Presentation Design India is the world's 12th largest economy and is forecasted to grow by 7.2% in 2010 and 8.5% in 2011 Indian Macroeconomic Environment Economic Snapshot 9.5% 9.7% 9.2% 6.7% 7.2% 2006 2007 2008 2009 2010ae GDP Growth in India (%), 2006-2010 Source: Economic Survey 2009-10 Note: ae Advance estimates The deceleration in GDP in 2008-09 can be largely attributed to the: Decline in agricultural output due to a fall in the production of non-food crops and the high base effect of 2007-08 on agricultural sector Fall in exports due to global recession resulting, reduction in GDP contribution from manufacturing sector Continued capacity constrain in the electricity sector
Demographic Overview India has the second largest population in the world, of which 70% is rural population and 30% belong to the urban India
An estimated 57% of the population falls under the 15 to 59 years age group, which is primarily the income generating group
The middle class population of the nation , which is currently estimated to be around 50 million is projected to reach 500mn by 2025 Indian Macroeconomic Environment Demographic Overview Indian Macroeconomic Environment Composition of Indian Consumer Market The Indian consumers can be primarily categorised in the following four income group
Household earnings between Rs.90,000 and Rs.200,000 ($1,952-$4,338) per year comprising small shopkeepers, farmers, semiskilled industrial and service workers
Household earnings between Rs.200,000 and Rs.500,000 ($4,338- $10,846) per year including young college graduates to mid- level government officials, traders and business people
Household earnings between Rs.500,000 and Rs.1,000,000 ($10,846-$21,692) per year, which largely forms the upper middle class and comprise of senior government officials, managers of large businesses, professionals and rich farmers
Household earnings more than 1,000,000 ($21,692, or $118,000) per year. senior corporate executives, large business owners, high-end professionals, politicians and big agricultural-land owners form the affluent part of the country
The total number of high net-worth individuals (HNI) in India was 126,700 in 2009-10, compared to 84,000 in 2009-08
The total number of HNIs in the country is projected to be about 9.5 million by 2025 and their spending power is likely to reach Rs.14.1 trillion ($306bn) forming 20% of total Indian consumption Indian Macroeconomic Environment Black Economy in India The size of Indias back money is estimated to about $540bn, which is 40% of the total GDP
Black money includes money deposited in banks abroad, revenue generated through fake and counterfeit products, smuggled and pirated goods, unauthorised gambling, and bribery and prostitution, among a host of other sinister activities that go unaccounted Indian Prepaid Market Overview Prepaid Cards are pre-loaded cash cards used for bill payments or recharging certain services. These cash cards are the latest payment modes to enter the Indian market, following the successful growth in debit and credit card payments.
Currently prepaid services is provide largely by telecom companies via prepaid calling cards, virtual calling cards, voice over IP cards, long distance calling cards, prepaid mobile recharge cards etc.
Cash cards are also offered by branded outlets and superstores through gift and discount vouchers or coupons. Corporate houses also offer such cards to employees through food coupons and vouchers for various tax-related benefits and incentives
Oriental Bank of Commerce was the first bank to launch Indias MasterCard based prepaid card which is loaded with the facility to withdraw money from ATM. Of late many banks have come up with various formats of pre-loaded cards such as gift cards, travel cards, meal cards, payroll cards and multipurpose cards. Overview Key Players The key domestic players in the sector are this sector are ITZ Cash Card, ICICI, HDFC, State Bank of India, Punjab National Bank, Shoppers Stop, Future Group, Trent, Done Card, Oxigen, Paytronic etc
Few Leading international players First Data, Rev, Obopay, Kores Ltd, Hiten Cards etc Share of Different Payment Instruments The Reserve Bank of India, nations central bank, permits following payment and fund transfer facilities to be used by citizens and corporate bodies:
Plastic cards - Debit, Credit and prepaid cards Paper based payments - Check Electronic Clearing Service (ECS) - Credit and Debit Clearing National Electronic Fund Transfer (NEFT) Real Time Gross Settlement (RTGS) Mobile payments 64.75 11.61 3.11 10.99 7.98 1.56 Share of payment systems in India (in %), 2010 Cheque clearing ECS NEFT Credit Card Debit Card RTGS The total number of transactions through check in 2009- 10 was 1,380mn ECS transactions for 2009-10 was more than 247mn with 98.1mn credit transaction and more 149.3mn debit transaction NEFT transaction for 2009-10 amounted to 66.3mn while RTGS amounted to 33.3mn Total number of transactions through cards was 404.4mn of which 234.2mn was from credit card and 170.1mn from debit card
Indian Prepaid Market Overview Card Usage Pattern in India Currently about 90% consumer transactions in domestic market are done through cash or check. However, India is considered to be one of the fastest growing cards market within Asia-Pacific region. 156 170 228.2 260.0 234.1 46 60.1 88.3 128 170.1 2006 2007 2008 2009 2010 Trends in number of cards transaction since 2006 (in million) Credit Card Payments Debit Card Payments The use of card based payments rose by 22.5% in volume during 2008-09. Owing to the controlled spending during the economic slowdown the growth in credit card transactions started decelerating from 2008-09 while the growth in debit card transaction continued to remain strong as in previous years. Source: Reserve Bank of India 7,333 8,951 12,548 14,143 13,608 1,276.1 1,768.3 2,710 4,014 5,717 2006 2007 2008 2009 2010 Transaction value of cards since 2007 (in USD million) Credit Debit The value of the card based payments rose by 19% during 2008-09. Volume and value of debit cards is much less than that of credit cards due to: Provision of credit limit facility Purpose of card usage Debits cards are mainly used for cash withdrawal Source: Reserve Bank of India Indian Prepaid Market Overview Mobile and Internet Technology Mobile Technology Overview India is the second largest country in terms of mobile subscribers. The total number of telephone subscribers in India as of March 2010 was 621.28mn, of which wireless segment comprised of 584.32mn subscribers. 94.05 5.95 Telecom Subscription Data (as on March 2010) Wireless Subscription Fixedline subscription 140.32 206.83 300.51 429.72 621.28 98.78 166.05 261.09 391.76 584.32 2006 2007 2008 2009 2010 Telecom Subscription from 2006-10 (in millions) Total Telephone Subscriptions Wireless subscription Source: Telecom Regulatory Authority of India Source: Telecom Regulatory Authority of India The developments in wireless and mobile technologies have added to the growth of electronic payment in India, which is also commonly known as m-Commerce. Mobile payment software applications commonly known as Mobile wallets are emerging technologies making way in the domestic mobile market.
These applications allow the customers to make payments through debit, credit and prepaid cards and are easily available for download from the service provider sites. Ngpay, mCheck, Obopay, PayMate, Atom, Oxicash (part of Oxigen) etc are among the key players in this segment. Internet Technology Overview Mobile and Internet Technology The total number of internet subscribers in the country was estimated to be around 16.18 million in 2010, reflecting a year on year (YoY) growth of 19.5%. The share of broadband subscription in total internet subscription increased from 6.22 million in March 2009 to 8.77m in March 2010, representing a YoY growth of 41.05%. 12.86 13.54 14.05 14.63 15.24 Oct-Dec 2008 Jan-Mar 2009 Apr-Jun-2009 Jul-Sep 2009 Oct-Dec 2009 Trend in Internet Subscription Growth 41% 38% 37% 34% 20% 21% 21% 18% 10% 12% 12% 12% 29% 29% 30% 36% 2006 2007 2008 2009 Region-wise Breakdown of Internet Penetration, (%) 2006-09 Top 8 Metros Other Metros 5-10 lakh towns Less than 5 lakh towns Source: Telecom Regulatory Authority of India Source: Internet & Mobile Association of India and Indian Market Research Bureau The countrys internet usage is more often for the purpose of social networking and data collection. Such a trend is pre-dominantly noticed among college going students, young men, working women and non-working women. About 11% of working men and 11% of working women use internet for the purpose of e-commerce, especially for bill payments, booking tickets, shopping and online banking while 7% of the college going students opt for e-commerce facilities, mainly for the purpose of online shopping. Mobile and Internet Technology Point of Sale Systems and Automatic Teller Machines - Overview 88.64 11.36 % Share of PoS terminals and ATMs PoS Terminals ATM Source: Cheers Estimate There are in total 60,282 ATMs and 4.7mn PoS terminals across the nation.
The average cash withdrawal size through ATM is INR 2,845.
Debit card withdrawals through PoS up to INR 1,000 is permissible as per RBI guidelines Case Study Case Study: Indian Railway Catering and Tourism Corporation Limited (IRCTC) IRCTC, the Indian Railways online ticketing portal is the largest e-payment facility in Asia. The authority provides an Online Passenger Reservation System which offers booking facility of railway tickets online and offers other services like checking reservation status. The organisation is one of the important sector which uses prepaid cards. 70.19 8.11 21.65 Share IRCTC payments made through prepaid cards (in %) ITZ Cash Card Done Card I Cash Card 15% online payments on IRCTC made through prepaid cards included:
0.9mn payments made through ITZ Cash Card More than 99,000 payments made through Done Card 0.3mn payments made through I Cash Card While only 665 payments were made through Oxicash Regulatory Framework Reserve Bank of India (RBI) is the central bank of India vested with the authority to regulate and supervise the financial system of the country. In-order to ensure orderly development and operations of prepaid instruments in the country Reserve Bank of India has issued a set of operating guidelines Eligibility Only banks permitted to provide Mobile Banking Transactions by the Reserve Bank of India are eligible to launch mobile based prepaid payment instruments (mobile wallets & mobile accounts)
Other entities are permitted to issue only closed system prepaid payment instruments and semi-closed system prepaid payment instruments
Entities authorised under Foreign Exchange Management Act to issue foreign exchange prepaid payment instruments are exempt from the purview of these guidelines
The maximum value of any prepaid payment instrument (where specific limits have not been prescribed) shall not exceed Rs 50,000/- (USD1,076.4)
As a step towards anti-money laundering, all entities issuing prepaid payment instruments are required to abide by the RBIs Know Your Customer, Anti-Money Laundering and Combating Financing of Terrorism guidelines Environment Scan Capital requirements Only banks and Non-Bank Finance Companies complying with the Capital Adequacy requirement prescribed by Reserve Bank of India from time-to-time are permitted to issue prepaid payment instruments
All other entities are required to have minimum net owned funds of Rs 10 lakhs (USD 21,575)
Additionally Under the existing tax laws, meal vouchers can be given to any staff by a company, as a tax-free incentive subject, to a limit of Rs 50 per day, or Rs 1,300, for 26 working days. A tax payer can save up to Rs 15,600 a year, on income tax, by using these vouchers. Environment Scan Environment Scan Key Drivers Rising consumerism and changing lifestyle: availability of a huge variety of foreign and domestic consumer goods at affordable prices has sparked robust demand for financial cards, especially for credit cards followed by debit and prepaid cards. Financial Inclusion: Considerably a large section of the Indian society falls under unbanked sector. Out of the 600,000 habitations in the country, only about 30,000, or just 5%, have a commercial bank branch. Prepaid can gain significant market coverage by tapping this unbanked sector Payment infrastructure: Many banks are looking to expand their network of ATMs and PoS terminals. Having multiple access points at convenient places are the essentials for the success of prepaid payments Merchant mix: establishing a strong network base across the physical and electronic channel and across the category of goods and services through merchants will provide a high market penetration for the business Appropriate marketing and promotional tactics: pinning up the right emotion of the Indian consumers through advertisements and promotional activities is the key driving factor for prepaid service Product mix: the other key factors that can influence the positive growth of prepaid services is the denominations in which prepaid cards are made available to the consumers Key Challenges Environment Scan Lack of awareness: less awareness among people regarding the availability of prepaid services in sectors other than telecom is a key challenge for companies to overcome. Low penetration of financial cards: high dependency on cash and check payments by Indian consumers has been hampering the growth of financial cards resulting to its low penetration Low internet penetration: in comparison to mobile, internet penetration in India is still very low. Online purchase of goods and services, electronic bill payments through prepaid cards are still a new concept for a large section of the society as internet is yet to reach them. Security: apprehension of receiving a fraudulent card after making payment, risk of prepaid cards being used as an instrument for money laundering are some of the factors hampering prepaid growth. Indian Retail Industry Retail Industry Overview The retail and wholesale industry accounts for 24.8% of the GDP (at current prices)
The share of retail trade to the countrys GDP was 12% in 2009. Food and grocery is the largest segment accounting for 75.0% of the total retail trade
Major retail hubs include the National Capital Region (NCR), Mumbai, Pune, Bengaluru, Hyderabad, Chennai and Kolkata.
The overall size of the retail sector is expected to be at US$ 410bn in 2010, growing by US$ 55bn and at a CAGR of 5.5%. Retail Industry Structure 95.00 5.00 Retail Market Structure in India(in %) Unorganised Retail Organised Retail
Unorganised retail is the prevalent form of trade and accounts for 95.0% of the retail market The unorganised retail sector comprises of local general stores, street hawkers and vendors There are about 15mn unorganised outlets in India Source: Cheers Interactive Indian Retail Industry Organised retail formats in India Format Description Example Hypermarkets Average size: 60,000 sq.ft. - 120,000 sq.ft. Multiple line of products Spencers, Big Bazaar,etc. Cash-and-carry Average size: 100,000 300,000 sq.ft Bulk buying requirements Metro, Bharti-Wal-Mart, etc. Department stores Average size: 10,000-60,000 Large layout with mix of merchandise Major product categories Home products, apparel, fashion accessories Shoppers Stop, Lifestyle, etc. Supermarkets Smaller version of hypermarket Multiple lines of merchandise Apna Bazaar, Food Bazaar, etc. Speciality stores Single-category stores Next, Vijay Sales, etc. Discount stores Average size: 1,000 sq. ft. Wide range of products, mostly branded, at discounted prices Big bazaar, various factory outlets Indian Retail Industry Composition by Segments: 35.30 7.90 11.00 3.90 4.40 19.70 3.40 14.40 Private Final Consumption Expenditure in India (%) 2008-09 Food, Beverages & Tobacco Clothing & Footwear Gross Rent, Fuel & Power In 2008-09, food, beverages and tobacco accounted for 35.3% of total consumption in India, followed by Transport and Communication with 19.7% Clothing and Footwear accounted for 7.9% share in total expenditure Home improvement products such as furniture, furnishing, etc. accounted for 3.9% share Retail Payment Systems Source: Central Statistics Organisation 11,296.50 23,560.10 31,713.10 51,061.80 225,743 108,392 148,607 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 (P) Total Retail Electronic Payments (in USD mn) Total Retail Payments
Total retail electronic payments in 2009-10 projected to be USD 148,607mn
Total retail electronic payments have grown at a CAGR of 44.5% from 2003-04 to 2009-10
Source: RBI bulletin, July 2010 Indian Retail Industry Composition by Segments: Key Retail Players in India S No Retail Chain Segment No. Of Outlets Revenue 1 Apollo Pharmacy Pharmaceutical 1000+ NA 2 Mobile Store Consumer Durables 1050 NA 3 MedPlus Pharmaceutical 650 NA 4 More Food and Grocery 640 supermarkets & 5 hypermarkets NA 5 NEXT Consumer Durables 600 NA 6 Guardian Lifecare Pvt. Ltd Pharmaceutical 200 NA 7 Food Bazaar Food and Grocery 170 NA 8 Vishal Mega Mart Mix Retailer 163 NA 9 Big Bazaar Mix Retailer 116 NA 10 Shoppers Stop Apparel 93 NA 11 Lifestyle Apparel 50 NA 12 eZone Consumer Durables 36 stand alone and 14 shop-in-shop outlets NA 13 Croma Consumer Durables 49 NA 14 Pantaloons Apparel 45 NA 15 Westside Apparel 41 NA 16 98.4 o Pharmaceutical 30 NA 17 HyperCity Mix Retailer 7 NA 18 Religare Wellness Pharmaceutical NA NA 19 Himalaya Drug Pharmaceutical NA NA 20 Reliance Fresh Food and Grocery NA NA 21 Vijay Sales Consumer Durables NA NA 22 Reliance Digital Consumer Durables NA NA