Category: Breaking Corporate India Earnings News

For the home loan market, volume seems to be the name of the game at present, with emphasis on expanding book rather than focussing on margins. The combination of lower property prices, attractive interest rates and aggressive promotions does seem to be working, and banks are seeing a progressive pickup in disbursals.

Axis Bank has entered with its own discounted rate scheme for new home loans, PNB and SBI have extended the time period for which their low rate scheme will be applicable.

Banks have been conservative with their lending. The target base remains the salaried customer with a regular source of income. Monthly installments are capped at 50–55% of net monthly salary. Demand for housing remains high, and the majority of borrowers are owner-users rather than pure investors. Hence, they prefer to pay the monthly instalments even in times of financial stress.

We do not see banks being in a hurry to raise home loan rates until they see definite signs of overall interest rates in the system hardening.

US district court judge ruled in favor of the $2.5bn bid by Grupo for Asarco. The court, in its decision, said that Grupo’s bid for the US miner was feasible and more likely to close than a sale to Sterlite. The decision is in line with the US bankruptcy court judge recommendation of Grupo’s bid over Sterlite. Grupo would have to close the deal in 30 days.

Sterlite management is unlikely to appeal against the judgment.

We believe the usage of cash in terms of investments in growth projects, minority buy-outs, and further acquisitions remains key going forward. The final arbitration hearing for BALCO is in early December and management expects the closure of BALCO and HZL buy-outs in the current fiscal.

The controversial Indian Oil Minister Mr. Murli Deora has proposed a 31% hike in the regulated domestic gas price to US$2.55/mmBtu from US$2.34/mmBtu to benefit Reliance Industries indirectly. This will also help ONGC to some extent, but you know the Ministry’s intention.

The fertiliser and power ministries are likely to oppose the steep price hike and we believe the final gas price could be lower than that proposed. The near term positive impact of higher gas price would be ONGC’s FY10E-11E EPS going up by around 2.0-2.5%.

Apart from this, there will be fuel pricing reforms any time soon, we prefer ONGC over the oil marketing companies (OMCs), whose earnings face greater uncertainty than ONGC.

India’s industrial economy has quickly bounced back from a two-year industrial slowdown in FY2008 and FY2009. IIP growth has averaged 8.9% over last four months, up from an average of 0.9% in the eight months after the collapse of Lehman. We expect IIP growth to move to double digits in 3QFY10E, moderate slightly in 4QFY10E and record a growth of about 8.5% in FY2010E.

We now see IIP growth for FY2010E at about 8.5%, led by a double-digit IIP growth in 3QFY10E. Strong IIP numbers in a rising inflationary environment make a case for an early exit from fiscal and monetary stimulus.

Leaders: Consumer durables continued to outperform, with 12.9% mom and 22.2% yoy growth. Capital goods output jumped 31.3% mom and 12.8% yoy, touching an 18-month
high production-level.

Laggards:
Dismal performance of some core infrastructure industries, viz., crude oil, refinery products, steel and electricity.

Reliance Industries (RIL) announced on Nov 10 its first oil discovery in onshore exploration block CB-ONN-2003/1, where it holds 100% participating interest. The discovery, named Dhirubhai-43, was made at a depth of 1,451 meters in the fifth well drilled in this block. RIL is still ascertaining commerciality of the discovery with the Indian oil regulator.

Although the gross reservoir thickness of 15 meters of Miocene sand, giving test flow of 500 b/d, does not prima facie look outstanding, in our view, we note that this is the first oil discovery reported in the block and further data gathering and future success may open up more potential for reserve accretion. Moreover, other E&P operators like GSPC, ONGC have discovered commercial oil reserves in onshore blocks in the Cambay basin in the past.

Panacea Biotec sales from vaccines stood at Rs1050.4mn which is a growth of 15.5% YoY and a 13.1% QoQ decline. Despite delays due to programmatic changes in Global Polio Eradication Initiative (GPEI), supplies have begun and the inventory at the company’s end is being reduced. Expect contribution from vaccines segment to increase substantially by Q4, as Pbio shall begin servicing its new UNICEF order for its Pentavalent EasyFive vaccine worth $222.4mn for supplies over 2010-12 from January 2010.

The management re-iterates that a vaccine to combat Swine flu is the offing and could be ready by the end of the current fiscal. In India, only 2 other company besides Pbio, viz Serum Institute and Bharat Biotec have received the virus strain for H1N1 flu from the UK-based National Institute for Biological Standards and Control, for development of the vaccine.

The company has a huge debt of debt of about Rs7.4bn weighing on the stock price.