Economics/Road Infrastructure Development
Monday, March 30, 2009Infrastructure spending critical in the current economic environment - In the current domestic growth environment, while the private business capex is likely to suffer, we believe that the government's effort to push infrastructure spending will be critical. Within the infrastructure segments, we believe the roads spending is the most important considering its strong multiplier effect.
Of the total 33,097km planned, only 10,858km had been completed as of February 2009. About 50% of roads tenders have yet to be awarded.
The progress on road development is likely to be tardy until the end of 2009. The new cabinet, which should be in place by June 2009, will need to spearhead this spending and, if need be, take the financial risk on its own balance sheet.
Published by Webmaster @ 12:07 PM IST.
Nano likely to affect sales of M800 model: Maruti Suzuki
Friday, March 27, 2009Leading passenger car manufacturer Maruti Suzuki has admitted for the first time that the launch of Tata Motor's Nano would marginally affect the sales of its flagship model M800.
Reports quoted that the company could be forced to stop producing the M800 model by next year after stricter emission norms come into effect.
The current M800 model is Bharat Stage III (BS III)-compliant and the company would have to invest heavily in the engine assembly to upgrade it to meet the BS IV norms.
Maruti's chairman R C Bhargava stated that the company is neither having any plans of cutting the prices of the M800 model or the Alto model nor is it planning to enter the segment being created by Tata's Nano.
Published by Webmaster @ 4:56 PM IST.
Tata Chemicals reinforces confidence
Wednesday, March 25, 2009As per the company soda ash prices are stabilizing and demand in North America is stable despite slowdown as flat glass demand gets replaced by container glass. The company has also not scaled back price hikes it got in CY08 in UK and Netherlands.
Post channel checks and meeting with Tata Chemicals management we believe price correction in the stock is overdone given stabilizing prices in soda ash and strong expected free cash flow led by urea and iii) improving scenario in DAP.
Post de-bottlenecking, urea capacity is up 30% and is already functional. The company is in talks with Reliance Industries for gas supply and is likely to get ~US$6/mmbtu delivered cost. Moreover, we expect DAP and IMACID operations to become profitable in Q1 FY10 given strong correction in rock phosphate prices globally.
Published by Webmaster @ 7:25 PM IST.
Life insurance premium growth slowing down faster than expected
Monday, March 23, 2009As per IRDA, new business premium collection (individual non-single premium and 10% of individual single premium) for the industry declined 8.4% in April-January 2009.
LIC has shown degrowth of about 26.3% in individual new business premium collections for the period April 2008-January 2009 against about 10.9% yoy new business growth posted by the private sector.
Among stocks under our coverage, HDFC Standard Life has posted muted growth of 13% for the April-January 2009 period compared to our estimate of 35% growth for FY09. ICICI Prudential posted degrowth of about 14.7% for the same period compared to our expectation of 20% for FY09. SBI Life Insurance posted about 28% growth for April- January 2009 compared to 50% yoy growth estimated for FY09. However, note that our growth estimates are on weighted premiums (including individual premiums).
Historically, the life insurance business is back-loaded in the January-March quarter and we can thereby expect a reasonable firming of growth rates. However, given the slowdown witnessed in industry due to the steep decline in the sale of equity market linked products, we expect the growth rates to come at below our estimates.
Published by Webmaster @ 12:41 PM IST.
Near Term Steel + Cement Demand
Friday, March 20, 2009The near-term steel and cement demand is likely to be firm due to: restocking, government funded projects, rural demand, and prices (of steel) likely having bottomed out. However, most are not convinced of its sustainability, except for on-going government projects.
As segmental drivers differ, there is a low correlation in their growth rates. Risk to steel demand comes from general engineering, urban housing, and auto. Risks for cement come from urban housing and the commercial sector. Medium term infrastructure growth should help steel and cement.
Provisional domestic despatch growth of 7.8% YoY in February 2009 was in line with expectations, but lower than the 12-13% YoY growth in November - December 2008.
Published by Webmaster @ 9:22 AM IST.
Lowest inflation since Dec-78
Thursday, March 19, 2009For the week ending 7 Mar -09, headline inflation (wholesale price index, WPI) dropped to 0.44%. It was below our (0.93%) and consensus’ (0.88%) estimates.
Fuel deflation fell further to -5.95%, pushed lower by the fall in electricity prices.
Primary article prices fall first time. Primary article prices moved down due to
the fall in food grains (cereals and pulses), vegetables, fruits and nonfood articles. Though food prices softened, food inflation is still relatively high.
Manufactured prices, no change. All the major components, such as food products, edible oils, transport equipment, metallic and nonmetallic products, did not change. Chemicals and chemical products witnessed further softening.
Slow growth and approaching deflation increases the possibility of a rate cut soon. We expect the LAF (liquidity adjustment facility) corridor to go to the 2.5-4% range by end 2009.
Published by Webmaster @ 1:05 PM IST.
Historical Industrial Production Chart
Friday, March 13, 2009We are presenting to you the Chart from our data that we have maintained over years about Indian Industrial Production Growth Rate.
Data from the following chart suggests that India's IIP reported in Jan-09 is the lowest in the past 6 years.
Published by Webmaster @ 10:19 AM IST.
Industrial Production - IIP Declines for Second Month in a Row
Thursday, March 12, 2009Industrial production declined 0.5% YoY in January-09 compared with a decline of 0.6% in December-08 (revised upwards from -2% earlier) and growth of 1.7% in November. The decline in January was lesser than market expectations (Bloomberg survey) of -0.9%.
The manufacturing segment declined 0.8% in January compared to -1% in the previous month. The key contributors to this decline were food products, non metallic mineral products, basic metal & alloy industries and metal products & parts. The mining segment also declined 0.4% in January compared to growth of 1.8% in the previous month. The growth in the electricity segment, however, accelerated to 1.8% vs. 1.6% in December.
Growth in consumer goods decelerated to 1.1% in January compared to 1.5% in December. Within consumer goods, growth in the durables segment accelerated to 2.5% on low base effect (vs. -4.1% in December) while non-durables segment growth slowed to 0.7% vs. 3% in December. Capital goods growth accelerated to 15.4% in January mainly on low base effect compared to 5.2% in the previous month. Basic and intermediate goods declined 1% and 9.2% in January (vs. +1.9% and -9.4% in December) .
Other indicators of activity such as the Purchasing Managers Index, exports growth, non-oil imports, and motor vehicle sales have also been very weak in January. We continue to expect activity to slow considerably in the January-March quarter of FY09.
In a related development, Indian Inflation Touched a new 6 year low at 2.43%.
Published by Webmaster @ 7:53 PM IST.
EPS Estimates of PSU Banks - Goldman
Goldman Sachs has revised the EPS estimates of PSU Banks - SBI, PNB and BOB. The 3Q2008 results of these banks reflected strong demand for new loans, significant improvement in their pricing power for loans leading to higher NIM and significant gains on their bond trading portfolios due to rise in bond prices.
SBI:
SBI is expected to report an EPS of Rs 132.80 and Rs 147.35 for FY09 and FY10 respectively.
PNB:
Punjab National Bank is expected to report an EPS of Rs 51 and Rs 68 for FY09 and FY10 respectively.
BOB:
Bank of Baroda is expected to report an EPS of Rs 32 and Rs 36.02 for FY09 and FY10 respectively.
Published by Webmaster @ 10:26 AM IST.
External Commercial Borrowings making a come back
Monday, March 09, 2009Latest data indicate that ECBs have been holding up reasonably well. Flows in Jan 09 were up US$1.3bn, only marginally lower than the US$1.9bn seen in Jan 08. On a cumulative basis, however, ECB flows have slowed, to US$15.6bn in Apr-Jan FY09 from US$20.1bn in the same period last year.
However, the key is the sustainability of flows. This would depend on whether the current inflows are due to (i) recent policy changes or (ii) prior commitments. Inflows in Jan were largely due to borrowings by Vodafone Essar and Air India.
While companies are still accessing ECBs, borrowing via the foreign currency convertible bonds (FCCBs) route which had dwindled in the first few months has now ceased. In fact, with the bulk of the FCCBs turning out of the money (i.e., stock prices are trading at a discount to the conversion prices), the RBI introduced measures last year allowing companies to buy back FCCBs from rupee resources or by raising ECBs. However, due to limited funding, companies have found it difficult to buy back FCCBs.
Published by Webmaster @ 11:10 PM IST.
KEC International touches upper circuit with three new orders
Friday, March 06, 2009KEC International, a global leader in power transmission EPC business, has bagged two orders worth Rs 340 crore from Power Grid Corporation of India (PGCIL) and one order worth Rs 25 crore from Central Organization for Railway Electrification (CORE), Allahabad.
The first order worth Rs 185 crore from PGCIL is for the supply & construction of 400 kV D/C (Twin) Kameng Balipara & 400 kV d/C (Quad) Balipara - Bongaigaon Line (Part-I) associated with North East - Northern / Western Interconnector-I, while the second order is for the supply & construction of 400 kV D/C Gandhar - Navasari Line, LILO of 220 kV D/C Kawas - Navasari & 400 kV D/c Navasari-Navi Mumbai Line (Part-I) associated with ATS Mundra Regional System for WR.
The company has bagged its third order worth Rs 25 crore from CORE, Allahabad for design, supply, erection, testing & commissioning of 25 kV A.C. Single Phase, 50 Hz. traction overhead equipments, switching stations, booster transformer stations and LT. supply transformer stations including foundations, structures and all ancillary equipments for Pathankot (Excl.) -Jammutawi (Incl.) station of Ferozepur Division of Northern Railway under RE Project, Ambala.
Published by Webmaster @ 3:01 PM IST.
Status of Home Loan Market in India
Tuesday, March 03, 2009We decided to run a Status Check of the Home Loan Market in India and found that the Growth Rate market has been continuously declining in the past 6 quarters. YoY Growth peaked in Q2 FY07 to a whopping 80% and fell for the next 2 quarters to touch 25% in Q1 FY08 and saw a momentary rise to 32% in Q2 FY08 and since then began its downward journey and is now recording a growth of mere 10% YoY. The following Chart shows the Home Loan Outstanding Vs Growth in Home Loan Disbursal.
Home Loan Lending Data for the Past 2 Months:Top 5 Banks are as follows - No of Loan Accounts + Amount in Rs mn
SBI & Associates 6,970 2,605.7
Oriental Bank of Commerce 993 375.9
Syndicate Bank 1,528 336.8
Union Bank of India 1,228 301.5
Bank of Baroda 710 255.7
India Real Estate has mentioned from various research reports that the Realty market in India is headed for a deeper and longer correction. Historically, it is proved that Equity is a better investment over Real Estate as proved by Kotak Research.
Published by Webmaster @ 4:49 PM IST.
