Author: CP

Godawari Power & Ispat’s (GPIL) Standalone Top-line fell by a whopping 34.8% yoy to Rs171.8cr (Rs263.4cr) in 4QFY2009. This de-growth was on account of a 46% decline in the revenue from the steel division, and due to the production cut undertaken by the
company in its Steel Billets and Ferro Manganese segment (for the purpose of increasing the sales volume of the power division). However, the sales from Sponge Iron increased by a massive 235% yoy to Rs84.9cr (Rs25.4cr). For FY2009, the company’s standalone and Consolidated Top-line increased by 24.9% and 35.1%, respectively.

GPIL’s Standalone net profit stood at Rs9.7cr (Rs28.8cr), for the quarter, down 66.2%. This fall was primarily on account of the decline in the operating profit. The company’s FY2009 standalone and consolidated net profits declined by 39.6% and 37.7%, respectively.

Late last evening, the government raised retail prices of petrol by 9% (Rs4/ltr) and diesel by 6% (Rs2/ltr). Although this is still less than current international prices (petrol and diesel would need to be raised by an additional Rs2.5/ltr as margins are negative, the hike is positive, bodes well for the reform process and is a step towards fiscal consolidation.

Given that petrol and diesel have a weight of 2.9% in the WPI, the fuel price hike would have a ~30bps impact on inflation. We expect inflation to cross 4% levels by year end. On rates, we expect bond yields are likely to stay in the 6%-7% range due to the RBI’s continued participation in the borrowing program. We maintain our view that
RBI will reverse its easy money policy next year.