India economic update

Milind S. Kothari

Managing Partner
BDO India
milindkothari@bdo.in

The state of the Indian economy has been occupying centre stage with a unanimous view that it is in the grip of a slowdown. GDP growth has slipped to a record low of 4.5 % in the second quarter of the fiscal year (April-March), amid declining automobile sales, plateauing of core sector growth and receding investment in construction and infrastructure. These figures show the slowest growth in nearly 6 years.

For once, the endorsement to this view has also come from the Finance Minister (‘FM’), Ms Nirmala Sitharaman, claiming that some sectors are showing signs of recovery, while admitting that there is every chance that a fiscal slippage this year is inevitable.

Surprisingly, the good news is that the foreign portfolio investors (‘FPIs’) are investing into the Indian equity market at an unprecedented pace. The net investment by FPIs into the equities cash segment topped USD 06bn in the past 2 months. The move of lowering corporate tax rates in September, boosting earnings, coupled with an easy monetary policy globally are seen as reasons for sharp inflows. The need for business investment seems paramount as profitability is dipping, and hence the restoration of investment remains key with a rejuvenated monetary policy. However, in India, the fiscal policy has conventionally dominated monetary policy.

Reading into the global scenario and the ongoing trade war between USA and China and to augment the Make-in-India initiative, the Government in order to attract top of the line businesses, plans to offer 324 companies including Tesla and Glaxo Smith Kline incentives to set up factories in India. The proposal aims to provide these manufacturers land to set up units along with power, water and road access. The plan is to create a land bank for ready-to-move-in industrial clusters, offer investment and location-based incentives and rationalise anti-dumping duties. The latest proposal is aimed at reducing red-tape and bringing the country on a path to double its GDP to USD 05tn by 2025, a goal set by the Prime Minister, earlier this year.

In a late-in-the-year bid to manage the imminent fiscal deficit, the Government gave an in-principle approval for strategic disinvestment of its shareholding in five public sector enterprises along with management control. With USD 03bn achieved so far and only 4 months to garner the balance, the sale of these companies is critical for achieving the disinvestment target of USD 15bn set for this fiscal year.

On the international trade front, India walked away from signing the Regional Comprehensive Economic Partnership (‘RCEP’). The proposed agreement included 16 participating countries from ASEAN, China, Australia and New Zealand. If India had joined the pact, RCEP would have encompassed half of the worlds’ population and 35% of the global GDP. The canvass of this agreement would have covered import and export of commodities, goods, services, investment and intellectual property rights. The potential gains from the agreement were outweighed over concerns whether Indian manufacturing would have withstood the onslaught of cheaper Chinese goods, fears of retailers losing to e-commerce, anxiety of producers of primary goods and near certain disruption of the dairy sector. On the other hand, the Indian demand for an assured market access in export of goods and services and import cap on China did receive a consensus, resulting in the rest of the countries deciding to keep the partnership discussion on hold.

Nearly 30 months after the Indian Central bank took the highly unusual step of directing banks to put 12 large corporate defaulters into bankruptcy courts, the most closely watched distressed asset met with a resolution with a landmark decision of the Supreme Court. The decision set the precedent between the secured lenders and unsecured creditors and is likely to restore confidence in India’s bankruptcy process, hopefully paving way for revival of interest from foreign investors.

As the year 2019 winds down within the month, key take-aways that would resonate with Indians in the coming years would be i. the thumping win of the incumbent BJP Government led by Mr Narendra Modi and ii. the state of the Indian economy. Both are likely to garner great attention as 2020 begins.

India economic update

M & A tracker

Rajesh Thakkar

Partner & Leader/ Transaction Tax
rajeshthakkar@bdo.in

M&A in India

Between September 2019 to November 2019, around 108 M&A deals were announced of which 65 M&A deals were completed. The aggregate value of deals announced / closed is USD 2,895.90mn; dominated by domestic deals (75) followed by cross border deals (33)

In terms of sectors (considering only closed deals), Utilities sector saw the maximum deal value, with deals worth USD 151.06mn followed by Industrials sector with deals worth USD 95.45 mn and Information Technology sector with deals worth USD 29.08mn

Significant Deals completed between September 2019 to November 2019

Target Company: Hero Future Energies Private Limited
Acquiring Company:
Abu Dhabi Future Energy Company
Deal Value (in mn USD):
150
Sector: Utilities

  • In November 2019, Abu Dhabi Future Energy Company acquired 20% stake in Hero Future Energies Private Limited (Hero Future Energies) for a consideration of USD 150mn (INR 10.65 bn).
  • Hero Future Energies is an independent power producer and distributor and is engaged in the business of producing renewable energies like wind power, solar power, and hydropower.
  • The investment would help facilitate the further expansion of Hero Future Energies in India and other key growth markets along with expansion of its renewable energy portfolio.

Target Company: Ameya Logistics Private Limited
Acquiring Company: PSA India Intermodal Pte Limited
Deal Value (in mn USD): 93
Sector: Industrials

  • In November 2019, PSA International Pte Limited, through its subsidiary PSA India Intermodal Pte Limited, entered into an agreement to acquire a 50% stake in Ameya Logistics Private Limited from CMA CGM S.A. for USD 93mn (INR 6.65bn).
  • Ameya Logistics Private Limited is engaged in providing cargo and container management and distribution solutions.
  • As per the transaction structure, the payment of consideration will be made in 2 (two) parts: USD 85mn at closing and USD 08mn as earn-out.
  • Post transaction, Ameya Logistics Private Limited would operate as a subsidiary of PSA India Intermodal Pte Limited.

Target Company: PowerUpCloud Technologies Private Limited
Acquiring Company: Larsen and Toubro Infotech Limited
Deal Value (in mn USD): 15
Sector: Information Technology

  • In October 2019, Larsen and Toubro Infotech Limited acquired PowerUpCloud Technologies Private Limited for a consideration of USD 15mn (INR 1.07bn).
  • The transaction has been structured to pay part of the consideration upfront and balance as an earn-out over a period of three years.
  • The acquisition would help Larsen and Toubro Infotech Limited to strengthen its cloud services, capabilities through a combination of right leadership, team, assets and ecosystem connections, which in turn would enable it to provide better services to its existing and new clients.
  • Post-transaction, PowerUpCloud Technologies Private Limited operates as a wholly-owned subsidiary of Larsen and Toubro Infotech Limited.

Significant deals announced between September 2019 to November 2019 but are not completed

Target Company: Adani Gas Limited
Acquiring Company:
Total Holding SAS
Deal Value (in mn USD):
1,454.47
Sector: Energy

  • Total Holding SAS is in the process of acquiring 62.60% stake in Adani Gas Limited for a total consideration of USD 1,47mn (INR 103.02bn).
  • Total Holding SAS will acquire 688,478,342 equity shares at a price of ~ USD 2.1 (INR 149.63) each, through share purchase agreement followed by an open offer.
  • The transaction will help Adani Gas Limited to accelerate project executions in all its new geographical areas.

Target Company: Kyowa Pharmaceutical Industry Company Limited
Acquiring Company: Unison Capital Partners IV F L.P.
Deal Value (in mn USD): 524.81
Sector: Health Care

  • Lupin Limited is in the process of divesting its entire 99.82% stake in Kyowa Pharmaceutical Industry Company Limited to Unison Capital Partners IV F L.P. for USD 524.8mn (INR 37.28bn).
  • Kyowa will also work on its unique growth strategy of expanding its product and service portfolio beyond drugs, which Unison will support through its healthcare ecosystem.
  • The transaction is expected to be completed by the end of March 2020.
  • Post transaction, Kyowa Pharmaceutical Industry Company Limited will cease to be a subsidiary of Lupin Limited.
M & A tracker

Feature story

Anita Somani

Technology, Media and Telecommunications – India Expert

Industry 4.0 – As the saga unfolds

When computers were introduced, it was revolutionary, owing to the addition of an entirely new technology.  With the digitisation of industries, computers came to be engineered to communicate with each other, to ultimately make decisions with minimal human involvement. This transformation was and continues to be so disruptive and compelling that it is being called Industry 4.0, to mark a revolution transforming socio-technical ecosystems around the world. Even though some dismiss Industry 4.0 as merely a marketing buzzword, major shifts are taking pace, influencing key business decisions, that are compelling everyone to sit up & take notice

Are we ready?

Companies all over the world are expecting to dramatically increase digitisation. Regions that thrive and prosper will be the ones that bring industry, education and policy makers together around common objectives, combined with the ability to be agile and reactive to continual disruption and change in the marketplace.

Companies face formidable challenges in the adoption of new technologies. To build and sustain the lead, they must broaden and deepen their practical knowledge about digital technologies and tailor their business strategies to adapt to them.

While there are issues that need to be resolved such as skill shortage, lack of standards, data security, creating new business models and huge financial investments, India and the world are evolving, to onboard Industry 4.0.

Technology is the epicenter of this revolution. The Technology, Media & Telecommunication industries have pioneered many smart technologies with high-speed connectivity at the core. Data and analytics, autonomous robots, simulations, horizontal and vertical system integration, Internet of Things, cloud, additive manufacturing, augmented reality, cyber security are the pillars of the revolution.

Production, research and development, and product development and logistics were top areas for digital transformation in 2016 and 2019. A popular new area for digital transformation in 2019 is customer connectivity, or the ability to learn about customer needs using digital tools.

Are Tech Companies ready to leapfrog?

The role of technology companies would be crucial in leading this shift for the economy. However, the readiness quotient even amongst them is tenuous:  handful of organisations are “highly prepared” for new business models, smart and autonomous technologies, more powerful customers, and changing trade landscapes. Changes driven by digital disruption are pummeling TMT organisations. Those not fully on board with a transformative appetite for the smart and connected era or those that aren’t fully prepared to harness new technologies are in grave danger of being left behind or becoming redundant.

Media Industry – the transformation has already begun

From buying a newspaper to opening a news app, from renting a DVD to streaming your favorite television series on a smart TV or from buying a cookbook to getting customised recipe suggestions on your smartphone, it’s evident and undeniable that the digital transformation of the media industry is underway. The rise of mobile technology has further fueled this adaption.  

Media was one of the first substantial white-collar industries to be affected by new-age technologies. Once news began to be digitised, the long-established geographical monopolies of media companies disappeared. The ability to print and distribute news, once a huge expensive operation is now reduced to almost zero. The result of this has been the diminishment of various media empires and the rise of smaller and topic-specific startups. The lessons from this transition are still underway for the media industry itself and a reference for other professions.

Telecommunication – An important role to play.

On the telecommunication front, an interconnected society in the era of 5G may create a bigger role for technologies currently dominating the tech space. Cloud, IoT, AI, and mobile technologies are critical to the networked physical-digital universe; helping organisations collect and process vast volumes of data and become smarter digital enterprises.

Economies globally are embracing Industry 4.0 and recognise that this revolution is set to transform the future of business. They are working quickly to provide tax and business incentives to lure foreign investors and secure their country’s future in a digitally connected world. Global investors are keen to invest in Asian tech start-up companies although core financial sectors like banks and NBFCs are hesitant to lend to this sector due to lack of initial cash flows and high level of uncertainty.

While the concept is still evolving and we might not have a complete picture until we look back decades from now, at those companies who adopted new age technologies, reaping first-mover benefits with heaps of untapped potential.

Feature story

Guest column

Siddharth Anand

Founder - The Blue Circle Leadership Community
siddharth@thebluecircle.co

The rise of the Techno-wave

The1800s defined the first wave of mechanisation - when steam and water were used as energy. Nearly 100 years later, the 1900s bore witness to electrification - where the use of electrical tools formed the basis of manufacturing. The pace of progress sped up from the second to third revolution in manufacturing, as the late 1970s saw the emergence of computerisation. While the first three phases are ornaments of a past era; Big Data, Internet of Things (IoT), Artificial Intelligence (AI), connected device and analytics form the core of Industry 4.0 which enables higher productivity in manufacturing and also ensures greater response to consumer needs.

Traditional production lines that included robots to work repetitively on pre-programmed tasks are becoming history. Today, industrial robots are running independently and coordinating seamlessly with the entire supply chain using technologies such as machine learning and AI.

M2M integration enabled by the Internet of Things (IoT) has become a critical factor in capturing and extrapolating clean data to optimise productivity and streamline processes within factories. Machine-as-a-Service (MaaS) is becoming another force to reckon with, offering real-time data across departments and keeping a check on the ROI.

While fully-connected factories will take a few more years to see widespread adoption, companies in India too are taking baby steps to embrace smart manufacturing, as sensors, cobots and software take charge of factory floors.  Global companies like Mondelez, Bosch, Siemens and GE have taken the leap and are operating with smart factories in India.

Network Provider, Juergen Hase, CEO, Unlimit, Reliance Group said, “Several large-scale Indian manufacturing units have started investing in advanced technology to transform their traditional factories into smart-connected factories.” He further added that since digitisation will be the driving force towards Industry 4.0 manufacturers should appoint a Chief Innovation Officer, acquire new technological capabilities, develop new products with pioneering features and collaborate with an organisation with similar goals and strategies.

“The elements of Industry 4.0 offer unique opportunities to Indian manufacturers to be more efficient and competitive while offering superior customer experience,” said Pankaj Bhardwaj, CEO of Fortune 500 Avery Dennison, manufacturer and distributor of adhesives, labels and tags. “There are enough specific areas that can unlock value through IOT and data analytics. Warehouse management, connected planning, energy efficiency and Robotic Process Automation have well established use cases and are lower hanging fruits.”

As businesses plan to make the shift to Industry 4.0, they must evaluate how major digital investments impact the top line or bottom line of their performance and device concrete strategies for measuring RoI.

Gungo about retrofits, Ali Hosseini, CEO, SenRa shared, “We deploy LoRaWAN end-to-end solutions. We are working with our customers to develop retrofit solutions which can work on their existing equipment and provide real-time feedback on equipment health, output, and maintenance. This provides decision makers data points to make strategic business decisions to improve operational efficiencies.”

On a more cautionary note, Rakesh Malhotra, Founder, Sar Group, a leading power product company said, “Investment outlays can be large, paybacks uncertain and not enough practical expertise even with big name consulting companies. To build an Industry 4.0 ecosystem in India, vertical specific deep use cases need to be developed along with machine level data collection. We will need many local champion solution providers to make this happen.”

Tech enabler Daifuku India, Head, Asim Behera added, “India is a price sensitive country and whilst the general belief is that manufacturing cost is low, it’s not totally true. Once you add in the additional cost of infrastructure, taxes, compliances and given that for most Indian manufacturers the market size is limited to India, the cost of manufacturing is high. Because it’s a price sensitive country the margins are wafer thin. To this, adoption of Industry 4.0 will obviously add cost and in many cases, it will be difficult to have a viable business case. Also, as with every technology adoption, human capital also needs to be enhanced alongside, which is a challenge for us.”

Looking ahead the world has committed itself to Smart Manufacturing and is resolutely moving towards it. A forward-looking philosophy, investment in R&D, and skilled workforce along with a robust human-machine interface will be some of the key differentiators for manufacturers embarking on connected factories.

Guest column

India economic update

Milind S. Kothari

Managing Partner
BDO India
milindkothari@bdo.in
India economic update

M & A tracker

Rajesh Thakkar

Partner & Leader/ Transaction Tax
rajeshthakkar@bdo.in
M & A tracker

Feature story

Anita Somani

Technology, Media and Telecommunications – India Expert
Feature story

Guest column

Siddharth Anand

Founder - The Blue Circle Leadership Community
siddharth@thebluecircle.co

Guest column
X

The state of the Indian economy has been occupying centre stage with a unanimous view that it is in the grip of a slowdown. GDP growth has slipped to a record low of 4.5 % in the second quarter of the fiscal year (April-March), amid declining automobile sales, plateauing of core sector growth and receding investment in construction and infrastructure. These figures show the slowest growth in nearly 6 years.

For once, the endorsement to this view has also come from the Finance Minister (‘FM’), Ms Nirmala Sitharaman, claiming that some sectors are showing signs of recovery, while admitting that there is every chance that a fiscal slippage this year is inevitable.

Surprisingly, the good news is that the foreign portfolio investors (‘FPIs’) are investing into the Indian equity market at an unprecedented pace. The net investment by FPIs into the equities cash segment topped USD 06bn in the past 2 months. The move of lowering corporate tax rates in September, boosting earnings, coupled with an easy monetary policy globally are seen as reasons for sharp inflows. The need for business investment seems paramount as profitability is dipping, and hence the restoration of investment remains key with a rejuvenated monetary policy. However, in India, the fiscal policy has conventionally dominated monetary policy.

Reading into the global scenario and the ongoing trade war between USA and China and to augment the Make-in-India initiative, the Government in order to attract top of the line businesses, plans to offer 324 companies including Tesla and Glaxo Smith Kline incentives to set up factories in India. The proposal aims to provide these manufacturers land to set up units along with power, water and road access. The plan is to create a land bank for ready-to-move-in industrial clusters, offer investment and location-based incentives and rationalise anti-dumping duties. The latest proposal is aimed at reducing red-tape and bringing the country on a path to double its GDP to USD 05tn by 2025, a goal set by the Prime Minister, earlier this year.

In a late-in-the-year bid to manage the imminent fiscal deficit, the Government gave an in-principle approval for strategic disinvestment of its shareholding in five public sector enterprises along with management control. With USD 03bn achieved so far and only 4 months to garner the balance, the sale of these companies is critical for achieving the disinvestment target of USD 15bn set for this fiscal year.

On the international trade front, India walked away from signing the Regional Comprehensive Economic Partnership (‘RCEP’). The proposed agreement included 16 participating countries from ASEAN, China, Australia and New Zealand. If India had joined the pact, RCEP would have encompassed half of the worlds’ population and 35% of the global GDP. The canvass of this agreement would have covered import and export of commodities, goods, services, investment and intellectual property rights. The potential gains from the agreement were outweighed over concerns whether Indian manufacturing would have withstood the onslaught of cheaper Chinese goods, fears of retailers losing to e-commerce, anxiety of producers of primary goods and near certain disruption of the dairy sector. On the other hand, the Indian demand for an assured market access in export of goods and services and import cap on China did receive a consensus, resulting in the rest of the countries deciding to keep the partnership discussion on hold.

Nearly 30 months after the Indian Central bank took the highly unusual step of directing banks to put 12 large corporate defaulters into bankruptcy courts, the most closely watched distressed asset met with a resolution with a landmark decision of the Supreme Court. The decision set the precedent between the secured lenders and unsecured creditors and is likely to restore confidence in India’s bankruptcy process, hopefully paving way for revival of interest from foreign investors.

As the year 2019 winds down within the month, key take-aways that would resonate with Indians in the coming years would be i. the thumping win of the incumbent BJP Government led by Mr Narendra Modi and ii. the state of the Indian economy. Both are likely to garner great attention as 2020 begins.

M&A in India

Between September 2019 to November 2019, around 108 M&A deals were announced of which 65 M&A deals were completed. The aggregate value of deals announced / closed is USD 2,895.90mn; dominated by domestic deals (75) followed by cross border deals (33)

In terms of sectors (considering only closed deals), Utilities sector saw the maximum deal value, with deals worth USD 151.06mn followed by Industrials sector with deals worth USD 95.45 mn and Information Technology sector with deals worth USD 29.08mn

Significant Deals completed between September 2019 to November 2019

Target Company: Hero Future Energies Private Limited
Acquiring Company:
Abu Dhabi Future Energy Company
Deal Value (in mn USD):
150
Sector: Utilities

  • In November 2019, Abu Dhabi Future Energy Company acquired 20% stake in Hero Future Energies Private Limited (Hero Future Energies) for a consideration of USD 150mn (INR 10.65 bn).
  • Hero Future Energies is an independent power producer and distributor and is engaged in the business of producing renewable energies like wind power, solar power, and hydropower.
  • The investment would help facilitate the further expansion of Hero Future Energies in India and other key growth markets along with expansion of its renewable energy portfolio.

Target Company: Ameya Logistics Private Limited
Acquiring Company: PSA India Intermodal Pte Limited
Deal Value (in mn USD): 93
Sector: Industrials

  • In November 2019, PSA International Pte Limited, through its subsidiary PSA India Intermodal Pte Limited, entered into an agreement to acquire a 50% stake in Ameya Logistics Private Limited from CMA CGM S.A. for USD 93mn (INR 6.65bn).
  • Ameya Logistics Private Limited is engaged in providing cargo and container management and distribution solutions.
  • As per the transaction structure, the payment of consideration will be made in 2 (two) parts: USD 85mn at closing and USD 08mn as earn-out.
  • Post transaction, Ameya Logistics Private Limited would operate as a subsidiary of PSA India Intermodal Pte Limited.

Target Company: PowerUpCloud Technologies Private Limited
Acquiring Company: Larsen and Toubro Infotech Limited
Deal Value (in mn USD): 15
Sector: Information Technology

  • In October 2019, Larsen and Toubro Infotech Limited acquired PowerUpCloud Technologies Private Limited for a consideration of USD 15mn (INR 1.07bn).
  • The transaction has been structured to pay part of the consideration upfront and balance as an earn-out over a period of three years.
  • The acquisition would help Larsen and Toubro Infotech Limited to strengthen its cloud services, capabilities through a combination of right leadership, team, assets and ecosystem connections, which in turn would enable it to provide better services to its existing and new clients.
  • Post-transaction, PowerUpCloud Technologies Private Limited operates as a wholly-owned subsidiary of Larsen and Toubro Infotech Limited.

Significant deals announced between September 2019 to November 2019 but are not completed

Target Company: Adani Gas Limited
Acquiring Company:
Total Holding SAS
Deal Value (in mn USD):
1,454.47
Sector: Energy

  • Total Holding SAS is in the process of acquiring 62.60% stake in Adani Gas Limited for a total consideration of USD 1,47mn (INR 103.02bn).
  • Total Holding SAS will acquire 688,478,342 equity shares at a price of ~ USD 2.1 (INR 149.63) each, through share purchase agreement followed by an open offer.
  • The transaction will help Adani Gas Limited to accelerate project executions in all its new geographical areas.

Target Company: Kyowa Pharmaceutical Industry Company Limited
Acquiring Company: Unison Capital Partners IV F L.P.
Deal Value (in mn USD): 524.81
Sector: Health Care

  • Lupin Limited is in the process of divesting its entire 99.82% stake in Kyowa Pharmaceutical Industry Company Limited to Unison Capital Partners IV F L.P. for USD 524.8mn (INR 37.28bn).
  • Kyowa will also work on its unique growth strategy of expanding its product and service portfolio beyond drugs, which Unison will support through its healthcare ecosystem.
  • The transaction is expected to be completed by the end of March 2020.
  • Post transaction, Kyowa Pharmaceutical Industry Company Limited will cease to be a subsidiary of Lupin Limited.

Industry 4.0 – As the saga unfolds

When computers were introduced, it was revolutionary, owing to the addition of an entirely new technology.  With the digitisation of industries, computers came to be engineered to communicate with each other, to ultimately make decisions with minimal human involvement. This transformation was and continues to be so disruptive and compelling that it is being called Industry 4.0, to mark a revolution transforming socio-technical ecosystems around the world. Even though some dismiss Industry 4.0 as merely a marketing buzzword, major shifts are taking pace, influencing key business decisions, that are compelling everyone to sit up & take notice

Are we ready?

Companies all over the world are expecting to dramatically increase digitisation. Regions that thrive and prosper will be the ones that bring industry, education and policy makers together around common objectives, combined with the ability to be agile and reactive to continual disruption and change in the marketplace.

Companies face formidable challenges in the adoption of new technologies. To build and sustain the lead, they must broaden and deepen their practical knowledge about digital technologies and tailor their business strategies to adapt to them.

While there are issues that need to be resolved such as skill shortage, lack of standards, data security, creating new business models and huge financial investments, India and the world are evolving, to onboard Industry 4.0.

Technology is the epicenter of this revolution. The Technology, Media & Telecommunication industries have pioneered many smart technologies with high-speed connectivity at the core. Data and analytics, autonomous robots, simulations, horizontal and vertical system integration, Internet of Things, cloud, additive manufacturing, augmented reality, cyber security are the pillars of the revolution.

Production, research and development, and product development and logistics were top areas for digital transformation in 2016 and 2019. A popular new area for digital transformation in 2019 is customer connectivity, or the ability to learn about customer needs using digital tools.

Are Tech Companies ready to leapfrog?

The role of technology companies would be crucial in leading this shift for the economy. However, the readiness quotient even amongst them is tenuous:  handful of organisations are “highly prepared” for new business models, smart and autonomous technologies, more powerful customers, and changing trade landscapes. Changes driven by digital disruption are pummeling TMT organisations. Those not fully on board with a transformative appetite for the smart and connected era or those that aren’t fully prepared to harness new technologies are in grave danger of being left behind or becoming redundant.

Media Industry – the transformation has already begun

From buying a newspaper to opening a news app, from renting a DVD to streaming your favorite television series on a smart TV or from buying a cookbook to getting customised recipe suggestions on your smartphone, it’s evident and undeniable that the digital transformation of the media industry is underway. The rise of mobile technology has further fueled this adaption.  

Media was one of the first substantial white-collar industries to be affected by new-age technologies. Once news began to be digitised, the long-established geographical monopolies of media companies disappeared. The ability to print and distribute news, once a huge expensive operation is now reduced to almost zero. The result of this has been the diminishment of various media empires and the rise of smaller and topic-specific startups. The lessons from this transition are still underway for the media industry itself and a reference for other professions.

Telecommunication – An important role to play.

On the telecommunication front, an interconnected society in the era of 5G may create a bigger role for technologies currently dominating the tech space. Cloud, IoT, AI, and mobile technologies are critical to the networked physical-digital universe; helping organisations collect and process vast volumes of data and become smarter digital enterprises.

Economies globally are embracing Industry 4.0 and recognise that this revolution is set to transform the future of business. They are working quickly to provide tax and business incentives to lure foreign investors and secure their country’s future in a digitally connected world. Global investors are keen to invest in Asian tech start-up companies although core financial sectors like banks and NBFCs are hesitant to lend to this sector due to lack of initial cash flows and high level of uncertainty.

While the concept is still evolving and we might not have a complete picture until we look back decades from now, at those companies who adopted new age technologies, reaping first-mover benefits with heaps of untapped potential.

The rise of the Techno-wave

The1800s defined the first wave of mechanisation - when steam and water were used as energy. Nearly 100 years later, the 1900s bore witness to electrification - where the use of electrical tools formed the basis of manufacturing. The pace of progress sped up from the second to third revolution in manufacturing, as the late 1970s saw the emergence of computerisation. While the first three phases are ornaments of a past era; Big Data, Internet of Things (IoT), Artificial Intelligence (AI), connected device and analytics form the core of Industry 4.0 which enables higher productivity in manufacturing and also ensures greater response to consumer needs.

Traditional production lines that included robots to work repetitively on pre-programmed tasks are becoming history. Today, industrial robots are running independently and coordinating seamlessly with the entire supply chain using technologies such as machine learning and AI.

M2M integration enabled by the Internet of Things (IoT) has become a critical factor in capturing and extrapolating clean data to optimise productivity and streamline processes within factories. Machine-as-a-Service (MaaS) is becoming another force to reckon with, offering real-time data across departments and keeping a check on the ROI.

While fully-connected factories will take a few more years to see widespread adoption, companies in India too are taking baby steps to embrace smart manufacturing, as sensors, cobots and software take charge of factory floors.  Global companies like Mondelez, Bosch, Siemens and GE have taken the leap and are operating with smart factories in India.

Network Provider, Juergen Hase, CEO, Unlimit, Reliance Group said, “Several large-scale Indian manufacturing units have started investing in advanced technology to transform their traditional factories into smart-connected factories.” He further added that since digitisation will be the driving force towards Industry 4.0 manufacturers should appoint a Chief Innovation Officer, acquire new technological capabilities, develop new products with pioneering features and collaborate with an organisation with similar goals and strategies.

“The elements of Industry 4.0 offer unique opportunities to Indian manufacturers to be more efficient and competitive while offering superior customer experience,” said Pankaj Bhardwaj, CEO of Fortune 500 Avery Dennison, manufacturer and distributor of adhesives, labels and tags. “There are enough specific areas that can unlock value through IOT and data analytics. Warehouse management, connected planning, energy efficiency and Robotic Process Automation have well established use cases and are lower hanging fruits.”

As businesses plan to make the shift to Industry 4.0, they must evaluate how major digital investments impact the top line or bottom line of their performance and device concrete strategies for measuring RoI.

Gungo about retrofits, Ali Hosseini, CEO, SenRa shared, “We deploy LoRaWAN end-to-end solutions. We are working with our customers to develop retrofit solutions which can work on their existing equipment and provide real-time feedback on equipment health, output, and maintenance. This provides decision makers data points to make strategic business decisions to improve operational efficiencies.”

On a more cautionary note, Rakesh Malhotra, Founder, Sar Group, a leading power product company said, “Investment outlays can be large, paybacks uncertain and not enough practical expertise even with big name consulting companies. To build an Industry 4.0 ecosystem in India, vertical specific deep use cases need to be developed along with machine level data collection. We will need many local champion solution providers to make this happen.”

Tech enabler Daifuku India, Head, Asim Behera added, “India is a price sensitive country and whilst the general belief is that manufacturing cost is low, it’s not totally true. Once you add in the additional cost of infrastructure, taxes, compliances and given that for most Indian manufacturers the market size is limited to India, the cost of manufacturing is high. Because it’s a price sensitive country the margins are wafer thin. To this, adoption of Industry 4.0 will obviously add cost and in many cases, it will be difficult to have a viable business case. Also, as with every technology adoption, human capital also needs to be enhanced alongside, which is a challenge for us.”

Looking ahead the world has committed itself to Smart Manufacturing and is resolutely moving towards it. A forward-looking philosophy, investment in R&D, and skilled workforce along with a robust human-machine interface will be some of the key differentiators for manufacturers embarking on connected factories.