Session 3.3

1. Session 3.3 India-Centric Business Opportunities

2. Billions Beckon Forget the recession. The worst is over and entrepreneurial opportunities abound, both from new avenues and the old order. Some of these may come as surprises, but entrepreneurs need to be brave and identify opportunities to make their billions. Our analysis and interaction with experts revealed that 16 sectors are poised to make a big impact on the Indian economy. Read on for an in-depth look at these hot sectors.

3. RAIN-WATER-HARVESTING • Indiais on the brink of becoming a water-scarce country. While the average water scarcity threshold is 1,100 cubic meters per head per day, it stands at 1,200 in India—a scary scenario to say the least. The reason: the practices of planning, developing, distribution and optimum utilization of water resources under defined water policies and regulations are missing in the country. But, like in other sectors, wherever the state has failed, there lies a substantial business opportunity for enterpreneurs • The opportunity lies in generating water storage, processing and developing efficient water utilization technologies. Moreover, as the sector is presently decentralized and diffused, even small firms that aren’t looking at economies of scale can do great business. Clearly, it’s time for Indian companies to profit from this opportunity. So, what kinds of business models could one have? For starters, rainwater harvesting is soon becoming mandatory; Chennai has already made it compulsory. Cost-effective consultancies that design such systems for buildings could be a viable business proposition. How about developing new technologies to efficiently harvest, store and process rainwater? • Water auditing will be big in India, too, offering great business opportunities. States are setting up regulators to set guidelines on allocation, usage and tariff for water. Maharashtra has already set up a regulator and Gujarat is all set to implement one. So, a day when water audits are necessary pan-India, on the lines of energy audits, may not be far off. • These apart, the traditional water treatment and the effluent control and treatment businesses will also boom. With companies and governments becoming increasingly aware of the problem at hand, the opportunities in this sector are nothing if not eye-popping. • Current Market Size: $10 billion (Rs. 45,000 crore) • Growth Rate: 15-20 percent

4. GREEN TRANSPORT • These are the vehicles of tomorrow. Eco-friendly and efficient, ‘green’ machines are set to change the dynamics of the automobile sector. Though a part of daily life overseas, the concept of green transport is yet to catch the fancy of Indian consumers. However, both global giants and Indian manufactures are now looking at developing sustainable vehicles for India. Coupled with the government slashing duty on these vehicles, the demand for green transport will surely pick up. • While Swedish giant Volvo is busy with its hybrid trucks and trucks that run on alternative fuels, with at least seven fuel options, Indian companies too are on the drawing board. Growth for Indian electric carmaker Reva for the first few years was as high as 30 percent and it has sold about 3,000 cars since 2001. Chennai-based Bavina Cars India is also joining the bandwagon and plans to launch its electric car by 2011. Research findings indicate that by 2015, around 5 percent of the total car sales in the country would be of electric vehicles. • While much of the R&D in this field is taking place at the OEM level, there is a huge space for entrepreneurs who are involved with the technology of the future. You could find your footing by providing services in this sector, marketing components or even manufacturing them. • Current Market Size: A little over $100 million (Rs. 450 crore) • Market Potential: $5 billion (Rs. 22,500 crore)

5. ORGANIC FOOD • Here’s another golden goose. One doesn’t need much business acumen to know that anything organic will be a hit with consumers. • Organic food today is a viable alternative for an increasing number of consumers who are wary of chemical residues and the negative consequences on the environment caused by intensive production methods. • According to a survey conducted by the Bangalore-based International Competence Centre for Organic Agriculture (ICCOA), health and economic well-being of the urban Indian would drive the domestic organic food market that has the potential to be worth Rs. 1,500 crore. • For entrepreneurs, there could not be a better country than India to dive into the organic sector. The country enjoys traditional advantages coupled with a large agriculture base that is required to be a hotbed of organic farming. • Crucially, the ICCOA survey also found that Indian consumers are prepared to pay a 30 percent premium for organic food. Hence, opportunities lie not only in growing organic foods, but also marketing, retailing, inspection certification and even logistics. • Apart from the domestic market, there are numerous health and ‘environment-conscious’ markets in the west for the ‘organic entrepreneur’ to tap. • However, assuming that the consumer is a fool who’ll lap up anything that is labeled ‘organic’ will be a mistake; one must be convinced about the value of the product before he sells it. Also, aping an already successful product is a sureshot route to failure. Instead, one has to be innovative and superior in his offering. • Current Market Size: A little over $100 million (Rs. 450 crore) • Market Potential: $300 million (Rs. 1,500 crore)

6. CARBON CREDITS • It’s high time that Indian companies made some moolah by selling carbon credits. Globally, the demand for carbon credits was close to $10 billion (Rs. 45,000 crore) last year, and is expected to reach $25 billion (Rs. 1,12,500 crore) in the next two years. In India, over 1,100 carbon credit projects were registered in 2008, ranging from small initiatives offering less than 10,000 CER (1CER=1mt of CO2 emissions) per year to those offering close to 3 million CER per year. • But why the fuss about carbon credits? Although not a sector in itself, carbon credits stem from doing things innovatively and in an eco-friendly way. • Carbon credits are a key component of national and international emissions trading schemes that have been implemented to mitigate global warming. They provide a way to reduce greenhouse effect emissions on an industrial scale by capping total annual emissions. They also let the market assign a monetary value to any shortfall through trading. • These credits can be exchanged between businesses or bought and sold in international markets at the prevailing market price. Apart from the buying and selling of carbon credits, there also are a flurry of opportunities in providing consultation services and helping companies find buyers and close deals. • Current Market Size: $10 billion (Rs. 45,000 crore) • Market Potential: $25 billion (Rs. 1,12,500 crore)

7. ALTERNATIVE ENERGY • Calendar year 2009 holds much promise for India’s power sector. As the government has set a daunting capacity addition target of 18,000MW for 2009-10 and 78,577MW for 2012, there are obvious opportunities in equipment and material supply in this sector. The best opportunities for entrepreneurs are expected to be in the solar and nuclear energy industries. The Indian nuclear power industry, in particular, is looking at an investment of over $60-80 billion (Rs. 2,70,000 crore-Rs. 3,60,000 crore) in the next 25 years, so as to add roughly around 60,000MW. Twenty-one nuclear power plants are expected to be set up in the country over the next five years. This will open up opportunities galore in the areas of IT solutions, security, fuel supply, construction and human resources. • Solar energy, however, represents the more immediate opportunity with the government gunning to make India the solar energy hub of the world. Consider the facts: most parts of India have 300-330 sunny days in a year, which is equivalent to over 5,000 trillion kWh per year. This exceeds India’s total energy consumption per year. • An important change for energy entrepreneurs is that the government— having backed only major, conventional players for too long—has now opened its eyes to smaller and non-conventional players. Projects as small as 1MW are now easily finding an audience with the Ministry of Power, while promoters of novel concepts such as biomass, geothermal and micro-hydel power generation are finding it easier to get funding and clearances. • Demand: 80 million • Investment: $700 billion • Jobs: 4 million

8. SOCIAL ENTREPRENEURSHIP • FOR people living at the fringes of society, thoughts of owning a business may seem like a fantasy. But it is a fantasy that many libertarians do latch on to at some point in their lives—and bring to fruition. • Social entrepreneurship, more a mindset than a sector, is revolutionizing the way things operate in the country, thanks to the uncanny knack for innovation that comes with it. • Social entrepreneurs do not work in traditional markets. Instead, they tap into their need to uplift the status of the poor and to provide sustainable solutions to everyday problems. • It is a common denominator that seeks to provide social values like clean drinking water, sanitation and livelihood. The growth of social entrepreneurship is phenomenal in terms of its effectiveness in providing sustainable solutions. • What works for the social sector in these times is that despite there being a downturn and economic instability, the demographic it caters to has remained largely insulated. The financial and economic crisis has largely affected the burgeoning middle class. However, many people in the lowest of income groups have never been tapped in the first place and hence represent a completely new market for entrepreneurs. It is a market that has more significance attached to it than just plain numbers. • Current Market Size: Social entrepreneurship is an approach or a mindset and cannot be assigned a number. • Market Potential: Sky is the limit.

9. MICROFINANCE • WHILE the credit crunch had squeezed the life out of many banks and global corporations, this sector looks rock solid. So, what is the market potential for microfinance? Various estimates present different counts. • The most conservative of them peg the client base to be in the range of 58-77 million, translating to an annual credit demand of Rs. 25,650 crore-Rs. 85,950 crore—assuming loan sizes range from Rs. 4,500 to Rs. 11,250. • If we also consider the low-income but economically active population—including small and marginal farmers, landless agricultural laborers and micro-entrepreneurs—as potential microfinance clients, the annual credit demand goes up to an estimated 245.7 million individuals and Rs. 2,31,300 crore in annual on-lending requirements. • Most microfinance organizations charge interest rates to the tune of 35 percent, and returns are far higher than normal banking rates. Yes, it’s true that the interest rate on a bullock cart is much higher than that on the BMW 7 Series! Even then, the default rate of major microfinance organizations is less than 2 percent of the loans disbursed; unheard of in the conventional banking sector. • Microfinance works on a mix of trust, community and social good. People flock to microfinance because, for one, it is a ‘social’ concept that works through and with the village community. Second, the village money -lender typically charges a much larger interest rate. It’s a for-profit business model that is a win-win for both parties. • Current Market Size: $15 billion (Rs. 67,500 crore) a year • Market Potential: Over $100 billion (Rs. 4,50,000 crore)

10. LOW-COST HOUSING • Estimates have shown that India needs 80 million low-cost dwelling units to provide basic housing facilities to about 190 million urban dwellers. Currently, a significant part of urban India is spending between Rs. 30-40 lakh per dwelling unit. This apart, low-cost housing is a growing need among the rural population, too. With migration to urban areas on the rise, the demand is sure to increase still further. In Mumbai, the commercial capital, more than 8 million people now live in shantytowns, often paying substantial rent. • The cost is being kept low chiefly because flats are being built outside big cities and the houses are small. The simplest consist of a single room with a sink in the corner and a toilet behind a partition. These are in buildings of no more than three storeys, so there is no need for expensive structural works and can be built using unskilled labor. • Instead of bricks, lightweight molded concrete blocks are used for the walls. The concrete is often made with fly-ash or other waste materials to make it lighter as well as cheaper. This makes it easier and faster to build as well. • Unlike earlier, both NABARD and National Housing Board are now ready to finance these houses. This presents a goldmine of opportunities, not just in developing housing clusters, but also in creating new, lighter and easy-to-handle building materials, creating new building technologies and funding such projects. • Current Market Size: About $38 billion (Rs. 1,91,000 crore) • Market Potential: About $115 billion (Rs. 5,76,000 crore) by 2012

11. DISCOUNT RETAIL • The guys in the discount retail sector were perhaps the only bunch that raked in the bucks when the slowdown cast a gloomy shadow over almost every aspect of everyone’s financial lives. Organized retail itself constitutes 4.6 percent (around Rs. 55,000 crore) of the total Rs. 12,00,000 crore retail sector in India, according to the India Retail Report of 2007. Of this, 48 percent is contributed by sales of footwear, clothing and accessories. • Further, according to a McKinsey report, 40 percent of branded apparel sales in India come from discount retail. But discount retail, as an organized sector, is very small. Considering the average Indian’s penchant for bargaining, discount retail has unlimited scope in India at all times, bad or good. Indians like their apparels branded, but it’s even sweeter when coupled with a discount. • Little wonder, then, that discount apparel chain The Loot expects to maintain the impressive growth record it has established in the first four years of business, since it was set up in 2004. A company that provides 25 to 60 percent discount round the year on more than 100 international and Indian brands (including two in-house brands) is targeting a turnover of Rs.100 crore by the end of financial year 2009-10—almost double the 2007-08 turnover of Rs.53 crore. • Zahra Hooda, Marketing Manager at The Loot, feels that this is a good time to be in discount retail. “As there is a global economic meltdown, people are getting very cautious about their spending and are not going overboard,” she says. “But they will definitely not stop buying basic necessities like winter wear. At the same time, they will be looking for the best deals and discounts available. People will also prefer to buy branded goods at cheaper, affordable prices.” • Current Market Size: $3.5 billion (Rs.15,750 crore) • Market Potential: We suggest you don’t try to calculate this.

12. EDUCATION • This sector is recession-proof. In India, considering its target population of over 400 million, there is immense potential for investors and corporate houses to enter the education sector. In fact, India’s education sector presents entrepreneurs with a $40 billion opportunity. The aim should be to offer more skill-oriented education—both in terms of life-skills and livelihood skills. • In sheer numerical terms, India has the manpower to substantially meet the needs of a world hungry for skilled workers—provided its education system can convert those numbers into a workforce with the needed diversity of skills. • India currently has over 1 million schools that cater to over 200 million students with an ever-widening teacher to student ratio of 1:40, according to government statistics. Even so, over 140 million of the 360 million school-age children in the country are not attending school. • Once you mobilize the above students into completing secondary education, you then have the challenge of higher education. According to a report released by Technopak in late 2008, India would see a shortage of 5 million graduate seats by 2015 and 7 million by 2020. The aforementioned numbers represent gaps and market opportunities for entrepreneurs to fill. • Target Population: Age group of 6-24 years • Market potential: $40 billion

13. LIFESTYLE AND WELLNESS • Ironically, the dampener of the recessional spirit seems to be working well for the lifestyle and wellness sector in India. There’s an unprecedented need among the masses to look good and feel good, so as to bump up self-confidnce, succeed at the workplace and in social circles. This is the primary reason why VLCC, one of India’s foremost wellness chains, hasn’t had any reduction in footfalls at its centers, even while the bear was on a rampage at the stock exchange. • Mukesh Luthra, Chairman and Managing Director of VLCC says, “There is no slowdown in the health and beauty segment this time, contrary to the last recession of 2000-2003. The concept of holistic wellness has undergone a dramatic change for both men and women. Looking young and good is now considered critical to having a successful career.” • Luthra further adds that Indians have started to look at themselves as individuals who deserve to relax and rejuvenate themselves after catering to the never-ending demands of a competitive world. However, stress persists irrespective of economic cycles. So, whether it is a time of boom or bust, healthcare and wellness play a significant role in people’s lives. • Statistics belted out by various institutes also indicate that this sector has a huge potential for growth. A 2007 report by Euromonitor International pegged the Indian skincare market alone at $283 million (Rs.1,272 crore). The overall size of the beauty and cosmetics market in 2005 was $1 billion (Rs. 4,500 crore), growing annually at a rate of 20 percent. • Current Market Size: $3 billion • Growth Rate: 1.3 billion Indians want to look and feel good, so you can imagine the magnitude.

14. HEALTHCARE • A population of over a billion, increased literacy, escalating income and a growing awareness about health issues has ensured that even as the economy trundles downhill, the healthcare sector has its head above water. It is a throbbing vein in an economy that’s taken ill. • Jayant Singh, industry analyst for healthcare practices with Frost and Sullivan, points out a factor that helps this sector tide over bad times—besides the obvious need for medical attention from patients. The demand-price equation for healthcare services, he says, is pretty inelastic. • The general demand in this sector has been on the upswing owing to poor health service indices in India, as compared to global benchmarks like the U.K. or the U.S. • Another sector that is upcoming and is expected to do well through good times and bad are clinical trials. With the government opening up the market for phase III and IV trials, this sector is expected to boom, Singh believes. • Health insurance and health service outsourcing have also picked up pace, and so has medical tourism. The latter may have got a further boost with the slowdown in the west, forcing people to look toward the cheaper east. • Industry Size: $5.2 billion (Rs. 24,000 crore) • Market Potential: $10 billion (Rs. 50,000 crore)

15. SECURITY • It’s a sector that feeds on one’s fears. Private security in India is estimated to become a $10 billion (Rs. 50,000 crore) industry in about four years, as corporates have increased their spending on safeguards. • “Irrespective of what happens in society, security services are always needed and an economic downturn will not affect the sector,” says Kunwar Vikram Singh, Managing Director of Lancers Network Ltd. • Singh says socio-economic factors like disparity between the haves and have-nots breed hatred and crime. This leads to a demand for security services and protection. Also, socio-political factors like terrorism spur demand for private security guards to protect an establishment. • The demand for security services has increased in the last five years, and the shift in people’s mindset toward it is perceivable. The recent terror attacks left a widespread fear psychosis in its wake, leading to a huge demand for private security guards. • The numbers speak for themselves. At present, there are more than 50,000 security agencies in the country and 240 ISO-certified security firms. “Security services [deal with] loss-prevention in totality. This includes information security, emergency preparedness plans and background checks on employees, among others,” Singh says. • More than 100 training centers have mushroomed as well. The high growth rate in this sector is driven by considerable demand from sectors like retail, construction, hotels, tourism and from large manufacturing units and financial institutions. “States see this as a good employment venture. • Recruitments are now taking place through job fairs. About 45,000 people were recruited from Rajasthan alone in the past four months. Punjab is setting up a training center in Hosiapur at an investment of $2.1 million • (Rs . 10 crore) with plans of recruiting 100,000 people,” Singh says. • Current Industry Size: $5.2 billion (Rs. 24,000 crore) • Market Potential: $10 billion (Rs. 50,000 crore)

16. E-WASTE • Sustainability and commercial success, without doubt, are strongly linked. But as the country rapidly becomes a global center for information and communication technology, it inevitably uses more electronic items—and inevitably produces more e-waste. • The scale of the problem is immense. About 330,000 tons of the e-waste generated last year was dumped into rivers, landfills and sewage drains. Only 19,000 tons of the annual e-waste is recycled, of which the organized sector handles a mere 4,000-5,000 tons. • According to a report by hardware industry association Manufacturers Association of Information Technology (MAIT), e-waste from discarded computers, TVs and mobile phones is projected to grow to more than 800,000 tons by 2012 in India, with a growth rate of 15 percent. A handful of companies operate in the organized market, but the e-waste generated is massive. It’s a business opportunity that’s insulated from the financial meltdown. • B.K. Soni, CMD, Infotrek Syscom Ltd. says, “The size of the market in terms of monetization may exceed more then one billion dollars and may even exceed MAIT’s estimate and clock half a million tons. We started the recycling business last year and did only about 1,000 tons. The state of Maharashtra itself churned out 50,000 tons of e-waste last year. • Current Size: 500,000 tons • Projected Size: 800,000 tons by 2012

17. DIGITAL TECHNOLOGY - GPS • If you’re ever lost while driving in the city or from one city to another, the best option one often thinks of is to roll down the car window and ask for directions. But how reliable are the answers you receive? Now that digital maps and GPS systems have entered India with a bang, you don’t have to ponder over that question… and you don’t have to get lost again, either. • The Indian market is now at Rs. 2,016 crore, but has the potential to grow to Rs. 9,000 crore in the next three to four years. GPS companies (both local and international) are competing to grab a piece of this market; they are especially eyeing the field of logistics for tracking cargo and trucks across the country. Currently, prices for GPS devices in India range from Rs. 10,440 to over Rs. 1,04,625. • While the digital technology sector has become saturated in many western countries, it is still in the introductory stage in India. • Rohan Verma, Head (Marketing) of CE Info Systems/MapmyIndia, explains that the nascent sector has tremendous scope, and the need for such products is visible, making business in such items a viable option. Car manufacturers like GM, Ford and Maruti Suzuki are already offering these products in their models. Handset manufactures like Motorola, Sony Ericsson and Blackberry are also increasingly looking at fitting such products and services on their phones. Business in GPS and tracking devices never looked so good.

18. RADIO TAXIS • Indians are becoming increasingly aware of the need for comfortable, affordable and, more importantly, safe road travel. As a result, the demand for radio taxis is picking up speed with commuters who are eager to avail of its facilities. This trend is bound to have a big impact on the Indian radio taxi market, which is currently grappling to meet demands. • “This service fundamentally makes a huge amount of sense for transportation in a city. At present, the number of radio taxis available in cities is not very large; people are finding it a challenge to get a vehicle when needed. Demand is high,” says Rajiv K. Vij, Chief Executive Officer, EasyCab. • Vij says buying a car is the easy part of the business. The main challenge while increasing the fleet strength is finding reliable, safe and quality drivers. The opportunities in this sector are enormous. Due to the recent Supreme Court rulings, around 450,000 cabs in the country need to be replaced, as they don’t meet emission norms. Radio taxis are expected to fill this void. • Vij says the industry is very nascent and the impact of a downturn could not be felt. EasyCab plans to add 500 cars in the next two months and another 500 by December. Since its inception in January 2007, the company has done business worth over Rs. 10 crore. Last fiscal, it did business worth Rs. 45 crore and expects to rake in Rs. 80 crore in fiscal 2010. • Current Market Size: $23 billion (Rs. 1,03,500 crore) • Market Potential: $50 billion (Rs. 2,25,000) by 2011