EML's 4QFY17 reported numbers were on expected lines. Strong 21% volume growth resulted into 23% YoY growth in consolidated revenues. EBITDA margin at 31% was almost similar QoQ, but higher YoY. Consolidated PAT grew by 33% YoY. Profit from VECV JV jumped multifold YoY. Currently, Royal Enfield (RE) is facing capacity issue and hence sequential volume growth has been low. New plant will com
RBI notification casts light on measures aimed at resolving bad loans.
An RBI notification (1) clarifies its powers under a recent ordinance (2) allows the formation of oversight committees (OCs) under its aegis, (3) allows the formation of independent committees to decide a framework for reference for the Insolvency Code (IBC). RBI is also exploring t
NIITT reported strong growth of 3.4% sequentially (ex Settlement amount) beating our estimates of 0.8% growth. Margins were in line with our estimates at 17.6% (ex settlement amount), an expansion of 90bps QoQ. Key positive was the healthy order intake of USD112mn (6th consecutive quarter of intake over USD100mn), with 12 month executable order book at USD 320mn. US business reported good growt
Low double digit volume growth in the decorative paint segment and flattish volumes in the industrial segment translated into revenue of Rs 9.41 bn (-6% QoQ and +5.5% YoY).Operating profit was reported at Rs 1.64 bn with OPM of 17.4% (-60 bps QoQ and +250 bps YoY). The sequential drop in margins is primarily due to increase in raw material prices in Q4FY17 (co took average price hike of 3% from
GST: The finishing line is finally here.
We believe GST is all set to be implemented on July 1, 2017 with (1) the GST Council finalizing the GST rates on almost all goods and services and (2) 12 states passing the state GST laws; more will do so over the next few weeks. The government has followed a multi-pronged approach to prepare for the implementa
Pledged holding analysis, March 2017 quarter.
Our analysis of pledged holdings of BSE-500 stocks shows that the percentage of pledged promoter (majority shareholders) holdings has decreased in the March quarter in comparison to the December quarter. The percentage of promoter pledged holding decreased to 9% in March 2017 compared to 9.3% in December.
The curious case of the Indian cement sector, Part 2.
A reverse valuation exercise of the Indian cement sector shows rather remarkable results—(1) India will reach China’s peak cement consumption level in 20 years and (2) it will consume China’s peak cement volumes in perpetuity after that. China took 20 years to reach peak cement dem
Benign inflation, robust production.
Lower CPI and WPI inflations (base 2011-12) were largely attributable to the favorable base effect. Core CPI inflation also inched lower to 4.4% from 4.84%. While we expect around 50 bps of downside to RBI’s March 2018 estimate of 5%, the headline inflation is likely to still remain higher than the medium-term
The wait continues.
Tier-1 IT companies disappointed again with weak quarterly performance and outlook that barely met expectations. Rationale for lower-than-expected outlook was optimism of financial services clients not immediately translating into projects. We also believe that the drag from legacy business continues at a pace higher than new digital business. Sto
Adds clarity and urgency.
RBI and the government made a few changes to resolve the chronic NPL problem plaguing the sector. The government notified an amendment to the Banking Regulation Act which aims to provide more clarity to the RBI on the issue. RBI in turn has marginally diluted the JLF scheme to accelerate the pace of resolution under JLF/CAP vo
* Liquidity surplus remains intact.
The weekly average surplus remained unchanged at ~Rs 3.8 tn for the week ending May 6, amid month-end government spending even as outflows related to MSS, regular auction outflows and CIC continued to offset the increase. The government continued to utilize WMA to the extent of Rs 157bn as on Apr 28 though, lower tha
Can we get back to FY2018 earnings please?
4QFY17 results suggest stabilization in underlying parameters (volumes and realizations) in certain sectors but risks of earnings downgrades to our FY2018 estimates have resurfaced in others from domestic (higher provisions in the banking sector, stronger INR and higher interest rates) and global (lower commod
AUTO INDUSTRY VOLUME UPDATE - APRIL 2017
FY18 started off on a mixed note for the automobile manufacturers. In April 2017, demand was strong for the passenger car and tractor segment. Two wheeler segment performance continue to be on the recovery mode, post demonetization. Commercial vehicle segment (particularly MHCV segment) witnessed sharp YoY decli
* Liquidity surplus continues to moderate.
The weekly average surplus tightened further at ~Rs 3.8 tn for the week ending Apr 29 as against Rs 4.2tn the week prior ending Apr 21, amid outflows related to MSS and CMB issuances and the regular auction outflows. Our calculations shows that government’s surplus with RBI would have further reduced to
KIE’s foreign fund-flow tracker gives a comprehensive view of the market flow by listed funds into India and its emerging market (EM) peers. These market participants are further classified based on their investment styles [passive (ETFs) or active (non-ETFs)] in an attempt to understand the intent and sentiments governing the flows. Please note there is a
Spring is in the multiples, not earnings (as yet).
We are unable to fathom the rapid changes in the prices of stocks without any major changes in their fundamentals. It seems to us that the sole investment thesis in some cases is ’liquidity’, which is quite bizarre since ‘active’ investors should be deciding on the fundamental
He has both aptitude and attitude issues.
We see certain innate challenges to India’s demographics story given ‘issues’ with both skillsets and mindsets of India’s youth. We note that public discussions have largely focused on low education levels and skills of India’s young population but a bigger issue may be the mindse
State budgets: Walking the tight rope.
Aggregate states’ GFD/GDP at 2.6% in FY2018 indicates consolidation from the FY2017RE levels. But we are cautious on states achieving this as few states seem poised for some slippages. Further, GST implementation could have its own set of challenges on the revenue front. Though most of the UDAY-related expen
The supply glut.
Capacity utilization of generation assets continue to drop even as the Street remains hopeful of a potential closing of the gap on account of (1) improving demand prospects under UDAY, (2) de-commissioning of old and inefficient capacities, and (3) lack of new investment in generation assets by the private sector. We do not share the o
Tightening the screws.
The RBI announced (1) additional disclosure requirements for banks that fail to adhere to prudential norms, thus putting the onus on banks to tighten their NPL recognition and provisioning norms and (2) requirement for boards of Indian banks to proactively assess risks across sectors and make provisions above the minimum regulato
Near-normal monsoon on the cards.
The IMD forecasts the June-September monsoon at 96% of LPA, which qualifies as ‘normal’ southwest monsoons. The IMD noted that weak El Niño conditions could likely develop in the latter half of the season. We believe it is premature to conclude on effects on growth and prices. But after a normal mons
Small need not be beautiful.
The sharp rally in stock prices, especially of mid-cap. and small-cap. names without any significant changes in underlying fundamentals, makes us uncomfortable about the nature of the rally. It is perhaps easier to believe the narratives around ‘undiscovered’ stocks rather than well-researched large-cap. names.
Ending a strong year on a stronger note.
Private sector ended the year with 31% yoy APE growth in March translating into 26% growth for FY2017—highest in past nine years. HDFC Life had the most notable catch-up with 44% growth in March to end at 13% for the year; Bajaj Life, ICICI Life and SBI Life reported some fatigue. We tweak our APE estimat
FRBM report: Nub lies in implementation.
Targets fixed by the FRBM report seem achievable for the central government. The escape clause with a cap on slippages is also commendable. We believe that the report’s recommendation of setting up a Fiscal Council which will monitor the government’s fiscal health is crucial for long term setting of
* Liquidity surplus remained intact last week.
The weekly average surplus remained intact at ~Rs 4.4 tn for the week ending Apr 15 as against Rs 4.3tn the week prior ending Apr 7. Our calculations suggest that government’s surplus with RBI currently is likely to have reduced by ~400bn to around Rs 550bn, compared to ~Rs 950 bn in the previous we