‘Atmanirbhar’ stocks: Make in India push, fast track reforms may benefit these shares

Make in India is back in the spotlight with the Atmanirbhar Bharat campaign coming into the focus in the wake of a pandemic that disrupted supply chains.

The recent push given to the ‘Make in India’ initiative by the government could finally be the kind of support the plan needed to be a success. The central government has recently put its foot on the gas with targeted efforts this time to address long pending issues around land, labor, infrastructure, etc, that have historically impacted India’s aim to attract foreign investment, said a report by global brokerage and research firm Bank of America. Although the push is positive for India’s growth story in the long-term, the report adds that some stocks could witness near-term benefits as well.

The Push

Make in India is back in the spotlight with the Atmanirbhar Bharat campaign coming into the focus in the wake of a pandemic that disrupted supply chains. Targeted efforts have been made this time to address reforms that have been pending for long but have an ability to attract FDI. Bank of America in the report said that its channel checks suggest that the government is aiming to set up a single window clearance system to seek all regulatory approvals for firms wishing to set up manufacturing units in India. “This would go a long way in simplifying the current system involving approvals/licenses from up to 35 different ministries/departments. This would further improve India’s Ease of Doing ranking,” the report added.

The single window clearance system would also aid the approval of land, one of the key hurdles when it comes to investing in India. The report adds that the government is planning to set up a digital portal to provide details on land parcels available for ready transfer from the government. It says that so far six state governments have already identified 0.5mn hectares of such land. Land banks at the disposal of public entities are also being put up to be used by global firms. “BHEL has already floated an MoU in this regard inviting global firms to form JVs with the company and this would entitle them to use the vast land bank already available with it,” the report said.

Power sector is another area where the reforms have been explored. Currently, Bank of America said that the power distribution industry in India potentially incurs annual losses of US$7bn. India’s prized asset when it comes to attracting global manufacturing is the abundant labour at its disposal. The area too is being catered to with reforms being introduced to skill the labour.

Stocks to benefit

With reforms being implemented or charted out for various sectors, the scope for companies to gain from this diversifies across these sectors. In the pharmaceutical space, Bank of America has a ‘buy’ call on Divis Lab, Cipla, and Sun Pharma, with returns expected to be as high as 16%. In metals, Coal India and JSW Steel are two names that could see investors pocket gains between 5%-67%. The global brokerage firm said, “Our analysis assumes a WACC of 11.6%. At our PO, Coal India would trade at FY22E PER (x) of 9.3x, a 42% discount to its long term average (16x).”

In the oil and gas industry, BofA has a ‘buy’ call on Indian Oil Corporation, BPCl, HPCL, and Gail India. With more upside predicted for BPCL if sold to a private investor. With reforms also making their way towards the logistics space, Adani Ports and Gujarat Pipavav Port are also on the shopping list for the global investment bank.

Drawing conclusions from the Production Linked Incentive Scheme of the government of India that saw a positive response, Bank of America said that schemes like these could be a way to address the high cost to capital in India.