Category: Breaking Corporate India Earnings News

The Squabbling between the Ambani brothers which was off for few years is all set to take the center stage again. Guess, Mukesh Ambani shot himself into his foot by unnecessarily dragging Anil Ambani into a new controversy surrounding Reliance Communications and MTN deal. Mukesh who had to part with Reliance’s Telecom venture to Anil after the family division was jealous of Anil’s success had the latter been able to takeover MTN of South Africa which would give the combined entity [RCOM + MTN] higher EBITDA than RIL – Mukesh’s cash cow.

This time around Anil Ambani was very lucky and made the right move at the right time to influence the Government of India led by the Prime Minister Dr. Singh and Congress President Sonia Gandhi through his trusted lieutenant – Amar Singh.

Amar Singh has raised the issue of Reliance Petroleum enjoying EOU benefits when India as a nation is in deep Oil crisis. The Government under pressure from various other parties is seriously considering to levy a Tax / Duty on such refineries [Reliance Ind, Cairn and Essar] to offset for the losses incurred by PSU refineries and Oil companies. This led to unloading of RIL stock on the Mumbai Stock Exchange and the stock has hit a day’s low of Rs 1,997 breaking the psychological Rs 2,000 support level.

Instead of fighting over family business and supremacy, get into the wonderful world of R&D and innovation and sky is the limit to your business.

For the Indian Banks, this quarter is expected to be a leg down in net profits with 2.7% YoY growth for the sector. headline numbers is likely to be hurt, but keep an eye on deterioration in asset quality which will be the key operational parameter. Pre-provisioning profit growth should, however, remain relatively stable at 26.6%, driven by 25% loan growth, reasonable fee growth (23% YoY) and capital support for margins.

This quarter will be a test of the banks’ operational performance in the face of further rise in interest rates leading to lower growth and higher asset quality risks. Additionally, the impact of farm loan waivers shall also be seen in PSU banks.

In the private banking sector, profit growth is likely to be sharply lower at 17.2% YoY on slower capital market related fees, sustained cost pressures and loan loss provisions. Net interest margins should be supported by the sheer weight of capital and should drive pre-provisioning profit growth of 35% YoY.

Indian Brokerage houses are highly likely to report a decline in net profits QoQ. High pressure is seen in the following segments, retail brokerage (vs institutional); b) primary markets (vs secondary); and c) margin finance
portfolio (vs asset based lending). Retail volumes have shown a sharp decline – overall volumes down 54% from peak (-60% in derivatives). Cash volumes have fared better YoY (+40% vs +25% for derivatives) while QoQ they are relatively similar with declines of 16.8% vs 16.6%, respectively.

Brokerage and investment banking related fees to decline 18% QoQ due to the
weaker environment, both in the secondary and primary markets. Mutual Fund and other product distribution fees will also witness a decline.

The Indian Inflation as measured by the WPI rose to 11.63% for the week ending Jun 21 v/s 11.42% last week and 4.32% a year ago.

Of the headline 11.63% WPI number, 2.42% is attributed to primary articles, 5.7% to manufacturing and 3.5% to the fuel index. The worst part of this Inflation Saga is Upward revisions to the index has continued, with the April 26 data being revised up ~70bps from 7.61% to 8.27%.

Inflation is likely to remain in double digits and we expect RBI to hike the repo rate by another 25bps.

In a pre-election year, in the midst rampant market concerns of an infrastructure capex slowdown NHAI has indicated that it does not foresee any slowdown in spending.

NHAI indicated that public funding is a non-issue due to contributions from various sources 1] Cess on oil bill 2] Funding from multilateral agencies, and 3] Issuance of capital-gains tax exempt bonds under Section 54EC. Moreover as per NHAI, big players like Macquarie, L&T, IDFC and other Middle-Eastern companies have continued to bid and win road projects despite the sharp slowdown in equity markets.

L&T with its healthy balance sheet and superior execution skills is likely to bid and win projects from NHAI. Punj Lloyd in the midcap space is likely to be a tough competitor.

Simplex Infrastructures Ltd reported a Net sales for the full year FY08 at Rs28.12bn, increase by 64% over the previous year. For the quarter ended Q4FY08, sales at Rs9.48bn increased by 72% on a yoy basis and 34.8% on a qoq basis. For the full year FY08, operating margin of the company has remained flat at 9.5% while it has seen a decline in the fourth quarter at 8.6% from 9.5% in Q4FY07 and 10.0% in Q3FY08. The Net profit for the full year FY08 at Rs900mn.

With over 150 projects currently being undertaken and an order book position of the company over Rs100bn, the management has guided capex plans (machinery and equipments) of Rs2.0bn for FY09E to gear for the execution of the projects. The overseas business accounted for 17% of the FY08 revenues and 27% of the order book.

The power plant construction segment is expected to be a strong area in the future. The company has a diversified business model, which acts as a hedge against slowdown or project delays in any particular construction segment.

This is truly amazing, the Indian Auto sector didn’t witness the expected slowdown despite rising Inflation and Interest rates on Automobile Loans. Two wheeler sales of the three majors were impressive (up +10% Y/Y). Motorcycle sales were also strong (+12% YoY) in the backdrop of low base last year and strong performance by 125cc bikes. However, for CY2009, managements have cautioned single digit sales growth.

Maruti Udyog reported muted sales due to stiff base effect and a slowdown in the key compact segment. Swift sales were robust (+42% Y/Y), excluding Swift A2 segment declined 6% Y/Y. Dezire volumes remained robust which aided growth in the A3 segment. Inventory levels saw very slight increase at dealers end.

M&M June sales rose 13% YoY driven by a strong growth in tractor sales (+19% YoY) and decent growth in UV sales (+7% YoY) albeit a low base. Scorpio sales (+1% YoY) were muted while non-Scorpio sales (+9% YoY) continued to show decent growth.