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Broad-based planning supportive of India’s economic ambition

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It may be a New Year, but in many countries, old worries remain. Take the UK, for example. Brexit is as uncertain as ever and that’s unlikely to change any time soon. Not only have forecasts for economic growth in the country been tempered by the lack of a clear path for Brexit, the latest survey data from IHS Markit have served to underscore the worry felt by consumers and businesses, with the country’s dominant services sector close to stagnation during December.

However, the UK isn’t the only country experiencing uncertainty as to how 2019 will unfold.

India has an interesting 12 months ahead as incumbent Prime Minister Narendra Modi must work hard to maintain his position, after recent state election results make the likelihood of a new leader a real possibility. However, Modi has begun 2019 with ideas and a plan to show his support of the large farming industry, which is unhappy with the lack of fiscal support from the Government.

Speaking at the India Science Congress this week, the India PM urged scientists to find low-cost solutions for ‘social good’, including the creation of more affordable and balanced agriculture industry and using big data analytics to improve crop yields for farmers with smaller holdings. Introducing this element to the PM’s broader outlook for India’s economic development may always have been the plan.

Although, there will likely be many who will say its merely a move to encourage more votes in an election year. Regardless of the truth, this latest step is a further sign that Modi’s economic ambitions for the country remain front-and-centre.

Economic outlook

Even before this latest speech, the outlook for growth in the country was upbeat, particularly when compared with global competitors. Despite some GDP forecast downgrades from the likes of Fitch Ratings and the OECD – to a still healthy 7.2% and 7.3% respectively – India is assessed to have outpaced China during 2018 and to do so again in 2019. India’s finance ministry, meanwhile, forecasts economic expansion of 7.8% during 2019, which would likely be similar to the average pace of growth across 2018, despite the slowdown to 7.1% in the third quarter.

Indeed, it appears that the third quarter GDP number is partly behind most of the forecast reductions, although other details also weigh.

They include:

  • Generally weaker global GDP outlook.
  • Global trade worries.
  • Liquidity squeeze.

Modi and his Government, however, are upbeat and standing firm on their positive outlook. Many would say, with good reason.

Despite the difficult global scenario, some developments have been in India’s favour. The high price of crude oil has receded, despite the sanctions against Iran. Meanwhile, the country has moved up the World Bank’s ‘ease of doing business’ rankings. And while there has been some disagreement over the Government’s demands for the Reserve Bank of India to relax some restrictions on weaker banks, inflation has remained under control.

The decision to remain firm on many fiscal elements of governance while creating a more supportive backdrop for businesses and consumers, has been a core driver of the strong level of economic expansion across India. It appears that focus on moving forward with policies designed to encourage start-ups and innovation is very much still in place.

Modi told delegates at the Science Congress that following on from its success of improving its ‘ease of doing business’ score, it must now work to improve the ‘ease of living’ in India. That requires a broad-based plan; working to support businesses across every industry, supporting innovation and new ideas, job creation across every industry and providing a stronger and more reliable infrastructure for consumers.

At Red Ribbon we understand the importance of introducing innovative developments into an existing industry, which is why we believe the Eco Hotel industry is one that can help ensure India’s economic growth ambitions will succeed and even exceed expectations.

Red Ribbon CEO, Suchit Punnose said:

An economy the size of India’s will only flourish if a broad-based outlook is in place that also supports innovation and allows every industry to move in an agile fashion, particularly when it becomes clear that a new approach is required. India’s leisure and tourism industry is a case in point. It draws tourists from within and without the country to its variety of regions and attractions. Introducing a new type of accommodation, such as Eco Hotels, will work to add yet another string to India’s bow as the destination of choice for an even broader range of holiday-makers and business travellers, while supporting jobs growth and industry innovation at the same time. As long as business start-ups and industry innovations are supported and encouraged, they will only have a positive impact on India’s economy, the standard of living and the global environment.

India Cryptocurrency - Red Ribbon Asset Management Plc

India retains cautious Cryptocurrency stance

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India retains cautious cryptocurrency stance

A raft of recent news reports and blogs posts, suggest that those involved in the cryptocurrency markets are becoming a little impatient with the Indian Government and the Reserve Bank of India’s (RBI) caution relating to that specific financial sub-sector. The reports contain some conflicting views from different members of the two panels that are working to research cryptocurrencies and put a regulatory framework in place. However, despite a lack of real progress it appears the overall, official tone towards the crypto market is less negative than it previously was.

One of the Indian government’s panels currently researching the cryptocurrency markets is set to submit a report on its findings. That keenly awaited report has been delayed from July 2018 and right now, no time line is in place for it to be finalised and published. This detail is the cause of some of that unrest.

With that report being delayed, it’s no surprise that any details on possible virtual currency regulation in India is also taking time to be finalised. Without the approved findings of the official report, it simply doesn’t make any sense for a regulatory framework to be put in place.

Among the most likely reasons behind the slow progress of any official view and policy on cryptocurrencies across India, is the lack of a global steer. Also, and perhaps more importantly, is a lack of detailed knowledge and information on exactly what impact cryptocurrencies can have on the economy, particularly over the medium-to-long-term.

Some support for virtual currencies

While uncertainty over exactly how India will regulate and permit cryptocurrencies to be traded and taxed remains, it does appear that the Indian government is more positive on them becoming a permanent part of its financial landscape, than it was.

The Financial Stability Board (FSB), which India is a part of, has said that virtual currencies are not a threat.

“The FSB has undertaken a review of the financial stability risks posed by the rapid growth of crypto-assets. Its initial assessment is that crypto-assets do not pose risks to global financial stability currently,” the RBI report quoted the FSB as stating.

That’s a positive note and relevant to the discussions and research that are ongoing.

Getting it right

Despite that glimmer of support for crypto-currencies, global governments, central banks and other relevant bodies continue to move slowly with regards to implementing official regulation and plans to regulate Bitcoin, et al. But really, is it any wonder?

After surging in value during 2017, many virtual currencies then lost much of those gains during 2018. And now…? Well, the future for those currencies is very much unknown, particularly coming against a backdrop of so much broad-based uncertainty elsewhere.

Of course, the blockchain system that underpins cryptocurrencies is something that the Indian government and RBI are interested in, as are other countries and industries. But, having regulation and utilising one, is likely impossible without also having the other.

This is without doubt, another major reason why the panels formed to investigate cryptocurrencies are taking their time to collate all the details and submit a detailed and useful report. If blockchain is to become a part of India’s government, business industries and the economy, then it’s essential that any risks relating to supporting a regulated cryptocurrency network is clear, robust and performs the task it was created for.

India as a nation is one that welcomes change and new ways of doing things – provided it’s beneficial for the economy and its population. Even though it’s likely that virtual currencies and blockchain fall under that category, both the government and the RBI are right to be cautious over any policy and regulation that’s created, so they can be certain it’s right for India’s economy and its huge population, with its growing appetite for all things digital.

Nobody understands this market potential quite like Red Ribbon, which has placed India at the heart of its investment strategies since the company was founded more than a decade ago. Drawing on a pool of established expertise on Indian market conditions, Red Ribbon Asset Management offers a unique opportunity to share in that potential.

Red Ribbon CEO, Suchit Punnose said:

India’s appetite to be at the forefront of new technology is continuing to develop. However, even though some countries have begun a light touch regulatory oversight on cryptocurrencies, that doesn’t mean the government or RBI will rush into something that has the potential to impact India’s economy and financial landscape over the longer-term.

Indeed, a cautious outlook doesn’t mean digital currencies have no place, or an insignificant one for India’s economy. In fact, it’s more likely to suggest the opposite and that as a country, the government and central bank want to be sure they get their policy implementation on it, just right.

At Red Ribbon, we have the same attitude to new and developing opportunities. We’re willing to take some risk on new industries and investment opportunities, but only when we know exactly what those new industries have done and have the potential to achieve. With Eco Hotels and Modulex, we’ve worked hard to ensure we understand everything those businesses stand for and what they’re capable of, not only from an investment perspective, but on a global sustainability aspect, too.

Eco Hospitality benefits India economy - Red Ribbon Asset Management Plc

How Eco Hospitality provides a double benefit for India’s economy

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How Eco Hospitality provides a double benefit for India’s economy

The World Bank’s January 2019 Global Prospects Report shows that the United Nations institution continues to expect economic growth across India to expand in 2019 and beyond. The group’s estimate for full-year GDP growth in 2018 is for 7.3%. Meanwhile, the World Bank is also anticipating that level to rise to full-year GDP growth of 7.5% in 2019, 2020 and 2021.

There are many details that go into a forecast like this, which means it is an absolutely achievable and likely outcome. However, if some of the assumptions made in those forecasts don’t proceed as expected. Or, something completely unexpected occurs, then India’s economy could either exceed or fail to achieve that forecast rate of growth.

Another interesting figure that has recently been published about India’s economy, comes from the Indian Government’s Ministry of Statistics. According to its 2018 Environmental statistics, the natural capital in 11 of India’s states has declined. Natural Capital “refers to all types of environmental assets existing in the environment” according to the report.

Once again, a lot of work and details go into creating these data and stats to produce reliable and correct information.
The figures in that painstakingly generated report suggest that, at least in some parts of India, pure economic growth is being achieved at the expense of the country’s natural capital, or native environment. And that’s not something that can be allowed to continue unchecked. At least not if the economy is to remain on a long-term and sustainable, positive economic growth path.

 

Sustainable, eco-industry

With that in mind, we now turn to a specific part of India’s growing economy, the Eco, or green sector. While much thought is being put into how to ensure residential building and consumer habits are increasingly sustainable and Eco-friendly, another key area in which India is already developing an Eco-footprint in, is hospitality.

For a country that welcomed over 10 million overseas tourists during 2017 – an increase of 14% in number and 15.4% in income generation – it’s a sizable industry. In GDP terms, the total contribution from travel and tourism across India made up 9.4% of India’s GDP in 2017, likely rising to around 17% in 2018, according to the World Travel and Tourism Council.

If, however, efforts into supporting and growing the eco-hospitality sector of the travel and tourism industry continue, or even gain pace, not only will green hotels, eco holiday destinations and sustainable tourist hot spots generate welcome income for the economy, it will also help improve and even expand the country’s natural capital. That’s something that’s a double boon for the sub-continent that consistently strives to develop, advance and improve.

Eco Hotels is among the green businesses that are investing in India’s economy, in a sustainable way. The world’s first carbon neutral, mid-market hotel brand has been operating since 2012 and is a popular option, for businesses, investors and also among those travellers who include Eco credentials in their search for holiday accommodation.

Growing India’s eco-hospitality sector is something that is will undoubtedly help ensure the country’s travel and tourism industry will contribute to both the financial GDP figures and its nature capital. But, even better, positive eco changes in one country actually contribute to green credentials and work towards stopping climate change on a global basis too.

With so many benefits to be gained from Eco hospitality, there’s little doubt as to just how valuable it is to India’s economic, business and green ambitions.

Red Ribbon is the founder of Eco Hotels, the world’s first carbon neutral hotel brand which offers “green hospitality” as part of a progressive roll out across India designed to take advantage of current market opportunities on the subcontinent. The brand meets all key sustainability criteria without compromising on either quality or standards of hospitality and is designed to cater for commercial and recreational travellers alike.

Red Ribbon CEO, Suchit Punnose said:

Understanding the full implications of the way in which a country achieves economic expansion is an essential part of working towards maximising that country’s growth potential, while also making sure all the ingredients required to continue growing and innovating remain available. While the 11 states experiencing a decline in their nature capital account for fewer than half of India’s regions, its not something that should be ignored.

With Eco Hotels, Red Ribbon is putting both India’s economy and nature capital at the heart of its investment strategy. Combatting climate change, promoting sustainable industry and creating profitable carbon neutral businesses, is the right way to create an investment that will remain popular and relevant for years to come.

India Economic Evolution - Republic Day - Red Ribbon Asset Management Plc

India’s economic fortunes in the 70 years since gaining independence

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India’s economic fortunes in the 70 years since gaining independence

This year’s Republic Day in India marks the 70th anniversary since it truly became an independent country, with its first elected President after the withdrawal of British rule in 1947. Since then, every year on January 26th, the nation celebrates its hard-won achievement.

India’s first elected President was Dr. Rajendra Prasad, who took his oath at the Durbar Hall in Government House. Since that time, India has proudly voted for its own President during elections and celebrates that independence with joy and jubilation.

Of course, the year is now 2019 and many things have changed since 1950. Ram Nath Kovind is the country’s 14th President, with Narendra Modi serving as Prime Minister. The economic landscape is very different from 70 years ago and it continues to transform further as a combination of financial, digital and ecological developments demand.

Economic output

It’s never easy to gain a true comparison of economic performance between years gone by and any given year in today’s era. However, the available data does give an idea of the make up of economic growth and also the rate at which a country expands – or contracts.

Given India’s size, population, agricultural performance and the more recent growth of eCommerce and finance, you likely won’t be surprised to find that the current pace of GDP growth is superior compared to the rates of growth achieved in 1950.

Data from India’s Central Statistics Office shows that GDP growth in the 1951-52 financial year was 2.3%, with the main contributor to that growth, being the agricultural sector.

Until recently, academics have placed India’s average rate of GDP growth at somewhere between the 3.5% to 4.5% level. But that average is well below the 7.5% rate of GDP growth anticipated for 2018 and also that masks many peaks and changes in the country’s fortunes and chosen paths.

The official data show that after some notable peaks and troughs, GDP has been broadly positive and even prosperous since the 1980s. India’s economic landscape, however, has shown a consistent picture of agriculture losing its place as the major part of the economy, being replaced by the services sector.

Where agriculture made up over half of activity and profits in the 1950s, it now accounts for around 18% of GDP growth, despite employing close to 50% of its population. The services sector, meanwhile, has doubled from a proportion of around 30% of GDP in the 1950’s to the 60% mark, today.

This switch between the dominance of two key industries across India highlights the way technology and digitisation have evolved and been embraced across the country and indeed, the world. While some pain has been felt along the way during that transformation, it also shows that even though it is a huge country with an impressive population, it is able to recognise when change is required and crucially, to implement that change.

Modern economic drivers

Republic Day is a wonderful to day to remember that after 20 years of struggling to gain independence, it was finally achieved. It is also a day to reflect on how, as an independent country, India has chosen to adapt to and even welcome wide-reaching changes, today.

Technology and digitization is something that has affected every industry and by embracing that, the future for India’s economy has become brighter.

Manufacturing has changed thanks to the way technology has enhanced its capabilities and made it a safer environment for its workers. Meanwhile, tourism and eco-hospitality are also examples of where the abilities of technology, combined with the wants of a modern society, can be incorporated to produce something that not only services the needs of consumers, but also the needs of the environment in the name of sustainability.

Red Ribbon CEO, Suchit Punnose said:

Republic Day is a special day, not only because of the celebrations that mark its passing, but also because it underscores that as a country, India is always moving forward, developing and achieving thanks to its own population and ability to embrace change.

Red Ribbon embodies that sentiment and our investment in industries such as modular construction, through Modulex and the eco-hospitality sector, with Eco-Hotels, show that we’re always looking towards supporting a prosperous future for India’s economy and vast population.

We look forward to continuing to play our part in India’s future, participating to the utmost in the opportunities the subcontinent’s explosive growth has to offer and at the same time providing above market rate returns from our investors in what I am convinced will continue to be one of the world’s most exciting markets for many years to come.

Eco Tourism Odisha - Red Ribbon Asset Management Plc

How Eco-Tourism is generating economic boost for India

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How Eco-Tourism is generating economic boost for India’s Odisha state

Eco-tourism is becoming an increasingly important part of India’s economic growth. Just take a look at the state of Odisha. Located on the on the Eastern coast of India, on the Bay of Bengal, Odisha’s investment into eco-tourism is beginning to pay off, as it’s expected to generate some Rs6 Crore (£ 700,000) in revenue by the end of the 2018-19 financial year and providing a boost to local Government coffers.

As the popularity of the sector continues to grow, so too will the India Government’s return on its investment.

Of course, this economic benefit hasn’t happened overnight. However, nor has it taken as long as one might anticipate. The Odisha State Government has invested some Rs34 crore (£ 4 million) during the 2016-17 to 2018-19 financial years, into 37 separate eco-tourism locations across the state.

The eco-tourism offerings, created and managed by Odisha’s Forest and Environment Department are expected to reach Rs 10 crore (£ 1 Million) in the 2019-20 financial year, according to the department’s chief conservator of Forests and wildlife.

As you can see, even though the end of the current fiscal period has not yet arrived, the region is already seeing notable revenue generation form its investments, with further growth anticipated. That highlights the popularity of eco-tourism and hospitality as a something that’s more than a passing trend.

For the Indian sub-continent, which is awash with natural beauty and a growing desire to enhance that, with green, eco-friendly and carbon neutral hotels and other hospitality sector developments, now is the perfect time to support that ambition. Not only does it give tourists – from both India and the rest of the world – the opportunity to retain their eco-consciousness even when they travel far afield. But it also provides an option for investors to make socially responsible and sustainable financial decisions, too.

That’s essentially why opting for sustainable and eco-friendly investments is a good decision right now; they provide an option for travellers, countries and investors, who hold to environmental ideals that are now possible.

But Odisha isn’t the only region in India to pursue eco-friendly tourism. There are a growing number of mid-market eco-hotels that are continuing to expand across India. We’ve previously highlighted how Lemon Tree hotels is already proving a success in terms of cost controls and room occupancy rates.

Our own carbon neutral hotel group Eco Hotels, meanwhile, builds on everything we’ve mentioned here – and more. Demand for hotels across India is strong and rising, boosted in part, by the increasing middle-classes of the region.

Creating an eco-friendly hotel chain fulfills all the needs that we have identified:

  • The growing number of hotels across the subcontinent.
  • Creating sustainable, carbon neutral tourism options.
  • Giving investors peace of mind that their decision to support Eco Hotels, is a socially and environmentally responsible one, as well as a sound financial one.

Red Ribbon is the founder of Eco Hotels, the world’s first carbon neutral hotel brand which offers “green hospitality” as part of a progressive roll out across India designed to take advantage of current market opportunities on the subcontinent. The brand meets all key sustainability criteria without compromising on either quality or standards of hospitality and is designed to cater for commercial and recreational travellers alike.

Red Ribbon CEO, Suchit Punnose said:

The quick and impressive revenue generation from the commitment of an entire Indian state to eco-friendly tourism, only works to highlight our belief that socially and environmentally responsible developments and investment decisions, are the right path for, not only Red Ribbon, but the broader investment community.

Eco hotels, that are created to provide business and leisure travellers with the accommodation they desire, in the location of their choice, is just one way we are supporting this view. With demand for such options growing both domestically and internationally, the Eco Hotels brand is proud to be built with carbon neutrality and green credentials as part of its fundamental core.

I’m proud that Eco Hotels have done just that from the very beginning of the project, and proud too of the part Red Ribbon has played in developing the brand and its ambitions in the succeeding years, spearheading an environmentally friendly response to India’ resurgent tourism demands.

Key Benefits Modular Construction - Red Ribbon Asset Management Plc

Key Benefits of Modular Construction

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Right now, the demand and requirement for residential and commercial property across India remains elevated. And, true to form, the relevant industries are supporting that need in the best way they can – constructing buildings. However, having relied upon mainly traditional methods for so long, that’s the go to option in many cases.

Enter modern, modular construction.

Modular construction techniques have come a long way since the first attempts in the 1800s. Indeed, they’ve even evolved and improved vastly in the past 10 years. That’s part of what makes it a big part of the answer to India’s requirement for homes and business premises. Add to that the easier property construction regulation under forward thinking Prime Minister Modi’s RERA act and modular construction is most definitely an option drawing increased interest. Not only across India, but globally, too.

There are many reasons why that should be the case and is now becoming so.

Why modular construction is an essential part of the solution to India’s housing needs

Because modular construction is an excellent way to create housing and commercial properties of all shapes and sizes, quickly and relatively affordably. This has helped encourage thought and investment into the industry, with extremely positive results.

That’s not to say it should completely take over traditional property construction methods. There’s absolutely room for all kinds of skills and ways of building. However, modular construction is no longer a final thought or last option. It’s right up front with all the other property construction methods, which is exactly where it should be.

Its cost-effective

When it comes to building property, its not something that could ever realistically be described as ‘cheap’. One thing that makes modular construction a more cost-effective building option is the use of set, factory-based methods.

This is particularly relevant for apartment blocks, or developments where properties will feature the same internal layout. Having a set pattern for the off-site, factory construction, means fewer plans, designs and templates are required. This also helps support a more efficient work-rate. In addition, among the various ‘major costs’ of on-site construction, is the wages of builders, supervisors and other professionals, who need to be there. With modular construction, many of the builders only need to be on the actual building site for between a quarter and half of the time they would on traditional build.

Eco-credentials

Building property will always have pros and cons. Among the cons is the amount of waste and also the often-difficult task of ensuring all required energy efficiencies are made-to-measure and in place from the beginning. Utilising a purpose-built modular factory dramatically improves waste control. That’s borne of working to specific measurements in an environment that makes it easy to order only exactly what you need.

That’s not to say that traditional building methods aren’t precise and materials ordered accordingly. But, without such controlled conditions, over-ordering and materials waste is notably higher. But that’s not the only green credential modular construction techniques lay claim to.

By constructing all the internal wall panels and other elements of a modular building in a factory, it’s much simpler to ensure all the required energy efficiencies are fully installed, at source in the right way. This makes any eco-friendly options easier to safely install in the factory. Solar panels, water saving features and suitable heat conservation, or air circulation requirements can be handled in a controlled, measurable way, using the right materials and methods.

Modulex Construction is the World’s largest and India’s first Steel Modular Building Company, setting out to meet the challenges posed by India’s urban housing shortages in a practical and dynamic manner. The company is at the heart of a project established by Red Ribbon to harness the potential of India’s markets and delivering opportunities for investors. Because, when it comes to investing on the subcontinent, nobody knows India and its markets better than Red Ribbon.

Red Ribbon CEO, Suchit Punnose said:

India’s housing needs are no secret. But nor are the advances in techniques to help support faster and more cost-effective construction options. Add to that a supportive Government regulatory environment it begins to make sense that all types of reliable and suitable methods are put to good use. We, along with an increasing number of professionals, investors and industry specialists, know that modular construction is a major part of the answer to India’s housing needs.

Modular construction is already part of India – and the world’s – property development needs. And that’s something that is only going to increase as it becomes a major element of the construction landscape. Not only due to its speed of delivering the finished, habitable product, but also its cost-effectiveness, green credentials and sustainable factors it brings.  That’s why Red Ribbon was committed to Modulex Construction from the very beginning of the project and we remain committed to it today. I’m convinced it is not only a vital element in meeting market challenges but will also deliver on the unprecedented opportunities currently presented by the subcontinent’s burgeoning economy.

10 Reasons to Invest in India by Red Ribbon Asset Management Plc

The place to be: 10 reasons to invest in India

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India’s economy and business landscape are changing, ushering in a period of growth, prosperity and investment opportunities. All the ingredients are in place for India to become a world leader investment destination.

Let’s look a little more closely at just a few of the more compelling reasons why investing in India is an opportunity you can’t afford to miss:

1. The Perfect Demographic For Growth: India is the fastest growing large economy on the planet. Its rapidly increasing population is predicted to overtake China by 2022, and become the largest in the world.

2. Exceptional Consumer Led Demand: A large part of the 1.34 billion people are increasingly sophisticated, technologically literate and wealthy.

3. Supportive Fiscal Regime: The government has been making radical changes to create a more business friendly environment. There is now a uniform tax regime (GST) across all 29 states of India, and introducing an affordable housing programme with additional tax breaks.

4. Dynamic Real Estate Market: India is experiencing an unprecedented demand for both domestic housing and commercial property. Real Estate investment in India’s six major cities doubled in the first half of 2017.

5. Vibrant Private Equity Sector: 2017 was the busiest year for more than a decade for private equity deals in India, with total investments of £16.84 billion.

6. Unprecedented Infrastructure Spending: There is a public infrastructure programme of moving scale. This includes 83,677 km of new road being built over the next 5 years (The UK’s motorway network is a little over 3,000 km).

7. Regulatory Certainty: The government has been decisive. Demonetisation has removed much of the ‘black economy’ and over 6,000 companies suspected of improper activities have been closed. Arbitration and court procedures have been overhauled and sped up.

8. Global Trading Hub: Major international companies, such as Virgin and Amazon are now moving to India to invest in and participate in the expansion.

9. World Leading Computer Technology: India is now recognised globally as a technology powerhouse, with an increasingly IT literate population.

10. Stable Federal Structure: India’s federal structure offers highly effective risk management, that helps protect the economy from any unpredictable events. Which means that investors are more than ever protected against localised market risk.

For these reasons and more, India is now one of the most exciting places to invest. At Red Ribbon, we use our expertise and resources to identify the investment opportunities that have the potential of delivering superior returns to our investors.

Nobody understands that potential for growth better than Red Ribbon Asset Management, which has placed India at the very heart of its investment strategies since the company was founded more than a decade ago. With an unrivalled knowledge of market conditions on the subcontinent, Red Ribbon offers a unique opportunity to share in that vast potential. India is more than just an exciting investment opportunity, it’s also a driver to global economic growth and that’s why Red Ribbon has long held the view that no investment portfolio can be considered properly balanced unless at least 10% of its holdings are deployed in Growth Markets and, of course, for us that has always meant India in particular.

 

At Red Ribbon we are very proud to have been playing our own part in India’s economic resurgence over the last decade, investing in just the kind of projects that are at the heart of the interlocking triangle of growth mentioned in the article: everything from the modular construction technologies now being developed by Modulex so as to deliver affordable housing at the pace demanded by the subcontinent’s urban expansion, through to innovative sustainable energy infrastructure investment. And to see India now firmly established at its place on the economic top table, uniquely well placed to move further forward still is, of course, a particular source of pride for us.

 

 

 

 

 

We look forward to continuing to play our part in India’s future, participating to the utmost in the opportunities the subcontinent’s explosive growth has to offer and at the same time providing above market rate returns from our investors in what I am convinced will continue to be one of the world’s most exciting markets for many years to come.

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The Eco Hotel Phenomenon and Donald Trump’s observations- Red Ribbon Asset Management Plc

The Eco Hotel Phenomenon and Donald Trump’s observations

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What turns a run of the mill, resource hungry hotel into an Eco Hotel and why does it matter? Well, the clue lies partly in the question: an Eco Hotel isn’t resource hungry at all. Instead of gobbling away at all before it, an Eco Hotel sips and nibbles at its key resources: energy, water and raw materials. Eco Hotels are hard wired to save water and minimise on energy and waste material usage. But what about the second part of the question: why does any of this matter? Look no further than last week’s US National Climate Change Assessment, the work of 300 scientists and 13 Federal Agencies which concluded that “ Earth’s climate is now changing faster than at any point in the history of modern civilisation, primarily as a result of human activities…” Donald Trump may have dismissed the three-inch thick report out of hand as “largely based on the most extreme scenario”, but virtually nobody else is.

And for a President so intent on wrapping himself in a mantle of economic competence (and hotel owner to boot), the supreme irony is that key policies at the heart of a concerted response to adverse climate change are now proving to be drivers of commercial growth too. Eco Hotels are a case in point.

By definition, a non resource hungry hotel will also have reduced operating costs: it’s also likely to have reduced liabilities, will generally produce a higher return on relatively low risk investments and also deliver greater profitability across the board than its more resource hungry counterparts. Those are the hard conclusions arrived at in the seminal sector report for the subcontinent “Green Hotels and Sustainable Hotel Operations in India” and, perhaps inevitably, the markets haven’t been slow to see their potential either. Green hotels are more popular than ever on the subcontinent and if you need solid evidence of that, look no further than the explosive growth of Lemon Tree Hotels after the company’s successful IPO earlier this year.

Donald Trump could usefully brush up on his bedtime reading before leaving the West Wing to resume control of his own hotel chain …

The travelling public (business and leisure) is now increasingly aware of the importance of environmental compliance when it comes to choosing a hotel room, and the current surge in demand on the subcontinent is running well ahead of supply: not least because India’s tourist numbers have reached unprecedented levels in absolute terms as well.

But when it comes to meeting this burgeoning demand in practice, something much more is required than simply re-branding an existing hotel with “green credentials”. Key consumption variables have to be built in from the very beginning of the construction phase: making water saving devices and waste reduction part of the DNA of the hotel from the outset of the project. That’s why Eco Hotels are being built with solar tubing that reflects light across the hotel day and night, resulting in electricity bills that are roughly half those of a conventional hotel and its properties also has a single kitchen which dramatically reduces the carbon footprint. All those savings go straight to the bottom line.

Red Ribbon is the founder of Eco Hotels, the world’s first carbon neutral hotel brand which offers “green hospitality” as part of a progressive roll out across India designed to take advantage of current market opportunities on the subcontinent. The brand meets all key sustainability criteria without compromising on either quality or standards of hospitality and is designed to cater for commercial and recreational travellers alike.

Red Ribbon CEO, Suchit Punnose said:

The boom in Indian tourism (both domestically and internationally) is currently playing a huge part in driving forward the subcontinent’s resurgent hotel and hospitality sector, and as the article says eco credentials are playing a bigger part than ever in determining where this burgeoning tide of travellers are deciding to stay. Recent surveys confirm so called “green credentials” are high up on the scale of priorities when they come to make their choice.

And as the article also says, meeting that demand is certainly not just a matter of a last minute rebranding. To deliver properly on green credentials, the hotel has to be built with eco compliance as part of its structure (from the ground up). Only by doing this will cost savings and sustainability criteria properly come together in the future operation of the hotel, delivering the range of benefits described in the article.

I’m proud that Eco Hotels have done just that from the very beginning of the project, and proud too of the part Red Ribbon has played in developing the brand and its ambitions in the succeeding years, spearheading an environmentally friendly response to India’ resurgent tourism demands.

India Real Estate - Red Ribbon Asset Management Plc

Time matters with India’s Real Estate revitalisation

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KPMG reported last month that Indian Real Estate Sector has now entered a “revitalisation mode”, with aggregate growth projected to reach $ 650 Billion by 2025 and topping $850 Billion by 2028: the average yearly contribution of real estate to the Indian economy will more than double from its current 7% by 2025. And CBRE India are equally optimistic: in their own quarterly report, snappily titled “India Real Estate: Variance in Construction Costs”, they forecast 17 Million new jobs will be added to the sector and an additional 8.2 Billion square feet of space released by 2025.  It all resonates well with the ambitions objectives of Prime Minister Modi’s Affordable Housing Programme, with Real Estate now set firmly in growth mode, and growing stronger every year. But there’s a dark shadow in the garden…

Each of these influential reports has highlighted a potential issue relating to construction costs on the subcontinent, capable of acting as a brake on growth and with no less than six major conurbations (Chennai, Pune, Hyderabad, Mumbai and Delhi) causing particular concern. Perhaps predictably, Mumbai tops the list of areas where unit construction costs have spiralled over recent years and show little sign of slowing down despite the broadly stabilizing effect of GST legislation introduced by the Modi Administration which helped smooth out some of the worst supply and pricing differentials across the country.

The average cost of construction for a residential apartment in Mumbai is now Rs 3,125 per square foot, compared to the Rs 2,375 per square foot the same apartment will cost in Hyderabad. At one (macro) level the reason for all this is obvious: an increasingly urbanised population pushing up demand for units in the largest conurbations as part of a gradual drift away from the land, but the disparity in relative costs between conurbations is still striking. Inter market differentials of this kind are likely to be caused primarily to an uneven distribution of construction skills, with highly skilled workers drawn to areas of greater demand so increasing the unit cost of labour in specific areas of the subcontinent. Certainly we might expect other variables such as recent sharp rises in the wholesale price of steel to be more uniformly spread across the country.

In short, construction is becoming progressively more expensive in the very areas where more housing and commercial units are likely to be needed most…and that’s a real dilemma.

One answer is to make greater use of just in time delivery systems which are capable of dramatically reducing overall construction schedules: simple maths tells us that if an expensive worker is on site for a quarter of the normal building phase, costs will come down no matter how prohibitive the daily rate. And of course we have now grown used to the significance of just in time methodologies because of the prominence the issue has assumed as part of the current Brexit debate. Just as any significant inhibition on frictionless trade has potential to throw the UK economy into chaos after Brexit, so too the same frictionless technologies can help address systemic cost differentials across the Indian construction sector as well.

Modular Construction prefabricates all of the essential components of the building off site, everything from exterior walls, ventilation systems and internal wiring networks with the parts then arriving on location only when they’re needed: meaning field workers aren’t left waiting around (expensively) for the next phase of the project to get underway. Research has shown that through a combination of just in time delivery techniques and modular technology, otherwise complex units such as student accommodation blocks or hospitals can be erected on site in days rather than the months and sometimes years of conventional technologies. And an added advantage is that Modular Technology also reduces the potential for human error and snagging in the final building which can also be a major but hidden expense on any project.

Modulex Construction is the World’s largest and India’s first Steel Modular Building Company, setting out to meet the challenges posed by India’s urban housing shortages in a practical and dynamic manner. The company is at the heart of a project established by Red Ribbon to harness the potential of India’s markets and delivering opportunities for investors. Because, when it comes to investing on the subcontinent, nobody knows India and its markets better than Red Ribbon.

Red Ribbon CEO, Suchit Punnose said:

Prime Minister Modi has successfully appealed to the youthful and increasingly urbanised population that is currently driving India’s economic growth, not least through his Government’s re-energised Affordable Housing Programme the scale and scope of which has at times been breathtaking. So it should come as no surprise to learn that such an increasingly mobile population is also creating real estate hot spots (and cost differentials) through being attracted to a number of specific locations: by definition, a mobile population is difficult to keep still.

So as it seems to me the resulting cost differentials in construction across the subcontinent are likely to be a fact of life for some years to come yet. But that’s certainly not to diminish the problem, and cost disparities are a problem in India’s most expensive real estate markets, Mumbai in particular. They have real potential to distort the market.

In delivering a workable solution to that challenge most expert commentators now agree that Modular Construction is simply inescapable. No other technology offers the pace and scale of delivery needed to meet India’s housing needs and, as the article points out, it is the perfect corollary for just in time delivery systems. That’s why Red Ribbon was committed to Modulex Construction from the very beginning of the project and we remain committed to it today. I’m convinced it is not only a vital element in meeting market challenges but will also deliver on the unprecedented opportunities currently presented by the subcontinent’s burgeoning economy.

India Mid Market Hotels - Red Ribbon Asset Management Plc

How and why mid-market hotels are taking over India’s branded sector

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In the late 1980’s Esso commissioned a survey of its UK customers and found less than 7% travelled onto Mainland Europe with their cars. Why this reticence on the part of families clearly capable of making their way from Poole to Provence in an overcrowded Metro? And no, it’s not what you think: back in those days we hadn’t even thought of Brexit. As Esso found out, there was a more homely explanation: the Continent simply had far fewer automated pumps on its forecourts, so drivers were in danger of having to talk with an attendant and you know how the English are with languages. Better leave the car behind than risk the unseemly spectacle of sign language on the forecourt with a Frenchman.

And when you think about it, that’s all quite interesting. It’s the reason petrol stations have gradually come to look exactly the same all over the world: with the pumps all roughly in the same place, all self service and roughly the same kind of shop to pay in. It’s why you can now buy a burger (from a screen) in identical McDonalds outlets from Vienna to Vladivostok without once having to speak a word of German or Russian, and it’s why Esso long made sure you can buy your petrol the same way. There’s simply no need to leave the car at home anymore…so we don’t. We buy more petrol instead and everyone’s happy.

Economists call this phenomenon Brand Synergy and until recently India’s mid-market Hotel Sector was widely perceived to be more or less dead to its charms. A senior analyst on the subcontinent memorably (and anonymously) put it as follows: “…it was like an airline that uses a Boeing 747 for travel between Delhi and Mumbai, a Dakota for Kolkata-Delhi, and a Dornier for Bengaluru-Pune”. The poor old travellers never knew what to expect when they got there. Just like trying to buy petrol by word of mouth.

But not anymore…

The subcontinent’s mid-market Hotels including Ibis Styles, Lemon Tree Hotels and Eco Hotels have all made progress over the last decade in adopting a much more uniform approach to product profiling, achieving a consistency in specification that has now seen the mid-market secure nearly half the branded hotel sector: spurred on, no doubt, by an increasing number of private equity investors, none of whom are noted for being slow in recognising brand synergies when they see them.

All of which has made the mid-market uniquely well placed to take advantage of the surge in India’s middle class and increasingly urbanised travellers that has doubled airline occupancy rates over the last seven years.  And with the average cost of building a mid-market room coming in at between Rs 3 Million and Rs 7 Million, breaking even within six years, it all makes bottom line economic sense too. Compare that with the larger branded chains where average construction cost for each room is Rs 15 Million and break even takes 15 years: more than twice as long.  In the past 10 years alone the mid-market has expanded at more than 15% annually (according to Howarth HTL) and now accounts for 43% of total branded stock.

Having got away its successful IPO earlier this year (raising Rs 311 Crore from key investors), Lemon Tree Hotels last week took the trend a stage further by launching its brand overseas: signing a deal for the first of its hotels to open in Dubai next year. It will be the first mid-market hotel on the luxury studded Al Wasi Road, sitting literally in the shadow of the Burj Al Arab and Al Waleed Real Estate’s CEO didn’t miss the significance:  “There was a need for a mid-market hotel of this calibre in this location and India has been the largest source of tourists into Dubai, as well as the UAE as a whole, for over three years now.” To save you Googling it up, the exact figure is 13%: India now accounts for a whopping 13% of total tourist numbers into the Emirates, which shouldn’t come as a surprise to anybody given the subcontinent’s wealth and proximity as well as the population’s found mobility.

And now they’ll recognise at least one familiar, distinctively Indian hotel brand when they get there…Plus ca change.

Red Ribbon Asset Management is the founder of Eco Hotels, the world’s first carbon neutral mid-market hotel brand, offering “green hospitality” as part of a progressive roll out across India which intended to take full advantage of current market opportunities on the subcontinent. The brand offers sustainable living without compromising on standards of hospitality and is designed to cater to commercial and recreational travellers alike.

Red Ribbon CEO, Suchit Punnose said:

Working as part of the Eco Hotels Project has certainly taught me the importance of branding and product profiling in the hospitality sector, so I was pleased to read about the renewed emphasis on branding generally and unsurprised to see that it has now increased the mid-market share to just shy of 50%. Monolithic 2000 room hotel chains are no longer the first choice for travellers, especially given all the evidence suggests they are increasingly looking for accommodation that also complements their preference for sustainability.

And that’s important because the boom in Indian tourism (domestically and internationally) is playing a significant part in driving forward the subcontinent’s resurgent hotel and hospitality sector. It’s certainly an area that cannot be overlooked when seeking out the best investment opportunities over the coming years.

That’s why I’m very proud that Red Ribbon has played such a significant role in the creation and development of the Eco Hotels Project, spearheading the response to that demand in an environmentally friendly manner.

Red Ribbon

At Red Ribbon we understand that the transition towards a resilient global economy will be led by well-governed businesses in mainstream markets, striving to reduce the environmental impact of their production processes on society at large and on the environment as well.

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