Current Economic Statistics and Review For the
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Theme
of the week: First Quarter Performance: Sector-wise Review*
Introduction According to data released by Central Statistical Organisation (CSO), Indian economy has witnessed a robust growth of 8.9 per cent during the first quarter (April-June) of 2006-07 – highest first quarter growth since 2000-01 – on top of a healthy 8.5 per cent growth during the same period previous year. Another indicator of economic performance, Index of Industrial Production (IIP), has continued with its growth momentum posting a robust growth of 10.1 per cent during April-June 2006 though a marginal slowdown from a 10.4 per cent growth in the first quarter of the previous year. The manufacturing sector with a growth of 11.2 per cent has remained the key driver of the industrial activity. This is also reflected in the vibrant first quarter (2006-07) performance of the corporate sector, which has been in continuation of the steady financial growth registered by Indian companies during 2005-06. The overall buoyancy witnessed in the profitability of the companies during 2005-06 has continued in the current financial year (2006-07) also and the corporates have recorded yet another quarter (April-June 2006) of satisfactory growth despite significant cost pressure such as escalating raw material prices and interest rates. As per few large sized sample studies by various media sources, the first quarter of the current financial year has been the best in the last three years. In
this note we have analysed the financial performances of 400 private and
public limited companies, listed on BSE 500 Index, based on their
unaudited/audited financial results collected from the website of Bombay
Stock Exchange. The sample companies consist of 368 manufacturing and IT
companies and 32 banks and non-bank financial institutions. These 400
companies are classified among 16 sectors namely capital goods, textiles,
oil and gas, chemicals and petrochemicals, metals, automobiles,
pharmaceuticals, information technology (IT), fast moving consumer goods (FMCG),
cement, shipping, power, consumer durables, banks and financial
institutions, agriculture and miscellaneous and diversified. Financial
Performance of 368 Companies (Manufacturing and IT Companies) The financial performance of corporate sector during April-June 2006-07 has improved significantly over April-June 2005-06 as indicated by sales and profit figures given in Table 1. All the 15 sectors (excluding banks and financial institutions) have registered double-digit growth in net sales, except textiles and transport services, which includes shipping services. One of the reasons for the robust growth in both sales and net profit could be the low base of Q1 2005-06, which saw a relatively slower growth of sales and profits.
As
we see from table 1, the net sales of 368 companies has grown considerably
by 29.7 per cent to Rs 3,34,596 crore during April-June 2006 as compared
to Rs 2,58,054 crore over the same period a year ago. The total
expenditure incurred by these companies has shot up by 30.8 per cent to Rs
2,86,939 crore, at a higher rate than that of net sales (29.7 per cent),
exhibiting some failure in controlling costs by these companies. The ratio
of total expenditure to sales has risen marginally to 85.8 per cent during
April-June 2006 as compared with 85 per cent in the same period a year
ago. In the case of manufacturing companies, expenditure have grown due to
rise in input cost whereas for IT and services sector it is due to
increased spending on salaries. Net profit of these companies has surged
by 35.6 per cent to Rs 31,742 crore as against Rs 23,408 crore. A
significant highlight of this study is a substantial rise in interest
payments of these companies, which has grown heavily by 34.6 per cent to
Rs 4,293 crore as against Rs 3,188 crore and is a cause of concern. The
net profit to sales ratio has stood at 9.5 per cent during April-June 2006
as compared to 9.1 per cent from April-June 2005 implying enhanced
profitability, despite a lower gross profit margin (gross profits to
sales) on sales ratio at around 15 per cent as compared to 16.1 per cent
during April-June 2005. Performance
of Banks and Financial Institutions A
similar trend witnessed in case of performance of 368 manufacturing and IT
companies has also been seen in the growth of banks and financial
institutions. The profitability of banks has been getting stronger due to
higher interest and other income. The interest income of 32 banks and
financial institutions indicates a healthy 21.8 per cent growth at Rs
41,425 crore during April-June 2006 from Rs 34,015 crore over the same
period a year ago. Other income has also increased by 15.5 per cent to Rs
6,730 crore from Rs 5,829 crore. The 32 banks studied here have posted an
increase of 6 per cent in net profit at Rs 4,899 crore (Table 2).
Among
these banks, State Bank of Sectoral PerformancesA general observation shows that broadly all sectors have participated in the growth. Sectors that registered growth between 30-50 per cent have been oil and gas, metals, chemicals and petrochemicals, IT, capital goods and miscellaneous and diversified. The engineering and construction sectors have seen huge order books. Sectors like agriculture, cement and consumer durables have reported more than 80 per cent growth in net profits. Automobiles, FMCG and Pharmaceuticals companies have posted growth between 16-23 per cent. On the other hand, shipping and textile companies have witnessed subdued performances due to a sharp rise in interest payments. The cement sector has been the best performer with the growth impetus arising out of demand from housing and infrastructure development. On the back of robust semi-urban and rural demand, the consumer durables companies have recorded robust growth in profit during the quarter under review. The sectors, which were largely distressed by rising interest cost, include capital goods, IT, Pharmaceuticals, metal, power and shipping. Despite the sharp rise in interest cost, interest to sales ratio at 1.28 per cent has been marginally higher compared to 1.24 per cent during the quarter ended June 2006. The interest cost has moved up due to the combined effect of increasing interest rates as well as increasing level of borrowings by companies. Automobile Automobile
industry in
Table 3 reveals the healthy performance of automobile companies; the net sales of 41 automobile companies comprising auto ancillary companies have increased by 26.9 per cent to Rs 27,970 crore during April-June 2006 from Rs 22,046 crore a year ago. A healthy rise in sales has resulted from robust domestic and export demand conditions, volume growth and excise duty reduction. A sharp rise of 26.6 per cent in total expenditure of these companies has been due to higher input costs mainly aluminium, steel, rubber and plastic. However, overall auto companies have shown a strong performance even though their margins are under pressure due to increase in component prices. The net profit of these companies has risen by 16.6 per cent to Rs 2,213 crore from Rs 1,897 crore during April-June 2005. Cement
Cement
is one of the six core infrastructure industries in
During
April-June 2006, 23 cement companies have shown a strong growth of around
40 per cent in net sales at Rs 9,367 crore from Rs 6,697 crore over the
same period a year ago (Table 4). Strong demand on the back of intense
housing and infrastructure development activities have led the cement
companies to post a robust growth of 81 per cent in net profit to Rs 1,727
crore from Rs 954 crore. The country’s biggest cement maker ACC has
reported a whooping 191 per cent jump in its net profit on the back of
increase in price realisation and Rs 140 crore gains from the sale of land
and Rs 40 crore gain from sale of Mancherial cement works. Ultratech
Cement, an Aditya Birla group company, has reported a net profit of Rs 210
crore for the quarter ended June 2006 from a low base of R 60 crore over
the same period a year ago. The cement despatches of four giants, ACC,
Ultratech, Gujarat Ambuja, and Grasim for the quarter ended June 2006 has
risen by 7.4 per cent to 162.33 lakh tonne.
FMCG
The
FMCG sector that witnessed a scenario of sluggish growth from past 2-3
years has reached at a level of one of the largest growing sectors in
The buoyant performance of FMCG sector has also been reflected in the aggregate results for April-June 2006 of 27 FMCG companies with net sales of Rs 12,782 crore, a 16.8 per cent rise and the net profit of Rs 1,650 crore, a rise of 17.7 per cent (Table 5). Companies have been benefiting from hiking product prices to offset higher input costs. Hindustan Lever Limited (HLL), has posted 35 per cent growth in net profit at Rs 380 crore benefited mainly from healthy growth in its home and personal care businesses, while sale of beverages declined during the quarter under review. Similarly, ITC has also registered a rise of 16.8 per cent to Rs 652 crore from its cigarettes business and also from other divisions like hotels, agri-products and paper. The companies have continued to spend more on advertisement and publicity and product innovations. Most of these companies have reported sound volume growth in rural areas. Also, price increase has been marginal during the first quarter. Another interesting thing regarding the FMCG companies has been growing FII (foreign institutional investors) holdings in these companies. FII holdings in most of the Indian FMCG companies like Godrej Consumer Products Limited (GCPL), Colgate-Palmolive, Britannia and Dabur India Limited has risen considerably. The rising prices and rural market growth have been the reasons behind the growing investment. FII’s have been targeting companies with relatively smaller market capitalisations such as GCPL, Marico and Dabur and have sold their holdings in large market capitalisation companies like HLL and ITC. Pharmaceutical The pharmaceutical companies have shown mixed results during April-June 2006. Sector majors like Ranbaxy Laboratories, Dr. Reddy’s Laboratories Cipla, Aurobindo Pharma have reported a double-digit growth in net profit. While Nicholas Piramal, GlaxoSmithKline, Novartis and Wockhardt have recorded a decline in net profit.
Our
study of 38 pharmaceutical companies indicates a healthy increase of 17
per cent in net sales at Rs 9,065 crore during April-June 2006 as against
Rs 7,737 crore over the same period previous year. Net profit has recorded
a growth of 23 per cent at Rs 1,469 crore from Rs 1,191 crore. Cipla has
delivered impressive results with a 53 per cent increase in net profit to
Rs 170 crore on the back of two products its generic version of Pfizer’s
anti-depressant drug Zoloft and Merck’s prostate drug Proscar. Ranbaxy
Lab has posted a 31 per cent increase in net profits to Rs 99 crore on a
revival of generic medicine sales in the On the contrary, GlaxoSmithKline, Nicholas Piramal, Novartis, Torrent Pharma and Glenmark pharma have registered subdued performance for the quarter ended June 2006. Nicholas Piramal has reported a 6 per cent decline in net profit to Rs 51 crore as compared to the previous year. The acquisition of Avecia and an increase in expenditure on research and development led to a slip in margins for the quarter ended June 2006. A draft of a new drug policy suggests that the number of drugs to be brought under price control will include 354 formulations, in addition to the 74 already in the list. If implemented, then the companies that depend on the domestic market will suffer badly. Metals
Riding high on soaring metal prises and burgeoning demand, non-ferrous companies have reported robust growth in sales and profit for the quarter ended June 2006. Even the steel companies have also posted positive growth in profits after three quarters of decline in net profits.
Our study of 35 metal companies inclusive of steel, zinc, copper, aluminium companies indicate a substantial growth of 34.7 per cent in net sales to Rs 32,977 crore for the quarter ended June 2006 from Rs 24,481 crore over the same period a year ago. Modernisation and expansion plans by various steel companies have resulted in a slowdown in their profitability during the quarter under review. Companies like SAIL, Essar Steel, Tata Steel and Uttam Galva have reduced their interest payments substantially. Non-ferrous metals had their share of buoyancy on the back of higher LME prices for aluminium, zinc, copper, etc. Among the non-ferrous metal companies Hindustan Zine has registered a whooping 572 per cent increase in net profit at Rs 874 crore followed by Hindalco Industries has reported a 85 per cent growth in net profit at Rs 601 crore and NALCO has registered 121 per cent growth at Rs 622 crore over the quarter ended June 2005. Information
Technology
The
information technology (IT) companies have posted vibrant growth in
April-June 2006, driven mainly by sizeable outsourcing business, largely
from Europe and the Telecom
The telecommunication sector has been growing rapidly on the back of strong subscriber base. At the end of June 2006, the gross subscribers’ base has touched 153.37 million, of which mobile subscribers have accounted for around 105.95 million and fixed line subscribers about 47.42 million. The aggregate sales of 9 telecom companies have increased by 28.6 per cent to Rs 692 crore for the quarter ended June 2006 from Rs 538 crore and net profit has surged by a healthy 57 per cent to Rs 849 crore. Bharti Airtel, GTL and Finolex Cables have been the major achievers. The mobile phone sector had another quarter of high growth, with subscriber base increasing by 14.5 per cent quarter on quarter and 80.3 per cent year on year to reach 102.6 million at the end of June 2006. The extended coverage to new towns and cities has helped increase telecom revenue. The new (net) telephone connections (land lines) provided both by public and private sectors during April- June 2006 has stood at 17.95 lakh, an increase of 76.2 per cent as compared to 10.19 lakh connections provided during April -June 2005. During this period while private sector provided 24.20 lakh wired telephones, the public sector surrendered 6.25 lakh wired telephones. Capital
Goods
The
engineering sector is the integral part of the Indian industrial sector. Our
study of 34 capital goods companies reflect a healthy growth of 27 per
cent in net sales at Rs 13,834 crore for the quarter ended June 2006 from
Rs 10832 crore over the same period a year ago. These companies have
reported a 12 per cent increase in interest payment at Rs 98 crore from Rs
86 crore. The net profit has surged by 56 per cent to Rs 1123 crore from
Rs 716 crore. A robust growth in this segment has continued on the back of
healthy order book positions for several companies like Thermax, Bharat
Heavy Electricals Limited, L&T, etc and a strong demand
both, in the domestic as well as the export markets. Thermax Limited, a
leading player in energy and environment sectors, announced a 60 percent
rise in net profit in the first quarter of 2006 at. Rs. 318.6 crores. The
company's order book position has stood at Rs 2,449 crores at the end of
June 2006 as compared to Rs 1,056 crores. Larsen and Toubro has also
reported an increase of 10 per cent in net rofit at Rs 157 crore for the
quarter under review. The company's engineering and construction segment
has recorded an impressive 121 per cent growth in order booking at Rs 6324
crore. International orders have constituted 16 per cent of the total
value of orders booked during the quarter. Major portion of orders are
accrued from infrastructure and refinery sectors. Oil
and Gas
The combined net sales of 18 oil refining and marketing companies exhibited good growth of 32 per cent for the quarter ended June 2006 at Rs 1,59,855 crore from Rs 1,20,54 crore over the same period previous year. The ratio of total expenditure to net sales has risen substantially to 92 per cent in April-June 2006 from an already high of 90 per cent over the same period a year ago. The profit margins have reduced at operating and gross level over the previous year, but the net profit margin has marginally improved to stand at 5.1 per cent compared to 4.6 per cent. Rising crude oil prices have had a mixed impact; refiners like HPCL and BPCL have posted losses of over Rs 600 crore during the quarter due to under-recovery of prices. Oil and Natural Gas Corporation Limited (ONGC) has posted sales turnover of Rs 14,677 crore for the quarter ended June 2006 from Rs 10,954 crore over April-June 2005. The increase in turnover has been due to higher price realisation for crude oil, natural gas and naphtha, and also marginal increase in production. The subsidy burden borne by the company during April-June 2006 has stood at Rs 3,120 crore as against Rs 1,748 crore. Despite, the heavy burden of subsidies, ONGC's net profit has risen by 24 per cent to Rs 4,118 crore from Rs 3,318 crore. Reliance Industries Limited has posted only 10.7 per cent increase in net profit due to refinery maintenance and fall in retail fuel sales. The company’s exports of manufacturing products have risen substantially by 86 per cent at 13,270 crore during the quarter ended June 2006 from Rs 7,144 crore. Indian Oil Corporation has registered a turnaround performance by posting a net profit of Rs 1,780 crore for the quarter ended June 2006 from a net loss of Rs 54 crore over the same period a year ago; after considering the profit of Rs 3,225 crore from sale of 20 per cent of its investment in ONGC. Shipping
One
of the exception to the robust financial growth of corporates, has been
the shipping industry which has been constantly been reporting paltry
profits and sales. Shipping plays an important role in the Indian economy,
yet only 30-32 per cent of
Table
8 show that, the net profit of all the leading shipping companies have
been adversely affected during April-June 2006-07 over April-June 2005-06.
The major factors responsible for the deteriorating performance of the
Indian shipping companies during Q1 2006-07 have been relatively softer
global freight rates, spiralling bunker prices as well as higher interest
and depreciation cost. Essar Shipping has recorded the biggest drop of 67
per cent with net profit falling to Rs 37 crore as against Rs 110 crore
over a year ago. Similarly, Shipping Corporation’s (SCI) net profit has
suffered by 33.6 per cent to Rs 182 crore for the quarter ended June 2006
from Rs 274 crore. One of the reasons for the fall has been the increasing
cost of bunkers that has hit vessels on spot voyages. During the quarter
under review, SCI’s cost has increased by 53 per cent to Rs 142 crore
over the same period a year ago. The average spot shipping freight rate in
the key tanker segment has been higher in the quarter ended June 2006 on a
year-on-year basis. For instance, within the tanker segment, the average
spot freight rate of VLCC (ships uses for transporting crude oil from the Indian
shipping companies are on a massive vessel acquisition spree. SCI is
planning to acquire 37 vessels for Rs 6,500 crore; it has chalked out a
mega plan to buy 72 vessels with Rs 13,300 crore by 2012. The country’s
largest private shipping company, Great Eastern Shipping Company (GE
shipping) has recently placed an order for four Long range One (LRI) and
five Medium range (MR) product tankers. The group has also ordered four
Anchor handling tug cum supply vessels and one platform supply vessel
which will be handled by Great offshore after demerger.
Essar shipping, which has recently raised $ 200 million abroad
to fund its $ 300 million vessel acquisition has plans to source another $
100 million from internal accruals. Varun shipping is planning to purchase
second hand offshore supply vessels, platform supply vessels and multi
support vessels for Rs 450 crore. The
shipping companies are on the verge of diversification, venturing into new
areas like port development, dry docks, offshore business and logistics.
Mercator Lines has forayed into offshore business by placing an order
worth Rs 810 crore for premium offshore oil-rig for worldwide drilling.
Varun shipping, a major LPG carrier with 77 per cent market share in Prospects
for 2006-07
Based on general observations, it is expected that the domestic demand-driven growth momentum would continue during 2006-07. The automobile companies will maintain their growth momentum on the basis of strong growth in domestic and export sales volumes. However, profit margins may remain subdued due to higher input costs mainly aluminium, steel, rubber and plastic and there by raise total cost of production. During 2005-06, the domestic pharmaceutical industry has shown a strong growth. However, in order to sustain growth it is imperative for pharma companies to be internationally competitive. The prospects for 2006-07 are as brighter as it was for 2005-06 on the back of mergers and acquisitions, new product patent and foreign direct investment inflows, etc. A healthy growth in the revenues of capital goods, construction and engineering companies given their ever-enlarging order books is expected to be sustained, assisted by strong investment activity in the economy. The fast moving consumer goods companies are expected to distend their growth rally. Despite a rise in cement prices, demand for cement is expected to be unaltered, due to increased infrastructure activities, mega investments in retail and real estate sector. The invigorating activity in the infrastructure and construction sectors is projected to provide the demand backed revenue growth impetus to the cement sector. The international crude oil prices have started falling down from past two months (September 2006) also government’s decision to issue oil bonds to oil companies would result in better performance of the oil marketing and refining companies. The rising prices of copper, aluminium and zinc in the international market or at London Metal Exchange are expected to benefit the domestic companies. Reference BSE
(www.bseindia.com); Various
media sources * This note is prepared by Vidya Kanitkar
Highlights of Current Economic Scene AGRICULTURE
The exports of spices and spice-based products from the country have surged by 23 per cent during the April-October 2006 in value terms to touch Rs 1,725.15 crore as against Rs 1,406.2 crore during the same period in the previous, driven by a sharp increase in cumin exports to Rs 136.8 crore against Rs 40.32 crore. In terms of quantity, however, the exports have registered a 2 per cent decline to 195,432 tonnes from 199,477 tonnes a year ago, mainly due to a 6 per cent drop in chilli exports from 70,540 tonnes to 66,250 tonnes during the period under consideration. As per the monthly forecast of International Grain Council (IGC), the total global grain output in 2006-07 (July-June) is likely to be 1,557 million tonnes. While consumption is projected at 1,623 million tonnes, the world carryover stocks are pegged at 242 million tonnes, which are at a 10-year low. Thus, the global grain market is expected to witness a very tight supply situation due to second successive fall in world grain output coupled with a further rise in consumption. As
per the estimates of the US Department of Agriculture (USDA), sugar output
of the country for the sugar season October-September 2006-07 is likely to
be 25.1 million tonnes. It has
estimated sugar consumption at 21.0 million tonnes, while export are
expected to be 2 million tonnes. With stocks of 4.7 million tonnes at the
start of the current sugar season, the total sugar availability has been
pegged at 29.8 million tonnes. The
global sugar output, according to USDA, is expected to increase to 155.2
million tonnes, 10.5 million tonnes higher from last year. The consumption
is likely to be 146 million tonnes, up 3.2 million tonnes from a year ago.
The exports are forecast at 47.7 million tonnes (down 3 million
tonne from a record 50.7 million tonne in 2005-06) and year-end global
stocks at 33.2 million tonnes, up 4.2 million tonnes from a year ago. The
report has attributed the rise in global sugar output to higher production
in The
continuation of ban on sugar exports is likely to benefit sugar industry
in Thiland, as sugar importing countries like Indonesia, Sri Lanka and
Bangladesh are likely to buy more from Thailand than from India. The
central government, with a view to control the rising prices of essential
commodities, has banned the export of sugar till from July 04, 2006 to
March 31, 2007. Black
pepper exports from the country to the The Union Ministry of Environment and Forests has notified empowering testing of seeds of genetically modified crops by the State seed inspectors. Under this exercise, the seed inspectors have been allowed to take samples of genetically modified crops for analysis and also to regulate the quality as per the provisions of the Environmental (Protection) Act. Industry Overall
Industrial sickness that has been plaguing India Inc ever since liberalisation is on the downslide for the past few years. However, notably, the decline in sickness is not due to “improved economic efficiency by the firms, but due to consolidation and restructuring in a prey-predator environment”, say experts. Standing high in 2000, the number increased at a high rate till 2002, after which year the number of companies turning sick as reported by BIFR started declining (See table). The number of cases of sickness reported has hit the nadir in 2006; till October 2006, the number of companies against which cases have been registered by BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 stood at just 74. Textiles The
Confederation of Indian Textile Industry (CITI) has asked the finance
ministry to extend the `optional' excise duty scheme to all textile
producers including the man-made fibre consuming industry. To facilitate
this, it wants the excise duty on man-made fibre products cut from the
present 8 per cent to 4 per cent at par with products from cotton. The
delegation has also suggested the total removal of the import duty on
polyester/viscose fibre to make imports viable. Another plea from the apex
textile body is to remove the excise and customs duty on furnace oil used
by the textile industry for captive generation, which, is expected to
bring about the parity in the power costs between InfrastructurePower Buoyed
by the steady progress on the Indo-US civilian nuclear deal, the central
government is firming up plans to set up around 5 new coastal nuclear
power stations using high-end reactors of 1,000 MWe and above. The
stations would be designed to accommodate up to 6-8 such reactors so that
the overall capacity of each station can be gradually ramped up to almost
8,000 MWe. A 12 member site selection committee under the department of
atomic energy (DAE), which recommends locations for setting up nuclear
plants, has visited a number of coastal areas in the country and is likely
to select sites in Gujarat, Andhra Pradesh, Orissa and Petroleum,
Petroleum Products and Natural Gas
The government has announced that petrol would be cheaper by Rs 2 per litre and diesel by Re 1 a litre, on the heels of the Congress President, Ms Sonia Gandhi's suggestion and pressure from the left parties to consider reducing the prices of the two products in order to protect the consumer. The Petroleum Minister, Mr Murli Deora, has informed the Parliament that it had been decided to reduce the retail selling prices of petrol and diesel with effect from 29th Nov 2006 midnight for the state-owned oil marketing companies (OMCs). As per the minister, the government had evolved a policy of equitable burden sharing to deal with the consequences of high international oil prices so as to put least burden on the common man and also to protect the health of navratna oil companies. Though the move would bring respite to the consumers, the margins of the state-owned oil marketing companies may take a hit. According to analysts, while petrol margins would come down by Rs 2, margins in the case of diesel would be negative and if crude prices again surge ahead, the situation could worsen unless domestic prices are revised accordingly. They argued that under recovery has a direct co-relation with profitability. The under recovery suffered by OMCs for the first half of the current fiscal year on sale of the four petroleum products stands at about Rs 33,200 crore. As per estimates based on current crude prices, the under recovery for 2006-07 is now expected around Rs 50,000 crore (including the Rs 2,000 crore additional impact due to price cut announced). Carbon
Fibre A
Rs 30-crore, indigenous carbon fibre manufacturing plant, which will feed
the Light Combat Aircraft (LCA) as well as civilian SARAS aircraft, among
other applications, is ready for commercial production. The process of
quality certification of the carbon fibres is under way and it is expected
to be ready by March 2007. The plant with an annual capacity of 20 tonnes
at the NAL campus is a joint initiative of the Defence Research and
Development Organisation and NAL. It will be able to meet the demands of
LCA, Agni missile, projects of the Indian Space Research Organisation as
strategic material and also some commercial industry. In NAL's passenger
aircraft SARAS, whose third prototype is under development, a conscious
decision has been taken to reduce the weight which is to be achieved by
the use of carbon fibres. Similarly, in the missiles and civilian
aircraft, the use of this lightweight, tough and anti-corrosive carbon
fibre-based composite is underway. The demand for carbon fibres is so high
that aircraft major like Boeing has booked large portion of the material
from wherever it is produced. With the civil aviation sector to boom in Coal The
ministries of power and coal and the Central Electricity Authority (CEA)
are finalising new norms to remove various constraints faced by power
utilities in procurement of coal. The regulatory utilities may be allowed
up to 100 per cent of their certified requirement through fuel supply and
transportation agreement (FSTA). To ensure fuel security to coal-based
power plants, a tripartite FSTA would be signed by the coal company,
railways ministry (for rail fed coal-based stations) and power utilities.
CEA has brought to the notice of power and coal ministries that
self-regulations imposed by power utilities and unloading constraints at
some thermal stations are critically affecting power production. In the
past, some of the power stations had requested companies to restrict the
supply of coal due to excessive stocks or lack of storage space. CEA has
argued that power stations have adequate unloading capacity and rakes can
be unloaded in free time allowed. However, oversized coal, stones and
boulders and sticky coal during monsoon result in high detention of rakes.
Bunching of rakes by railways also results in high detention of rakes. Railways A key point raised by the 14th Parliamentary standing committee report on land management by the railways is that even though the Indian Railways owns 4.31 lakh hectares (ha) of prime land, it is not working towards developing them for supplementing its internal resource generation. The committee has criticised the railways ministry for not having formulated a business model for development of its vacant land, despite this being a key component of the Ninth Plan for Railways. The Committee has also censured the Railways regarding the fact that the ministry has not been able to set up the Rail Land Development Authority (RLDA) even after a period of 10 years. While the ministry has already notified setting up of the RLDA, it has not been approved by the law ministry, which wants rules for the proposed body to be framed first. As far as the development of surplus land is concerned, the panel has recommended that surplus railway land for commercial development should be leased on short-term basis only, for a maximum period of 30 years. This will ensure that railways will be able to retrieve it easily, if required, in the future. About 2,033 ha of railway land, mainly in metros and urban areas, has been encroached upon. However, the committee has reported that Railways is preparing a unified policy to deal with such encroachments. Ports The
InflationThe annual point-to-point inflation rate based on wholesale price index (WPI) rose by 5.45 percent for the week ended November 18,2006 as compared to 5.29 per cent in the last week or at a lower rate of 4.27 per cent during the corresponding week last year. During the week under review, the WPI declined to 208.8 from 208.9 in the previous weeks’ level (Base: 1993-94=100). The index of ‘primary articles’ group, (weight 22.02 per cent), declined by 0.5 percent to 213.4 from its previous week’s level of 214.5, mainly due to decline in prices of ‘food article like jowar, fruits and vegetables , urad and fish marine and arhar. The index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) remained unchanged at 329.4. The index of ‘manufactured products’ group rose by 0.1 per cent to 180.3 from 180.1 during the week under review. Food Products like oil cake, rice bran oil, groundnut oil, rape and mustard oil, chemicals and chemical products prices rose. The latest final index of WPI for the week ended September 23,2006 has been revised upwards; as a result both, the absolute index and the implied inflation rate stood at 207.9 and 5.43 per cent as against their provisional levels of 206.6 and 4.77 per cent, respectively. BankingWith a view to liberalise procedure related to current account transactions, the RBI has permitted authorized dealers (DC) category – I banks to permit drawal of foreign exchange by person for purchase of trademark of franchise in India, without approval of the RBI. Plagued
with the problem of rising defaults estimated to be around Rs 4,000 to Rs
5,000 crore by many state governments undertakings, public sector banks (PSBs)
have sought the RBI’s intervention to recover their dues. The state
government corporations either have defaulted on both SLR and non-SLR
bonds. The Indian Banks Association (IBA) has also studied the matter and
submitted its report to the RBI a month ago detailing the possible action
plans by the central bank. Financial MarketsCapital
Markets Primary
Market The
Bangalore-based Sobha Developers, SDL was open for subscription with a
public issue of 88,93,332 equity shares of Rs 10 each through book
building process in the price band of Rs 550 - 640 per share. The issue
closed on November 29. The issue comprised a reservation of upto 8,89,300
equity shares for SDL's permanent employees and a net issue to the public
of 80,04,032 equity shares. It constitutes 12.20 per cent of the
post-issue paid-up capital of the company. The issue was oversubscribed
among all the categories and the portion reserved for qualified
institutional buyers (QIBs) was oversubscribed by about 169 times. LT
Overseas, maker of Dawat brand of rice, was open for subscription with an
initial public offering, IPO of 70,35,714 equity shares of Rs 10 each for
cash at a premium to be decided through the book-building process. The
issue price was fixed between Rs 50 and Rs 56 per equity share of Rs 10
each. The issue closed on November 30, 2006. Secondary
Market The
market kept its rally intact as investors continued to mop-up shares at
higher levels. The BSE sensex advanced 141.45 points (1.03 per cent)
during the week ended 1 December, to 13,844.78, a record closing high. The
S&P CNX Nifty rose 46.75 points (1.18 per cent), to settle at
3,997.60, an all-time closing high. Trading for the week began on a firm
note. On Monday (27 November), the sensex rose by 70.26 points, to
13,773.59, a record closing, partly on steady-to-firm Asian markets and
partly due to short covering in the derivatives segment. However, it fell
by 171.64 points, to 13,601.95, tracking weak global markets on 28
November 2006. The BSE sensex rose marginally by 14.78 points, to
13,616.73 on 29 November, amid a mixed trend in its constituents. On 30
November 2006, the sensex closed with a gain of 79.58 points, at
13,696.31. The sensex jumped
148.47 points to 13,844.78 on Friday (1 December), a record closing
following a smooth rollover of November contracts and the subsequent build
up for December series, coupled with robust GDP figures. Oil
& refinery stocks slipped after the government announced a cut in
retail prices of diesel and petrol by Re 1 and Rs 2, respectively, on
Wednesday. Also crude oil prices moved near $62 per barrel, leading to a
further fall in these stocks. Indian Oil Corporation (down 11.10 per cent
to Rs 445.50), Hindustan Petroleum Corporation (down 7.30 per cent to Rs
289.75) and Bharat Petroleum Corporation (down 9.15 per cent to Rs 342)
declined. The
Government is likely to come up with foreign direct investment norms for
stock exchanges. The notification specifying the FDI limit is expected
within in a week. It will mention separately the FDI limit as well as the
FII limit for investment in the stock exchanges," Mr K.P. Krishnan,
Joint Secretary in the Finance Ministry, told newspersons on the sidelines
of the India Economic Summit 2006 here on Monday. The Securities and
Exchange Board of India had recently issued new guidelines for
corporatisation of stock exchanges. These guidelines stipulate that the
public should continuously hold at least 51 per cent of the equity in such
exchanges. The capital market regulator has also capped the individual
investment, direct or indirect, in such exchanges at five per cent. The
stock of Lanco Infratech, an infrastructure development company with
interests in power, construction and property development, made a debut on
the bourses at Rs 270, at a premium of 12.5 per cent to the issue price of
Rs 240. At the BSE, the stock touched an intra-day high of Rs 275 and low
of Rs 239.55 before closing at Rs 241.40. The stock touched an intra-day
high at Rs 290 on the NSE before settling at Rs 241.40. The public issue
of the company was oversubscribed 11.88 times. The company entered the
capital markets with an initial public issue of 4.44 crore equity shares
of Rs 10 each at a premium to be decided by the book building process. The
company plans to use the proceeds for capitalising its power and property
subsidiaries. Part of the issue proceeds will go into the equity of
Nagarjuna power project, payment for acquisition of 13.3 per cent stake in
Aban power and payments to Globeleq for acquiring its 25.1 per cent equity
stake in Lanco Kondapalli, an independent power project located near
Vijaywada. The
book building process for de-listing of shares from the stock exchanges is
proposed to be scrapped by the SEBI, which has put in place an alternative
pricing mechanism. Under this, the offer price shall be higher than the
fixed price, which would be the floor price plus a premium of 25 per cent.
The floor price would be determined by Regulation 20 of SEBI (Substantial
Acquisition of Shares and Takeover). Regulation 20 sets down the norms for
the determination of the minimum offer price (in this case floor price).
Under the second option, the offer price will have to be over the fair
value determined by an accredited rating agency plus a premium of 25 per
cent. Derivatives
The
settlement went off smoothly with unusually low volatility across both
cash and F&O sections. The new settlement seems to have started with a
well-distributed bull-run.The spot Nifty touched 4001 and closed at
3997-plus. The December Nifty futures were settled at 4007 and January
Nifty was settled at 4012. Government
Securities Market
Primary
Market Under
the weekly T-Bill auctions, the RBI mopped up Rs.2563 crore and Rs.2273.18
crore through 91-day T-Bill and 182-day T-Bill. From this, the RBI raised
Rs.1500 crore and Rs.1000 crore under the Market Stabilisation Scheme
(MSS) through 91-day T-Bill and 182-day T-Bill respectively. The cut-off
yields for the 91-day and 182-day T-Bill were 6.6877 per cent and 6.8869
per cent respectively. The
Government of RBI
issued 7.75 per cent Oil Marketing Companies Government of India Special
Bonds 2021 for Rs.5,000 crore to three Oil Marketing Companies as
compensation. The Special Bonds were issued to three Oil Marketing
Companies as compensation for under-recoveries in their domestic LPG and
Kerosene (PDS) operations during the current financial year. The second
tranche of the Special Bonds was issued at par to Indian Oil Corporation
Ltd. (including IBP) for Rs.2,838 crore, Bharat Petroleum Corporation
Limited for Rs.1,135 crore and
Hindusthan Petroleum Corporation Limited for Rs.1,027 crore. Secondary
Market Call
rates during the period ranged between 6.14 per cent and 6.25 per cent,
while repo rates ranged between 5.13 per cent and 6.15 per cent and the
CBLO rates ranged between 5.19 per cent and 6.05 per cent. The daily
average outstanding amounts in the LAF (reverse repo) operations conducted
during the period were Rs.15,684 crore vis-à-vis Rs.17,279 crore and Rs.
16,350 crore for CBLO and Call market respectively. The
weighted average YTM of G.S 2016 7.59 per cent bond was 7.4171 per cent on
December 01, 2006 as compared to 7.4425 per cent on November 24, 2006. The
1-10 year YTM spreads decreased by 5 bps to 53bps. Bond
Market
Speaking
at a session on Financial Markets at the India Economic Summit 2006, Mr
Krishnan, Joint
Secretary in the Finance Ministry
said that, post-Patil committee recommendations on corporate bond market,
the Finance Ministry had asked a law firm to identify the legislative
changes that may be required to implement the recommendations of the
committee. "It was found that about 78 pieces of legislation require
a change. These changes include administrative as well as legislative
change. We are now identifying those that could be done through executive
orders and those that may require change in law," Mr Krishnan said.
He pointed out that an issue like definition of "corporate bond"
needs attention. "There is no specific definition of a corporate
bond. We may have to amend the Companies Act and the SCRA Act for
this," he said. On the issue of deepening the capital market, he
underscored the need for more good quality issues to tap the capital
market. Foreign
Exchange Market
The
rupee-dollar exchange rate depreciated from Rs 44.87 on November 24 to Rs
44.67 as on December 1. The six-month forward premia closed at 2.1 per
cent (annualized) on December 01, 2006 vis-à-vis 1.96 per cent on
November 24, 2006. Commodities
Futures derivatives
The
businesses on the national commodity exchanges are witnessing a declining
trend amidst rising commodity prices. The aggregate turnover on NCDEX
plunged fromRs 1,17,47,142 crore in September to Rs 94,12,513 crore in
October. Similarly, the turnover on MCX fell from Rs 1,90,128 crore in
September to Rs 1,76,185.2 crore in October. One of the major reasons for
declining trading volumes could be due to losses incurred by investors in
the last several months because of high volatility. In addition, new
market participants have turned rather wary of entering this market
without gaining adequate knowledge of the market and products. The futures
market regulator - Forward Markets Commission (FMC) - has played a key
part in the slowdown by tightening regulatory oversight through higher
margins, penalties and so on. Systemic risks - bad and / or delayed
deliveries - too have scared participants away. The regulator has cut open
interest position on many commodities forcing many investors to liquidate
their positions to meet the norms. The imposition of additional margins on
volatile commodities has also scared away many small investors. Insurance Life Insurance Corporation of India (LIC) has launched “Corporate Active Data Warehouse (CADW), the world’s largest warehouse in the life insurance sector and world class data centre to house its entire IT infrastructure relating to its core applications. The CADW has been fed with data related to 28 crore policies and their transactions over the past 5 years of which 19 crore policies are live. Under the project, LIC’s 2048 branches, 71 pension and group business units, 7 zonal offices and the corporate office have been centralized CADW. Corporate
Sector
Tata Power has registered a 13.8 per cent increase in sales revenue at Rs 1200 crore for the quarter ended September 2006 and its net profit surged by 61 per cent to Rs 202 crore over the same period a year ago. Reliance Communications has awarded $ 700 million equipment contract to Chinese telecommunications vendor ZTE Corporation. Under the contract, the Chinese company will supply GSM equipment, including base transceiver stations (BTS), receivers, soft switches and other equipment, to the Indian company. Tata Consultancy Services (TCS) has signed $ 65 million, seven-year agreement to provide a full range of managed IT services to Somerfield, a leading UK-based small-format food retailer. Under the new agreement, TCS will takeover the entire IT operations, asset management and planning for Somerfield and provide a fully managed IT infrastructure and applications service within Somerfield, aimed at meeting its current and future business demands. Ranbaxy Laboratories has strengthen its position in the South African pharmaceutical market by acquiring Be-Tabs Pharmaceuticals (Pty) Limited, the fifth largest generic player in the country for $70 million. This is the fourth major overseas acquisition of the company. Thomas
Cook ( External SectorThe government is considering a proposal to raise the foreign investment cap in domestic carriers from 49 per cent to 74 per cent. This has been necessitated following the failure of the existing regime to bring in substantial foreign direct investment in the sector. A
Group of Ministers has cleared a proposed legislation that will allow
foreign universities to set up campuses in The finance ministry has cleared 17 FDI proposals worth 3536 crores including Italian auto major Fiat SPAs proposal to enhance investment in its Indian arm. TelecomBSNL is tying up with the world’s largest chipmaker, Intel, to deploy the country’s first wireless broadband and telecom service on WiMAX.
*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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