt Lake City, Kolkata – 700091, WB, IndiaTel: +91 33 6610 6100 Fax: +91 33 6610 6187/ 6179 / +91 33 6601 1719 / 1720CIN: U00000WB2001PLC115841

registered officeTATA Centre,

43 Jawaharlal Nehru Road,Kolkata 700 071

Tel: +91 33 6610 6100, 2288 2606 Fax: +91 33 2288 2078

tapas.chakraborty@mjunction.in

16

www.mjunction.inwww.buyjunction.in