Indian Equity Research and Investment Strategy
Breaking News in Corporate India / Earnings Analysis
Aggregate earnings growth for Sensex companies at 20% yoy was in line with expectations. The breadth was however disappointing. Sectorally, only IT services exceeded expectations.
Revenue growth was driven by cyclical sectors benefiting from a weak base effect, be it commodity prices for global sectors or weak volumes for local cyclicals. (more…)
RBI has hiked the CRR – Cash Reserve Ratio by a whopping 75 bps instead of the expected 50 bps. CRR will change from 5% to 5.75% and will be effective in two stages 50 bps effective Feb-13 and the second 25bps on Feb-27. The hike will suck Rs 36,000 cr of liquidity from the market.
RBI for now has left the Repo and Reverse Repo Rates unchanged.
As outcome of CRR hike, the RBI said,
Reduction in excess liquidity will help anchor inflationary expectations. The recovery process will be supported without compromising price stability. The calibrated exit will align policy instruments with the current and evolving state of the economy.
The next date for review of monetary policy will be announced on April-20th.
Domestic equity markets turned negative in the late afternoon session tracking rise in food price inflation to 17.40% for the week ended January 16 from 16.81% the week before.
Surge in the food inflation has once again raised apprehensions of stricter measures from the central bank in its policy review [Our opinion, the RBI is lacking the will for strict measures and is un-necessarily taking directions from the South Block].
The government released the wholesale price index (WPI) in respect of primary articles and the fuel group on Thursday. The primary articles Index, which has a weight of 22.02% in the overall WPI, increased by 0.32% to 285.5 from 284.6 in the previous week. As a result, the annual rate of inflation for primarily articles, calculated on point to point basis, increased to 14.66% as compared to 13.93% for the previous week and 10.96% during the corresponding week of the previous year.
IBFSL’s 3QFY10 earnings of Rs640mn were 40-45% below est. owing to a write-off of ~Rs610mn in one large a/c. However, excluding w/o, earnings were 8-9% below estimates, owing to higher–than-estimated repayments, despite in-line disbursement growth.
However, excluding w/o, earnings were 8-9% below estimates, owing to higher–than-estimated repayments, despite in-line disbursement growth. But, for this, all other parameters have rebounded, with disbursements of Rs21bn vs. ~Rs16bn in 2Q; loan growth up 6% qoq; margins holding up; headline gross & net NPLs down 2% qoq
IBFSL has settled with one large a/c, which had been in the news the during Oct- Dec 09 period. Of the Rs2.9bn o/s, Rs2.3bn is the settlement amount between parties.
ICICI Bank Ltd has announced the following Audited results for the quarter ended December 31, 2009:
The Bank has posted a net profit of Rs 11010.60 million for the quarter ended December 31, 2009 as compared to Rs 12721.50 million for the quarter ended December 31, 2008. Total Income has decreased from Rs 103506.20 million for the quarter ended December 31, 2008 to Rs 77627.10 million for the quarter ended December 31, 2009.
The Group has posted a net profit of Rs 11486.60 million for the quarter ended December 31, 2009 as compared to Rs 15597.60 million for the quarter ended December 31, 2008. Total Income has decreased from Rs 169227.30 million for the quarter ended December 31, 2008 to Rs 141768.40 million for the quarter ended December 31, 2009.
Larsen & Toubro Ltd (L&T) has announced the following Unaudited results for the quarter ended December 31, 2009:
The Company has posted a profit after tax of Rs 7588.20 million for the quarter ended December 31, 2009 as compared to Rs 15204.40 million for the quarter ended December 31, 2008. Total Income has decreased from Rs 89243.20 million for the quarter ended December 31, 2008 to Rs 83557.50 million for the quarter ended December 31, 2009.
India’s Central Electricity Regulatory Commission (CERC) has announced changes to power trading margins. CERC, the power regulator, allows trading margin to be raised by c75% to INR0.07/kwh if sale price exceeds INR3/kwh (c80% of short-term volume).
The margin cap increase is a short- to medium-term positive for power trading companies like PTC India, which now can charge a higher margin for short-term trades. As 80% of PTC’s short-term (ex-cross border) trading volume is above INR3/kWh, it will benefit.
But increased competition from peers and power exchanges should limit the benefit longer term, when the trading margin should be lower than the prescribed cap. Further expect competition to get more intense and margins to fall again, because a) the supply of shortterm power is expected to increase at a faster pace than demand, and b) the number of power traders is expected to increase to 50-55 from the current 44. More important, the power exchanges, which charge only INR0.01/kWh, will also likely emerge as a preferred platform for short-term trading and limit the ability to charge higher margins