Tuesday, October 26, 2010

AMAL Ltd (BSE Code 506597) CMP 22.80

Brief description of the Company:   Amal Ltd is basically a pure case of prospective turnaround. The company was a loss making entity till FY 10 and even got registered with BIFR as a sick company. The company has a huge negative net worth of Rs 20 crore, however things are set for complete change.

Amal (AMAL) is engaged in the manufacture of dyes and dye intermediates. It was incorporated on July 4, 1974.

 Company manufactures sulphuric acid, oleum 65%, sulfur trioxide and sulphur dioxide.

 Manufacturing site of the company is located at Ankleshwar.

 There's another plant at Valsad, however that has now been completely shut down by the company.

 The company was registered with Board of Industrial Finance and Restructuring (BIFR) for 

restructuring in 2006. It's been a loss making company since long and has negative net worth at present.

 For FY10 the company made a loss of 93 lacs with its operations, however after receiving the approval from BIFR to the revival scheme, waivers from creditors were credited to the Profit and Loss Account resulting in a net profit of Rs 378 lacs for FY 10.

 Once the BIFR approved the revival scheme on July 17, 2009, the Company took initiatives to build the foundation for the future.

 The company also recently saw a complete change in management with Atul Ltd taking over the control. Atul Ltd itself is a reputed and Rs 500 crore market capitalization company. 

 Amal has already started with production at it's Ankaleshwar site under the able guidance of the new management.

 The company has identified two projects for revamping the existing facility:-

1. To debottleneck the capacity of the existing plant from 100 tpd to 140 tpd and

2. To introduce a new product in which the company will be effectively competing worldwide.

 Company has also signed an agreement on June 01, 2010 to supply excess steam coming from Sulphuric Acid plant to a neighbouring company.

 The Company has an accumulated loss of Rs 38.84 crore and management is looking to wipe out the loss as well as the consequent negative net worth as soon as possible.

 Mr. Sunil S Lalbhai did his MS degree in Chemistry from the University of Massachusetts 

and MS Degree in Economic Policy and planning from the Northeastern University. He 

has been functioning as Chairman & Managing Director of Atul Ltd.

 Mr T R Gopi Kannan has done FCA, FCS, FICWA followed by Post Graduate Diploma in 

Management Studies from IIMA & ACMA (LONDON). He has over 25 years of experience 

including around 9 years in Pfizer Ltd and Nestle India Ltd in the areas of Finance and 

Accounting and over 16years as Head of Finance in Atul Ltd.

 Mr Bharat M Trivedi has done B. Tech (Chemical Engineering) from the Indian Institute of 

Technology (IIT), Mumbai in 1984. He has over 25 years of industrial experience in 

Technical fields like process-development, manufacturing operations, materials 

management, project execution, information technology etc.

 Mr Naresh C Singhal has done his post graduation in subjects of Economics, Statistics & 

Administration, Professional courses from IIM, Ahmedabad and Kolkatta, IIT, Kanpur 

and Administrative Staff College, Hyderabad.

"Ernst & Young has been appointed as the Internal Auditors of the company"

 On an annualized basis the company is expected to record a net profit of Rs 2.5 crore.

 However this is without taking into account the 40% expansion that will result on carrying 
out de-bottlenecking.

 Currently the company is operating at 100tpd capacity however in subsequent quarters 
one can expect more sales with improvement in capacity utilization.

 So with better efficiency and capacity utilization we may also see an improvement in 
operating margins of the company.

 Currently the market cap is 15 crore. So, on the basis of annualized forward earnings the 
company is quoting at a PE of 5.83 (without taking into account de-bottlenecking and 
margin expansion)

 As mentioned earlier, the intent is clearly there to turn around the company especially 
with the appointment of reputed Ernst & Young as the internal Auditors of the company. 
They will be basically ensuring the improvement in internal efficiency.

 And lastly the Gross block of the company is Rs 60 crore i.e. almost 4 
times the market cap of the company. The Management is looking at 
revaluing the same as per current valuations. The same can have a 
positive bearing on the balance sheet and thus the overall valuation of 
the company.

The effect of the initiatives taken by the management has already started reaping results with company posting a turnover of Rs 4.49 crore for Jun'10 and a net profit of Rs 0.6 crore (Rs 5 crore turnover for FY 10 with an operating loss of Rs 0.93 crore)

2 Phase Buying Strategies Suggested [Always buy in SIP ways]

ü  1st Phase  : Buy at the current price range Rs 21-23 [50% of investment]

ü  2nd Phase :  Add if the price fall down to Rs 17.5-19.5 [50% of investment]

>>> Expect at least 60-100% return in next 12 months time frame!!!


Monday, October 18, 2010

Sicagen India Ltd (Code 533014)

Buy Sicagen India Ltd (BSE Code: 533014) around Rs. 29 - 30. Target: 1st TGT – Rs. 32.5, 2nd TGT – Rs. 36, 3rd TGT - Rs. 40 (30% Upside) in 2 months holding period.

 

The company has performed well YOY by showing increment in its revenue, net profit and EPS by 21.6%, 216% & 145.6% respectively. This quarter results will be announced on 20th Oct'10 and it is expected that company is going to perform well in this quarter also.   

Rationale: 


Sicagen India Ltd. (533014) is a south based company. It has a strong business relationship with its principals, suppliers and customers like Tata Motors, Finolex, ACC etc. Company is confident of making higher turnover and profits in trading of building materials and commercial vehicles.

 

Sicagen's core business is trading of building materials such as steel tubes, MS/GI pipes, boiler tubes, seamless tubes, rectangular/square hollow sections, PVC pipes, electrical cables, steel fittings and cement. Sicagen is the authorized distributor for Tata Steel, Jindal Pipes, SAIL, Finolex Cables, Supreme Industries, Maharashtra Seamless and ACC Cements.

 

Sicagen is relatively a small company in terms of Market cap (Rs.117.5 Crore). Company is having an EPS of 2.3 and P/E of 12.9. Sicagen is available at 1/3rd of its Industry P/E. Company has shown a tremendous growth if we compare it with last year. Company is highly undervalued as far as book    value (92.3) and P/E (12.9) is concerned. After looking all these factors we can say that it is a fundamentally strong company and can fetch decent returns in short and medium term holding.

 

Technical Analysis:

 

· Short term moving average (20-EMA) is currently providing an immediate support to the counter near Rs.25 levels.

· Next level of support could be expected near the Medium term moving average (50-EMA), currently trading at Rs. 23 mark, which could be utilized to add positions.

· The start of a bullish buying momentum could be witnessed in the scrip, in case the "Slow Stochastic momentum indicator (%D & %K) penetrate the oversold (20) mark which looks eminent on the charts".

· The bounce back of the MACD indicator from the neutral levels would also encourage investors to "Accumulate at dips" for a trending movement.

· The Demand Index is trading in the positive direction, which indicates towards the buying interest at every lower level.

· The correction seems to be over in this counter and it may attempt for Rs. 38- 40 levels in the intermediate time frame of nearly two months.

 

As the economic situation is improving and focus is on housing and infrastructure development, it reflects the bright future for company's Building Material and Commercial Vehicle Division.

 

Note: The basis of stock selection can be technical, news events or quarterly results etc. These stocks are strictly for short term holding as advised hence one must not hold it for medium/long term. One should do his/her own research before buying. I am just suggesting it.



COAL INDIA LIMITED





Expected Listing : Above Rs. 255 

Issue Details 
    Company Incorporate : 1973 
    Reg.Office        Kolkatta 
    Industry : Coal Mining 
    Offered Shares             631 Cr. 
    Offer Size at Higher offer Price 15460 Cr. 
    Offer Price Rs. 225 –  245 
    Retailer Discount 5 % (After Dis. Issue Price-Rs.233) 
    Post Issue Equity Capital 6316 Cr. 
    Issue Open Date                  18 Oct 2010(Monday) 
    Issue Close Date                 21 Oct 2010 (Thursday) 
   Retail Quota 35 % (Rs. 4865 Cr.) 
    Face Value Rs. 10 
    Market Lot 25 Shares 
    1 Lot Value @ Cap Price Rs. 6,125 
    Maximum Application for Retailers Lot –16, Shares-400, INR98,000 
Industry Outlook: 
According to CRISIL Coal Outlook, as of the date of the report, coal meets approximately 41.0% of the world's electricity needs.

The major coal exporting countries in the world are Australia (244 million tons), Indonesia (202 million tons), Russia (100 million tons) and South Africa (67 million tons). The major coal importing countries are Japan (182 million tons), Republic of Korea (88 million tons), Taiwan (69 million tons), the United Kingdom (50 million tons) and Germany (46 million tons). (Source: CRISIL Coal Outlook). In fiscal 2010, India imported about 67.74 million tons of coal. 
 Nationalization of the Indian coal industry occurred in the early 1970s with a view to enable investment of large public fund for faster growth in coal sector. 
 Coal is the dominant source of energy and met 52.4%, primary energy requirement of India in fiscal 2009. 
 According to CRISIL Coal Outlook, demand for non-coking coal in the power sector is expected to increase at a CAGR of 11.3% between fiscal 2009 and 2014. 
 The total coal production in India during fiscal 2008, 2009 and 2010 was 457.00 million tons, 492.76 million tons and a projected 532.06 million tons, respectively, representing a growth rate of 6.1%, 
7.8% and 8.0%, during the said period.
 11th Five-Year plan projected a gap between the demand and availability of coal in fiscal 2012 to be 51.0 million tons, the revised projections according to the MTA estimate the shortfall to be 83.3 million tons, 
 In fiscal 2010, India imported about 67.74 million tons (provisional) of coal which is 11.69 % of its total coal consumption. 
Company Outlook: 
 Coal India is the largest coal producing company in the world, based on its raw coal production of 431.26 million tons in fiscal 2010. 
 Coal India is also the largest coal reserve holder in the world based on its reserve base as of April 1, 2010. Coal India had a total of 18,862.9 million tons of Total Reserves, comprising 10,595.1 million tons of Proved Reserves and 8,267.8 million tons of Probable Reserves.Coal produced by it accounted for approximately 81.9% of coal production in India in fiscal 2009. 
Coal India operated 471 mines in 21 major coalfields across eight states in India. Coal India produce non-coking coal and coking coal of various grades for diverse applications. 
 Non-coking coal represents a substantial majority of their raw coal production, and represented 93.1%, 93.4%, 91.6% and 90.5% of their total coal production in fiscal 2008, 2009 and 2010 and in the three months ended June 30, 2010, respectively. 
 As of March 31, 2010, 45 projects (comprising 22 capacity expansion projects for existing mines and 23 new mine projects) had received relevant investment approval. 
 25 projects, with an aggregate estimated capacity of 47.51 million tons per annum were at various stages of implementation and are expected to become operational by the end of fiscal 2012; and (ii) 20 longer gestation projects, with an aggregate estimated capacity of 33.27 million tons per annum, are expected to become operational during the 12th Five Year Plan period (2013-2018). 
 Coal India have also established a wholly-owned subsidiary in Mozambique, Coal India Africana Limited ("CIAL"), to pursue coal mining opportunities in Mozambique and have acquired prospecting licenses for two coal blocks in Mozambique. 
 As of June 30, 2010, Coal India had 394,041 employees, including 14,968 executives, 38,773 supervisors and 340,300 workmen.

Management Details 
Mr. Partha S. Bhattacharyya, aged 59 years 
Designation  :Chairman and Managing Director 
He holds a post graduate degree in physicsfrom Jadavpur University, Kolkata, and a diploma in finance from ICFAI University, Hyderabad. He is also a Fellow of the Institute of Cost and Works Accountants of India and the World Academy of Productivity Science. 
Strengths 
 Coal India has strong track record of financial performance and steady cash flows from its existing operations provide it with sufficient resources to fund their projects, support their working capital requirements. 
 Coal India is well positioned to capitalize on the high demand for coal in India, particularly in the thermal power, iron and steel, cement and other manufacturing and industrial sectors.
 Coal India's raw coal price increases have been lower than average inflation rates in India and are significantly less than the landed cost of imported coal in India. 
 As a result of the high demand for coal in the thermal power sector and the iron and steel industry, demand for non-coking coal in India is projected to grow at a CAGR of 11.3% from 508 million tons in fiscal 2009 to approximately 868 million tons in fiscal 2014, while the demand for coking coal is likely to increase at CAGR of 9.7% in the same period. 
Risk Factors 
 Coal India currently operate 279 loss making mines, or 59.2% of our total mines, which accounted for 13.0% of their total production. These mines have historically contributed to losses in their operating subsidiaries in the absence of scope of mechanization and adverse geo-mining conditions, together with socio-political conditions that make it difficult for us to discontinue operations at these mines. 
 To share 26% of our profits with local inhabitants 
 The quality of Indian coal is considered lower in comparison to coal from some other countries, primarily due to its higher ash content and lower GCV. Most of the coal available in India, including their reserves, is lower quality non-coking or thermal coal, used primarily in the power generation sector. 
 Coal India have in the past experienced significant delays in obtaining relevant statutory and regulatory approvals for the acquisition of land and surface rights to commence mining activities on some of their projects, including delays related to negotiation of rehabilitation packages for existing owners and displaced communities and the implementation of the rehabilitation and resettlement process. 
Valuation Note 
Coal India F.Y. 11 Mar 10 (12 M) –BV -Rs. 58.59 x  MP / BV Ratio  5 =  Rs.292.95 
Coal India F.Y. 11 Mar 10 (12 M) –EPS Rs. 18   x   P/E Ratio 15   =  Rs.270

Wednesday, October 6, 2010

A bumpier but freer road - Despite all the mess and chaos of India, the country’s business is booming. This will change the world



AN INDIAN boss gestures from the lofty window of his steel-and-glass office. Ten years ago, says Pramod Bhasin, "you couldn't even get a cup of coffee around here." Now the area bristles with office blocks. Gurgaon, near Delhi, has swiftly become a global hub for outsourcing. Its recent rural past is not forgotten, however. Villagers still herd goats along its streets; pigs snuffle in the rubbish.
Mr Bhasin, who heads a firm called Genpact, speaks of outsourcing as a dentist might of flossing. Car firms should concentrate on making better cars, he says; most other tasks should be outsourced. Personnel departments, for example, need a few people to handle employees' gripes face-to-face, but form-filling and data entry can be handled more efficiently by specialists. "I've got 10,000 people doing this," he says. "They're good at it."
Genpact began as an internal unit of General Electric before being spun out, better to serve a wider set of customers, in 2005. It helps other organisations do dull things more quickly and cheaply. For example, by analysing the way American hospitals carried out mundane tasks, such as bed-changing and deciding where to put doctors' offices, it was able to point out more efficient ways of using people and equipment. As a result, doctors perform 25% more operations each day. Demand is brisk: Mr Bhasin predicts that his sales could grow from $1.2 billion to $10 billion in the next ten years.
Such vast ambitions are no longer unusual in India. Firms now worth $5 billion expect soon to be worth $30 billion, observes Vijay Govindarajan, of the Tuck School of Business at Dartmouth College. The country is in a "global sweet spot", says Nandan Nilekani, a former software mogul who heads a government project, launched on September 29th, to give every Indian an identity number.
India's GDP is expected to grow by 8.5% this year, and could grow even faster. Chetan Ahya and Tanvee Gupta of Morgan Stanley, an investment bank, predict that India's growth will start to outpace China's within three to five years. China will rumble along at 8% rather than double digits; India will rack up successive years of 9-10%. For the next 20-25 years, India will grow faster than any other large country, they expect. Other long-range forecasters paint a similar picture.
Several factors weigh in India's favour. The first is demography. Indians are young (see chart 1). "An ageing world needs workers; a young country has workers," says Mr Nilekani. Previous Asian booms have been powered by a surge in the working-age population. Now it is India's turn. The proportion of Indians aged under 15 or over 64 has declined from 69% in 1995 to 56% this year, says the UN. India's working-age population will increase by 136m by 2020; China's will grow by a mere 23m, says Morgan Stanley (see chart 2).
To be sure, many Indians are poorly educated. There will certainly not be jobs in business-process outsourcing for all. India, unusually for Asia, has not yet made much of a fist of labour-intensive manufacturing for export. But its workforce will stay young and keep growing, and it includes millions of English-speakers.
India's second advantage is that the economic reforms of the early 1990s have unleashed an explosion of pent-up commercial energy. Tariff ramparts have been torn down (see chart 3). The "licence raj"—a system under which it seemed that a businessman could not pick his teeth without a permit—has been swept aside. Private firms have been forced to compete with the world's best. Many have discovered that they can. Exports have shot up.
Indian firms are increasingly global and sometimes world-class. Arcelor Mittal, based in Luxembourg, is the world's largest steel firm. Tata Motors, best known for making cars that cost only $2,000, also owns Jaguar and Land Rover, two luxury brands. Bharti Airtel, a mobile-phone firm with 140m subscribers in India, is rapidly expanding into Africa, too.
China's growth has been largely state-directed. India's, by contrast, is driven by 45m entrepreneurs, says Amit Mitra, the secretary-general of the Federation of Indian Chambers of Commerce and Industry, a business lobby. He gushes about the energy of India's vast informal sector, and its ability to solve problems. Mr Mitra recalls meeting the owner of an informal suit-cutting business who used, as a kind of collateral, the fact that his brother held a government job. The brother went to the same office every day. So the moneylender could always find him, and that made the suit-cutter creditworthy.
In Dharavi, a Mumbai slum with perhaps 1m inhabitants, many alleys are too narrow to turn a wheelbarrow around. Yet every other doorway seems to lead to a small business. Bhaskar Chaudhary's tiny factory works day and night turning out back pockets, which are whisked to a bigger factory, sewn onto jeans and exported to the Gulf. Business is good. Four years ago Mr Chaudhary had only one (Chinese-made) embroidering machine. Now he has three. He is still only 21 years old.
Indian firms export a lot of services, but their primary focus is on the needs of domestic consumers. Indian shoppers demand goods that are cheap, rather than fancy. Indian "frugal innovators" oblige. Tata Chemicals makes a filter that requires no power and can give a family of five safe drinking water for a month for 30 rupees ($0.65). Researchers at the Indian Institute of Technology and the Indian Institute of Science produced a prototype for a $35 laptop in July. A firm called Ayas Shilpa makes suspension bridges for a tenth of the price of conventional ones. In a country where countless villages are connected to the outside world only by perilous rope bridges across raging rivers, this is a colossal boon.
Indian firms are devising new business models as well as products. HCL Technologies, a software firm, helps clients improve their IT systems on the understanding that if they reap no benefits, they pay nothing. If they do gain, HCL takes a share. "It puts our skin in the game," says Vineet Nayar, the firm's chief executive.
India is the last frontier, says Moon B. Shin, the Korean boss of LG Electronics' Indian subsidiary. By which he means: India has the largest number of people who have not yet bought many electronic goods. LG's annual sales in India are about $3 billion. But what really excites Mr Shin is that they rose by 30% just in the first seven months of this year.
LG started manufacturing in India in the late 1990s. It is now the country's most popular maker of all manner of gizmos. To succeed, it has kept its prices ultra-low and adapted its products to Indian tastes. Since many Indians are vegetarian, it offers a fridge with less freezer space and more drawers for vegetables. Since Indians like their televisions loud, LG affixes powerful speakers. The firm also sells voice-activated washing machines for middle-class families with illiterate maids. Its products are designed to cope with fluctuating power, and its packaging is extra-tough to cope with India's terrible roads.

An elephant can stumble
If India keeps growing as fast as it is now, it will change the world. Optimists predict that it will be the next China, only friendlier and more democratic. Pessimists retort that such forecasts are over-spiced. They point out that India has a lot of catching up to do. China's economy is four times bigger, so that even if India starts to grow faster, it will not overtake China for a long, long time. And they add that Indian businesses face several bottlenecks on the uneven road to growth.
The most obvious of these bottlenecks is lousy infrastructure. Indian roads are awful. Potholes gape; traffic lights don't work. Rural roads are largely unpaved; in cities traffic often snarls to a halt. Cyrus Guzder, who runs a distribution business, complains that long-distance trucks average only about 20kph (12mph). Crossing the border between two Indian states can be more troublesome than crossing an international boundary. Between Kolkata and Mumbai (a distance of 2,000km), a truck must negotiate a couple of dozen checkpoints. Delays and shakedowns by grasping officials add 30% to the cost of road freight, estimates Mr Guzder.
"We have to have our own power backup, water-treatment plants and transport for employees," grumbles Mr Nayar of HCL. As if on cue, the power goes off in his office. Big companies lay on fleets of cars and buses to ferry staff to work. Computer servers need costly extra layers of backup.
India's economy will grow fivefold in the next 20 years, predicts McKinsey, a consultancy. The urban population will double from the 2001 census figure of 290m to perhaps 590m by 2030. McKinsey reckons that merely to keep pace, the country must spend $1.2 trillion on urban infrastructure, or at eight times today's rate. Per person, China's capital spending on cities is roughly seven times greater than India's.
The other worrying bottleneck is a shortage of skills. The workforce may be young and growing, but 40% are illiterate and another 40% failed to complete school. The Boston Consulting Group sees a shortfall of 200,000 engineers, 400,000 other graduates and 150,000 vocationally trained workers in the coming years. Meanwhile, there are 62m surplus workers in agriculture, most of them barely skilled.
India's best universities—the Indian Institutes of Technology—are world class, but there are only 16 of them. Many universities turn out graduates who are good at exams but unaccustomed to thinking about real-world problems. Employers train them for months, at great expense. Then they are ruthlessly poached by rivals.
Public schools are a mess. Supplies disappear. Teachers do not turn up, and even the worst are unsackable: as civil servants, their jobs are constitutionally protected. India's adult literacy rate is only 66%; China's is 93%. Nearly half of children under five are malnourished, which makes it hard for their brains to develop properly. A government scheme to deliver cheap grain to the poor is a national disgrace: two-thirds of the grain is stolen or adulterated.
The shortage of skills is wonderful for those who have them. Their wages are surging. The technologically minded young are getting cocky, their elders grumble. They expect stimulation as well as pay. "They are willing to walk away from a bad or boring job," marvels Chaitanya Kalbag of Business Today, a magazine that recently published a cover story on "Brats at Work".
The lack of skilled workers makes it harder to bring infrastructure up to the mark. Builders, electricians and plumbers are scarce. Cock-ups on building sites, such as lifts being installed upside down, are plentiful. The run-up to the Commonwealth games in Delhi, which began on October 3rd, has been a reminder that India does some things very badly.
Instability is another huge worry. About 200 of India's 588 districts are affected by a Maoist insurgency called the Naxalite movement. The rebels hide in India's great forests, which are also where much of the country's mineral wealth is buried. So mining and logging firms are seriously affected. Some of these also provoke violence, by evicting the poor to make way for their operations.
The home minister tried to assure investors in September that the insurgency would be quelled and that India was a safe place to park their money. He may be right about the second point: most businesses can avoid Naxalite-held areas. The biggest risk for banks in Mumbai and software firms in Bangalore is not that rebels will burst through their front doors but that a government sensitive to the anger of the poor will take populist steps to assuage it.
Populism is already a big problem. Some politicians woo voters by demonising business. Tata Motors dropped a plan for a factory in West Bengal after Mamata Banerjee, an opposition MP who is now the national railways minister, whipped up a campaign against the compulsory acquisition of land. The government often handles such transactions badly, so locals' fears were not absurd. But the area missed out on much-needed jobs. Ms Banerjee is expected to lead her party to victory in the next state elections.
Rahul Gandhi, a possible future prime minister, plays populist chords when it suits him. Construction of a new road between Delhi and the Taj Mahal has been delayed because some of the farmers whose land is to be paved over demanded as much compensation per square metre as landowners in the pricey Delhi suburbs. After a mob of farmers killed and gouged out the eyes of a policeman, Mr Gandhi rushed to the area and expressed sympathy—for the farmers.
Corruption is another concern. India's technocratic prime minister, Manmohan Singh, is widely admired, but some of his colleagues are crooks, thugs, rabble-rousers or all three. Corruption is debilitating. Many businesspeople think it is getting worse. In the old days ministers asked for bribes. Now they demand shares in firms to which they are about to award contracts, Indian bosses complain. Pratyush Sinha, who retired as head of India's anti-corruption watchdog in September, reckons 30% of his compatriots are "utterly corrupt".
That is uncharitable. Firms in sectors that do not depend on the government—software, cars, soap powder and so on—are mostly clean and professional, insists another senior official. The "messy stuff" mainly occurs in transactions that involve land, public contracts or natural resources. Yet the rot in these areas is so bad that it threatens to undermine the moral legitimacy of capitalism itself, frets this official.
India also faces challenges from abroad. Its success has inspired both a backlash and copycats. The governor of Ohio recently made headlines in India by banning state agencies from offshoring any of their work. Some American firms are shifting their call centres to the Philippines, where workers are as cheap as Indians but culturally closer to America.
The potholed road to prosperity
The Indian government will tackle the country's infrastructure problems more slowly and ineptly than it should. But it will tackle them. It planned to spend $500 billion between 2007 and 2012. That pace will accelerate, not least because the state is getting better at inducing private investors to stump up some of the capital.
The skills shortage, too, is being addressed. Even illiterate parents now see the value of education. Rather than pulling their children out of school to work in the fields, they are increasingly urging them to study, in the hope of landing a job in a call centre. Where public schools are no good, cheap private ones have sprung up. Remarkably, in rural areas more than 20% of Indian students, most of them poor, attend private schools. The literacy rate is rising fast. Among 15-24-year-olds, it is over 80%, though girls do worse than boys.
Busy present, exciting future
Several reforms that will benefit business are inching towards enactment. A proposed national sales tax would replace the confusing patchwork of state and local levies. A proposed land law would simplify and speed up sales of land for infrastructure, factories and so forth. And maybe one day Wal-Mart will be allowed to open retail stores in India.
Some investors complain that India's sprawling democracy is unpredictable. Understanding the relationship between the central government and the states is hard enough. Working out what fractious parties, pressure groups and powerbrokers are up to is virtually impossible.
Even when the government has made a decision, it is subject to challenge in court or by public opinion. Sometimes it is hard to tell who is in charge. "Don't tell the Indians I said this, but I'm more comfortable in China than India," says a prominent Western banker. "It's much easier to deal with the well-understood 'org chart' of China Inc than the freewheeling chaos of India."
Both China and India have taken off since their governments allowed people and companies more economic freedom. China went first, so it has a big head start. But as Morgan Stanley's economists point out, India's growth since the reforms of the early 1990s bears a striking resemblance to China's since its grand opening in the late 1970s (see chart 4).
And India's democracy may confer long-term benefits. It is not just that Indians can say what they please without having tanks rolled over them. It is also that India can change governments without a revolution. In the long run, that may offer a better guarantee of the stability that businesses crave.