Companies & Sectors
Fast-food restaurants to face rough weather in medium term: Report
The quick service restaurants (QSR) industries in India is facing tepid growth despite players refurbishing menus and sweetening offers and promotions. With increased competition from online players and private equity (PE) funded food players, the QSR industry would face rough weather in medium term, says a research report.
 
In the note, Edelweiss Securities Ltd, says, "The frequency of 'buy 1 get 1 free' (BOGO) offers in second quarter of FY17 surged substantially compared to the base quarter. Further, global player like Wendy, which is world’s third largest burger chain, has cut prices to shore up India sales. This will make the QSR players to face rough weather in medium term. However, improvement in consumer sentiments over the next two-three years aided by good monsoon and the Seventh Pay Commission payout are anticipated to benefit QSR companies in the long term."
 
 
The report talks about promotional offers launched by market players, which failed to beat slowdown blues. Jubilant Foodworks (JFL) is trying to boost its same store growth (SSG) via BOGO offers, as Dominos increased frequency of BOGO offers during second quarter of FY17 compared to the base quarter. Subway too has jumped on the BOGO bandwagon. 
 
"It implies that the QSR industry is going through a slowdown induced by low urban spending. IRCTC’s e-catering service for passengers travelling on trains is likely to benefit Dominos, Kentucky Fried Chicken (KFC), Delhi Darbar, Haldirams, Chaayos, among other local QSR players. Other developments like focus on health conscious consumers (McDonald's is further reducing sodium content of French Fries and McNuggets) is bound to bolster incremental growth. However, 14.5% fat tax imposed by the Kerala government on junk food to make people more conscious about food choices may negatively impact QSR companies," the report added.
 
 
During July 2016, JFL launched a significant new innovation in the Indian market, Burger Pizza. In addition, the company also launched a new variant Pizza Mania Extreme to drive SSG. It has discontinued Subwich, Junior Joy Box and Custard Bliss as these products failed to meet its internal benchmarks. Edelweiss says, "Though we do not expect the new launches to spur SSG in the short term, we appreciate JFL’s strategy of harnessing innovations to boost sales."
 
"Over the past few quarters, McDonald’s (Westlife) SSG has revived and bulk of sales is from burgers. Hence, it makes sense for Dominos to expand its product offerings to the burger category. Further, Burger Pizza is a healthy offering. Since in India, pizza is perceived as a meal and burgers are considered on-the-go items, JFL’s novel offering is anticipated to boost its SSG. However, it is pertinent to note that burgers are also offered by Dunkin Donuts (part of JFL)," Edelweiss added.
 
Pizza Hut has announced a new social ordering platform or "chatbot" which will enable conversational ordering of pizzas and other menu items on Facebook Messenger and Twitter. Pizza Hut has partnered with technology company Conversable which will helped it launch the service from August. Pizza Hut will be competing against Dominos, which had introduced an ordering system through Twitter in CY15. Once an order is confirmed, Pizza Hut will email the customer a receipt and an order confirmation message will be sent in the messenger conversation.
 
"Till now, none of the QSR companies offer these services in India," Edelweiss says, adding, "We expect the services to be launched in India once the QSR industry milieu improves. We expect players like JFL and Yum Brands to launch these services in India."
 
 
According to the research note, the second quarter is estimated to be optically strong for most QSR companies due to the mismatch of Ramadan. 
 
Edelweiss says, total food services stand at Rs3,091 billion in CY16 and projected to grow to Rs4,981 billion at a compounded annual growth rate (CAGR) of 10% by CY21. "Key trends emerging in the space include virtual kitchens, stores at travel hubs such as airports, railways and highways, ordering-in and food trucks. India's exponential growth and consumption in terms of frequency of eating out and experimentation with cuisines and concepts have given the services sector a huge fillip. The restaurant industry is estimated to contribute close to 2.1% to India’s GDP by CY21," it concluded.

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Sensex, Nifty to record more gains – Monday closing report
We had mentioned in Friday’s closing report that Nifty, Sensex might rally if weekly lows hold. The major indices of the Indian stock markets rallied strongly on Monday to close 1.35%-1.47% over Friday’s close. The trends of the major indices in the course of Monday’s trading are given in the table below:
 
 
Positive global cues lifted the Indian equity markets on Monday. Buying was witnessed in automobile, capital goods and banking stocks. The BSE market breadth was skewed in favour of the bulls - with 2,228 advances and 660 declines. On the NSE, there were 1,316 advances, 155 declines and 42 unchanged.
 
Two and three wheeler major Bajaj Auto on Monday reported a decline of 2% in its total sales for September. According to the company, its total sales during the month under review stood at 376,765 units from an off-take of 384,400 units during the corresponding month of 2015. However, total domestic sales in September were up 21% to 255,592 units from 210,599 units sold during the like month of last year. The overall exports during the last month declined by 30% to 121,173 units from 173,801 units shipped out during the corresponding month of 2015. The company's total motorcycle sales during the month under review increased by one per cent to 331,976 units from 330,228 units sold in the like month of last year. In contrast, the overall commercial vehicle sales declined by 17% to 44,789 units from 54,172 units sold during September 2015. Bajaj Auto shares closed at Rs2,875.30, up 1.52% on the BSE.
 
Automobile manufacturer Hyundai Motor India (HMIL) on Monday reported an overall sales growth of 4.7% in September. According to the company, its total sales for last month stood at 59,211 units -- up from 56,539 units sold in the corresponding month of 2015. The automobile manufacturer's domestic sales grew by 0.2% to 42,605 units, from 42,505 units sold during the like period of last year. Exports during last month rose by 18.3% to 16,606 units from 14,034 units shipped out during September 2015. "We hope that the festive season will see a benchmark growth in the industry with the evenly spread monsoon along with the 7th Pay commission building to positive sentiments in the market," said Rakesh Srivastava, Sr. Vice President Sales and Marketing, Hyundai Motor India. Currently, the company has ten car models across segments -- Eon, i10, Grand i10, Elite i20, Active i20, Xcent, Verna, Creta, Elantra and Santa Fe.  The S & P BSE Auto Index closed at Rs22,774.95, up 2.44% on the BSE.
 
The Indian government is set to spend $7.2 billion on IT products and services in 2016 -- an increase of 2.4% over 2015, a new report said on Monday. The forecast includes spending on internal services, software, IT services, data centre, devices and telecom services, noted the report released by the global research firm Gartner. IT services (which includes consulting, software support, business process outsourcing, IT outsourcing, implementation and hardware support) is expected to grow 9.3% in 2016 to reach $1.8 billion. Telecom services will be a $1.6 billion market, with the mobile network services sub-segment recording the fastest growth with 5.2% in 2016 to reach $909 million. "Government spending on software will total $885 million in 2016, a 4.5% increase from 2015," said Moutusi Sau, principal research analyst at Gartner.  Internal services (salaries and benefits paid to the information services staff of an organisation) will grow 5.8% in 2016 to reach $1.5 billion.  "The e-governance initiatives to simplify digital channels and data-driven initiatives are driving investments in the government and are anticipated to grow through 2020," Sau added. The S & P BSE Information Technology index closed at 10242.78, up 0.13% on the BSE.
 
The pound sterling was the worst performer among major currencies on Monday, after British Prime Minister Theresa May said Britain would kick off the process of separating from the European Union (EU) by the end of March 2017. Speaking at the Tory party's annual conference here, Theresa May ended weeks of speculation and revealed that she will launch formal Brexit talks with EU leaders before the end of first quarter of 2017, meaning Britain is set to leave the EU by summer 2019. The major indices in the Indian stock markets had reacted adversely when the British public voted in favour of the Brexit.
 
With the government cutting the price of domestic natural gas, state-run Indraprastha Gas Limited (IGL) on Sunday announced a reduction in the selling prices of compressed natural gas (CNG) and piped natural gas (PNG) in Delhi and the NCR cities of Noida, Greater Noida and Ghaziabad with effect from midnight. The revision in prices would result in a decrease of Rs1.40 per kg in the consumer price of CNG in Delhi, and Rs1.60 per kg in Noida, Greater Noida and Ghaziabad. As per the release, CNG from Monday will cost Rs35.45 per kg in Delhi and Rs40.60 per kg in Noida, Greater Noida and Ghaziabad would be effective from midnight Sunday, the release said. "This is the third price time in the last one year that prices have been reduced by IGL. The price of CNG in Delhi remains lowest in the entire country," the company said. The company’s share closed at Rs790.45, up 1.78% on the BSE.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 

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Government unveils urban agenda for next 20 years
Stressing the need to go for a big push to fully realise the benefits of urbanisation, the government on Monday unveiled its urban development strategy for the next 20 years.
 
Union Minister for Housing & Urban Poverty Alleviation M. Venkaiah Naidu released the "India Habitat III - National Report", ahead of the UN Habitat III Conference in Quito, Ecuador, slated for later this month. A global "New Urban Agenda" for the next 20 years is likely to be adopted at the conference.
 
Speaking at the launch ceremony in Vigyan Bhavan here, Naidu on Monday said: "The agenda for the next two decades proposed in the national report will be ensuring economic growth and productivity, improving quality of life, and importantly, addressing issues of inclusivity, sustainability and climate change." 
 
The challenge is about ensuring sustainable development while taking advantage of economic growth that results from rapid urbanisation in the country, he said. 
 
"For long, urbanisation has been looked at from the limited perspective of providing basic services. But our contemporary response shall be wide ranging, aiming at serving larger macro-economic transformational goals together with meeting local priorities. We need to go for a big push to harness fully the potential of urbanisation," said Naidu.
 
Elaborating on the strategy for transforming urban India, the minister said it would be achieved through elimination of barriers to the flow of factors of production, like capital, land and labour, and development of rural and urban areas, in a synergetic manner.
 
The minister said that the outcomes of new urban agenda based on sustainable urban planning would include reducing water and electricity use by 50 per cent from that of normal use, enabling over 60 per cent of urban travel by public transport, generating half of power from renewable sources, and compact and cluster urban development, among others. 
 
"It's an eloquent testimony of India's commitment to sustainable development," said Naidu on India ratifying the Paris Agreement on Climate Change on Sunday. 
 
Naidu also announced that under the Pradhan Mantri Awas Yojana (Urban), construction of 10,10,424 houses for urban poor has been approved.
 
"An investment of Rs.59,771 crore has been approved with the central assistance of Rs.14,955 crore," he added.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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