Three Fledglings

The India Inc is reeling under the pressure of global recession and the turbulence in the Indian economy due to high levels of integration. With every passing day, the avenues for growth seem to be reducing for corporate India. The companies are reducing the pace of their diversification and try to concentrate on their core competencies.

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At this point of time, there are three industries which promise to grow at astronomical growth rates. These three sectors can weather the impact of a slowdown and expand at exponential rates. They are Space, Nuclear power and Defence; the “AWESOME THREESOME”.

These three sectors are highly technology intensive. These are literally unassailable bastions, as the entry barriers are huge. This tech know-how is concentrated to few giants and the government plays an important role in all these industries.

Nuclear Economics

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In spite of the “Republicans” losing the polls, the Indo-US nuke deal is expected to be signed. Obama is probably sensible enough to understand that the US needs the nuclear trade to flourish, as this would give an additional impetus to the slumping economy. The nuclear trade would is expected to be worth $ 150 billion as the Indian government seeks to increase the nuke power generation from 4,000 MW to 60,000 MW. This will not only cheer the bigger players but also the smaller ones. Most of the Indian players do not have the technical expertise required to build nuclear plants. Initially they are expected to forge JVs to enter the segment.

A Pie in the Sky

Indian have just set their foot in the moon with the successful launching of Chandrayaan – I. It was not just ISRO that was involved in the mission but also 40 companies which were involved in manufacture of a variety of elements ranging from the body of the satellite to solar panels. ISRO has major plans in future, which includes Chandrayaan – II in 2011, a mission to an asteroid or a comet and a mission to the Mars in 2019. As ISRO plans to step up its commercial operations, it will penetrate into the global market which is worth more than $251 billion.

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Business opportunities for ISRO lie in building & launching satellites, leasing the space in these satellites for DTH, GPS and disseminating & processing data. All this is expected to be carried out by “Antrix”, the commercial arm of ISRO. Indian players enjoy the cost benefit over the European counterparts.

The private firms in India have a great opportunity to manufacture ancillary parts required to build satellites and space vehicles. Indian firms which supply parts to ISRO have already started to attract investments from PEs. I believe that in some time ISRO would just be a mere facilitator for space program and would outsource all the manufacturing function to the private sector.

Defence

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India imports most of the defence equipment required for the armed forces. In 2009, the imports are expected to be to the tune of $ 10 billion. With this figure going to increase in years to come global giants have tried to establish there presence in India. Small Indian players are expected to reap benefits out due to outsourcing of contracts. It is a question of time when the final products will bear the “Made in India” tag. The Indian indigenous component in the defence equipment is expected to increase to more that 75 percent in another 5-10 years.

These three sectors offer some cushion against the slowdown. The risk is considerably less because of high level of government spending. These "three chicks" could well be the difference between the economic slump and quick recovery.