Expert Analysis of the Global Macro Events & News affecting the Indian Markets

WEEKLY MARKET SYNOPSIS 

US and India Talks with Prime Minister Modi 

Strategic talks between two countries have always been a long game with no single clear winner. These usually start on a high note and keep on getting impeded. India and UK FTA are prime examples of this. But will the US and India talks be a successful one? In this week’s newsletter, we will look into the past and what the future holds for the relationship between the most developed and a developing country. Let’s begin.

From Kennedy to Biden

With America being one of the most developed economies and India being one of the fastest developing economies, the nations have seen ups and downs in International relations from when Nehru headed India to now Prime Minister Modi. Be it tensions in India due to the relations of the US and Pakistan or former US President Trump appreciating the growth in India, the nations have seen it all. If we take a look at the history, both India and the US have had concerns about China’s assertive behaviour and have engaged in dialogues to address shared challenges posed by China. While both countries seek to balance their economic ties with China, they also aim to manage potential security risks and promote a rules-based order.

Landmark deals for India’s growth

Prime Minister Modi recently visited The White House and as a result of discussions with President Biden of the US, numerous deals have been made which will lay down the fundamentals of relations between India and US for the coming decades. Ever since PM Modi has come in power, the government has tried to strengthen political relations with major foreign powers. But this series of discussions might just prove to be one of the most significant ties for India. 

The countries talked about various avenues of partnership, the sectors being Technology, Defense, Clean Energy, Global Growth, Trade Agreements, Health and more. We’ll not be getting into the specifics of everything today but we will discuss some major deals that will benefit India tremendously. Let’s start with something that’s been a hot topic for some time now.

Artificial Intelligence 

AI and the need for its regulation by the public sector has been in discussion ever since it started gaining traction. It was also discussed during the US India talks and a Global Partnership on AI has been formed with India as the Chair. The nations have agreed on developing trustworthy and responsible AI to develop education, workforce initiatives and commercial opportunities. 

Defence Jet Engines

US is a superpower when it comes to defence equipment, and now India will get its knowledge too. In an unprecedented technology transfer and co-production proposal, jet engines will now be manufactured in India. General Electric of US and Hindustan Aeronautics of India have signed an MoU for the manufacturing of GE F-414 jet engines in India, for the Hindustan Aeronautics Limited Light Combat Aircraft Mk 2. This is a landmark deal for India as for the first time, we will get the tech of US fighter jet engines.

Semiconductor Chips 

Micron Technology Inc. will be investing up to $825 million to build a new semiconductor assembly and test facility in India. The combined investment of $2.75 billion will create about 20,000 new jobs over the next five years. Additionally, Applied Materials Inc. will invest $400 million to establish a collaborative engineering center in India. This MoU signed on Semiconductor Supply Chain and Innovation is a huge step forward for India’s research and skill development.

Trade Dispute Settlement 

In 2018, US imposed import taxes on Indian imports, so, in retaliation India in 2019 imposed customs on 28 US products being imported. This has been going on for a few years now but during PM Modi’s state visit to the US, both nations have agreed upon settling six outstanding disputes at the WTO out of court. This has been done to improve economic ties between the nations and promote trade. 

Space Collaboration

Now this is huge, Nasa and ISRO have joined hands to develop a framework for human spaceflight cooperation by the end of 2023. NASA will also be providing training to Indian astronauts at its Texas space centre. India has also joined NASA’s Artemis Accords highlighting our dedication to global space cooperation. Well, I am looking forward to the launch of NISAR, a satellite built jointly by NASA and ISRO that’ll soon go into space.

This visit by PM Modi has brought in so many exemplary deals and partnerships from tech to defence to clean energy and so much more. I have only discussed some of them in our newsletter but you should definitely go and read the statement released by The White House for details on other deals. I am looking to see these partnerships take shape and benefit India in the ways it promises. Let’s see how these pan out!

Stock Specifics – Salzer Electronics Ltd.

Almost every other second wire or cable you’ll find installed in the electrical systems around you is manufactured by this company named Salzer Electronics Ltd. This week in stock specifics, we are talking about Salzer Electronics Ltd. A company that we’ve been invested in our smallcase and PMS.

Salzer Electronics is into manufacturing and supplying of CAM operated rotary switches, industrial wires, cables, plugs, electric control panels, MCBs and many other electrical products. We recently had a chat with the joint MD of Salzer in an episode of Green Sharks where we got to know about the company’s recent actions and future plans. 

So, today, we’ll talk about the company’s recent joint ventures, its growing market share and its financials. Let’s get into it!

Salzer is based out of Coimbatore having six manufacturing facilities operational there. With the company’s rotary switches and wire ducts having more than 40% market share in India, it is now trying to expand its global market share. The company has segmented its products into four divisions: Industrial Switchgear, Wires & Cables, Building electrical products and Energy Management Systems. 

Here is the breakdown of revenue according to segments:

The company has shown good performance over the last year. Let’s look at some financials:

• The net revenue increased by 29.28% from 783.63 Cr in FY22 to 1013.08 Cr in FY23
• The EBITDA margin grew from 8.14% in FY22 to 9% in FY23
• The PAT increased by 61.74% while the PAT margin increased by 72 bps
• For investors, the EPS has increased from Rs.14.07 to Rs.22.74

Why are we talking about Salzer Electronics? 

With acquisitions and joint ventures that have recently been executed, the company is planning to expand.

• Salzer acquired Kaycee Industries Ltd, its biggest competitor in manufacturing of rotary switches to increase its market share and compete with other smaller companies.
• Salzer has formed a joint venture with Austria based company Kostad, a leading developer of fast charging stations for EVs. The JV has been formed to manufacture EV charging stations and chargers for the Indian market and its growing need for these products as the Electric Vehicles sector is being promoted.
• It has also formed a joint venture with EMarch LLP to manufacture and supply EV conversion kits. Conversion kits are used to turn traditional fuel based vehicles into Electric vehicles. 

With the recent acquisition and joint ventures of the company, we think Salzer will grow with the manufacturing of products for the EV sector. India is aggressively promoting the EV sector and Salzer Electronics could turn out to be the company to fulfil India’s fast charging needs. 

CURRENT ECONOMIC EVENTS

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Green Portfolio is a SEBI Registered (SEBI Registration No. INH100008513) Research Analyst Firm. The research and reports express our opinions which we have based upon generally available public information, field research, inferences and deductions through are due diligence and analytical process. To the best our ability and belief, all information contained here is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable. We make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use. This report does not represent an investment advice or a recommendation or a solicitation to buy any securities.