NEWS ANALYSIS..........
Rajesh Desai
AUTOMOBILES
· Tata cuts car prices by up to Rs 50,000
Tata Motors, India’s largest automaker by revenues, has slashed the prices of its hatchbacks & sedans by up to Rs 50,000, to stimulate sagging sales. The price cut comes as domestic passenger vehicle volumes of the company declined to 10,613 units in February, a fall of 62% over the corresponding period last year. February sales were the lowest monthly volume in more than 6 years. Almost all automotive companies have been offering discounts & benefits since the past 6 months. But this is the first direct price cut from a company in the year. Tata Motors has been under pressure due to the competition & weak buying sentiment in the market. Its aging product portfolio has been challenged by Toyota, Honda, Maruti Suzuki & Hyundai. Simultaneously, the Mumbai-based company increased prices of utility vehicles such as the Safari, Sumo & Aria. An increase of Rs 7,500-11,000 has been made on these models. The hike was in addition to the increase brought in by the excise duty change.
· Iconic Harley cuts prices, increases local assembly
In a move that could enthuse motorcycle aficionados, iconic-bike maker Harley-Davidson has announced that it will locally assemble 3 more models — Fat Boy, Fat Boy Special & Heritage Softail Classic. With this, the company will be able to slash prices by about Rs 4 lakh on these models. Including these 3 models, the company will now assemble 9 out of the 11 models it has on offer in its line-up in India. The latest announcement comes close on the heels of the government increasing customs duty on imported motorcycles (with engine capacity upwards of 800 cc) to 75% from the earlier 60% in the Budget. While Harley Davidson Fat Boy would now be cheaper by a whopping Rs 4.55 lakh at Rs 14.9 lakh (ex-showroom, Delhi), the Fat Boy Special & Heritage Softail Classic would be available for Rs 16.25 lakh (earlier Rs 20.45 lakh) & Rs 15.6 lakh (earlier 19.70 lakh) respectively. Harley Davidson sells 11 models in India priced between Rs 5.71 lakh & Rs 22.81 lakh. The bike maker has nine authorized dealerships. Since it commence sales in July 2010, Harley Davidson has sold over 2,000 motorcycles in India. The iconic bike maker was allowed to sell motorcycles in the Indian market in 2007 when emissions norms for big bikes exceeding 800 cc were relaxed.
MODEL | PREVIOUS PRICE (Ex-showroom Delhi) | CURRENT PRICE (Ex-showroom Delhi) | Price Reduction |
FAT BOY | Rs. 19.45 Lakh | Rs.14.9 lakh | Rs.4.55 lakh |
HERITAGE SOFTAIL CLASSIC | Rs.19.70 lakh | Rs. 15.6 lakh | Rs. 4.1 lakh |
FAT BOY SPECIAL | Rs. 20.45 lakh | Rs. 16.25 lakh | Rs. 4.2 lakh |
· Hero wage talks inconclusive, 'hard' decision today
With pay rise between management & workers at Hero MotoCorp’s Gurgaon factory making no progress on Monday, the heads of the staff union indicated of a “hard decision” that is likely to come out today. The state government’s labour department took an initiative in Monday’s talk to try to bring in a settlement between both the parties but failed to mark up any positive result. The union, if all other means fails, might even go for a strike at the company’s Gurgaon facility. Workers at the Gurgaon unit have been agitating for about two months, sporting black armbands and not taking the subsidised tea and snacks offered by the company. The employees want a pay rise of Rs 15,000 a month, spread over three years. The management is reluctant to go beyond a rise of Rs 7,500-9,000 a month. Talks have been on for six months. Hero MotoCorp has a factory each at Gurgaon, Dharuhera (both in Haryana) and Hardwar. The Gurgaon unit rolls out 6,000-7,000 two-wheelers daily. The company employs around 1,200 permanent workers and 4,000 contract workers at Gurgaon. The average salary of a permanent worker at Gurgaon is around Rs 32,000 a month.
CEMENT
· Cement stocks decline on poor sales
Stocks of India’s major cement companies came under pressure after reports suggested poor cement off take in February. Though there are no overall sector sales numbers available as competition watchdog Competition Commission of India (CCI) had barred the industry body from collecting data last June. On the BSE, shares of ACC, Ambuja & Shree Cement lost between 2.5% & 4% on Monday while those of Aditya Birla group’s UltraTech lost a little less than 2%. Though these stocks touched lower levels during intra-day trade, they had recovered by the time trade ended. 2 other north-based majors, JK Cement & JK Lakshmi Cement, were hit hard as their shares lost over 5% value while the Heidelberg stock was down 4%. The fall came on a day when the benchmark indices witnessed a marginal erosion of 20 basis points. Several of these counters are trading much below their 52-week highs. For instance, ACC which touched a high of Rs 1,515, lost around 20%, while Ambuja & Shree Cement shed about 15% from those levels. Mid & small cap players like JK Cement, JK Lakshmi & Heidelberg are trading as much as 33% lower than their 52-week highs.
COMPANY |
CLOSED (Rs./share) | CHANGE (%) |
J K Lakshmi | 118.30 |
-5.09 |
J K Cement | 294 |
-5.05 |
Heidelberg | 40.35 |
-4.16 |
ACC | 1220.05 |
-3.79 |
Shree Cements | 4160 |
-3.32 |
Ambuja | 186.70 |
-2.89 |
UltraTech | 1849 |
-1.90 |
METALS & MINING
SAIL’s 10.82% divestment likely on March 20
· The Centre is likely to auction 10.82 per cent stake in Steel Authority of India Ltd on March 20 as a part of disinvestment programme before the end of the financial year. In its recent stepped up efforts towards disinvestment process, the Government of India has also planned overseas road shows to attract qualified institutional investors.
· The Empowered Group of Minister (EGoM) may take a final call on the floor price on March 18 for the one-day share sale. Barely a few weeks away from the end of the financial year, aiming to bridge the Rs 8,500-crore shortfall in reaching the 2012-13 PSU sell-off target of Rs 30,000 crore, the Government has decided to opt for the stock exchange-hosted auctions to save on time.
· The Government aims to raise around Rs 3,500 crore. Steel Ministry sources said last month that efforts were renewed for bridging the gap in a short span of time. The Government of India currently holds 85.82 per cent stake in SAIL.
NMDC Cuts Iron Ore Prices by 2.2% for March
· India’s largest iron ore producer NMDC has lowered iron ore prices for March by 2.2%,in line with a tapering of demand in the local market and dip in global ore prices. After the price cut, NMDCs high-grade iron ore lumps will be available for INR4,950 per tonne for local steel mills. However, price of iron ore fines, which make up for nearly 70% of sales, will remain unchanged at the current level of INR2,610 per tonne.
· The downward price revision in lumps is based on domestic demand and supply scenario. While domestic demand has come down a bit, international prices have also softened due to improved supplies, said an NMDC official, who did not wish to be named. The company’s board thus decided to cut lumps prices by about.100-110 per tonne, or 2.2%,for the current month.
SAIL, Nalco Stake Sale Process Starts on Mar 11
· The government is set to complete the sale of minority stakes in India’s largest aluminium and steel makers, Nalco and SAIL, respectively to raise about INR4,500 crore by March 31.On successful completion, the government will be able to raise around INR26,000 crore by selling minority stakes in state-run companies in 2012-13,the biggest mop-up from disinvestment in a single fiscal year. Last week, the government completed road shows to sell 12.15% stake in Nalco and the sale process will start from March 11.The government plans to complete the sale of 10.82% in SAIL before March 31,2013.
· Nalco divestment is likely to be approved by a ministerial panel on March 11 and the divestment through offer for sale (OFS) route mechanism on stock exchanges is planned for March 13. Two teams that include a dozen top officials from the steel ministry, department of disinvestment and SAIL officials, are going on road shows to be held in the US, Europe, Japan, Hong Kong and Singapore from March 6.
Petrol, Diesel Price Hike to Impact Coal Output Cost
· The government said the hike in petrol and diesel prices will impact the cost of coal production in the country. To a query on whether the petrol/diesel price rise will impact the cost of coal production, Minister of State of Coal Pratik Prakash Bapu Patil in a written reply to Rajya Sabha said: Yes. Petrol price was hiked by INR1.40 per litre, while diesel prices for bulk consumers like Railways was increased by almost INR1 per litre last week.
SAIL, JSPL raise steel prices following costlier coal |
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· State- run Steel Authority of India Ltd ( SAIL) and Naveen Jindal- led Jindal Steel and Power Ltd ( JSPL) have hiked steel prices, citing a rise in coking coal prices internationally by up to $ 20 (around INR 1,100) per tonne.
· JSPL has hiked steel prices by INR 1,000 per tonne, while SAIL, the country’s largest steel maker, has increased the prices by up to INR 500 per tonne for March. The ( price) correction was required, prices in international markets are rising. Coking coal prices have gone up by $ 15- 20 per tonne ( internationally) in recent times, other input costs have also increased.
· The price rise comes at a time when the country’s largest iron ore miner, NMDC Ltd, has decided to cut prices of iron ore lump for March by 2.2 per cent. Other steel makers have not yet made up their minds on revising prices. Essar Steel Ltd said the company hadn’t tinkered with prices this month, but the prices might vary depending on the freight rates. Railway Minister Pawan Kumar Bansal, in the Railway Budget presented in Parliament on February 26, proposed a raise in freight charges for the next financial year.
· JSPL defended the move, saying margins had been virtually absent and the prices of long steel products were low. JSW Steel Ltd did not reply to a query, but a company official said on condition of anonymity it had decided to raise prices. |
BANKING
SBI sees profit at Rs 14,000-15,000 cr this fiscal
State Bank of India expects to clock a net profit of Rs 14,000-15,000 crore in the current fiscal, backed by strong internal generation and robust demand for loans. “For SBI we got an allocation of 3,000 crore this year (capital infusion by the government) and we expect to make a net profit of another Rs 14,000-15,000 crore of net profit this year,” State Bank of India (SBI) Chairman Pratip Chaudhuri told a television channel. SBI had reported a marginal 4.08 per cent increase in net profit at Rs 3,396 crore for the third quarter ended December 31, 2012, mainly on account of higher provisioning for bad loans. The public sector lender had announced earlier it will get Rs 3,004 crore as part of the government’s capital infusion plan for the current fiscal.
Financial outreach plan is key for new bank licence
The Reserve Bank of India said that financial inclusion plan will be an important criteria for getting new banking licences in the private sector. The RBI came out with new banking licence guidelines last month wherein it said the important criteria for processing the application would be the business model of the applicants and it should provide for financial inclusion.
“We have also said that new banks are required to establish at least 25 per cent, a quarter, of their branches in places with less than 10,000 population... “I do hope that the new bank applicants indeed everybody interested in financial inclusion will come up with innovative and imaginative ideas, financial inclusion as an obligation and not as business opportunity and hence the reach of inclusion was less. ” RBI Governor D Subbarao said.
As per the guidelines, the interested entities would have to send in their applications by July 1, 2013. As per the new norms, the RBI has prescribed private corporates and public sector entities with 10 years experience to be eligible to apply for new licence. The initial paid-up capital for new banks has been set at Rs 500 crores.
NHB rolls out special scheme to help boost fixed rate home loans
To encourage fixed rate home loans for the low- and moderate-income segments, the National Housing Bank (NHB) has come out with a special refinance scheme for banks and housing finance companies (HFCs). Banks and HFCs giving fixed rate home loans up to Rs 10 lakh can get refinance for 15 years from NHB at a concessional interest of 8.60-8.75 per cent. Fixed rate home loans are aimed at mitigating the interest rate risk that retail borrowers face.
ECB
NHB has received applications from HFCs, such as HDFC, LIC Housing Finance and Dewan Housing Finance, to raise ECBs aggregating $800 million. NHB itself plans to raise around $200 million via ECBs. NHB has sought clarifications on the stringent requirements for builders, who want to directly access ECB for building affordable housing projects, regarding local regulatory and environmental approvals. Though builders can raise ECB through NHB, none of them has approached the Bank so far.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
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CA. Rajesh Desai