Every industry has its own definite drivers, a learning of which gives the market analyst design of the sector as well as the company under contemplation. Let us see under some of the key drivers for the important industries in India.
A key parameter while analyzing this segment is Average Revenue Per Unit (ARPU).
It is calculated by total revenue divided by a number of subscribers and the higher it is improved for the company.
It is noteworthy that India has between the lowest ARPUs in the world.
Formerparameters like mobile penetration and spectrum costs are also significant for the Telecom industry.
IT/ BPO/ KPO:
The IT sector in India grew first and foremost due to a large available group of English-speaking young ability at a stumpy cost.
IT companies made in Dollars and spent in Rupees and made enormous profits.
Even nowadays, USDINR rate, attrition rate among employees, attentiveness of revenues with particular clients, absorption of geographies etc. are significant parameters to look out for in IT and associated sectors.
Banking/ NBFC/ Housing:
Monetary Policy by the RBI is the single largest influencing factor for this segment. NPA levels, provisioning norms, tight/loose regulatory reserve requirements all of these influence banks and NBFCs.
Typically, in a waning interest rate circumstance, banks are likely to do well due to the dual collision of declining yields on G-Secs holdings and larger demand for loans. NPAs also characteristically are low when interest rates are low as default turns out to be less due to the affordability of Equated Monthly Instalments (EMIs).
On the source of funds side, low-cost deposits (Current Account, Savings Account - CASA) is an influential factor for banks.
Any media company is based on content; consequently, a company producing its own content will have a lead over others.
Distribution companies would more or less always be under pressure as it is the strong struggle in the sector and content providers to media companies would be charging a premium.
Television Rating Points (TRPs) are the most extensively tracked indicator in electronic media.
A high TRP means more people are watching the show/ channel and therefore it can get more advertisers and can charge at a higher rate. Whether electronic or print – in media – content and viewership is king.
The retail sector saw a huge leap in the first decade of the new millennium. Retail stores-relies on low cost obtaining of goods from manufacturers and selling it on very thin margins to a large number of people.
For this reason, foot drops become a vital industry driver. Nowadays, many retail chains have started mixing towards the back and have started selling their own products as well.
Margins are visibly higher when they sell their own products at their own counters. Retail analysts would characteristically analyze all these aspects and more.
Regulatory environment/framework :
Industry analysis cannot be complete without adequate knowledge of the rules of the game.
Even small changes in the regulatory framework can have a big impact on the businesses.
For instance, the whole conversation in India on FDI in multi-brand retail has been spinning around how much should retailers invest in developing the back-end infrastructure, what could be interpreted as a back-end infrastructure, could they buy out some firms active set up, how much minimum they should purchase from Indian vendors, etc.
Changes in the environmental policies have resulted in the conclusion of a range of mines and have affected the businesses considerably. Cancellation of Telecom licenses has affected the business in that industry. The latest modifications made to the Companies Act have transformed the entire scenery for doing business in India.
For that reason, analysts should pay enough attention to the regulatory characteristics of businesses.
What are the sources of information for industry analysis?
There are several sources of information on the industry. Some of them are stated below:
Industry reports from various sources - industry journals and media reports
Annual Reports of companies in the Industry – ‘Management Discussion and Analysis’ section
Associations/Trade Bodies publications
Relevant ministry website/publications
What is Company Analysis? Qualitative dimensions?
The Money put in in the market is always a bet on the future show of businesses. Analysts understand that great earnings and assets make a business valuable; and, earnings and assets are resolute by the qualitative aspects of businesses.
One must value that sooner or later, ‘Great Quality’ would echo into ‘Great Quantity’ for investors.
The historical performance is most often the set off to analyze a business. Another set off include changes in macroeconomic or microeconomic aspects that make a business an attractive investment plan or an anticipation of a great long-term performance as in the case of venture-capital investing.
Historical financials give us a great sense of qualitative characteristic of business.
If financials are vast, optimistically, quality of the business is enormous; though, it is not a declaration given the subject of corporate misgovernance and financial manipulations.