Today's post is inspired by the Breaking news from the Indian Economy " GDP Grows by 7.9% during Q1 FY'09". Read on .....lots of info ahead !! Happy Weekend !!!!
India's economy probably grew at the slowest pace since 2005 last quarter as the fastest inflation in a decade and higher borrowing costs damped consumer spending.
India, Asia’s third-largest economy, expanded at 7.90% percent during the quarter ended June 30 from a year earlier, vis-à-vis an 8.8 percent gain in the previous quarter ended March 31st 2008.
Higher fuel and food prices have pushed inflation to 12.4 percent and forced the Reserve Bank of India to raise interest rates three times since June. The central bank still expects the economy to expand around 8 percent this year, almost double the average pace since India's independence in 1947. However India's growth is still pretty good the future will not be that Bright as it was in the last few years because of the aggressive monetary tightening.
India may lose its position as the world's fastest-growing major economy after China this year, according to World Bank estimates. Russia's economy may grow 7.1 percent in 2008, overtaking India's 7 percent expansion this year, while China may increase 9.4 percent this year, the bank forecast in June. However, the standings do not matter much except for the expected FII inflows that might be taken aback by the declining growth rates of the economy. The mitigant is that the valuations of most of the companies have come down from the high premiums commanded during the calendar year 2007. Thus, the theme of value investing might and will attract the FIIs in the next few quarters assuming positive political climate in the country.
As of date High inflation and interest rates are issues that are bothering the Indian industry as they have an impact on consumer demand and hurt corporate profitability.
On the political front, Inflation can win or lose elections in India, where about 456 million people live below the World Bank's poverty line of $1.25 a day. Mr. Manmohan Singh lost ground in nine of 11 state elections since January 2007 because of rising prices. General elections are scheduled to be held before May. To fight the back lash against spiraling inflation Mr. Singh wrote off $17 billion of farm loans during February, 2008 and during this month increased salaries of about 5 million government employees by 21 percent to spur consumer demand and there by win the hearts of the Indian middle class….AAM AADMI !!!!!
Industry, which makes up a quarter of gross domestic product, is also getting support from investments in India's special economic zones, which are enclaves with uninterrupted power, water and other infrastructure support for manufacturers. It is expected that investments may reach 2 trillion rupees ($45 billion) in about 250 zones by December 2009, the commerce ministry estimates.
India's passenger car sales were almost stagnant in July. Maruti Suzuki India Ltd., maker of half the cars in the country, posted a heart breaking 1.5 percent gain in sales while Hyundai Motor Co.'s India unit, the nation's second-largest car maker, boosted sales by 0.5 percent!!!
ACC Ltd., India's biggest cement-maker, reported a worse- than-estimated 27 percent drop in second-quarter profit on fuel costs and government-enforced price curbs to check inflation. Sales rose by 1.2 percent as construction slowed.
India's benchmark Sensitive index has declined by a third this year, while the yield on the key 10-year bond has climbed about 60 basis points to 8.80 percent. The rupee has weakened 8.3 percent against the U.S. dollar since Jan. 1.
Services, which account for 55 percent of the economy, may have also been dented in the second quarter because of higher interest rates. Banking services, for example, will probably take a hit after loan growth at Indian banks slowed to about 23.5 percent in the first six months of this year, compared with 27.8 percent a year earlier, according to the central bank.
The June-September monsoon, which accounts for a whooping four-fifths of the nation's annual rainfall, was 1 percent below average in the week ended Aug. 24, according to the weather office. A normal monsoon will help the country's 234 million farmers harvest a bigger crop, boosting incomes. Agriculture makes up about 20 percent of India's economy, though it provides a livelihood to three-fifths of India's 1.1 billion people who dwell in rural areas.
Amen.....
www.invest-insight.blogspot.com
Disclaimer: The author of this page is not a registered financial advisor, and you should not construe anything written here to be investment advise. You should consult a qualified broker or other financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. No representation is being made that any investment made on the basis of data or information on this blog will result in profits. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments.
Friday, August 29, 2008
Thursday, August 21, 2008
Indian Realty Sector - Global Thinking to fight slump !!
The realty sector is the most visible sector in the pink press during the last few quarters. Recently, there were some insights on the globalization pill being medicated by the subject sector. This post dwells on the same.....
Let me share with you a very interesting definition of globalization, thanks to the world wide web !!!!
Sri.Narayana Murthy, the iconic founder of one of India’s most revered IT company Infosys, had once defined globalization as
"Sourcing capital from where it cheapest,
sourcing talent from where it is best available,
producing where it is most cost effective and
selling where the markets are without being constrained by national boundaries."
The real estate industry seems to be swayed by this definition and according to a leading business daily, a handful of firms from the sector are setting up shop overseas and that too, for a variety of reasons.
Let me share with you a very interesting definition of globalization, thanks to the world wide web !!!!
Sri.Narayana Murthy, the iconic founder of one of India’s most revered IT company Infosys, had once defined globalization as
"Sourcing capital from where it cheapest,
sourcing talent from where it is best available,
producing where it is most cost effective and
selling where the markets are without being constrained by national boundaries."
The real estate industry seems to be swayed by this definition and according to a leading business daily, a handful of firms from the sector are setting up shop overseas and that too, for a variety of reasons.
- While financial hubs like US and UK are being sought for locking in long-term private equity funds
- Countries like China are being scoured for cheaper construction material, a godsend in these times of inflation.
- Destinations like Singapore and Australia are being tapped to unearth potential buyers.
- In Sri Lanka and Malaysia for identifying properties for development.
These efforts are being taken to beat the slump that is currently underway in India and the one that has come on the back of five years of robust growth. High interest rates and inflation have not only squeezed margins and scared away buyers but they have also made fund raising difficult, forcing players to adopt different strategies. For the long-term though, the outlook of the sector is quite positive.
Assocham, the industrial body predicts the real estate sector to grow nearly 14 fold over the next 10 years on the back of demand from IT services and residential segments.
Indian Telecommunications Sector – An Overview
Today's post gets you a capsule on the very exciting Indian Telecom sector. Good reading asset.
The Indian telecommunications industry is abundant with exciting possibilities. The industry is growing at the fastest pace in the world and India is expected to become the second largest telecom market globally by 2010. Forthcoming services such as 3G and WiMax will further augment the growth rate.
The world's leading telecom handsets manufacturers, such as Nokia, Samsung, Motorola and LG have their presence in India, along with leading global service companies and infrastructure majors, such as Vodafone, AT&T, Ericsson, Alcatel, Singapore Telecom and Siemens.
On June 18, 2008, India reached the target of having 300 million telephone subscribers, becoming the second largest telecommunications network in the world after China. India is adding around 8.5 million to 10 million new mobile subscribers to the network each month, emerging as one of the fastest growing telecom markets in the world.
According to the report titled 'Mobile BRIC: Extreme Growth Ahead', BRIC (Brazil, Russia India and China) India is expected to be the second largest mobile market in the BRIC nations, with 560 million mobile users, by 2012 (after China with 800 million users).
In July 2008, the cumulative revenues of cellular, fixed line, national long distance, international long distance, broadband, radio trunking and VSAT services, had risen to a humongous US$ 30,888 billion registering a growth of 21.3 per cent, as revealed in a Voice & Data survey. The Indian telecom market had generated revenues around US$ 20 billion in 2006-07.
The market saw a growth rate of 33 per cent over previous year and recorded a compounded annual growth rate (CAGR) of 22 per cent for the period from 2002-03 to 2006-07. This growth has resulted in the revenues of the segment growing two-fold, in the past three years. It is projected that the industry will generate revenues worth US$ 43 billion in 2009-10.
India's overall tele-density stood at 26.89 per cent in June 2008, and the government has plans to raise the tele-density to 40-45 per cent by 2010, thereby offering greater growth opportunities for service providers to exploit the large untapped potential.
Growth in Segments
Indian mobile operators are adding over 8 million subscribers a month, with a majority of the new users being from rural areas. The share of mobile phones had increased from 71.69 per cent at the end of March 2006 to 87.68 per cent at the end of May 2008. While the total mobile subscriber base was 277.92 million, wire-line subscriber base was 39.05 million. The number of mobile subscribers in India, (India is the world's second-largest wireless market after China) has gone up to around 280 million.
According to a report by Gartner Inc., India's mobile subscriber base is projected to exceed 737 million connections by 2012 growing at a CAGR of 21 per cent and India is likely to remain the world's second largest wireless market after China in terms of mobile connections. The overall cellular services revenue in India is projected to grow at a CAGR of 18 per cent from 2008-2012 to exceed US$ 37 billion. Cellular market penetration will rise to 60.7 per cent from 19.8 per cent in 2007.
GSM companies added over 6.3 million new customers in June 2008, (excluding the GSM subscriber base of Reliance Telecom) crossing the 212 million mark, with a growth of 3.07 per cent over May 2008, according to the Cellular Operators' Association of India (COAI).
According to an analyst firm Springboard Research, India will become the leading market for WiMAX in the Asia pacific region and is expected to have 15.8 million WiMAX subscribers by 2012, accounting for 46.7 per cent of total subscribers in Asia-Pacific and 35.7 per cent of revenues from the region. However, India had only 3.4 million broadband subscribers in January 2008, which was much lesser than the government's target of 9 million.
Global consumer electronics and mobile phone vendors are going green in India. Bigwigs like Nokia, LG, Samsung and Haier, among others, are planning to introduce products that will be positioned on an environment-friendly platform, starting the trend of environment as a brand strategy in the Indian consumer electronics industry.
Investments on the Anvil
The booming domestic telecom market has been attracting huge amounts of investment, which is likely to accelerate with the entry of new players and launch of new services.
The telecom industry saw an estimated US$ 8.5 billion in investment flow in during 2006-07 alone, of which US$ 550 million was in the form of foreign direct investment. The industry is expected to receive an investment of a whopping US$ 32.5 billion between 2008-2010, with the entry of new licence holders and their launching of new services.
With 3G in the offing and TRAIs latest recommendations on net telephony, get ready to experience action packed telecom sector in the ensuing weeks !!
Good Day.
www.invest-insight.blogspot.com
Disclaimer: The author of this page is not a registered financial advisor, and you should not construe anything written here to be investment advise. You should consult a qualified broker or other financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. No representation is being made that any investment made on the basis of data or information on this blog will result in profits. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments.
The Indian telecommunications industry is abundant with exciting possibilities. The industry is growing at the fastest pace in the world and India is expected to become the second largest telecom market globally by 2010. Forthcoming services such as 3G and WiMax will further augment the growth rate.
The world's leading telecom handsets manufacturers, such as Nokia, Samsung, Motorola and LG have their presence in India, along with leading global service companies and infrastructure majors, such as Vodafone, AT&T, Ericsson, Alcatel, Singapore Telecom and Siemens.
On June 18, 2008, India reached the target of having 300 million telephone subscribers, becoming the second largest telecommunications network in the world after China. India is adding around 8.5 million to 10 million new mobile subscribers to the network each month, emerging as one of the fastest growing telecom markets in the world.
According to the report titled 'Mobile BRIC: Extreme Growth Ahead', BRIC (Brazil, Russia India and China) India is expected to be the second largest mobile market in the BRIC nations, with 560 million mobile users, by 2012 (after China with 800 million users).
In July 2008, the cumulative revenues of cellular, fixed line, national long distance, international long distance, broadband, radio trunking and VSAT services, had risen to a humongous US$ 30,888 billion registering a growth of 21.3 per cent, as revealed in a Voice & Data survey. The Indian telecom market had generated revenues around US$ 20 billion in 2006-07.
The market saw a growth rate of 33 per cent over previous year and recorded a compounded annual growth rate (CAGR) of 22 per cent for the period from 2002-03 to 2006-07. This growth has resulted in the revenues of the segment growing two-fold, in the past three years. It is projected that the industry will generate revenues worth US$ 43 billion in 2009-10.
India's overall tele-density stood at 26.89 per cent in June 2008, and the government has plans to raise the tele-density to 40-45 per cent by 2010, thereby offering greater growth opportunities for service providers to exploit the large untapped potential.
Growth in Segments
Indian mobile operators are adding over 8 million subscribers a month, with a majority of the new users being from rural areas. The share of mobile phones had increased from 71.69 per cent at the end of March 2006 to 87.68 per cent at the end of May 2008. While the total mobile subscriber base was 277.92 million, wire-line subscriber base was 39.05 million. The number of mobile subscribers in India, (India is the world's second-largest wireless market after China) has gone up to around 280 million.
According to a report by Gartner Inc., India's mobile subscriber base is projected to exceed 737 million connections by 2012 growing at a CAGR of 21 per cent and India is likely to remain the world's second largest wireless market after China in terms of mobile connections. The overall cellular services revenue in India is projected to grow at a CAGR of 18 per cent from 2008-2012 to exceed US$ 37 billion. Cellular market penetration will rise to 60.7 per cent from 19.8 per cent in 2007.
GSM companies added over 6.3 million new customers in June 2008, (excluding the GSM subscriber base of Reliance Telecom) crossing the 212 million mark, with a growth of 3.07 per cent over May 2008, according to the Cellular Operators' Association of India (COAI).
According to an analyst firm Springboard Research, India will become the leading market for WiMAX in the Asia pacific region and is expected to have 15.8 million WiMAX subscribers by 2012, accounting for 46.7 per cent of total subscribers in Asia-Pacific and 35.7 per cent of revenues from the region. However, India had only 3.4 million broadband subscribers in January 2008, which was much lesser than the government's target of 9 million.
Global consumer electronics and mobile phone vendors are going green in India. Bigwigs like Nokia, LG, Samsung and Haier, among others, are planning to introduce products that will be positioned on an environment-friendly platform, starting the trend of environment as a brand strategy in the Indian consumer electronics industry.
Investments on the Anvil
The booming domestic telecom market has been attracting huge amounts of investment, which is likely to accelerate with the entry of new players and launch of new services.
The telecom industry saw an estimated US$ 8.5 billion in investment flow in during 2006-07 alone, of which US$ 550 million was in the form of foreign direct investment. The industry is expected to receive an investment of a whopping US$ 32.5 billion between 2008-2010, with the entry of new licence holders and their launching of new services.
With 3G in the offing and TRAIs latest recommendations on net telephony, get ready to experience action packed telecom sector in the ensuing weeks !!
Good Day.
www.invest-insight.blogspot.com
Disclaimer: The author of this page is not a registered financial advisor, and you should not construe anything written here to be investment advise. You should consult a qualified broker or other financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. No representation is being made that any investment made on the basis of data or information on this blog will result in profits. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments.
Thursday, August 14, 2008
Entrepreneurship - Reality Bytes
Today’s post is a press article which reveals interesting insights on Entrepreneurship. The author of t is co-founder and chief executive officer, InfoEdge (India) Ltd, which runs the Web portal Naukri.com.
Entrepreneurship is a much more celebrated term today than it was till the 1980s. The world has turned around to look at people who have executed innovative ideas to create value. Entrepreneurship as a career choice has gained social acceptability among the educated middle classes in recent years. I have been on this path for nearly 20 years now. Friends have always ribbed me about the fact that I preach entrepreneurship, but we started a job site— Naukri.com.
Today, entrepreneurship is going beyond mere social acceptability and even getting to be fashionable as a career choice. A large number of people are doing start-ups, many because of a herd mentality, taking inspiration from stories of entrepreneurs who founded successful companies. This is a worrying trend.
There is a misplaced sense of romance about entrepreneurship. I would like to caution those considering a start-up that the early days of struggle of successful entrepreneurs seem romantic to observers only in hindsight. When you are actually going through it, there is a lot of pain. And for every poster boy success in entrepreneurship, there are a hundred who are still struggling. The failure rate is high.
The first thing to understand is that entrepreneurship is not about getting rich. Sure, if the company you start does become successful, chances are you will make money. But, that’s a happy incidental outcome. It should not be the main object of the endeavour.
If you want to be an entrepreneur in order to become wealthy, my suggestion is, don’t. There are very few entrepreneurs I know who succeeded without a long period of financial struggle, belt tightening and personal sacrifice. More often than not, success will take longer in coming than you think. There will be times when at the end of the month there will not be enough money to pay the office rent and employee salaries, but you will somehow scrape though.
There will be times when you yourself will not be able to take home a salary for months. There will be years on end when you will be financially the worst-off person in your batch from business school.
During these years, you will need to make compromises on your lifestyle—the house you are able to afford, the car you drive, the holidays you take, the restaurants where you eat and the schools your children go to.
And all this without any guarantee of success, in search of the big idea, hoping for venture capital funding— years without any light at the end of the tunnel.
During times like this only your passion, your commitment to the idea and your stubbornness will see you through. So, before making the jump ask yourself a question: “Will I love doing this for the rest of my life even if I am not financially successful?” If the answer is a clear yes, then you have passed the first test of commitment.
Then, when is entrepreneurship a worthwhile career to pursue? If one in hundred will succeed, surely it is an irrational thing to do.
You should become an entrepreneur only if you believe that that is how you will find fulfilment.
Entrepreneurship is about freedom, creating, a chance to build a brand, an institution, showing the world a new way of doing something, being your own boss, creating a legacy that will outlive you, identity, making a difference, obsession, ego, having a shot at something big, doing what you love, innovating, doing things your way…
Whichever way you want to put it, it is about finding meaning in your life.
Yes, it is an irrational thing to do—if you are well educated and you have a good career ahead of you as a professional manager.
It is an article of faith. A bit like religion. Or as my friend Nikesh Sinha eloquently put it: “It is like falling in love”.
It’s an irrational choice.
Independence day greetings
www.invest-insight.blogspot.com
Disclaimer: The author of this page is not a registered financial advisor, and you should not construe anything written here to be investment advise. You should consult a qualified broker or other financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. No representation is being made that any investment made on the basis of data or information on this blog will result in profits. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments.
Entrepreneurship is a much more celebrated term today than it was till the 1980s. The world has turned around to look at people who have executed innovative ideas to create value. Entrepreneurship as a career choice has gained social acceptability among the educated middle classes in recent years. I have been on this path for nearly 20 years now. Friends have always ribbed me about the fact that I preach entrepreneurship, but we started a job site— Naukri.com.
Today, entrepreneurship is going beyond mere social acceptability and even getting to be fashionable as a career choice. A large number of people are doing start-ups, many because of a herd mentality, taking inspiration from stories of entrepreneurs who founded successful companies. This is a worrying trend.
There is a misplaced sense of romance about entrepreneurship. I would like to caution those considering a start-up that the early days of struggle of successful entrepreneurs seem romantic to observers only in hindsight. When you are actually going through it, there is a lot of pain. And for every poster boy success in entrepreneurship, there are a hundred who are still struggling. The failure rate is high.
The first thing to understand is that entrepreneurship is not about getting rich. Sure, if the company you start does become successful, chances are you will make money. But, that’s a happy incidental outcome. It should not be the main object of the endeavour.
If you want to be an entrepreneur in order to become wealthy, my suggestion is, don’t. There are very few entrepreneurs I know who succeeded without a long period of financial struggle, belt tightening and personal sacrifice. More often than not, success will take longer in coming than you think. There will be times when at the end of the month there will not be enough money to pay the office rent and employee salaries, but you will somehow scrape though.
There will be times when you yourself will not be able to take home a salary for months. There will be years on end when you will be financially the worst-off person in your batch from business school.
During these years, you will need to make compromises on your lifestyle—the house you are able to afford, the car you drive, the holidays you take, the restaurants where you eat and the schools your children go to.
And all this without any guarantee of success, in search of the big idea, hoping for venture capital funding— years without any light at the end of the tunnel.
During times like this only your passion, your commitment to the idea and your stubbornness will see you through. So, before making the jump ask yourself a question: “Will I love doing this for the rest of my life even if I am not financially successful?” If the answer is a clear yes, then you have passed the first test of commitment.
Then, when is entrepreneurship a worthwhile career to pursue? If one in hundred will succeed, surely it is an irrational thing to do.
You should become an entrepreneur only if you believe that that is how you will find fulfilment.
Entrepreneurship is about freedom, creating, a chance to build a brand, an institution, showing the world a new way of doing something, being your own boss, creating a legacy that will outlive you, identity, making a difference, obsession, ego, having a shot at something big, doing what you love, innovating, doing things your way…
Whichever way you want to put it, it is about finding meaning in your life.
Yes, it is an irrational thing to do—if you are well educated and you have a good career ahead of you as a professional manager.
It is an article of faith. A bit like religion. Or as my friend Nikesh Sinha eloquently put it: “It is like falling in love”.
It’s an irrational choice.
Independence day greetings
www.invest-insight.blogspot.com
Disclaimer: The author of this page is not a registered financial advisor, and you should not construe anything written here to be investment advise. You should consult a qualified broker or other financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. No representation is being made that any investment made on the basis of data or information on this blog will result in profits. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments.
Thursday, August 7, 2008
Oil & Gas Q1 FY'09 : mini-Report card
Todays post dwells on the performance of the domestic Oil & gas sector during Q1 FY'09 (April 08 to June 08)
The upstream segment continued to enjoy favorable conditions due to the buoyant crude prices. In fact, ONGC’s operating margins (OPM) and net profit margins (NPM) improved substantially in 1QFY09 over 4QFY08. However, it subsidises a substantial portion of the under recoveries of the downstream oil marketing companies which is announced in an ad hoc manner. As a result earning visibility remains poor.
The midstream segment continued to do well because these companies earn transportation charges on volumes transmitted. They aren’t directly affected by high crude prices and the high demand for gas keeps their infrastructure operating at high levels. There was no substantial change in either the operating or net margins of the midstream companies in 1QFY09. We believe, this segment of the energy sector will continue to be insulated to gyrations in commodity prices or a possible slowdown in the economy.
In the downstream segment, the public sector oil marketing companies suffered the most in 1QFY09, as crude prices spiraled upwards mounting further under recoveries on them. They were also hit by one time provision of employee benefits. The other players managed to avoid a similar fate. Castrol sells lubricants and only suffered a small decline. As a pure refiner, Chennai Petro benefited from the buoyant gross refining margins (GRMs). RIL’s results were strangely subdued this quarter with it clocking GRMs lower than those of the public sector refineries. One of the possible reasons is that it holds lower inventory of crude as compared to its public sector counterparts. As crude prices spiked during the quarter, fresh contracts of crude made RIL’s inputs costs higher in comparison to its peers.
OPM NPM
>Upstream
As the crude hovers around $120 currently and the fears of crude touching $ 200 are as such buried now, there are positive vibes in the industry. However, the spiking tensions between Iran and Israel cannot be ignored. There is danger lurking in the dark deserts........
http://www.invest-insight.blogspot.com/
Disclaimer: The author of this page is not a registered financial advisor, and you should not construe anything written here to be investment advise. You should consult a qualified broker or other financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. No representation is being made that any investment made on the basis of data or information on this blog will result in profits. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments.
The upstream segment continued to enjoy favorable conditions due to the buoyant crude prices. In fact, ONGC’s operating margins (OPM) and net profit margins (NPM) improved substantially in 1QFY09 over 4QFY08. However, it subsidises a substantial portion of the under recoveries of the downstream oil marketing companies which is announced in an ad hoc manner. As a result earning visibility remains poor.
The midstream segment continued to do well because these companies earn transportation charges on volumes transmitted. They aren’t directly affected by high crude prices and the high demand for gas keeps their infrastructure operating at high levels. There was no substantial change in either the operating or net margins of the midstream companies in 1QFY09. We believe, this segment of the energy sector will continue to be insulated to gyrations in commodity prices or a possible slowdown in the economy.
In the downstream segment, the public sector oil marketing companies suffered the most in 1QFY09, as crude prices spiraled upwards mounting further under recoveries on them. They were also hit by one time provision of employee benefits. The other players managed to avoid a similar fate. Castrol sells lubricants and only suffered a small decline. As a pure refiner, Chennai Petro benefited from the buoyant gross refining margins (GRMs). RIL’s results were strangely subdued this quarter with it clocking GRMs lower than those of the public sector refineries. One of the possible reasons is that it holds lower inventory of crude as compared to its public sector counterparts. As crude prices spiked during the quarter, fresh contracts of crude made RIL’s inputs costs higher in comparison to its peers.
OPM NPM
>Upstream
- ONGC 59% 33%
>Midstream
- IGL 40% 23%
- GAIL 24% 16%
- Gujarat Gas* 18% 14%
- Petronet LNG 12% 6%
>Downstream
- Castrol 20% 13%
- RIL 15% 10%
- Chennai Petro 10% 6%
- BPCL -2% -3%
- HPCL -1% -3%
As the crude hovers around $120 currently and the fears of crude touching $ 200 are as such buried now, there are positive vibes in the industry. However, the spiking tensions between Iran and Israel cannot be ignored. There is danger lurking in the dark deserts........
http://www.invest-insight.blogspot.com/
Disclaimer: The author of this page is not a registered financial advisor, and you should not construe anything written here to be investment advise. You should consult a qualified broker or other financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. No representation is being made that any investment made on the basis of data or information on this blog will result in profits. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments.
Wednesday, August 6, 2008
Dr.Economy on Dragon & Elephant !!!
The China dragon is slowing down after a scorching pace of growth, Asia’s largest economy, is likely to find itself struggle to sustain this momentum. The dazzling growth in the Chinese economy in the past few years and the Olympics, which is being hosted in the country had bolstered demand for various metals and oil and was the chief catalyst in spurring the rally in commodities. But the ills afflicting economies across the world seem to be sapping the strength of this Asian behemoth as well. The signs are evident.
- Exports are growing at a snail’s pace as a direct result of the slowdown in the US and Europe and appreciation of the yuan against the dollar.
- New orders from factories are plunging, the housing market is weakening and inflation in the meanwhile is steadily moving northwards.
- Fierce snowstorms during the early part of the year, the earthquake and resultant floods have only compounded its woes.
The Chinese economy had been growing at a rate of 11% a year in the past and economists have now forecasted growth to taper off to around 9%-10% in the coming year or even downwards. Given that the developed world is already heading into a recession, a slowdown in China could further cast a pall of gloom on global growth. Metal prices for instance are already showing signs of cooling off. To put things into perspective, as per reports on Bloomberg, China's home-appliances makers, the world's largest exporters, are cutting purchases of copper as e xports of air conditioners and fridges slow.
What about the Indian(Elephant) economy?
Inflation does not seem to be sparing India either with the figure being just a hair’s breadth away from the 12% mark. As a result, the RBI effected a hike in the CRR as well as the repo rate to 9% each to rein in inflation. More important is the expected growth in the country’s GDP going forward. The Indian economy had been logging in robust growth rates of 9% and above in the past three years. This made the country attractive for many investors to pour money into and hugely contributed to the surge in the Indian stock markets. The tide seems to have turned now.
Given the high level of inflation and the increase in interest rates, replicating this kind growth in the coming year is likely to be a Herculean task. Indeed, the RBI itself has revised the GDP growth estimate for FY09 from the range of 8%-8.5% to just 8%. And the Indian stockmarkets have been on a downward spiral following the weakness in the global markets and the impending slowdown therein. Soaring oil prices have further played spoilsport.
The Economist states that despite the recent easing of crude prices globally, India still faces a crude import bill of US$ 120 bn this fiscal as compared to US$ 69 bn the year before. The oil and fertilizer subsidies, together with the farm loan waivers and the huge pay hikes to government employees is expected to put heavy burden on public finances. The Indian rupee, which had appreciated sharply against the dollar last year is already beginning to feel the heat and has depreciated considerably this year after some c racks have begun to appear in the Indian economy.
www.invest-insight.blogspot.com
Tuesday, August 5, 2008
Indian Corporate spin mastero - Sales upswing, Profits downswing ?
Today’s post relates to the current corporate scenario where in there exists increased demand and inflation with corporate sales growth surging ahead but higher raw material costs have ensured profit growth has plummeted.
With the economy slowing down dramatically and the growth in the Index of Industrial Production down to just 3.8 per cent in May 2008 as compared to 10.6 per cent in May 2007, you’d think corporate sales would be plummeting. However, thanks to consumer demand built on five years of high GDP growth, and a sharp spurt in inflation, especially in commodities, corporate India’s sales are rising as never before. Just how dramatic this growth is can best be judged from the RBI’s latest Expectations Survey where just a fifth of those polled expected selling prices to increase in the quarter.
This sharp hike was seen pretty much across sectors — so while FMCG firm Hindustan Lever saw at 21 per cent hike in top-line growth, infrastructure majors like Larsen & Toubro and BHEL saw a 53 per cent and 34 per cent hike respectively.
There were, of course, exceptions and engineering major ABB saw a disappointing 15 per cent hike (on the back of an equally poor 17 per cent increase in the March quarter) and retailing giant Shoppers Stop saw same-stores sales growth fall to just 7 per cent (in comparison with a 16 per cent growth in the March quarter). Commodity producers like Reliance Industries saw an 41 per cent growth in topline, SAIL 37 per cent and Tata Steel 47 per cent, while revenues for Hindalco were flat.
The rise in sales, however, have been accompanied by an even sharper hike in expenses, and not just those on raw materials like steel and petroleum products (contrary to popular perception, petroleum prices for the industrial sector have risen dramatically since items like aviation fuel and furnace oil are sold at market prices) – salaries too have increased significantly. As a result, expenses in this quarter rose 42 per cent as compared to 31 per cent in the previous quarter.
Raw material costs for Tata Motors (as a percentage of sales) rose by 230 basis points to 72 per cent in the June quarter. For Mahindra & Mahindra, the increase was 130 basis points to 69.7 per cent; for NTPC, fuel costs as a percentage of sales were up nearly 200 basis points at 64.8 per cent; and for Ambuja Cements, the cost of key materials and freight rose 370 basis points to 48.3 per cent.
As a result, net profits are up a miserable 6 per cent in the June-ending quarter; while that’s not much worse than 9 per cent for the March-ending quarter, they’re less than a fourth of that in the quarter ending December 2007. So, while L&T’s net sales were up 53 per cent, its net profits rose just 33 per cent; Maruti Udyog’s sales rose 20 per cent but net profits fell 6 per cent; profits at Tata Motors too fell 30 per cent on higher revenues of 14 per cent.
Foreign exchange losses have added to the problems of firms like Ranbaxy and Mahindra & Mahindra, though this could just as well reverse if currency movements are favourable — most of these losses have been incurred since these companies have foreign currency exposures.
High interest rates have added to companies’ woes, as interest costs in the quarter ended June 2008 rose 86 per cent as compared to just 44 per cent in the March-ending quarter. Too much, however, shouldn't’t be made of this since interest costs comprise just 1.5 to 1.7 per cent of sales for most companies. In the case of the banking sector, of course, high interest costs have resulted in a sharp decline in credit offtake and with loan growth tapering off, so will fees. There’s already some moderation in credit growth which is expected to come off to around 20 per cent this year in line with RBI’s targets. While credit growth is currently at around 24-25 per cent, a part of it can be attributed to higher borrowings to pay for oil purchases — which is why bond yields have been climbing quite steeply.
If this isn’t bad enough, many are expecting a lot worse in the months ahead. High interest rates, for instance, have meant that Maruti Suzuki’s sales volumes in the home market rose just 0.1 per cent in July; ICICI Bank says its retail loan portfolio will grow by just 5-10 per cent this year. With interest rates hardening, weaker consumer demand is a foregone conclusion.
The investment cycle cannot remain immune from high interest rates, so if rates harden, demand is bound to slacken. Goldman Sachs has lowered its GDP forecast for 2009-10 to 7.2 per cent from the earlier 8.2 per cent due to weaker investment outlook caused by higher interest rates. And Merrill Lynch’s Holland feels not all capital goods firms are bagging the kind of orders they were last year.
We will have to wait and watch the corporate proceedings in the ensuing quarters to diagnosis the economy precisely.
Do let me know in case you have any queries on this post. Your comments are for a red-carpet welcome !!!
www.invest-insight.blogspot.com
Disclaimer: The author of this page is not a registered financial advisor, and you should not construe anything written here to be investment advise. You should consult a qualified broker or other financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. No representation is being made that any investment made on the basis of data or information on this blog will result in profits. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments.
With the economy slowing down dramatically and the growth in the Index of Industrial Production down to just 3.8 per cent in May 2008 as compared to 10.6 per cent in May 2007, you’d think corporate sales would be plummeting. However, thanks to consumer demand built on five years of high GDP growth, and a sharp spurt in inflation, especially in commodities, corporate India’s sales are rising as never before. Just how dramatic this growth is can best be judged from the RBI’s latest Expectations Survey where just a fifth of those polled expected selling prices to increase in the quarter.
This sharp hike was seen pretty much across sectors — so while FMCG firm Hindustan Lever saw at 21 per cent hike in top-line growth, infrastructure majors like Larsen & Toubro and BHEL saw a 53 per cent and 34 per cent hike respectively.
There were, of course, exceptions and engineering major ABB saw a disappointing 15 per cent hike (on the back of an equally poor 17 per cent increase in the March quarter) and retailing giant Shoppers Stop saw same-stores sales growth fall to just 7 per cent (in comparison with a 16 per cent growth in the March quarter). Commodity producers like Reliance Industries saw an 41 per cent growth in topline, SAIL 37 per cent and Tata Steel 47 per cent, while revenues for Hindalco were flat.
The rise in sales, however, have been accompanied by an even sharper hike in expenses, and not just those on raw materials like steel and petroleum products (contrary to popular perception, petroleum prices for the industrial sector have risen dramatically since items like aviation fuel and furnace oil are sold at market prices) – salaries too have increased significantly. As a result, expenses in this quarter rose 42 per cent as compared to 31 per cent in the previous quarter.
Raw material costs for Tata Motors (as a percentage of sales) rose by 230 basis points to 72 per cent in the June quarter. For Mahindra & Mahindra, the increase was 130 basis points to 69.7 per cent; for NTPC, fuel costs as a percentage of sales were up nearly 200 basis points at 64.8 per cent; and for Ambuja Cements, the cost of key materials and freight rose 370 basis points to 48.3 per cent.
As a result, net profits are up a miserable 6 per cent in the June-ending quarter; while that’s not much worse than 9 per cent for the March-ending quarter, they’re less than a fourth of that in the quarter ending December 2007. So, while L&T’s net sales were up 53 per cent, its net profits rose just 33 per cent; Maruti Udyog’s sales rose 20 per cent but net profits fell 6 per cent; profits at Tata Motors too fell 30 per cent on higher revenues of 14 per cent.
Foreign exchange losses have added to the problems of firms like Ranbaxy and Mahindra & Mahindra, though this could just as well reverse if currency movements are favourable — most of these losses have been incurred since these companies have foreign currency exposures.
High interest rates have added to companies’ woes, as interest costs in the quarter ended June 2008 rose 86 per cent as compared to just 44 per cent in the March-ending quarter. Too much, however, shouldn't’t be made of this since interest costs comprise just 1.5 to 1.7 per cent of sales for most companies. In the case of the banking sector, of course, high interest costs have resulted in a sharp decline in credit offtake and with loan growth tapering off, so will fees. There’s already some moderation in credit growth which is expected to come off to around 20 per cent this year in line with RBI’s targets. While credit growth is currently at around 24-25 per cent, a part of it can be attributed to higher borrowings to pay for oil purchases — which is why bond yields have been climbing quite steeply.
If this isn’t bad enough, many are expecting a lot worse in the months ahead. High interest rates, for instance, have meant that Maruti Suzuki’s sales volumes in the home market rose just 0.1 per cent in July; ICICI Bank says its retail loan portfolio will grow by just 5-10 per cent this year. With interest rates hardening, weaker consumer demand is a foregone conclusion.
The investment cycle cannot remain immune from high interest rates, so if rates harden, demand is bound to slacken. Goldman Sachs has lowered its GDP forecast for 2009-10 to 7.2 per cent from the earlier 8.2 per cent due to weaker investment outlook caused by higher interest rates. And Merrill Lynch’s Holland feels not all capital goods firms are bagging the kind of orders they were last year.
We will have to wait and watch the corporate proceedings in the ensuing quarters to diagnosis the economy precisely.
Do let me know in case you have any queries on this post. Your comments are for a red-carpet welcome !!!
www.invest-insight.blogspot.com
Disclaimer: The author of this page is not a registered financial advisor, and you should not construe anything written here to be investment advise. You should consult a qualified broker or other financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. No representation is being made that any investment made on the basis of data or information on this blog will result in profits. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments.
Subscribe to:
Posts (Atom)
