Navneet Publications business has been affected by the sudden entry of state governments into the study material market. Government has started distributing workbooks free of cost (Gujarat and Maharashtra). The government with its social objectives could severely hamper private companies in the education market, we believe this could be restricted to the retail segment – which is currently very small for the major education companies. (more…)
Month: December 2008
Inflation headed to sub 5% levels
With the recent cut in fuel prices and CENVAT, the Inflation is headed towards sub 5% level. The move has direct impact to reduce inflation by 0.5 ppt; total impact may be about 1 ppt.
CENVAT reduction can lower inflation rate by 2.5 ppt on complete pass-through, but actual impact may be much less. The CENVAT reduction can lower the inflation rate closer to 7.0% by end-December, even assuming a moderate pass-through.
Strong base effects starting January 2009 may lower inflation to sub-six percent at the start of the new year. Inflation is likely to trend down to 4.0% by end-March 2009 with further downside risks to this number. One can expect inflation to continue to decline to around 1% by July 2009, unless global oil prices reverse before that or some new shock comes.
Larsen & Toubro – Hold Citi
Citigroup has downgraded Larsen & Toubro from BUY to Hold due to changing macro environment that is likely to affect the best in the Capital Goods class. Adding to L&T’s woes is the availability of capital has reduced and the cost of the same has increased, growth in capital formation is likely to come in at low single digits vs. the 17% CAGR seen during FY03-FY08. Capex cycle is far healthier than the one in the 1990s, incrementally things will only get worse before (more…)
RBI rate cut + Fiscal stimulus package
RBI’s Weekend Package included Rate Cuts and Renewed Focus on FCCBs, Exporters and the SME Segment. In line with expectations, the RBI cut both the repo (liquidity injection) and reverse repo (liquidity absorption) rate to 6.5% and 5% respectively. While it may still take time for banks to cut rates meaningfully, what was encouraging was that the RBI has said that it – (more…)
DLF + Unitech + Ansal properties downgraded by Fitch
Global rating Agency Fitch has downgraded the Ratings for Indian Real Estate Companies including DLF, Ansal Properties and Unitech.
- DLF has been downgraded from F1+ to F1 due to reduced liquidity position, which is driven by an overall slowdown in the real estate sector, resulting in slower sales and significant receivables from DLF Assets Ltd [Privately Held Company].
- Unitech – Long Term Debt rating is down to A- from A+ and outlook revised to Negative from Stable. Likely negative impact of the rapidly deteriorating real estate sector on Unitech’s ability to service debt given its current cash flow generation and amortising debt structure and reduced liquidity position.
- Ansal Properties and Infrastructure – Long term debt rating has been revised to BBB- from A- and outlook revised to Negative from Stable. Weaker than expected operating results, higher financial leverage levels than previously anticipated and reduced liquidity position resulting in increased refinancing risk.
Other who have faced the ire include Omaxe, Parsvnath and Sobha in Q3 of 2009.
What’s Holding India + What will Boost It ?
During the past five years (F2003-2008), India has received cumulative inflows of US$224 billion. This serviced India’s biggest ever credit and capital spending cycle. India’s outstanding credit grew from US$189 billion in March 2003 to US$643 billion by March 2008. Over that time, the country spent US$1.4 trillion on investment. It’s no surprise that growth accelerated and averaged nearly 9% during this period.
India’s infrastructure was not ready for this growth, and combined with the surge in global commodity prices (again reflecting unprecedented global growth for mostly the same reasons), inflation surged – a classic case of overheating. Of (more…)