Month: June 2008

In a surprise move, the government imposed additional specific duties of Rs15,000 and Rs20,000 on cars/ UVs with engine displacements between 1500-1999 cc, and over 2000cc, respectively. There doesn’t appear to be a significant economic rationale, as the hike will result in additional excise inflows which are 0.5-1% of the overall excise collections.

The overall impact on end prices will be ~2-3% for cars and UVs, but, when juxtaposed against high inflation rates, high commodity prices and persistently high finance rates, could result in demand displacements over the short term.

In short term, Mahindra is the most vulnerable to a sales decline (Scorpio / Bolero are ~30-35% of overall revenues), followed by Maruti (SX4 is ~4% of volumes, but around ~6-8% of revenues) and Tata Motors (Sumo/Safari are ~3% of volumes and ~5% of revenues).

For Q4FY2008, Gujarat Industries Power Co. Ltd. (GIPCL) has posted 65.7% growth in net sales to Rs. 2,850.3Mn as compared to Rs. 1,719.9Mn for the quarter ended Mar 31, 2007. Power generation has increased during the quarter by 5%, owing to higher PLF contributed by the Surat lignite power plant and Vadodara station-II. Total Income has increased from Rs. 1,755.2Mn for the quarter ended Mar 31, 2007 to Rs.2,912.8Mn for the quarter ended Mar 31, 2008.

For the full year, it clocked revenues of Rs. 9,355.5Mn from Rs. 7,955.8Mn in FY07 presenting a growth of 17.6%. Fuel Cost for the year has increased by 38.4% to Rs. 6,058.7Mn from Rs. 4,378.2 in FY07. This has been due to increase in gas prices, subsequent rise in tariff’s for the gas based plants & excellent operating performance of the power plants.

Indiabulls Properties Investment Trust (IPIT) listing on the Singapore exchange is a prime example of the worsening situation; despite the relatively small size of the issue (USD220 mn), it was barely subscribed one time, indicating a definite lack of investor interest. The response to the IPIT IPO does not augur well for other proposed listings that are larger in size, such as those of DLF Assets (~USD1.3 bn) or Unitech Office Trust (~USD700 mn).

IPIT’s listing received a poor response, reflected by valuations as it closed below issue price at 0.9 s$. Private equity now appears to be the only avenue left for Realtors to fund their projects and even this is becoming a challenge, as these investors are now demanding a higher return on their investments than before.