Chillin' out till it needs to be funded
India’s first global lifestyle brand, Airtel managed to score high in its first quarter post acquisition, managing the $62 billion in Enterprise Value with $8 Ave Revenue per user a tentative positive for the company’s mature portfolio. In India, they maintained market share, increased MOUs to 480 and though profit was down to Rs`1671 crores, $355.2 million for the quarter which really increases the investible cash flows esp as this is sustainable thru 2011. The 16 countries in Africa include Seychelles ( and Madagascar) which has a per capita GDP of $19400 and as we have shown before , lot of new OIL money is flowing from African wells into the Economy as also showcased at the Airtel conference.
As resource based economies growing the Services sector, the emerging markets of Africa would be growing lifestyle spends esp on technology franchises like Computers, networks and Telecom as also in urban infrastructure like construction, highways and railways. China’s spending in the region has petered down though more MoUs have been signed. 23 days of African revenue have been included in this quarter from Zain Telecom
Vedanta’s purchase of 10% in Cairn and Ssangyong’s Renault Nissan stake sale to M&M show a maturity in dealing with Indian dealmakers without long schedules and conditions since the last edition of the takeover code. It also shows that interest in energy infrastructure and lifestyle infrastructure, even SUVs is a foregone conclusion. Thus for India it bodes well that they have prospective custom and large business prospects in the Dark continent as Airtel establishes strengths in branding and operational excellence in the new territories. Earlier Indian forays in Africa have been eclipsed by China and now it is contingent on these few with cash resources to find the lucrative opportunity and not let the indian heritage exports of the last 500 years go away with a whimper.
Talks of recession and slower growth may have blunted the edge in the Europe, US and even China, but here the story is much different with Top 25 of the 30 economies in Africa growing at more than 5% and where barter trade and such alternative avenues are also available to manage the costs of business. Ssangyong’s current markets in Western Europe and Russia may just be sluggish enough to consider its sourcing prowess for new markets. Even in barter trade conducted by BHEL for Capital equipment sales against OIL trading rights and others may be leveraged in other new markets in Africa to ease the costs of business operations.
Business exports to Africa continue to be cheaper in cost for sourcing companies from Asia and one should leverage these strengths to create new superbrands in these 25 markets, 16 for Airtel alone, which has the unenviable task of creating motivators and differentiators towards increasing existing utilization from its telecom assets in Africa. Team Ogilvy Africa may soon get many new customers from India for its Team Airtel, with Pharma and Oil Majors as well as old hands BHEL trying their luck on the new continent.
In Healthcare and lifestyle markets, Ranbaxy sells nearly INR 2000 million or 10% of its quarterly turnover in Africa where Indian cost effective drugs may find a further large upticks in the $10s of billions in drugs and vaccination arrangements made in Africa by the GAVI alliance and Glaxo among others.
Though Indian Sovereign cannot afford to establish its own private investment company it can continue to source well priced aid for African nations and use that to buy more land rights esp in economies like Kenya, Nigeria, South Africa and Seychelles. Airtel itself has identified additional investments of $250 -300 million in each of its markets over the next 3 years