Category: Breaking Corporate India Earnings News

Real estate demand in the residential vertical has been badly hit due to high prices and poor affordability.

Buyers Sentiment in Realty:
Buyers are shying away from new projects or under construction projects, where project delivery is more than a year away. This is because – buyers are optimistic that prices have to correct further in the near term, and they lack confidence in the developers and the developers’ ability / intention to construct and deliver the project on time.

Reality of Indian Realty List Prices:
The list prices quoted by developers for under construction projects have little meaning today as no few deals are concluded at the official list prices. Deals are happening at 30-50% discount to list prices. However, developers are not officially lowering list prices, as they believe that taking such measures may not necessarily result in any incremental demand from home buyers, but developer himself will be impacted due to the negative outlook on prices and weak sentiments.

Standard Chartered – BKC Deal which happened at a 30% discount to the last deal reported in Bandra Kurla complex has led to re-negotiation of lease rentals / rates in the Commercial property segment across India.

This must come as a surprise to most of our readers as India’s loan growth is accelerating; 22% yoy in Jan-08, which has climbed to 28% currently. But, with a slowing economy, where is this growth coming from ?

RBI data suggests that, Large and medium corporates are borrowing most aggressively, consumer and agriculture are lagging industry growth, while small businesses make up the rear, with negative growth YTD. [This is really bad, Small businesses should be given an opportunity to Grow]. Excluding Oil companies, loan growth remains high at 27% yoy.

Loan Growth is a Big Risk:
The fastest-growing sectors – real estate (46%), construction (56%), iron & steel (34%), credit cards (90%) and financial companies (46%) – are also probably the most risky ones. Infrastructure loans also strong (36% yoy), but have moderated in 2Q09 (3% qoq). While rising loan momentum in the face of falling economic growth / Industrial production data sits uneasy, the sectoral bias of this growth suggests even more caution.

Can Indian banks recover the loans lent to Real Estate and Credit Cards ?

Inflation for the week ended Nov-8 falls further to 8.9% as compared to 8.98% reported in the last week. The prices of primary articles decline to 9.31% for week ended November 8, 2008 as compared to 11.01% for the preceding week.

The prices of fuel items declined to 8.21% for the week as compared to 9.22% in the preceding week. The inflation for manufactured products continued to decline for eleventh consecutive week to 8.02%, as compare to 8.06% for the preceding week.

Amongst the manufactured articles, the prices of metal products, woods products, chemical and chemical products and Beverages tobacco & tobacco products rose the most, by 15.25% yoy, 9.77% yoy, 8.98% yoy and 8.33% yoy respectively.

There are rumors that the RBI may announce steep rate cuts in a week or so and reports that the government has decided to inject a whopping Rs50,000cr for funding infrastructure projects in a bid to pump-prime the economy.

The RBI is also likely to create a special repo window to allow banks to borrow up to 100 basis points of the statutory liquidity ratio (SLR) – the percentage of deposits invested in government securities – to make available Rs40,000cr for infrastructure
like national highway projects.

It is unlikely that the market situation will improve in India in the near future as American markets touched a new 5 year low and other markets follow Dow Jones and then lead in going down further.

Cement despatch growth rate deteriorated in October-08 due to lack of demand from the construction sector, really especially the Real Estate.

All the Major Cement Companies except Ultratech and Shree Cement reported a drop in Cement Dispatch in Oct-08 compared to their sales figures in Oct-07.

• ACC -3.5% YoY
• Ambuja Cement -3.9% YoY
• Grasim Industries -6.4%
• Ultratech +5.5% YoY
• India Cements -12.3%
• JaiPrakash -1.2%
• Shree Cement +12.6%

Cement company lobby is maintaining the prices at Rs 240, [Rise from Rs 150 levels in 2006]. Demand is unlikely to improve in the near future.

Data for the month of October 2008 shows that the combined two wheeler and three wheeler industry volumes declined significantly by 10% Y-o-Y for the first time in FY09. Despite the festival period falling in the month of October 2008, sales at the companies’ end plunged sharply due to a huge pile up of inventory of the previous month at the dealer network, though retail sales recorded an increase.

Hero Honda (HH) – Decline in domestic volumes of entry-level Motorcycle segment (75-125cc) pull down overall volumes. Motorcycle sales were down 4.9% Y-o-Y and 10% sequentially to 335,754 units. Scooter sales witnessed a growth of 38% Y-o-Y to 16,695 units.

Bajaj Auto’s overall volumes declined sharply by 31% Y-o-Y and 21.8% sequentially to 191,840 units, due to a significant decline of 47.6% Y-o-Y in domestic sales to 116,748 units in October 2008. The company’s overall Motorcycles volumes plunged 34% Y-o-Y to 163,850 units, aided by the export growth of 42.3% Y-o-Y to 61,608 units.

TVS’s total volumes for October 2008 declined 9.7% Y-o-Y and 14.7% sequentially to 117,101 units. The company’s Motorcycle sales fell 11% Yo-Y to 60,273 units.