Reliance group, Tatas increase profit margins in H108-09

It pays to be big. When Corporate India is rueing over faltering bottomline, the big brothers have succeeded in bucking the trend. Mukesh Ambani Reliance group, the biggest in terms of sales or the Tatas, the second biggest, both have increased their margins in the first half of the current year over the same period last year when most of the smaller groups have witnessed a decline in their margins. The aggregate net profit of Mukesh Ambani group has increased 10.2% in the first half of 2008-09 while that of 27 companies of Tata Group has risen 10.4%. The growth rate of profit of both of them has decelerated compared to the same period of 2007-08 net profit of Reliance and the Tatas had increased 32% and 24.5%, respectively, in the first six months of 2007-08 over the same period of 2006-07 but what is important is that amidst faltering bottomline they have managed to increase their profit. Much of the rise in Tata Group profit in the current year owes its origin to the good performance of its flagship company Tata Steel which has witnessed a sharp 35.8% rise in net margins in the first half following sharp rise in turnover net sales increased 45% during this period. The net profit of Tata Motors, however, has declined during this period as tight demand conditions resulted in a fall in unit price realisation. Net profit of Tata Motors has declined a huge 32.3% in the first half of the current year against a 24% rise in the same period last year. Of the 27 group companies , 16 have increased their net profit in the current year. Titan Industries and Tata Coffee have more than doubled their net profit during this period. The deceleration in profit growth of Reliance in the current year at the other end, has largely been due to sharp rise in expenditure . The net sales of Reliance Industries (RIL) have grown by a huge 40.3% in the first half of the current year, but its total expenses have grown 47.2% during the same period following higher crude prices. The raw materials cost of RIL, which accounts for more than 90% of its total expenses , have increased 67% during this period. The company has, however, still managed to increase its net profit by over 10%.

Maha govt plans Rs 4500 cr invest plan for power sector

The Maharashtra government on Tuesday unveiled an ambitious Rs 4,500-crore investment plan for the power sector to meet its energy requirements by 2012. Replying to the debate on last week’s resolution on power crisis moved by Leader of the Opposition, Ramdas Kadam (Shiv-Sena), and Eknath Khadse (BJP) in the state legislature, state energy minister Sunil Tatkare said the Cabinet has already taken the decision to invest Rs 4,500 crore in the next 2-3 years. Listing out measures initiated to reduce load-shedding hours and improving the overall power scenario, he admitted that power stations have outlived their utility and are unable to work efficiently. Mr Tatkare said that during the past 7-8 years, the state has witnessed growth in demand for power while the installed power generation capacity stood at 6,700 mw. “Since power generation plants are old, they often face breakdowns, which suddenly cut off power supply,” he added. As for the coal shortage faced by the state thermal power plants, Mr Tatkare said he had held discussions with the CMD of Western Coalfields recently to sort out the issue so that thermal plants can get an uninterrupted coal supply. According to the minister, the state government is expecting the situation to improve between January and March 2009 with addition of 1,500 mw in phases.

Inflation drops further to 6.38%

India’s annual rate of inflation dipped further to 6.38 percent for the week ended Dec 20 from 6.61 percent the week before, official data released Thursday said. The inflation rate was 3.74 percent during the corresponding week the previous year. The wholesale price index (WPI) for all commodities declined 0.2 percent to 230.2 from 230.7 the previous week. All the figures in the index are provisional. The index for primary articles declined 0.2 percent to 248.8 from 249.2 the previous week. The index for fuel, power, light and lubricants declined 0.5 percent to 330.5 from 332.1 the previous week due to lowering of aviation fuel prices by 13 percent, and light diesel oil by 6 percent. The index for manufactured products, too, declined 0.1 percent to 201.4 from 201.7 in the previous week. Economists said the fall in fuel prices and the tight monetary policy adopted by the central bank in recent months would push inflation further downwards.

ICICI Bank defers stake sale in Firstsource Solutions

ICICI Bank is understood to have deferred the sale of its holding in Firstsource Solutions, a Mumbai-based pure-play business process outsourcing (BPO) entity. The bank along with its subsidiaries owns close to 27 per cent stake in the BPO firm. The bank was understood to have initiated discussions with a few global private equity (PE) and strategic players to sell its stake valued at around Rs 660 crore. Industry information indicates that this move has been necessitated by the recent drop in stock price to as low as Rs 13 from the earlier Rs 45. The 52-week high was Rs 89 for the stock. Industry sources indicates that PE players such as Warburg Pincus, Temasek were among others interested in the stake. The company employs close to 20,000 people and has revenues of around Rs 1,500 crore and a net profit of Rs 150 crore. Firstsource provides business process management to global players in the banking & financial services, telecom & media and healthcare sectors. While the bank declined to comment on the development, the company early this year had stated that “depending on the market opportunities, we always keep exploring various options.” The company at the end of the second quarter of the current financial year also slashed its revenue guidance to 21 per cent in dollar terms from the original 33-38 per cent. Commenting on this, MD & CEO Ananda Mukerji said, “While the business environment is challenging, we are pleased that we have been able to grow revenues and improve margins.”

External debt falls in Sept quarter to $222.6 billion

The country’s total external debt stood at $222.61 billion at the end of September this year, marginally lower than the $223.81 billion at the end of June. The ratio of foreign exchange reserves to total external debt stood at a comfortable level of 128.6%, the ministry said. Besides, India has the lowest level of external debt to gross domestic product (GDP) ratio, the statement said, quoting World Bank data. Long-term external debt, which accounts for 78% of total external debt, declined by $2.69 billion to finish the quarter at $172.51 billion. Although external commercial borrowings and NRI deposits declined, export credit posted a growth

Promoters spend big on buyback of own shares

One and a half dozen companies, including bluechips like Reliance Infrastructure and DLF, have bought back shares worth more than Rs 1,100 crore between March and December 2008. With share prices having fallen sharply during the year, promoters of many companies were able to raise their stakes cheaply. Under a buyback programme, a company purchases its own shares in the open market. While the shares are usually cancelled, it can also keep them as treasury shares so that the company would be able to resell them in future. “There are many reasons why a company goes for a buyback. In a bad market, it offers the much-needed support to share prices.

Huge call writing at 3000-3200 strikes, Nifty Jan narrows premium

In futures, Nifty January provisionally settled at a premium of 6 points against 7.4 points on Tuesday. The contract price slipped 0.73 per cent while open interest added 21 lakh shares. The cost of carry was at 2.78 per cent little changed from previous day. Huge call writing was observed from 3000 to 3200 strikes while put writing was seen at 2900 and 2800 strikes. Put buying was witnessed at 3000 and 2700 strikes. Traders bought put at 2700 strike to hedge their portfolios. "Today's fall can be attributed to profit booking from traders as they don't want to hold their positions for longer duration. Given the options build up, I expect Nifty to trade in 2900-3000 levels. For traders, buying lower level puts at every rise will be a good strategy to gain from volatility," said Ankit Sinha, CEO-Spark Advisory. In stocks futures, Reliance Industries January fell 1.83 per cent while open interest added 3.8 lakh shares. State Bank of India slipped 0.55 per cent while added 1.9 lakh shares in open interest. DLF futures dropped 1.91 per cent and ICICI Bank skid 2.55 per cent. Reliance Communications slid 0.61 per cent while open interest added 4 lakh shares. Suzlon rose 1.47 per cent and Satyam Computers jumped 7.65 per cent on short covering. Tata Steel advanced 0.44 per cent and open interest just added 1.12 per cent.